The Gigafactory will take in the raw materials for lithium batteries and put out finished packs, not only for the electric vehicles made by Tesla and its automotive customers, but also for massive amounts of renewable energy storage – that's a niche the company plans to begin to occupy sometime early next year with residential-sized products. The production volume is expected to be at least 30 gigawatt-hours-worth per year. That's more storage than all the lithium battery factories in the world combined produce now. Color us impressed.
The production volume is expected to be at least 30 gigawatt-hours-worth per year.
Now, you might be thinking, "Is it really necessary to go that big at this point in time?" In a word: yes. Tesla CEO Elon Musk has said its upcoming, more-affordable vehicle – widely expected to be called the Model E – will wear a $35,000 price tag and boast a battery big enough to take it 200 miles on a charge. To achieve this, the cost of the cells needs to come down dramatically, and so it's no coincidence that the time frame for the new facility will parallel that of this car. According to Musk, the benefits from the economies of scale will see a cost drop between 30 and 40 percent.
Of course, historically high prices are one of the main reasons why battery storage has not been widely used in the renewable energy sector, so this development could help drive more demand for cleaner, affordable energy, which, in turn, will drive demand for more storage. That's the kind of vicious cycle we like to see.
Speaking of renewables, that is where the Gigafactory will get much of its needed energy. During the call with financial analysts that accompanied the release of its 2013 fourth quarter earnings report, Musk mentioned that the new plant will be "heavily powered" by wind and solar energy, and will also use older Tesla packs for storage. These will help deflect the traditional arguments against wind and solar, that the sun doesn't shine at night and the wind doesn't always blow.
Musk said the Gigafactory will be "heavily powered" by wind and solar energy.
This leads us to the question of where will the Gigafactory will land. It ought to be some place with lots of sun and wind and, perhaps, a state government keen on incentivizing a new and innovative industry. One, perhaps, that hasn't passed laws to discourage the sale of Tesla's car within its borders. The hot new rumor sees that location as somewhere in Nevada. According to the Reno Gazette-Journal, the Silver State is being seriously looked at, and may have recently beat out New Mexico as the preferred building site. It certainly would stand to reason. Not only does it have ample sun for solar energy production, it's also the location of the only brine pool lithium production in the US and is close to the company's California operations.
The financing of the Gigafactory, which has been estimated to cost as much as $2 billion to build, is, as they say, a known unknown. It obviously has to happen, but the specific arrangements remain a mystery. Will new Tesla stock be issued? Or, will a new entity be created by the automaker and its various partners? Certainly it could provide an interesting investment option for those with confidence in Musk's low-carbon vision.
While we wait for for the earth to spin on its axis a few more times and bring us the official announcement, please feel free to let us now what you expect to hear about the Tesla Gigafactory in the Comments.