EnerNOC and Tesla will enable enterprises to monetize the batteries through demand charge management and demand response using EnerNOC’s EIS. Initial collaboration will include select EnerNOC customers in California.

Enablement of EnerNOC customer sites with Tesla energy storage systems is currently underway.

Energy management today is more complicated than simply buying power from the utility. Innovative companies like Tesla give us new options that enable us to reduce our reliance on the grid when prices are high, and EnerNOC’s software gives us the visibility we need to make informed decisions about when to use these technologies and how to measure the impact they're having on our business.

—Scott Limbacher, Vice President of Construction and Maintenance at Stater Bros. Markets, a Southern California supermarket chain

Lux Research noted that with its massive capacity for lithium-ion batteries from the Gigafactory coming online soon, Tesla and its supplier Panasonic need new markets to which to sell, and the burgeoning stationary energy storage market is a ripe target—albeit targeted by other providers as well—but that Tesla will need more help—through acquisitions and partnerships—to succeed.

Cheap cells made in the Gigafactory are only part of the puzzle. Unlike electric vehicles, in stationary batteries there is more of a relative cost contribution coming from power electronics, software, and installation. Without more vertical integration—and perhaps even some acquisitions and Gigafactory-like efforts dedicated to inverters—Tesla is limiting its growth potential here.

—Dean Frankel of Lux Research

The distributed energy storage space already has many players offering standalone and solar-connected battery systems, so Tesla is certainly not the first to market. However, the EV maker does have key product scaling benefits afforded to few of its competitors, through its relationships with Panasonic for lithium-ion cells and SolarCity, the largest residential solar installer (with Elon Musk as Chairman).

Still, in order for Tesla to see success, the EV maker must tackle three key areas, Lux said:

• Cost reduction beyond Li-ion cells. At $350/kWh, Tesla is the industry’s current price leader for stationary Li-ion packs, due to its partnership with Panasonic and its upcoming Gigafactory. However, consumers will also need to pay for an inverter, installation, and other costs, which altogether will nearly double the $3,000 price of Tesla’s entry-level Powerwall unit. Tesla will need to push their power electronics and installation partners to cut their costs further—or do that itself, either in-house or via acquisitions.

• Offering financing and new residential business models. Tesla and SolarCity have relied on California’s self-generation incentive program (SGIP) for the majority of its systems to date. However, SGIP is an unsustainable model in the long term. Tesla has to establish new business models beyond residential load shifting, to open up all US and international markets. Moreover, Tesla’s stated goal of selling 30% of its output from the 50 GWh Gigafactory to stationary markets implies about $3.7 billion in revenues in 2020. Providing financing options for many of those purchases will be key, echoing the successful strategy that solar has already employed.

• Working with utilities, not against them. As more distributed solar comes onto the electric grid, utilities are increasingly at odds with consumers and companies like SolarCity. Energy storage can turn distributed generation into a utility asset, but only a few utilities have explored owning and controlling smaller residential and commercial systems. For Tesla to impact the stationary market, it will need to work with utilities and grid operators to ensure its solar and storage solution can be a key grid management tool. Its initially announced utility projects—with Southern California Edison and Oncor—are excellent demonstration trials, but just a start; Tesla will need to bring hundreds of more utilities on-board, which will take time and resources.

Tesla stock is trading down slightly this morning following CEO Elon Musk’s livestreamed announcement of the stationary storage systems last night.