After struggling with electric cars, American automakers are turning to energy

Tesla’s energy storage business is an elder statesman, more than a decade old. Growth in sales of Powerwall (battery storage for homes) and Megapack (battery storage for utilities and commercial facilities) in recent years has helped offset declines in electric vehicle sales, although the last quarter saw a surprising decline in energy revenue. However, Tesla is moving forward with plans to launch a facility in Houston dedicated to a new, larger Megapack later this year.

In all, 11 battery cell manufacturing plants are being retooled for energy storage, according to a March count by BloombergNEF, eight of them in the United States.

Driving time

One reason investors are bullish on battery energy storage is their continued enthusiasm for artificial intelligence. AI companies need data centers, and data centers need power. Batteries are well-suited for data centers, says Shan Tomok, who leads battery energy storage research at Benchmark Mineral Intelligence, a research firm focused on battery supply chains. Batteries can directly help power power-hungry cores, which constantly power servers and other devices, as well as the cooling systems that keep them running.

Storage systems can also be suitable for data centers that often rely on other energy sources, such as natural gas. Battery power storage systems can act as a backup power source if something breaks down, and can help data centers manage large, wild power fluctuations related to AI training. They can also help reduce demand on the network, lowering costs not only for data centers, but for everyone else who relies on the same system — an important upside in already technology-hostile societies.

“If the huge market for data centers continues to grow every year, it makes sense for automakers to pivot,” Tomok says. He is expected to do so. “In the United States, there is a real push to build data centers, to keep the United States number one in terms of artificial intelligence.”

For automakers moving away from electric vehicles, there’s another potential upside to battery storage, even if the hub isn’t fully operational. “If automakers aren’t making money from storage and aren’t making money from EVs, they would rather not make money from storage because it’s not competing with their gas vehicle production,” says Jill Tal, who directs the Center for Electric Vehicle Research at UC Davis’ Institute for Transportation Studies. “It makes perfect sense, unfortunately.”