Tesla CEO Elon Musk announced on Twitter on Sunday that his company will build a factory in Shanghai with the goal of assembling 10,000 giant batteries annually for power producers and distributors.
The batteries, which Tesla calls Megapacks, are designed to store large amounts of electricity — a single Megapack can power 3,600 households for an hour, according to Tesla. The batteries, which are about the length and height of an international shipping container, can discharge the electricity to run factories or homes when demand from the local grid is high, or during a power outage.
The ability to store electricity when it is not in demand is critical as electric utilities turn to wind and solar power to replace energy generated by fossil fuels. In China, demand for grid storage batteries is particularly strong. Many counties now need new solar and wind farms to have enough batteries to hold 10 to 20 percent of the electricity they generate.
China has also liberalized its energy markets in response to waves of blackouts in the fall of 2021, when demand overwhelmed the country’s energy suppliers. Many factories were closed for days and some office towers had to be evacuated before their elevators went out of power. Part of a chemical plant exploded, injuring dozens of workers, when it suddenly lost the electricity it needed to maintain the mix of temperature, pressure and other variables necessary for its processes.
China has responded by allowing electricity prices to vary much more throughout the day in hopes of encouraging more lenient use of power. Electricity becomes cheap when the sun shines brightly or when the wind blows hard, generating so much renewable energy that factories and homes may not be able to use it all at once.
Variable electricity prices are intended to encourage electricity users to turn off high-power devices when demand is high, reducing the risk of blackouts. The combination of the price shift in China and the regulation of new renewable energy plants to store electricity has led to a rapidly growing demand for batteries.
Tesla is also active in renewable energy: it is a major manufacturer of solar panels in the United States.
Large batteries allow power generators, energy consumers and even speculators to buy electricity when it is cheap and sell it when the price rises.
“It’s that gap that determines whether storage makes money or not,” said David Fishman, a senior manager at the Lantau Group, an energy consultancy in Hong Kong.
Mr Musk said in a tweet that the purpose of the new plant was “to supplement production from the Megapack plant in California”. The Biden administration and the Chinese government have been pressuring companies to make large investments in emerging technologies.
The $370 billion Inflation Reduction Act, which President Biden signed into law last year, provides incentives for rechargeable battery production in the United States to supply the US market.
The Shanghai government immediately declined to comment on Tesla’s announcement.
For Tesla, Shanghai is the location of the largest electric car manufacturing plant. As well as supplying China’s domestic car market, the plant also exports large numbers of cars to Europe, where Tesla has found it more difficult to build factories as quickly as in Shanghai.
