Tesla Motors Inc. will supply 20 megawatts (80 megawatt-hours) of energy storage to Southern California Edison as part of a wider effort to prevent blackouts by replacing fossil-fuel electricity generation with lithium-ion batteries. Tesla's contribution is enough to power about 2,500 homes for a full day, the company said in a blog post on Thursday. But the real significance of the deal is the speed with which lithium-ion battery packs are being deployed. 

"The storage is being procured in a record time frame," months instead of years, said Yayoi Sekine, a battery analyst at Bloomberg New Energy Finance. "It highlights the maturity of advanced technologies like energy storage to be contracted as a reliable resource in an emergency situation."

Eoin Treacy's view

Tesla is essentially a battery company which also happens to produce electric cars. It has been my argument for quite some time that the only way solar can achieve grid parity is if it is used in conjunction with batteries. As long as solar power is subject to intermittency which forces utilities to maintain excess capacity it will not be taken seriously as a viable alternative to fossil fuels. 

The good news is that the cost of storage is coming down and business models are evolving which will help finance domestic battery packs in consumers’ homes. Privately held Green Charge Networks is one such company and there are sure to be others as the economics of paired solar and battery technology improves. 

Tesla is ramping up production of batteries but the share continues to trade on an aggressive valuation which does not leave very much room for error. 

BYD also has plans to increase its battery production to a similar scale. The share is currently testing the upper side of an almost 3-year range and has at least paused. A break in the progression of higher reaction lows, with a sustained move below HK$50, would be required to question medium-term scope for a successful upward break. 

Hon Hai Precision (Foxconn) has now completed its acquisition of Sharp which produces some of the most efficient solar cells. If it also goes down the path of producing its own batteries it has the capacity to offer a powerful value proposition considering the firm’s manufacturing scale. The share has bounced from the region of the trend mean, having broken a progression of lower rally highs in July, and a sustained move below TWD75 would be required to question potential for additional upside.