Tesla wants to sell electricity directly to Texas households

It’s part of a long-standing plan to expand beyond the company’s signature electric cars.

Tesla wants to sell power directly to Texas households, according to an application filed with state regulators by its new Tesla Energy Ventures subsidiary.

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Tesla founder Elon Musk, who moved to Texas last year, has told investors he expects the company’s energy business to one day rival its auto manufacturing, according to Bloomberg. He wants to turn Tesla into multifaceted clean energy company, and purchased the financially strapped solar panel provider Solar City to forward those ambitions.

For Texas, any significant expansion by Tesla could help diversify the state’s energy mix, which is dominated by oil and gas. The limitations of the state’s light-touch regulatory environment were put on display earlier this year when a cold snap knocked out power for weeks across the state.

Tesla, which markets itself as a premium brand, isn’t expected to be among the bargain-basement retailers fighting to sign up customers by running interstate billboards offering free power on nights and weekends. Tesla could sell kilowatts that are either drawn from the grid—when it is working—or pulled from Tesla-made home batteries when the grid goes down. Importantly, Tesla could also let individual Texans with solar panels earn money by sharing their excess power with the grid. That’s something that, today, only large commercial customers can do easily.

Tesla also told the state’s grid operator that it wants to build two giant utility-scale batteries that will serve wholesale power companies in the state. A 250-megawatt battery would be located near its under-construction Gigafactory outside Austin, where it plans to build Cybertrucks and Model Y SUVs. Another massive battery would be located outside Houston, according to Bloomberg.

People aware of Tesla’s strategy tell me the company had hoped to enter the state’s deregulated power market earlier. Then came the widespread blackouts due to February’s winter storms, which ripped through the power markets like an EF5 tornado, leaving over a hundred dead and the state on the hook for more than $10 billion in costs that providers such as Brazos Electric Power Cooperative couldn’t pay.

Five electric retailers have exited the market since February, including train wrecks like Griddy, as well as others forced to purchase electricity on the spot market for $9,000 per megawatt hour and then sell it to customers who’d locked in prices below $50. Even as state regulators mull a market redesign to clean up that mess, companies like Tesla see opportunities. Thirteen different companies have submitted applications to sell power in Texas since the blackouts, according to a tally given to me by a Public Utility Commission analyst.

Tesla said in the filing it made with the PUC that it plans to drum up business among existing Tesla customers, targeting them through its mobile app and website. The company, with its all-electric branding, does seem well positioned to tap into a loyal customer base that’s interested in moving past fossil fuels. On top of that, plenty of Texans already seem to be the kind of electricity buyers and sellers that Tesla’s new energy venture could serve. As of June, Texans had installed more than 1 gigawatt of personal solar panels, according to federal energy data. That trails only Arizona and California. (By comparison, the South Texas Project Electric Generating Station’s two nuclear reactors can each generate 1.28 gigawatts of power.) With all those new solar panels and Tesla’s Powerwall batteries being controlled by Tesla-managed algorithms, Texas homes could conceivably use Tesla to become their own power plants operating on an interconnected grid.

That could fatten the bottom line for Musk’s company, and would be in keeping with where he expects Tesla to go. In 2020, Musk told investors that he believed Tesla’s energy business could one day rival its electric-vehicle manufacturing operations. “I think long-term Tesla Energy will be roughly the same size as Tesla Automotive,” he said.

For Musk, the benefits of Tesla’s foray into the Texas power market may also be personal. He could have the chance to drive a vehicle made in Texas by one of his companies and fill it with electricity sold by another of his companies, as he motors through Boca Chica—sorry, Starbase—to watch rockets made by one of his companies take off. At this rate, Tesla might want to rename itself Texla.

Still, while Tesla could be a welcome addition to the state’s troubled power grid, Musk has promised plenty of things he’s yet to deliver on. (When’s that hyperloop coming?)

But anyone who can launch a sports car into space because of, well, reasons, seems like a pretty good fit for the wild west of deregulated power markets. So, welcome to Texas, Elon. Stay a while. Something interesting is bound to happen before long.