Tesla Solar & Energy Storage Revenue Surpasses Costs - $810M
Tesla's Expanding Energy Business
While Tesla is primarily recognized for its electric vehicle sales, recent financial reports indicate substantial growth within its energy generation and storage sector.
Growth in Energy Solutions
According to Tesla CEO Elon Musk, the potential for further expansion within this division is contingent upon securing an adequate supply of necessary microchips for its energy storage products.
The company’s latest quarterly report detailed $801 million in revenue generated from its energy business. This encompasses three core offerings: solar energy systems, the Powerwall residential and commercial storage solution, and the Megapack utility-scale storage unit.
Improved Profitability
Despite representing a relatively small portion of Tesla’s overall $12 billion revenue, the energy division is experiencing significant sales increases. Revenue climbed by 62% compared to the previous quarter and exceeded 116% growth when contrasted with the same period in 2020.
Notably, the cost of revenue for solar and energy storage reached $781 million. This signifies a pivotal moment, as production and distribution costs were, for the first time, lower than the revenue generated from these products.
Deployment Increases
Total deployments of these technologies have also risen considerably. Tesla installed 1,274 megawatt-hours of energy storage during the second quarter of 2021, marking a 205% increase year-over-year.
Solar energy deployments also saw substantial growth, reaching 85 MWh in Q2 2021, a 214% increase from Q2 2020. It’s worth noting that deployments were largely stagnant between Q2 2019 and Q2 2020, likely due to disruptions caused by the pandemic.
Revenue Surge
The most significant development is the acceleration of revenue growth. In 2019, Tesla reported $369 million in revenue from its solar and storage business.
Revenue remained relatively unchanged in Q2 2020, at $370 million. However, the most recent quarter’s revenue more than doubled the figures from the corresponding quarters in both 2019 and 2020.
Factors Driving Growth
Several factors have contributed to this positive trend. Tesla attributes the growth to the commissioning of multiple Megapack projects and the increasing popularity of its combined solar and Powerwall package.
Currently, Tesla mandates that customers purchase a solar installation alongside a Powerwall system. A single Megapack is priced around $1.2 million before taxes, as indicated on Tesla’s website, with delivery timelines extending into 2023 in certain regions.
Supply Chain Challenges
Despite the positive momentum, Tesla’s energy storage business is encountering obstacles. Elon Musk highlighted that demand for both Megapack and Powerwall units currently surpasses the company’s production capacity, resulting in a growing order backlog.
The global semiconductor shortage is the primary constraint, preventing Tesla from fulfilling the existing demand.
Prioritizing Vehicle Production
Tesla utilizes the same chips in its Powerwall systems as in its vehicles, and Musk stated that vehicle production will take precedence when chip supplies are limited.
Long-Term Outlook
Looking ahead, Musk estimates that a combined annual production capacity of 1,000 to 2,000 gigawatt-hours will be necessary to meet future energy storage demands.
Tesla has requested its cell suppliers to double their output in 2022, although this goal is contingent upon resolving ongoing supply chain issues. The company’s strategy involves overproducing cells and allocating excess supply to its energy storage products, but vehicle production will remain the priority in situations like the current chip shortage.
Battery Cell Strategies
During discussions regarding battery cell technology, Elon Musk highlighted Tesla’s progress with its 4680 cell, currently under development.
He also addressed the company’s plans to utilize more affordable lithium-iron-phosphate (LFP) batteries across various products.
Shift to Iron-Based Batteries
Musk indicated a strong possibility of transitioning all stationary storage systems to iron-based battery chemistry.
This would represent a move away from the currently used nickel-manganese-cobalt (NMC) and nickel-cobalt-aluminum battery types.
“A shift to approximately two-thirds iron and one-third nickel is anticipated in Tesla’s future battery plans,” Musk stated.
This strategy is advantageous due to the abundant global supply of iron, contrasting with the limited availability of nickel and cobalt.
Allocation of Battery Chemistries
Approximately one-third of Tesla’s battery production will continue to utilize nickel-based chemistry.
These batteries will be reserved for electric vehicles requiring extended driving ranges.
The remaining electric vehicle models will adopt LFP batteries.
This transition is already underway in vehicles manufactured at Tesla’s facilities in China.
The move to LFP for standard range vehicles and stationary storage is driven by cost and material availability.
