Tesla stock surges on storage speculation

Tesla stock surges on eve of domestic, commercial and utility-scale energy storage announcement. Experts warn of high valuation.

Tesla stock surges on eve of domestic, commercial and utility-scale energy storage announcement. Experts warn of high valuation.

UPDATE: Elon Musk has unveiled the price of Tesla’s ‘Powerwall’ consumer product will be USD$3,500, significantly below expectations.

By Jason Deign

Tesla Motors shares were changing hands for mind-boggling amounts ahead of a likely energy storage announcement as Energy Storage Report went to press this week.

The electric vehicle maker’s stock, which was given junk-bond rating less than a year ago, closed at just over USD$230 a share yesterday after having peaked at $237.06 on Monday.

Tesla’s valuation soared at the beginning of the week after Deutsche Bank issued a ‘buy’ recommendation relating to a battery storage announcement due tomorrow.

“Tesla’s announcement may be more significant than the market indicates,” said Deutsche Bank. “While stationary storage is still in its infancy, we believe that there are clear indications that significant growth lies ahead.”

There appears to be little doubt that tomorrow’s announcement, scheduled for 8pm, Pacific Standard Time, at Tesla’s design studios in Hawthorne, Los Angeles, will be fully focused on energy storage.

Information leaked already

Indeed, given the amount of information leaked already it might be difficult for Tesla’s effervescent boss, Elon Musk, to find much new to say.

Back in February he announced during an earnings call that: “We are going to unveil the Tesla home battery, the consumer battery that would be for use in people’s houses or businesses, fairly soon.”

And last month he Tweeted that tomorrow’s event would be to unveil a “major new Tesla product line – not a car.”

Finally, last week Bloomberg reported on an email to investors and analysts from Tesla’s head of investor relations, Jeffrey Evanson, confirming the announcement would relate to residential and ‘very large’ utility-scale batteries.

There is even a fairly good idea of what Tesla’s residential energy storage products will look like, thanks to press reports relating to SolarCity customers who have had early versions of the battery systems for the past year or so.

“An uninterruptible power supply”

According to information gleaned from investment analyst Trip Chowdhry in The Guardian, “the Tesla battery system is basically an uninterruptible power supply.”

The Guardian says the system is being offered in 10 and 15kWh configurations and costs about $13,000.

In California, though, the utility Pacific Gas & Electric will give users a 50% rebate, “presumably because it can be used to decrease load on the grid during peak use hours.”

Chowdhry revealed that Tesla’s business model is likely to be lease-based, with an initial payment of around $1,500 and then monthly payments of $15 for 10 years, after which the customer hands back the system.

The analyst said he believed there would be a niche for the product among homeowners with a keen need to keep the lights on in the event of a blackout.

A product you can’t live without

“If you feel naked when you leave your iPhone at home, this is a product you can’t live without,” he told The Guardian.

Tomorrow’s announcement comes as a number of potentially game-changing players are eyeing up the energy storage market.

Earlier this year, for example, it emerged that the tech giant Apple was considering thermal energy storage for wind power. Apple also faces legal action after poaching battery experts from A123 Systems.

To date, though, it is probably Tesla, with its Gigafactory manufacturing plans, which has led speculation around energy storage coming into the mainstream in the US.

And not just in residential energy storage, which most analysts believe could still take a few years to make real economic sense in markets such as California.

Last week, for instance, Bloomberg noted that Tesla had signed nearly half of the applications made under the California Self Generation Incentive Program (SGIP) for commercial-scale projects.

Batteries for commercial uses

“A review of California’s SGIP shows Tesla has ambitions to sell batteries for a range of commercial uses, from powering its factories to reducing electric bills at schools and wineries,” Bloomberg said.

“Tesla is on track to reap as much as $65m in SGIP rebates, which are designed to encourage investment in alternative energy.”

Notwithstanding the potential upside, however, some voices have expressed concern over the feeding frenzy around Tesla shares right now.

“Traders are getting charged up about Tesla’s prospects, but both the technicals and fundamentals may indicate the stock is close to reaching its top,” wrote CNBC producer Lawrence Lewitinn yesterday.

And one day trader consulted by Energy Storage Report said: “The shares are at $232 and in Q2, 2013, it was around $40. It doesn’t look good. They look pretty over-rated.”

Meanwhile Tesla’s reputation as a high-tech leader took a knock last weekend after its website and Twitter account were hacked, with the online criminals offering to give away free cars from the company.

Given the level of expectation surrounding tomorrow’s announcement, Musk may well have to come up with something just as spectacular simply to keep his business from going into meltdown.

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