Tesla Inc. Chief Executive Elon Musk has placed one of his biggest bets yet on where energy development is headed and how fast he can get there.
Musk wagered a few months ago that Tesla could build a grid-connected energy-storage system in Australia within 100 days, or he'd eat the costs. Now he has a chance to prove it.
Tesla announced Friday it will build the world's most powerful lithium-ion battery storage system in the state of South Australia. Musk pledged the project would be completed in 100 days or it's free.
Tesla, based in Palo Alto, said it will team up with French renewable energy firm Neoen to complete the project by December — in time for Australia's summer to begin.
With 100 megawatts of capacity, the system would provide enough power for more than 30,000 homes for a little more than an hour at maximum output. It said the project's capacity will be three times that of the current largest battery installation.
The biggest installed lithium-ion battery sits on a site owned by San Diego Gas and Electric in Escondido. Californians have increasingly eyed battery storage as an alternative to building more natural gas plants as a way to meet the state's growing demand for clean energy.
All California utilities must produce 50% of their electricity from clean energy by 2030, and some lawmakers want the mandate raised to 100% by 2045.
Energy storage is viewed by many as a key to achieving the state's goals while ensuring that the lights stay on.
Last September, 1.7 million residents in South Australia were left without electricity after a storm damaged critical infrastructure, and early this year, more blackouts occurred. To prevent further blackouts, the South Australian government sought a renewable energy solution.
In March, Musk wagered his company could get a grid-connected battery system in South Australia installed and working within 100 days to help alleviate blackouts, going back and forth on Twitter with Australian software billionaire Mike Cannon-Brookes.
At a news conference Friday, Musk said Tesla could end up losing $50 million if the company can't finish the system in time. The specific costs of the project weren't revealed.
Although Musk is known for his ability to hype his products, his pledge isn't so far-fetched, said Robert McCullough, an energy consultant who runs Oregon-based McCullough Research.
In January, Tesla unveiled one of the world's largest energy-storage facilities in partnership with Southern California Edison. Using 400 Tesla PowerPack units, the facility can store enough energy to power 2,500 homes. That storage project was completed in 90 days.
"The good news about the equipment is it's modular," McCullough said. "If you can install one, you can install 100."
During the news conference, Musk said large-scale battery applications were the way of the future. "I do see this as something that the world will look at as an example," Musk said.
A significant step in the evolution of energy storage would fundamentally change how the electricity grid operates in California and across the nation.
Natural gas plants are seen as the bridge to a future where carbon-free, clean-energy sources such as solar and wind power provide all electricity. Natural gas plants can ramp up quickly to meet periods of high demand or provide a constant supply of electricity, unlike power generated from solar and wind, which rely on variable natural sources.
But higher-efficiency and lower-cost sources of energy storage would mean less need for fossil fuel natural gas plants that emit less pollution but still contribute to greenhouse gas emissions.
State regulators have given approval for three new natural gas plants in the Los Angeles basin, primarily to ensure ample electricity supply when solar and wind farms in the desert fail to deliver needed electricity — whether because of a lack of wind, cloud cover or a natural disaster damaging power lines.
But the Los Angeles Department of Water and Power and the operator of the state's electric grid, the California Independent System Operator, are reviewing clean-energy alternatives to a handful of other natural gas plants.
Sometimes, California produces so much solar power that the system operator must pay other states to take it.
Clean-energy proponents argue that energy storage is the answer.
Ravi Manghani, director of energy storage for GTM Research, said Musk's latest project is uniquely designed to meet Australia's need to replace the losses of power plants, such as during September's blackout.
Although the battery system will be the most powerful in the world, it could run at its full 100 megawatts only for a little more than an hour, compared with the smaller system installed for San Diego Gas and Electric, which at 30 megawatts, can power fewer homes but for as long as four hours.
Tesla's system also could power fewer homes longer but not at its highest power rating.
"It would be like operating your smartphone in power safe mode versus streaming YouTube videos," Manghani said.
McCullough noted that the western United States has been storing energy in similar ways using hydroelectric dams. The battery storage, however, reduces the size of the projects and brings them to population centers.
And at the estimated $50 million for the Tesla project in Australia, that's about 46% less than other battery cost projections.
"The bottom line is we're getting close to prime time," McCullough said.
3 p.m.: This article was updated with additional analysis.