Photograph by Kevork Djansezian, Getty Images
Read Caption

Thursday night's launch event for the Powerwall unit, shown above, was powered by solar panels and batteries at the Tesla Design Studio in Hawthorne, California.

Photograph by Kevork Djansezian, Getty Images

Tesla Unveils Home Battery: 5 Reasons It's a Big Deal

The electric car maker isn't the first to offer energy storage, but its impact on the market could be sizable.

With its splashy foray into energy storage for homes, Tesla is mapping out a future where it might eventually be known more for batteries than its luxury electric cars.

The automaker unveiled a suite of battery products Thursday—each geared for homes, businesses, and utilities—that promise not to "suck," to use CEO Elon Musk's choice label for competitors. The home battery, a sleek, mountable unit dubbed Powerwall, will be available this summer and starts at $3,000.

Musk, who also envisions us vacationing in space and traveling through suspended tubes (though not driving hydrogen cars, which he deems "bulls**t"), is known for colorful quotes and bold ideas. He's on firm ground, though, when it comes to batteries.The technology is already advancing on fronts large enough for the electric grid and tiny enough to be invisible. Tesla's batteries allow cars to go up to 270 miles on a single charge.

Despite the advances, an affordable, accessible battery for solar-powered homes and businesses has remained elusive. It would allow them to bank energy for use regardless of weather. It would also make them less dependent on the electric grid, a mixed prospect for utilities.

The Palo Alto, California-based firm is betting big on batteries. Its $5 billion Gigafactory, under construction in Nevada, will produce lithium ion cells for a projected 500,000 vehicles. The facility will also make batteries for buildings, which are now being tested in California at 11 Walmart sites and at select homes through another Musk company, SolarCity. (Walmart is using fuel cell power, too: See three surprising places where hydrogen energy is working.)

Here are five reasons why Musk's latest venture matters:

"There's going to be a market bloodbath." That's the prediction from Jeff Chamberlain, executive director of Argonne National Laboratory's Joint Center for Energy Storage Research. Tesla is just one of several companies, including Stem and AES Energy Storage (which is also listed as a partner on Tesla's grid product), offering similar energy storage systems but not necessarily using the same chemistry.

"There's going to be a wide variety of new technologies" introduced, Chamberlain says, "and many of them are going to fail."

With Gigafactory, he says, Tesla is building more battery capacity than the entire planet has today. That sheer scale could give it the power to crush competition, but it's also a vulnerability: Tesla will need to attract a lot of battery orders to keep the factory afloat.

"They're going to be in a race with themselves to try to be profitable," says Chamberlain. "It's not going to be easy."

Still, Musk made it clear Thursday that he plans to run not one, but multiple Gigafactories.

Tesla's long game goes way beyond backup power. Right now, batteries on the grid are used primarily to provide backup power during outages and to help businesses save money by smoothing out peaks in their energy use, says Jesse Morris, transportation and electricity manager at the nonprofit clean energy research group Rocky Mountain Institute (RMI).

But Morris sees at least 10 other possible ways that batteries could serve the grid and make money in the process. Small energy storage systems, for example, could aggregate and compete with natural gas plants by ramping up quickly when surplus electricity is needed.

"I guarantee you that Tesla knows that those things [can] be monetized in the near future," he says. "They want to get ahead of the curve."

Watch Related Video: Passive Homes Aggressively Save Energy

It could be very bad news for utilities—but doesn't have to be. As more households generate their own power via solar panels with battery storage, utilities could lose up to $15 billion in the U.S. Northeast alone by 2030, according to a recent RMI report.

It could be very bad news for utilities—but doesn't have to be.  As more households generate their own power via solar panels with battery storage, utilities could lose up to $15 billion in the U.S. Northeast alone by 2030, according to a recent RMI report.

At the same time, utilities are adopting their own battery systems to boost reliability, which is why Tesla sees them as customers too. As for energy storage on the household side, utilities have reach: Why not get in on the game and start selling those systems themselves?

"It's a threat and an opportunity, depending on how they treat it," says Morris.

It's not just about the battery. Chamberlain notes that while Tesla's particular type of lithium ion battery works well for its electric cars, "we don't know how good it is for the grid." Part of the test for Tesla, particularly when it comes to its grid-scale product for utilities, will be whether it offers the right software controls and other components to make batteries work as a package beyond EVs.

The biggest impact could be outside the U.S. The Gigafactory, which Tesla is building with Japanese electronics giant Panasonic, will capitalize on the U.S. network that Musk has built through SolarCity.

As its production goes up, and prices for both solar panels and batteries come down, the implications could be huge for developing countries such as India that are plagued by outages and energy poverty. Musk said at Thursday's launch event that Tesla's batteries will be sold internationally.

"When you look at it as a worldwide phenomenon, this is absolutely game-changing," Chamberlain says. "It's a fascinating thing that's going to happen in our lifetimes."

On Twitter: Follow Christina Nunez and get more environment and energy coverage at NatGeoGreen.

The story is part of a special series that explores energy issues. For more, visit The Great Energy Challenge.