HAWTHORNE, Calif.—Tesla Motors Inc. Chief Executive Elon Musk unveiled a line of home and industrial battery packs late Thursday, representing a strategic shift as his money-losing electric car company tries to break into a crowded energy storage market.
More than just a splashy evening party in a hangar at Tesla’s Southern California design studios, the event was the 43-year-old billionaire’s attempt to bring attention to an alternative business unit that has long been under development.
Mr. Musk says “power wall” batteries—ranging from a $3,000 7 kilowatt-hour wall-mounted unit to a $3,500 10 kwh unit—cost far less than the going rate for large-scale batteries and can be easier to install. Palo Alto, Calif.-based Tesla aims to begin delivering units by the summer from its California car factory, and later shift production to a $5 billion battery plant under construction near Reno, Nev.
Tesla also will sell massive battery blocks for industrial users and open-source the patents for the entire range, much like the company does with electric-car technology. Mr. Musk portrayed the effort as a breakthrough toward transforming energy use in favor of renewable resources.
“We’re talking about trying to change the fundamental energy infrastructure of the world,” he said during a public unveiling. “This is actually within the power of humanity to do. It is not impossible.”
Mr. Musk sees the potential for the battery business to match or surpass Tesla’s car business in terms of the potential for energy generation. He expects demand to range from countries where solar is popular, such as Germany, to developing economies that don’t have existing power lines.
Eventually, he expects Tesla will need to build more factories modeled after its Nevada factory.
Tesla’s first battery customers include Green Mountain Power Corp., Vermont’s largest utility. It plans to buy Tesla packs and sell them to customers that already have solar power.
Green Mountain Power Chief Executive Mary Powell said she thinks the rapid spread of solar power, combined with lower battery costs, will lead a revolution in power distribution.
Another customer is TreeHouse Inc., an Austin-based home improvement store concentrating on ecologically friendly goods. The store will sell the battery packs along with its own solar installation options.
A new market is growing for robust batteries. Initially developed for electric cars, they are now being installed at buildings, wind farms and other places that can store electricity for later use. Tesla said its home products can be configured as a backup device, or to buy power at night when prices are cheap and discharge it during the day, or store power collected from solar panels for later use.
About 62 megawatts of batteries and other energy-storage devices were installed in 2014 at 180 properties, at a value of about $128 million, up 40% from the previous year, according to energy research firm GTM Research. Battery installations this year are likely to more than triple, to 220 megawatts, the firm predicts.
Utilities such as Duke Energy Corp. and Edison International have installed large battery systems next to wind farms. The batteries store electricity that the wind turbines generate at night and release the power to the grid in the late afternoon and early evening when electricity demand spikes.
Other companies, such as Stem Inc. and Green Charge Networks are installing batteries for large retailers and hotels, to help the companies limit their power usage and cut their utility bills.
Government subsidies can reduce the cost of installing the batteries. In California, state rebates cover up to 60% of the price of the battery. Nationwide, batteries that are connected to solar panels are eligible for federal tax credits equal to 30% of the price of the battery.
California’s subsidies and a mandate requiring utilities to use batteries or other devices to store power have put that state at the center of the stationary energy-storage market. Hawaii, Texas and some eastern states also are using batteries to store electricity from solar panels and wind farms, and to keep the flow of electricity on transmission lines moving smoothly.
Tesla batteries initially will use cells made by Panasonic Corp., the supplier of batteries in its Model S electric sedan. When production shifts to Reno, costs will drop by 30%, it estimates.
The new battery models include large, standing industrial-level batteries intended for use by utilities sold in units of 100 kilowatt-hours, which cost $250 per kilowatt-hour. The company already has a customer with plans to install 250 megawatt-hours-worth of such batteries, Mr. Musk said.
Its home model, called “power wall,” comes in sleek black and white models and will be aimed at people who want to more efficiently use power from solar panels or go entirely off the electrical grid, Mr. Musk said. The larger home model can store enough electricity to power a home for 10 hours, Tesla said.
The Power Wall batteries will be installed through certified third parties, including SolarCity Corp., where Mr. Musk is chairman.