This week, Tesla Motors announced plans for a $5 billion “gigafactory,” a large-scale factory designed to produce batteries for mass-market electric vehicles by 2017. This kind of facility would allow Tesla to produce more cars, faster and cheaper, and would allow for a more vertically integrated production of Tesla vehicles. Tesla expects that, by moving the manufacturing of the batteries in-house, it can reduce the per-kilowatt cost of a battery by more than 30 percent in the first year of production.
Tesla itself plans to invest $1.6 billion in the factory, but that leaves a lot of capital to raise. GigaOM reports that Tesla’s current battery supplier Panasonic could have plans to fund the project to the tune of $1 billion, possibly with other battery manufacturers joining as well.
Beyond the question of how exactly Tesla plans to raise the remaining billions to fund the factory, several other details remain unknown. The factory will be located in the Southwest, with Arizona, Nevada, New Mexico, and Texas as the “finalists” for the plant’s location. The New York Times notes that Tesla’s approach has surprised some experts. "I wasn’t expecting a two-step process, with bidding left," said Efraim Levy, senior automotive equity analyst at S&P Capital IQ.
Never one for a subtle approach, the announcement followed an earlier announcement proclaiming Tesla’s $761 million in fourth quarter earnings. In a shareholder letter, the company predicted that 2014 vehicle production would begin at 600 per week and reach 1,000 per week by year-end, noting batteries would by and large be the limiting factor.
The Q4 earnings exceeded Musk’s earlier target revenues of 25 percent of gross margin. In 2013 the automaker distributed nearly 22,500 Model S sedans and expanded into Europe and Asia.
In other news, Fast Company’s “The World’s Most Innovative Companies 2014,” the magazine's "annual guide to the businesses that matter most," featured several advanced energy companies. That’s not surprising, as innovation is a driving force behind advanced energy. The advanced energy industry lends itself to the development of disruptive technologies that will make the global energy system more clean, secure, and affordable. Google, Tesla, and Nest made the list, as did Dow Chemical, citing the development of the Powerhouse solar shingle, and the solar crowdfunding platform Mosaic. Check out the full list of advanced energy companies here.
This year has already been big for advanced energy investment, including an announcement of $40 billion in global investment from Goldman Sachs earlier this month. This week, General Electric announced that it would invest an additional $10 billion into its Ecomagination initiative, which would bring the GE’s total investment in the initiative to $25 billion by 2020. The program has already brought in $160 billion in revenue for GE, and Greentech Media reports that the sales of Ecomagination-branded GE products have outpaced the company’s other sales. The $10 billion is expected to funnel mainly into three areas of research: increasing the output of GE’s wind turbines, improving the efficiency of natural gas-fired power plants, and R&D partnerships with two natural gas companies.
This wave of investment frankly makes sense. As discussed in AEE’s Advanced Energy Now Market Report 2014, Advanced Energy is a $1.1 trillion global market and growing. Download the report to discover the full size and scope of this growth industry.