Today, Morgan Stanley analyst, Adam Jonas, announced that his "revised price target offers 92 percent upside potential from [Tesla’s] current share price.”  According to Bloomberg Business, “Tesla Mobility could triple revenues by 2029.” Tesla closed up nearly 5 percent upon Morgan Stanley’s update. 

According to Bloomberg Business, Tesla stock value should have a bright future considering the recently predicted announcement of business plans for Tesla Mobility, a “an app-based, on-demand mobility service," and plans to reduce the cost of the PowerWall, a storage battery meant to be used in conjunction with solar energy.  

Let’s look at the basics. Tesla makes cars that run on batteries. They also make batteries. 

To meet the grid’s future demand for batteries with large storage space, Tesla Motors, Inc. (NASDAQ:TSLA) released the PowerWall in May 2015, just one quarter ago, which caused quite a stir at the time within the energy and transportation industries.

As more and more grid energy is being produced by solar, storage of the generated electricity will become an essential part of the grid system. The PowerWall is a battery that promises a future where a home, including an electric car, can have sufficient energy using only a solar PV system and batteries. Demand for the PowerWall is so high that Tesla received 38,000 reservations as of May 6 this year, only a week after the new technology’s release.  

Investors should still be cautious. Despite the PowerWall’s high demand and usefulness for solar generated grid energy in the future, it is not cost-effective once the loss of incentives is considered. Further innovation is required for true market adoption.

There are two different types of PowerWall batteries currently available to the public. One is capable of being used nonstop in conjunction with a solar energy system and the other is capable of being used as a backup generator.

In most parts of the United States, net metering (transferring excess power onto the grid) is a very important incentive for generating home electricity from solar. When the PowerWall capable of daily use is used in conjunction with solar PV systems, net metering loses its value. This is because the electricity that would normally be sold back to the grid through net metering is instead used to charge the PowerWall. The proceeds could be enough money to pay for most of a home’s electricity. However, without net metering, the all-in costs for solar PV systems are significantly higher.

SolarCity (NASDAQ:SCTY), a solar installation company partnered with Tesla, is offering the PowerWall designed to be a backup source of electricity. SolarCity’s spokesperson said that the PowerWall designed for daily use does not make financial sense for most Americans because of net metering. Hawaii is the only State where there is no net metering and electricity costs are high enough for the PowerWall designed for daily use to cost effective. For this reason Hawaii is the only place so far where this battery will be available for installation through SolarCity in 2016. Tesla’s new battery is proving to be incompatible with solar as long as net metering is of important value.  While it is possible that in the future net metering will not be profitable enough to be an important incentive, it currently offers homeowners with solar PV systems a more than fair price for their excess electricity

Even if you ignore the issues with net metering, the time it would take to save more money through using a PowerWall than the battery costs is longer than it’s ten-year warranty. Furthermore, each battery can only continuously produce two kilowatts of electricity, so most homes would need several batteries to move entirely off the grid.  Home appliances alone could use up all the energy produced by one battery. Two kilowatts of energy is barely enough to power a hairdryer and is not nearly enough to heat a home during a cold winter. According to Bloomberg, “To provide the same [sixteen] kilowatts of continuous power as this $3,700 Generac generator from Home Depot, a homeowner would need eight stacked Tesla batteries”.

There are also other more affordable generators on the market that can be powered by solar. Zamp Solar is currently offering a solar powered generator capable of up to a one-kilowatt output at about half the price of the PowerWall and includes a lifetime warranty. Other options from Zamp Solar and Goal Zero are less expensive but also have significantly smaller output. The PowerWall designed for use as a backup costs $3,500, so to provide the same amount of continuous power as a mainstream sixteen-kilowatt generator, the PowerWall batteries would cost the customer $28,000.  

While Tesla’s PowerWall aims to allow homes to be powered by using just solar and batteries, this cannot be achieved in a cost-effective manner. While Tesla’s new large-scale battery building factory will lower prices of the PowerWall significantly in 2016, this technology is not currently effective for the vast majority of Americans. While both the PowerWall and Tesla Mobility are expected to further increase Tesla’s stock value, neither will be the market this year.

COMPANIES TO WATCH:

There is insufficient graphite, lithium, and cobalt in the world to meet the demands of the large battery factories being built by Tesla Motors and other companies such as LG Chem and Foxconn. Prices for these precious metals can be expected to rise with the demand for batteries.

Syrah Resources Ltd. (SYR:ASX):  This company recently shared with the public that it is establishing two new spherical graphite plants, in Africa and the United States, to meet the demands of surging battery production.  Just before this announcement, Syrah Resources signed a deal with Chalieco, a subsidiary of Chinalco (ACH:NYSE), selling eighty thousand tonnes of flake graphite from a production site in Mozambique.  

Energizer Resources Inc. (EGZ:TSX.V; ENZR:OTCQX):  A study released in February this past year shows that the new and future projects being done by this company can be cost-competitive with China.  China is currently the main supplier of graphite for batteries around the world.

Great Lakes Graphite Inc. (GLK:TSX.V; GLKIF:OTCPK; 8GL:FSE):  Great Lakes Graphite has started up a new company called Great Lakes Innovations, which is restarting a lithium production facility that uses micronization.  This facility has the capability to produce as much as ten thousand tonnes of battery-grade graphite.

The Cobalt Industry: Fifty-five percent of cobalt comes from the Congo and new cobalt demands will need to be met.  Three North American companies searching for new cobalt assets are Global Cobalt Corp. (GCO:TSX.V) Fortune Minerals Ltd. (FT:TSX), Formation Metals Inc. (FCO:TSX).

Western Lithium USA Corp. (WLC:TSX; WLCDF:OTCQX): The closest source for lithium to Tesla’s new factory, this company is not yet producing lithium but is actively trying to develop production.

Pure Energy Minerals Ltd. (PE:TSX.V) and Ultra Lithium Inc. (ULI:TSX.V):  The  only site of lithium production currently found in North America is Rockwood Lithium GmbH’s Silver Peak site, in Nevada.  Pure Energy Minerals Ltd. is adjacent to this site and has begun a drilling project in Clayton Valley.  Also near Silver Peak, Ultra Lithium Inc. is developing a project sixteen miles away from Pure Energy Minerals’ drilling site.  These sites are all close enough to the location of Tesla’s new factory that they will likely all be considered as possible suppliers of lithium for Tesla’s new factory.

Orocobre Ltd. (ORL:TSE; ORE:ASX):  The newest company producing significant amounts of lithium, Orocobre is the first junior company using brine projects to produce lithium in Argentina.  This lithium production in Argentina started from a boom in production that began in 2009, and there is a staggering amount of lithium in the area where Argentina and Chile share borders.

 

Corey Blum is an independent journalist specializing in natural resources, the environment, and the energy industry. He is the Director of Sustainability and a regular contributor at AboutBoulder.com.  He hopes that his writing will educate readers on ways to protect the environment and boost sustainability without sacrificing their quality of life.