Tesla, the American electric vehicle and clean energy company, has secured a contract worth $413 million to install its Megapack battery energy storage systems in two facilities in Massachusetts. The contract will provide a total capacity of 800 MWh, helping to boost the stability of power grids and prevent outages. Each Megapack unit has a storage capacity of over 3 MWh, which is enough to power 3,600 homes for an hour.
While Tesla’s energy storage segment is smaller than its automotive business, it has been experiencing significant growth. In Q1 2023, Tesla’s energy generation and storage revenues increased by 148% year-over-year to $1.5 billion, accounting for 6.6% of the company’s total revenues. The deployment of Tesla’s battery energy storage systems (BESS) also rose by 360% year-over-year, reaching a new quarterly record of 3,889 MWh or almost 4 GWh.
This rapid growth can be attributed to Tesla’s efforts to ramp up Megapack production in its recently built 40 GWh Megafactory in California. The company plans to produce 10,000 Megapacks annually in this factory. Tesla has also announced plans to construct another 40 GWh Megafactory in Shanghai, China to meet the increasing demand for its energy storage systems.
The contract with Massachusetts will enable the state to achieve 80% of its 1 GWh energy storage deployment target by 2025. Under the approved contract, Tesla Megapacks will power two battery energy storage facilities in the state, with a total of 218 units. The Cranberry Point Energy Storage facility in Carver will have a capacity of 150 MW/300 MWh and will serve the New England region. The Medway Grid facility will have 140 Tesla Megapacks on site, along with a substation and a 300 MVA transformer.
Megapack was first launched in 2019 and was initially used in California for PG&E’s Moss Landing project, which involved over 400 Tesla lithium-ion Megapack batteries. Since then, Tesla has deployed its smaller battery energy storage systems, Powerwall and Powerpack, at more than 50,000 sites worldwide. For example, Tesla built a 6 MW/48 MWh Powerpack system in Nantucket, Massachusetts, which can power half the homes on the island for up to 8 hours.
The increasing demand for Tesla’s Megapacks reflects the growing market for grid-scale battery energy storage solutions. Research indicates that this market is expected to grow at a rate of over 24% through 2027, reaching over $15 billion. This growth is driven by the transition from fossil fuels to renewable energy sources and the need for energy storage to support the integration of renewable power into microgrids.
The International Energy Agency predicts that renewables will account for over 90% of global electricity capacity expansion from 2022 to 2027. As a result, the global grid-scale battery energy storage systems market is expected to experience significant growth, particularly in regions where renewables are growing at an above-average rate. This presents a significant opportunity for Tesla Energy and its battery energy storage solutions like Megapack.
Tesla’s clean energy segment, which includes its battery energy storage systems and solar panel installations, is part of the company’s commitment to sustainability. These operations generate carbon credits by reducing carbon emissions, which has provided Tesla with billions of dollars in revenue. While the clean energy segment is not yet comparable to the company’s electric vehicle production, it is expected to become one of Tesla’s major revenue streams.
Megapack, in particular, offers a powerful grid-scale energy storage capacity that can be recharged using clean and renewable energy sources. It plays a crucial role in stabilizing local grids, promoting sustainable energy infrastructure, and providing a safe and reliable source of power for communities and the environment.