Earlier this month, Elon Musk and JB Straubel, respectively CEO and CTO of Tesla Motors, visited Europe for a few meetings with owners of the Model S. We learned about a few interesting new features included in the upcoming update of the Model S software and general guidelines for the future of the company, but something in particular caught my attention during the meeting in Amsterdam. Someone asked a few questions about energy storage for home usage. The person was quite insistent and got the two executives talking on the subject. 

Tesla didn't build the Model S with the capacity to send power to your house. The car can receive electricity from your home, but not the other way around. It is a little-known fact that Tesla's first car, the Roadster, had that capability built in, but the Roadster was a sport car, more likely to spend more time in the garage and add less mileage to the meter. The Model S, however, is a completely different vehicle, and it is being mostly used as a commuter.

Some Model S owners have been pushing Tesla to enable the capability, assuming it's a matter of software, but that's only an assumption, since such a feature could also require additional hardware. The appeal of a home energy storage system is obvious for its usefulness in a power outage situation to provide power for your basic needs, but most people are interested in the product for the opportunity to save money on their utility bill.

From SolarCity's website:

An additional benefit of energy storage is to reduce peak-usage charges on your utility bill. Some utilities offer Time-of-Use (TOU) rate plans in which the price of electricity varies based on the hour of the day. Rates are higher during the afternoon when electric demand is at its "peak" across all utility customers.

A storage system may help you save more money by drawing power from your battery instead of from the grid during higher rates peak hours. You can then recharge your battery during lower rate, off-peak hours.

Tesla and SolarCity
Tesla and SolarCity already partnered on a project called DemandLogic to offer a stationary battery packs for businesses to save money using Time-of-Use rates and maintain power for essential equipment during power outages, but the project seems to be limited to businesses and is only available in areas of California serviced by Pacific Gas & Electric and Southern California Edison, areas of Massachusetts serviced by NSTAR, and areas of Connecticut served by Connecticut Light & Power.


Source: SolarCity.

Tesla's battery pack is currently being tested by SolarCity for residential use in selected California markets, and it hopes to offer the service nationwide by the end of the year, according to its website.

Production constraint
There are currently production constraints on the Model S, and the main reason is the supply of battery cells. One might be concerned that Tesla would have difficulty supplying battery packs for home energy storage if it can't even build enough power trains for its own cars, which is obviously its main business, but Elon Musk addressed this concern in a tweet in December after the announcement of DemandLogic:


Source: Twitter

The fact that Tesla's CEO felt the need to specify that the supply will be safe in the short term might indicate that he foresees a high demand, or that maybe he wants to make sure no one starts questioning the long delivery time of the Model S once the stationary battery packs begin shipping.

The future of home energy storage
Energy storage is the logical next step for the solar industry. In the long term, it will free solar panels owners and solar leasing companies, like SolarCity, from utilities and net metering. In the foreseeable future, the technology will allow people to completely get off the utility electrical grid, but in the short term, it can be introduced to consumers as an efficient way to reduce their utility bills while proving a very useful device in case of a power outage.

When asked about a timeline at the meeting in Amsterdam, Elon Musk mentioned the possibility of stationary battery packs being delivered to Europe as soon as next year. The whole situation leads me to believe the DemandLogic service and the systems being tested in California are pilot projects to test the technology for a bigger introduction in the near future.

Of course, there are a lot of assumptions -- far too many to start talking about numbers -- but I think it might be a very interesting revenue stream for both Tesla and SolarCity -- a stream that might flow sooner than anticipated.

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Frédéric Lambert owns shares of SolarCity and Tesla Motors. The Motley Fool recommends SolarCity and Tesla Motors. The Motley Fool owns shares of SolarCity and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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