Tesla’s take on the residential battery shakeout

Earlier this month, Tesla announced the latest addition to its suite of residential storage partners, at the RE+ conference in Anaheim. Starting in 2025, Tesla’s Powerwall will support smart breakers made by the Irish power equipment company Eaton, the company said.

Amid a year of massive growth in storage for the EV giant, Tesla is now intent upon simplifying its residential installation process, according to a spokesperson familiar with the company’s efforts  — and the Eaton partnership embodies this shift in priorities toward intelligent load management. (Tesla is famously reluctant to speak publicly about its strategy, but the spokesperson agreed to speak with Latitude Media on background.)

“The most efficient and economic way [to manage rising electrification load] is localized distribution and flexible load, while also doing centralized sustainable energy with dispatch and controls from storage,” the spokesperson said. “And what we’re finding is, increasingly on both sides of that equation, the glue that holds it together — the network operator, if you will.”

In Tesla’s view, fulfilling storage’s potential as a network operator on the home side of that equation comes down to both the speed and the cost of that installation process.

“For all the will in the world to move to a sustainable energy infrastructure, it has to be economical, and where the rubber really meets the road is the installation,” the spokesperson said. “How do you make it such that an installer can get into a site and install the project in a single day? That’s the north star, and that’s what has to be solved in order to get solar installers to add storage, but also add intelligence and everything else.”

That focus was a driving factor behind the release of the Powerwall 3 earlier this year, they added. With the Powerwall 2, Tesla quickly found that installation was becoming half the cost “if not more.” The latest iteration is therefore “mostly focused on installability, as a pathway to attack affordability.”

The state of home storage

In its latest earnings report, Tesla told investors that deployments of its storage offerings — residential and utility scale — had increased by 158% year over year, doubling in revenue during that time. (At the same time, the company’s other business lines faltered.) 

That massive growth coincided with the first year of California’s controversial net billing tariff, which implemented a new compensation structure for residential solar customers to sell power back to the grid.

But Tesla is seeing broad success with residential storage far beyond the Golden State, the spokesperson said.

“The residential storage market in the U.S. is booming, it’s going exponential right now,” they added. “We’re particularly seeing with the Powerall 3, which is a relatively new product, storage adoption pretty much everywhere.”

Earlier iterations of Tesla’s home storage solutions saw adoption primarily in places like Hawaii and California, but now the market is significantly broader. Some solar installation partners have reported that up to 70% of their customers are adding in a Powerwall, even in places where there aren’t VPP programs or tariffs, the spokesperson said.

In Tesla’s view, that saturation is largely down to affordability. Tesla sees offering competitively priced storage products as a long game; when those markets are ready to implement VPPs, for instance, Tesla’s batteries will ideally be ready and waiting to play a major role.

That said, it’s a tough period for storage, in which companies like Northvolt and Moxion that were investor darlings mere years ago are struggling or else going under entirely; and the residential storage market is experiencing the same “shakeout” that the broader battery industry is going through, the spokesperson said.

The spokesperson likened the current moment in storage to the 2010s in the solar industry: “Circa 2006, 2007, solar was the cool thing in Silicon Valley…everyone was chasing $1 a watt,” they said. “Over time, fewer and fewer players start to scale bigger and bigger. That doesn’t mean there isn’t room for new entrants or novel ideas, but I think this is probably one of those first shakeouts, where the market is starting to figure out the winning strategies.”

“I would call it the end of the beginning: the end of the first part of the book of residential energy storage,” they added. “This next part, I think, is scale, scale, scale.”