Tesla Home Batteries: The $800 Million Boon

Written By Ryan Stancil

Posted May 13, 2015

As a regular reader of these pages, you’re probably already familiar with the number of times Tesla has gotten a mention for its many projects.

Just last month, we wrote on the speculation that the company would be offering the public a home energy battery that will store solar energy as well as energy from the power grid during off-peak hours. This will allow homeowners to power their homes while making it so they can rely less on the utility companies that have been providing electricity for decades.

That product was revealed at the beginning of this month, and it’s already taken off in a way that not even Elon Musk, Tesla’s CEO, saw coming.

A Battery in Every Home and Business

There are two types of batteries that Tesla offers: one for homeowners, and one for business owners. The batteries for the home, the Powerwall, are available in a 10 kWh version and a 7 kWh version at $3500 and $3000, respectively.

The Powerpack, its cousin designed for industrial and commercial use, has a capacity of 100 kWh, and will likely cost around $25,000.

Both types of batteries have seen runaway success since being announced, with the Powerwall batteries receiving 38,000 reservations while the Powerpacks received 2,500.

It’s important to note, however, that those reservations don’t necessarily translate to sales, as making a reservation didn’t require putting any money down. Still, the over 40,000 reservations received between the two types of batteries act as a strong barometer for the kind of interest that alternative energy can generate.

This is especially true when you consider the fact that many of the Powerwall reservations were reportedly made by people reserving at least two batteries. According to Elon Musk, that means the number of actual batteries that would need to be made to fulfill reservations would have to be in the neighborhood of “50,000 to 60,000.”

All said, the combined reservations for Powerwall and Powerpack batteries would, according to Bloomberg, total just over $800 million in revenue for the company if they were fulfilled. This also means that Tesla’s Gigafactory, which hasn’t even opened yet, wouldn’t be able to fulfill demand right away. The demand would put the batteries on backorder until at least the middle of 2016.

In the meantime, there are a few things that need to be ironed out. For instance, the cost of multiple batteries to provide adequate power may not be economically feasible for many people interested in this technology, but that sort of thing is often expected with most new technologies. Remember, it wasn’t too long ago that the cost of having solar installed in the home was significantly higher than it is now.

And just like the price of solar fell over time, so too will the cost of these batteries. That’s how economies of scale work.

What You Can Do as an Investor

Word is getting out about solar and what it could potentially do for homeowners in the U.S., so if you want to make any investment moves, you will need to do so soon.

Being smart about playing alternative energy is, like other areas of investing, all about diversification.

As we’ve mentioned before, companies that build the components are sure bets, as are the companies that control the raw materials; graphite, in the case of Tesla’s batteries.

These are smart choices when it comes to a burgeoning industry, because their lower stock prices means you have a better chance at strong returns compared to what you might see if you were to invest directly in the company making the product. Tesla is good at what it does, but it wouldn’t be able to do it without the companies that make its end products possible.

Keep your eyes open,

Ryan Stancil