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| By Jon Markman |
Power companies are scrambling to meet accelerating energy needs, and it is a big opportunity for investors. Fortunately, virtual power plants are coming.
VPPs are pooled networks of small energy-producing or storage devices, like solar panels and batteries. The novel idea is that these resources can be tapped by electric utility companies during periods of peak demand to improve overall grid reliability.
A recent — and unfortunately, deadly — lesson shows why this is such a big idea …
The Texas power grid failed spectacularly in February 2021, following an unexpected winter storm. As temperatures plummeted, natural gas, coal and nuclear plants were all knocked offline. Even the wind turbines froze.
And once the powerplants went offline, engineers were unable to restart them quickly in subzero conditions. It was a disaster.
The New York Times reported that demand for power during the cold spell peaked at 69,000 megawatts, surpassing the worst-case scenario for an extreme weather condition.
Utility companies had no choice but to enforce the use of controlled power to avoid longer-term damage to key infrastructure. Epidemiologists later determined that tragically, 210 people died during the 2021 winter storm — many from hypothermia.
The Electric Reliability Council of Texas was formed in 1970 to manage the flow of electric power statewide. ERCOT was supposed to prevent catastrophic events, such as the fallout from the February 2021 winter storm.
Even though ERCOT failed, some valuable lessons were learned …
An Unlikely Solution for Texas
Two Tesla (TSLA) VPPs were approved this week by the state of Texas. The pilot project allows homeowners with power backup systems to sell energy back to the power grid, improving overall reliability.
Under an Aggregate Distributed Energy Resource pilot project announced last week, Tesla Electric customers with Powerwall energy storage systems can help avoid future power grid failures.
Homeowners and small businesses will be able to sell surplus energy to CenterPoint Energy customers in the Houston area and the Oncor Electric Delivery Company, operating in Dallas.
Utilities customers within these ERCOT power grid systems should get improved reliability. Tesla Powerwall owners should get paid.
These VPPs are part of a larger Tesla power business that never gets talked about.
Tesla Power and the government of South Australia announced in 2019 that a joint project would incorporate up to 50,000 home solar panel and Powerwall battery systems. The giant VPP project was extended in September 2021 to include Victoria, Australia. It’s already working well.
In May, South Australia’s government noted that electricity rates for the VPP are now the cheapest in the state — 23% lower than the default market offer.
The value proposition for Tesla Power is that its product brings cheaper prices, while being based on battery technology — a core strength of Tesla automotive.
Green energy requires battery technology because wind and solar farms are subject to natural shortfalls. The wind does not always blow, and nightfall limits solar power generation. Batteries are needed to store and transport green energy.
Batteries have become a big part of …
Tesla’s Master Plan 3
Back in February, Tesla CEO Elon Musk spent much of the company’s investors’ day event talking about how batteries will play a pivotal role in moving the world to renewable energy.
Musk says that the world needs to get to 240TWh of storage capacity to reach energy sustainability. That’s an enormous amount.
That’s why the introduction of VPPs in Texas is such a big deal. Tesla is quietly making inroads into the power generation and storage business in much the same way the company began with electric vehicles.
Investment experts and automotive industry insiders scoffed at the viability or need for EVs. However, since the company’s initial public offering in 2010, shares are up a whopping 20,953%.
Click here to see full-sized image.
At its current stock price, this means a $10,000 investment made in 2010 is now worth $2,105,300.
Tesla stock is perched slightly below its 50-day moving average at $257.50. Longer-term investors should continue to accumulate the stock. The next part of the growth story is beginning … and it starts with power storage.
That’s all for today. I’ll be back with more soon.
All the best,
Jon D. Markman
P.S. Tesla is also a major innovator in the world of AI, despite still being known as the EV-maker. While autonomous vehicle AI is one major industry set for huge profits, there's another sector I'm targeting right now. Check out our latest presentation on the most important AI industry right now.
