Tesla’s value . Astronomically. It’s now the . The company has had a 85.93% share price increase since the Dec 2016 and now has a ~$56Bn market cap. has not produced as many cars in its lifetime as the . So is that right? Are we skewed in our valuation of companies because they are more technologically innovative than others? The answer is yes. But, in Tesla’s case, it’s a lot more complicated and it’s definitely not for the reasons we think. I’ve had this conversation with a few non-utility industry friends and I had to write a post to share. jumped this past week 8th highest valued car brand in the world Yes, in a world where it #1 car manufacturer produced last year Most Tesla investors are focused on the long term possibilities of value that the company can capture from i) unleashing driverless cars (video below), ii) on the 98% of the market that is left unserved and iii) from more sales of more cars (Tesla Model 3) . Solarcity installations of solar panels to the masses But these things are not where the true (over)value of Tesla’s stock price comes from. While car sales and solar panels are valuable, they are not as valuable as the opportunity to make good on the promise Elon Musk made in his . Tesla Master Plan Part Deux It’s All About The Powerwall There is a lot of talk about how Elon Musk and other purveyors of solar, wind, energy storage etc., , , a utility that operated on a centralized business model of generating electricity in one location and transmitting it over a distance to a customer who paid for whatever amount of electricity they consumed. This disruption is central to what Musk is looking to do with Tesla. all classified as Distributed Energy Resources (DER) are disrupting the traditional utility It truly is about the utilization of DER. Musk clearly states this in his . The company goals are Tesla Master Plan Part Deux : discussed below Integrate Energy Generation and Storage : more cars to more people Expand to Cover the Major Forms of Terrestrial Transport : driverless cars and Autonomy : . Sharing A market that is not major and has a lot of companies competing in it It’s the whole point for the gigafactory which, , might actually be delivered on time. The Powerwall also does not require a similar disruptive innovation model of selling first to high-value customers (as Tesla did with the electric vehicles) as there are currently markets and use cases where the price/kWh of the electricity from the Powerwall is market competitive. unlike most other Tesla announcements Integrating Energy Generation and Storage The real value of Tesla as a company comes from the many and global use cases that Tesla can get from simply generating electricity from solar (through Solarcity)and deploying electric cars & Powerwalls everywhere as energy storage. From storing the energy generated by a solar panel (for e.g.), there are basically two benefits to energy storage technologies like Powerwall and Tesla car batteries. Storage can be used to : peaks in electricity load to reduce demand charges on your electricity bill (demand charge reduction), to reduce the electricity the owner of the battery pulls from the grid during high electricity charge periods (time-of-use bill reduction), storing electricity when the price is low to sell when the price is high (arbitrage), for critical load usage during power outages (back up power). Avoiding electricity costs and losses High value uses of storage for avoidance or cost reduction include leveling : High value uses of storage for revenue generation included using storage when a customer is participating in a utility program that provides money for not drawing electricity from the grid (demand response) and stabilizing frequency on the grid (frequency regulation). Generating revenue While there are many other medium and low value storage use cases on the electricity grid, what the list above shows (to those within the electricity industry and now to you) is that storage . . And, obvious but worth stating, electricity is at the core of everything we do in our digital economy across the world. Save for clean water, air and (to a certain extent) food, electricity is the same commodity everywhere in the world. This essentially makes the whole planet the total addressable market for storage/electricity. So it’s truly all about the Powerwall… pretty much covers almost all the use cases that are of any value towards maintaining a stable and functional electricity grid Storage is also the best transition technology between the current state of the electricity grid (which is not great) and the future utility So Is Tesla Worth That Much? With continued delays in delivery, , there will be issues along the way of matching the company’s value and stock price. Elon is now expected to make product pronouncements his companies cannot deliver on _According to Ronald Brakels, a blogger in Adelaide, Australia, the DC version of the Tesla Powerwall 2 will not be…_cleantechnica.com Tesla May Drop DC Powerwall 2 Option In Most Markets That being said, Tesla can provide the storage use case solutions shared above in markets across the world. This is already playing out as Powerwalls were deployed at , are being installed in , were sold to (image below) and to all with different grid uses cases. The critical point here is that the market opportunity for the storage solution is global. And that’s what’s being priced into the stock. We’ll see how it plays out. scale in Hawaii Australia Singita Safari Lodge in South Africa Virunga Gorilla park in Congo Image courtesy of Electrek What’s left is for Elon Musk and his crew to not screw this up for both their investors and us the customers on the (future) electricity grid. We all can’t afford for the substance to not match the hype… s_ign up for the Polymathic Monthly Newsletter_ Please share, like and tweet. Write your own blog posts using our WYOP tool (it gets you into writing flow) and here , you’ll love it.
