Tesla CEO Elon Musk announced on Twitter on Sunday that his company would build a factory in Shanghai with the goal of assembling 10,000 giant batteries annually for electricity producers and distributors.
The batteries, which Tesla calls Megapacks, are designed to store large amounts of electricity: a single Megapack can power 3,600 homes for an hour, according to Tesla. The batteries, which are about the length and height of an international shipping container, can discharge electricity to run factories or homes when demand on the local power grid is high or during a blackout.
The ability to store electricity when it is not in demand is critical as electric utilities move toward wind and solar power to replace energy generated by fossil fuels. In China, demand for grid storage batteries is particularly strong. Many provinces now require new solar and wind farms to have enough batteries to hold 10 to 20 percent of the electricity they generate.
China has also been liberalizing its electricity markets in response to waves of blackouts in the fall of 2021, when demand overwhelmed the country’s power suppliers. Many factories were closed for days, and some office towers had to be evacuated before their elevators lost power. Part of a chemical factory exploded, injuring dozens of workers, when it suddenly lost the electricity needed to maintain the mixture of temperature, pressure and other variables needed for its processes.
China has responded by allowing electricity prices to vary much more throughout the day in hopes of encouraging more fluid use of energy. Electricity becomes cheap when the sun shines brightly or the wind blows strongly, generating so much renewable energy that factories and homes may not be able to use it immediately.
Variable electricity pricing aims to encourage electricity users to switch off energy-consuming devices when demand is high, reducing the risk of blackouts. The combination of China’s price change and regulations for new renewable energy facilities to store electricity has created rapidly growing demand for batteries.
Tesla is also active in renewable energy: it is a large manufacturer of solar panels in the United States.
Large batteries allow power generators, electricity users and even speculators to buy electricity when it’s cheap and sell it when the price rises.
“It’s this gap that determines whether storage is in the money or not,” said David Fishman, senior director at Lantau Group, an energy consulting firm in Hong Kong.
Mr. Musk said in a tweet that the goal of the new factory was to “supplement the production of the Megapack factory in California.” The Biden administration, as well as the Chinese government, have been pressuring companies to make big investments in emerging technologies.
The $370 billion Inflation Relief Act, which President Biden signed last year, provides incentives for the production of rechargeable batteries in the United States to supply the American market.
The Shanghai government declined to immediately comment on Tesla’s announcement.
For Tesla, Shanghai is the site of its largest electric car manufacturing factory. The plant not only supplies China’s domestic vehicle market, but also exports large numbers of cars to Europe, where Tesla has found it more difficult to build factories as quickly as in Shanghai.
