Electric-car, battery, and solar company Tesla Motors (TSLA -3.14%) took a key step this week in advancing its nascent energy storage business when it celebrated the world's largest lithium-ion storage installation at electric utility Southern California Edison's Mira Loma substation. But despite its unprecedented scale, Tesla chief technology officer JB Straubel said the project is "just the tip of the iceberg in the future of how much storage we are going to see on the grid." 

Tesla's Mira Loma substation energy storage installation.

Tesla's Mira Loma substation energy storage installation. Image source: Tesla Motors.

Tesla's Mira Loma installation

Tesla's completed lithium-ion battery storage installation boasts 80 megawatt-hours (MWh) of battery capacity and helps Southern California Edison provide more reliable electricity for about 15 million people. Tesla says the batteries could store enough energy to power 2,500 homes all day, or 15,000 homes for four hours. The energy storage installation, along with two other similar energy storage projects for the electric utility by two other companies, will help the utility operate a flexible grid that delivers clean energy, said Southern California Edison CEO Kevin Payne at a ceremony acknowledging the project's completion.

As the largest energy storage project Tesla has deployed yet, the company's late-2016 introduced Powerpack 2 units were used for the utility-scale system. The updated Powerpack builds on the company's first-generation Powerpack, which was first introduced in May 2015. The new Powerpacks, which have 200 kilowatt-hours of capacity, have twice the energy density of the first-generation versions. Further, the Powerpack 2 has a new, Tesla-designed and produced inverter, which Tesla asserts is "the lowest cost, highest efficiency and highest power density utility-scale inverter on the market."

While the pricing details of Tesla's Powerpack project for the Mira Loma substation weren't made public, Bloomberg's New Energy Finance analysts believe it's possible that Tesla flexed its unprecedented scope of its new Gigafactory in Nevada to "establish new floors for pricing, forcing the industry to follow," Bloomberg's Tom Randall reported on Monday.

Ramping up

Importantly, this project follows Tesla's announcement in January that the company had doubled the size of its Gigafactory since last July to a 1.9 million-square-foot footprint and 4.9 million square feet of operational space on the building's multiple levels. In addition, Tesla said in January the company had begun mass producing the company's new, high-performance cylindrical "2170" lithium-ion battery cells for use in its energy storage products, with cells for its upcoming Model 3 vehicle scheduled to begin in Tesla's second quarter.

Tesla's Gigafactory being constructed in stages.

Tesla Gigafactory. Image source: Tesla Motors.

As the company continues to build out its Gigafactory, Tesla is ramping up energy storage production at exponential rates, and the economics of Tesla's Gigafactory are playing a key role in making Tesla's value proposition compelling. Not only were all of the products for the installation built at Tesla's Gigafactory, but Tesla emphasized the U.S.-based production dramatically increased the speed with which the company was able to produce and deploy this battery storage.

"That's part of how we were able to do this site in such a fast response time, literally if we had to ship things from overseas, that would have taken up a third a third of the available time for the entire deployment," Straubel explained at the ribbon-cutting event. Tesla's scalability and rapid deployment will be "key to advancing energy storage on the grid," Straubel said.

Tesla eventually hopes an 80 MWh installation will be dwarfed by the total levels of energy storage the company is regularly deploying. By 2018, Tesla is planning for the Gigafactory to support 35 gigawatt-hours of annual cell production for its vehicles and energy storage products combined. Meanwhile, Tesla apparently already has its work cut out for it: "It's sort of hard to comprehend sometimes the speed all this is going at," Straubel told Bloomberg. "Our storage is growing as fast as we can humanly scale it."

Editors note: A previous version of this article mistakenly said Tesla's Gigafactory is expected to support 350 gigawatt-hours of annual cell production instead of 35 gigawatt-hours. The author regrets the error.