Quick Memo: How Fast Can You Build a Battery Factory?

The Age of Batteries

Tesla and its competitors are racing to bring fully electric trucks to the market. Tesla is already trying to mass produce it’s affordable offering the Model 3. If the electric trucking revolution happens will there be enough batteries?

Via CNBC Via Tesla

The Tesla Gigafactory 1 began mass production of batteries starting in January 2017 and upon its completion it will become the world’s largest battery factory and more than double the current battery production capacity. Since construction of Gigafactory 1 there have been similar talks and investments into other massive scale battery factory operations all over the world. If more battery factories the size of the Tesla Gigafactory 1 are finished within the next decade the overall battery production output of the world will continue to grow and the price of batteries will continue to fall.

Northvolt is a Swedish company that is planning on building its own gigantic battery factory in Skelleftea, Sweden. Peter Carlsson recently disclosed on This Week in Startups with Jason Calacanis that the Northvolt factory would need about 4 billion dollars of investment to reach full maturation. The factory would also utilize a significant amount of electricity to create these batteries that was only possible due to Sweden’s extensive network of hydroelectric dams. The amount of electricity needed to fully power a Gigafactory 1 size site is not trivial and can put significant strain on most modern electric grids. Northvolt plans to build this factory despite Norway’s “Tesla Tax” that will increase the cost of buying a Tesla.

Telsa also plans on building Gigafactories in Europe and China, but LG Chem has already beaten Tesla to Western Europe by planning on construction of their own large scale battery factory. LG will open Europe’s largest battery factory near Wroclaw, Poland with an expected capacity of 100,000 electric vehicle batteries per year. The facility is expected to come online in 2019.

The planning and opening of these factories will offer thousands of jobs for the local sites and are a sign that the demand for batteries is growing significantly not only for electric vehicles, but for residential and commercial energy storage. It seems unlikely that battery production will reach overcapacity anytime soon despite multiple continents starting to build Gigafactory size production facilities.

Tesla has already started construction of the world’s largest biggest battery array in Australia to help solve problems of peak power consumption for the world’s largest island nation. Elon Musk joked that the two month construction time was faster than remodeling a kitchen. The battery project just passed its halfway point at the end of September. If Tesla fails to build the battery on time then Australia gets the battery for free.

The building of these factories is a sign that the world will slowly start to have the ability to store large amounts of energy and disperse it into the grid when needed. This could allow for the reduction of power generation capacity to handle peak consumption and it could also allow for energy generation technologies such as wind and solar to play an even bigger role in maintaining the grid. Northvolt’s Peter Carlsson acknowledged that eventually energy might be free in his conversation with Jason Calacanis. If we have free energy then free food and water might not be that far behind.

Note 1/1/2018: Eventually even batteries will become obsolete and these massive battery factories will either be converted to produce something else with existing assets or will be closed. The investors into these manufacturing sites should keep this concept in mind and hopefully the people building them understand that the winds that carried them to their current heights will not blow in perpetuity.

Deal Memo is looking for start-ups in the battery space to write about and we are excited about the area, but it’s asset heavy, full of risk, and very supply chain dependent.

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