Tesla Motors (TSLA 1.16%) wants to win the energy storage war -- but one of the biggest energy storage players is gearing up for battle, and it's not clear who will come out ahead. Here's what you need to know.
Big G Is Back
General Electric Company (GE 1.05%) recently announced that it's getting back into the energy storage game. After a strong start in 2009 and the grand opening of a $170 million production factory in 2011, GE nearly threw in the towel earlier this year.
But it's recently become clear that GE is simply switching strategies. Its cheaper but bulkier Durathon battery technology was a nice idea, but GE has decided, just like Tesla Motors, that lithium-ion is the future.
In April, the megacorporation flexed its muscles with a small 8 MWh energy storage system for Consolidated Edison in Central Valley, California. But a couple of weeks ago, General Electric Company made clear that its energy storage solutions will be more than pilot projects. In California's Imperial Valley, GE will build a 30-MW storage system for Coachella Energy Storage Partners. As President Mike Abatti put it: "We chose GE as the energy storage system provider for this project because they supplied the most comprehensive solution at a competitive price. GE is well-positioned to serve the needs of the project and will remain a stable, reliable technology provider as the energy storage industry evolves."
For Elon Musk over at Tesla Motors, those words must sting. Let's unpack a few of these phrases to better evaluate who's winning this energy storage war.
First, GE does provide a more comprehensive solution. Founded in 1892 , GE has been revolutionary for the industrial sector since, well, almost the Industrial Revolution. It's an all-in organization that has a vast knowledge of the power sector along every step of its supply chain. That can come in handy when determining how best to plop an energy storage system into a pre-existing grid.
Tesla Motors' energy storage solution may be just as robust, but its role as a "disruptor" and a stand-alone gadget may be less attractive to traditional energy companies.
The bottom line is essential to any company's comparative advantage. According to California media outlet The Desert Sun, the total cost of GE's project is $38 million, equivalent to $1.27 million per MW. Tesla Motors touts an infinitely scalable model where each module costs $3,000 and is capable of 0.002 MW of continuous power. But if Tesla Motors is truly offering a module-by-module system, bigger doesn't mean cheaper. On a simple cost-per-power-unit comparison, General Electric wins out.
General Electric Company
$ per MW
$1,266,667 per MW
$1,500,000 per MW
"Stable, reliable technology provider"
This is where General Electric's advantage becomes less clear. GE has enjoyed over a century of success, churning out products to customers and dividends to investors. But in just over a decade, Tesla Motors has proven itself to be the most reliable automaker on the market, and it approaches every innovation with an eye toward excellence.
If there's one thing every investor should know, it's that past performance is not necessarily indicative of future performance. Both companies are undergoing significant changes. GE is downsizing to home in on its industrial business, and Tesla Motors is figuring out the future of its battery business.
As an investor in both companies, I have an optimistic outlook and believe that General Electric Company and Tesla Motors are both stable, reliable technology providers. But in the energy storage world, each has won battery battles. General Electric has proven itself to be a formidable opponent, and investors will need to keep a close eye on these two companies to determine who will win the energy storage war.