Please ensure Javascript is enabled for purposes of website accessibility

Will SolarCity Become an Energy Storage Power Player?

By Travis Hoium - Apr 30, 2016 at 3:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Tesla Motors has big plans for energy sales to SolarCity in 2016.

The Powerpack could be a big product for SolarCity in 2016. Image by the author.

SolarCity (SCTY.DL) and Tesla Motors (TSLA -6.92%) are natural partners, especially because Elon Musk happens to be the biggest shareholder of both companies. But there's also another natural tie between the companies: SolarCity's effort to democratize energy production has a growing need for Tesla Motors' ability to store energy.

And it was recently uncovered by GTM Research that SolarCity has grand plans for Tesla Motors batteries in 2016.

SolarCity's energy storage plans
Over the past three years, SolarCity has signed a number of supply agreement with Tesla Motors for energy storage systems, both in the home and for businesses. By GTM Research's estimates, Tesla Motors supplied SolarCity with 25.8 MWh of energy storage systems in 2015, or 36% of all behind-the-meter energy storage installed in the U.S. "Behind the meter" basically just means the utility doesn't control the energy storage system, it's on the customer's side of the meter. 

Image source: GTM Research.

What's incredible is that Tesla expects to sell 116.5 MWh of energy storage systems to SolarCity in 2016, plus another 52 MWh that will go into the Kaua'I Island Utility Cooperative solar plus storage project in Hawaii. 

Image source: GTM Research.

Based on GTM Research's estimates (which include the declining cost of batteries), Tesla Motors is expecting revenue from SolarCity to jump from $8.0 million in 2015 to $44.0 million this year. In other words, it's expecting 450% growth in 2016 from just one customer, and SolarCity will install 60% more Tesla batteries behind the meter in the U.S. than the entire market in 2015.

Is energy storage about to take off?
What will be interesting to watch is where energy storage is actually deployed in 2016. States like California and New York are starting to see its value from a utility perspective, and in some cases commercial customers are installing it to reduce demand charges (fees based on the peak consumption, even if it's just for a 15 minute stretch of a month).

But the residential market has been a dud, as I highlighted recently, and Tesla Motors has even discontinued one of its Powerwall units. Hawaii could potentially emerge as a market where residential energy storage makes sense economically, but for now it doesn't look like a good investment in the rest of the country.

If Tesla Motors and SolarCity can tag team the energy storage market, it could be a big win for both companies. And 2016 could be a turning point for the business.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$628.16 (-6.92%) $-46.74
SolarCity Corporation Stock Quote
SolarCity Corporation
SCTY.DL

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
334%
 
S&P 500 Returns
117%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.