Energy storage is often touted as one of the growth markets Tesla Motors (NASDAQ:TSLA) is planning to target with battery production from its Gigafactory in Nevada. Partnering with SolarCity (NASDAQ:SCTY.DL), Tesla has a natural partner to reach both residential and commercial customers.
But if you think Tesla is alone in going after the energy storage market, you're sadly mistaken. Dozens, if not hundreds, of companies around the world are building energy storage solutions, and they're attacking the market from a number of different angles. Tesla has a lot of challengers to overcome to be a big player in energy storage.
Competitors eyeing the energy storage market
Below I have just a small snapshot of 11 players to keep an eye on in energy storage. Not every company manufactures batteries themselves and there are a number of strategies being employed, but the key takeaway is that companies big and small are targeting the same market as Tesla.
Enphase Energy (NASDAQ:ENPH) is one of the largest players in the solar inverter market, and they're looking at energy storage as a way to stay relevant in inverters. The storage system, as they see it, becomes the intelligent hub between solar panels and the grid. Being able to store energy will allow Enphase to stabilize home and grid impacts, adding value for everyone involved.
Alevo is a start-up with $1 billion in funding that is building a grid energy storage system called GridBank. Recently, it announced an agreement with Customized Energy Solutions to build 200 MW of energy storage that will serve the frequency regulation services to the wholesale energy market.
Sunverge is an energy storage company with backing from Total (NYSE:TOT) and a partnership with Total's solar company SunPower (NASDAQ:SPWR). It's combining energy storage and cloud software to "automatically lower electricity bills, improve reliability, and protect the grid." With its Total and SunPower ties, this is a company to watch closely in the future.
Germany's version of the Gigafactory is being built by Batterien-Montage-Zentrum (BMZ), a manufacturer of rechargeable batteries for mobile devices. The factory is planned to be 5 Gw-hrs, much smaller than Tesla's proposed 35 GW-hr size, but still a sizable competitor as the company moves into Germany's massive renewable energy space.
NEC Energy Solutions is a major grid storage player built from the remnants of former market high-flyer A123 Systems. Last year, it bought A123's old grid business from China's Wanxiang Group. The company says it has 110 MW of grid energy storage deployed, and now that it's under the NEC brand, the business should be given an opportunity to thrive. A new scalable storage solution launched last month is targeting off-grid solutions, which could be a big growth opportunity for energy storage.
Johnson Controls (NYSE:JCI) is a major battery supplier in the auto business but a latecomer to the grid energy storage business. It tried to acquire A123's assets before losing out to the Wanxiang Group, and it's now working on grid solutions on its own. Johnson Controls has an interesting role because it's a major HVAC systems designer and could play a role in building smarter buildings with energy storage capabilities incorporated into the building's infrastructure.
Samsung is one of the largest battery makers in the world, and it has a growing number of solutions for everything from 1-10 kW-hr residential systems to utility systems over 1 MW-hr. What Samsung could do is incorporate its many other electronic devices into smart homes powered by its energy storage solutions, which would be an innovative way to disrupt the energy storage market. No matter what it does, I wouldn't discount Samsung in energy storage.
LG Chem is another massive battery maker, and it recently partnered with grid equipment giant Seimens (NasdaqOTH: SIEGY) to collaborate on industrial battery storage. LG Chem is already one of Tesla's biggest competitors in the electric vehicle market, and energy storage will be no different.
What would the battery market be without BYD throwing its hat in the ring? BYD is making indoor and outdoor large-scale energy storage systems for wind and solar, and it's also getting into microelectronics.
Saft is a leader in batteries for renewable energy and rough industrial applications, and it may be a competitor worth watching long term. It just reported sales of 678.4 million euros in 2014, and it has extensive experience providing batteries in places like the arctic and grid storage for microgrids.
Mitsubishi has thrown its hat in the ring with an investment in Lithium Energy Japan. The manufacturing giant's thought is that electric vehicles will play a major role in building grid level energy storage, a thesis others have had in the past. That strategy may evolve, but this is another big player in the energy storage market.
Tesla Motors is far from alone
I'm just scratching the surface of the number of companies who make batteries or are investing in the energy storage market. The point here is that Tesla Motors is far from alone, and it's really trying to disrupt a battery market that is well established, with many large players.
What I question is whether or not Tesla can do anything fundamentally different than any of these competitors. If it can't, Tesla will be entering the commodity battery market and competing on price rather than with a high-margin differentiated technology. There's a big difference between the profit potential of the two markets, which investors should keep in mind.
Tesla has big goals for energy storage, but it's not a guaranteed success considering the stiff competition already in the market.