Tesla’s energy storage business picked up steam in the second quarter and even played a minor role in the company’s fourth consecutive quarter of profitability, according to earnings reported Wednesday.

Commercial and residential energy storage sales as well as solar are still mere slices of Tesla’s overall business, which is largely dominated by automotive. However, second-quarter results show some promise for energy storage, particularly Megapack, the utility-scale energy storage product that launched in 2019 and is modeled after the giant battery system it deployed in South Australia.

While Tesla does provide separate deployment stats for solar and energy storage, it combines the two when reporting revenue, making it impossible to fully measure the success of Megapack. However, Tesla made a point in its earnings statement to flag Megapack as a winner in the second quarter, and noted that it turned a profit for the first time.

“There’s a lot of demand for the product and we’re growing the production rates as fast as we can,” Drew Baglino, senior vice president of powertrain and energy engineering, said during Wednesday’s earnings call.

For the past four years or so Tesla has been asking investors to view it as an energy company instead of just an automaker. Some analysts think that the real value in Tesla’s business will be when it actually achieves some level of parity between the two sides of the shop — a goal that Musk is also shooting for.

But energy storage and solar has remained in Tesla’s automotive shadow, despite assurances that these business products will eventually be equals. For now, energy storage remains a small, but growing, fraction of Tesla’s revenue.

Global consulting firm Mercom Capital Group has released its report on funding, mergers and acquisitions within the battery storage, smart grid, and energy efficiency sector during the first half of 2020.

Total corporate funding (including venture capital funding, public market, and debt financing) for battery storage, smart grid, and energy efficiency companies in 1H 2020 was down 38% year-over-year (YoY) with $1.5 billion compared to $2.4 billion raised in 1H 2019.

Global venture capital funding (venture capital, private equity, and corporate venture capital) for battery storage, smart grid, and efficiency companies in 1H 2020 was 51% lower with $858 million compared to over $1.8 billion in 1H 2019.

In Q2 2020, VC funding for battery storage, smart grid, and efficiency companies increased with $605 million in 26 deals compared to $252 million in 16 deals in Q1 2020. Funding amounts were 61% lower YoY compared to the $1.5 billion raised in 21 deals in Q2 2019. The decrease in funding activity was primarily due to a billion-dollar deal in the Battery Storage sector in Q2 2019.

Battery storage

VC funding in battery storage companies in 1H 2020 was down by 61%, with $536 million in 14 deals compared to $1.4 billion in 17 deals in 1H 2019, according to the new Mercom Capital report.

A total of 26 VC investors participated in Battery Storage funding in 1H 2020.

Announced debt and public market financing activity in the first half of 2020 ($180 million in five deals) was 67% lower compared to the first half of 2019 when $547 million was raised in five deals.

There were five announced battery storage project funding deals in 1H 2020, bringing in a combined $26 million compared to $499 million in four deals in 1H 2019.

In 1H 2020 there were a total of eight (all undisclosed) battery storage M&A transactions compared to six transactions (one disclosed) in 1H 2019.

Technology group Wärtsilä has been awarded a contract to build a hybrid liquid petroleum gas (LPG) and light fuel oil (LFO)-fuelled power plant with an energy storage system to support grid stability in the US Virgin Islands.

The plant will deliver a total output of 36MW, while the energy storage system will add further 9MW for up to two hours.

The project, which was ordered by the US Virgin Islands Water and Power Authority (USVI WAPA), aims to improve the existing grid stability on the island and drive the energy transition towards low carbon systems.

Lawrence Kupfer, CEO of USVI WAPA, said: “The Wärtsilä plant will provide much needed additional baseload capacity to the island’s electricity supply.

“It will improve the system’s reliability, while at the same time giving us additional fuel and operational flexibility that will increase fuel efficiency and lower overall operating costs. It will also reduce the dependence and environmental impact of diesel oil.”

Tesla’s energy storage business picked up steam in the second quarter and even played a minor role in the company’s fourth consecutive quarter of profitability, according to earnings reported Wednesday.

Commercial and residential energy storage sales as well as solar are still mere slices of Tesla’s overall business, which is largely dominated by automotive. However, second-quarter results show some promise for energy storage, particularly Megapack, the utility-scale energy storage product that launched in 2019 and is modeled after the giant battery system it deployed in South Australia.

While Tesla does provide separate deployment stats for solar and energy storage, it combines the two when reporting revenue, making it impossible to fully measure the success of Megapack. However, Tesla made a point in its earnings statement to flag Megapack as a winner in the second quarter and noted that it turned a profit for the first time.

“There’s a lot of demand for the product and we’re growing the production rates as fast as we can,” Drew Baglino, senior vice president of powertrain and energy engineering, said during Wednesday’s earnings call.

For the past four years or so Tesla has been asking investors to view it as an energy company instead of just an automaker. Some analysts think that the real value in Tesla’s business will be when it actually achieves some level of parity between the two sides of the shop — a goal that Musk is also shooting for.

But energy storage and solar has remained in Tesla’s automotive shadow, despite assurances that these business products will eventually be equals. For now, energy storage remains a small, but growing, fraction of Tesla’s revenue.

The US utility-scale energy storage market is projected to maintain its position as the world’s largest and fastest-growing in the coming years, according to a new report from Guidehouse Insights.

Despite the rapid growth, the development of new utility-scale energy storage systems (ESSs) remains highly concentrated in a few states. The market research provider’s report shows California, New York, and Texas lead the top 10 US energy storage markets.

Alex Eller, senior research analyst with Guidehouse Insights, said utility-scale energy storage in the US “has quickly transformed from an expensive and poorly understood niche technology to a major source of new investment”.

“While several states have seen a blossoming storage industry, many others have little to no utility-scale energy storage currently operating,” he said.

“However, this reality is expected to change quickly as the falling costs of batteries and other technologies allow utility-scale energy storage projects to compete directly with conventional fossil fuel systems.”

The report, ‘Leading US States for Utility-Scale Energy Storage’, says the US utility-scale energy storage market is the most diverse in terms of the uses of energy storage and the number of competitors and technologies.

It notes that while the market is highly fragmented, additional states are quickly emerging as strong markets. However, the report warns of varying market structures, regulations and economic applications for projects in different states.

A new study has concluded that the economic value of energy storage increases as variable renewable energy generation increases its share of electricity supplied, however, the degree to which such variable renewable energy sources can be deployed hinges upon the future availability and cost of energy storage technologies.

The new study recently published in the journal Applied Energy was authored by researchers from the Massachusetts Institute of Technology (MIT) and Princeton University’s Andlinger Center for Energy and the Environment (ACEE), supported by General Electric (GE).

The research analysed battery storage technology in an effort to determine the key drivers impacting its economic value, how that value changes with increasing deployment over time, and the implications for energy storage’s long-term cost-effectiveness.

“Battery storage helps make better use of electricity system assets, including wind and solar farms, natural gas power plants, and transmission lines, and can defer or eliminate unnecessary investment in these capital-intensive assets,” said Dharik Mallapragada, research scientist at the MIT Energy Initiative (MITEI) and the paper’s lead author.

“Our paper demonstrates that this ‘capacity deferral,’ or substitution of batteries for generation or transmission capacity, is the primary source of storage value.”

There are other sources of value for energy storage identified by the report, including its ability to provide operating reserves to electricity system operators, avoiding fuel cost and wear & tear incurred by cycling on and off gas-fired power plants, as well as shifting energy from low price periods to high value periods.

However, the paper conclusively showed that these sources are of secondary importance compared to the value energy storage creates by helping to avoid capital-intensive capacity investments.

Total corporate funding (including venture capital funding, public market, and debt financing) for battery storage, smart grid, and energy efficiency companies in 1H 2020 dropped 38% year-over-year (YoY) with $1.5 billion compared to $2.4 billion raised in 1H 2019. That’s according to a new report from Mercom Capital Group.

The report notes that global VC funding (venture capital, private equity, and corporate venture capital) for battery storage, smart grid, and efficiency companies in 1H 2020 was 51% lower with $858 million compared to over $1.8 billion in 1H 2019.

In Q2 2020, VC funding for battery storage, smart grid, and efficiency companies increased with $605 million in 26 deals compared to $252 million in 16 deals in Q1 2020. Funding amounts were 61% lower YoY compared to the $1.5 billion raised in 21 deals in Q2 2019. The decrease in funding activity was primarily due to a billion-dollar deal in the battery storage sector in Q2 2019.

Battery Storage
VC funding in battery storage companies in 1H 2020 was down 61%, with $536 million in 14 deals compared to $1.4 billion in 17 deals in 1H 2019. The report claims the decrease was due to Northvolt’s $1 billion funding round in Q2 2019.

The top 5 VC funding deals in 1H 2020 were the following: QuantumScape raised $200 million, ProLogium Technology raised $100 million, Demand Power Group secured $71 million, Highview Power secured $46 million, and Nanotech Energy raised $28 million. A total of 26 VC investors participated in battery storage funding in 1H 2020.

Announced debt and public market financing activity in the first half of 2020 ($180 million in five deals) was 67% lower compared to the first half of 2019 when $547 million was raised in five deals.

There were five announced battery storage project funding deals in 1H 2020, bringing in a combined $26 million compared to $499 million in four deals in 1H 2019.

In 1H 2020 there were a total of eight (all undisclosed) battery storage M&A transactions compared to six transactions (one disclosed) in 1H 2019.

Energy generation has never been a single technology market. Gas, coal, nuclear, hydro, solar and wind all make a significant contribution to our global generation capacity, and each play different roles based on their specific characteristics.

For instance, nuclear provides low-carbon baseload, whilst gas generally meets more flexible, peaking requirements with a higher carbon cost. Renewables, once a high-priced subsidy-only option, are now considered to be a key low-cost and low carbon part of our future generating mix.

The energy storage market is no different. I don’t believe there will be a ‘one size fits all’ technology solution, given the wide variety of technical requirements and market designs that allow grids to operate effectively.

Could one energy storage technology technically perform every conceivable requirement? Yes, quite possibly, but specialisation in the market will deliver far more economically optimal solutions.

Approaching the roles that storage can play with a single technology would be like leaving your toolkit at home and turning up to a DIY job with just a hammer – it’s capable of a great many things, but it really isn’t the best tool to paint the bedroom with.

Differentiation will emerge as energy storage grows in future grid scenarios
Instead of a one-size-fits all situation, I believe the future will see a segmentation in the energy storage market, driven by myriad factors including; technology type, age, warranty limitations, control systems, financing structures and operating strategies. The technical and economic factors driving this segmentation will necessitate different storage products for different applications; once deployed, a further segmentation for dispatch will evolve.

We can see this today, for example within gas there are a wide range of solutions, from reciprocating engines to combined-cycle gas turbines (CCGTs). Selection amongst these competing solutions is made at the time of deployment based on the specific purpose they are intended to serve. During their operational lifetime, each generator is dispatched to meet market requirements at lowest cost. The same will be true for energy storage. Within a storage fleet you’re going to have older installations (based on earlier technologies) coming to the end of their life, competing in the same markets alongside newer systems, with different chemistries, warranties and operating strategies. It is easy to see how differentiation will emerge as energy storage grows in future grid scenarios.