Well, the rumors have been flying and the press releases are coming, so it’s about time for me to talk about Tesla Energy Group. Tesla Energy Group is a group within Tesla Motors, Inc. created to allow us to design and sell Energy Storage Systems (ESSes) to other companies. (By ESSes, I mean large lithium ion battery packs made from small, commodity, cells.)

A bit of history

When we started out thinking about the Tesla Roadster ESS, many cell manufacturers were understandably nervous about the hazards of a battery pack containing a large number of their cells. The burden was on Tesla Motors to demonstrate that we understood and designed for safety, even in the event of a spontaneous cell failure. And the truth is, in the beginning we did not fully understand all the issues.

But we learned. We did quite a few “Fourth of July” tests to understand how lithium ion cells (of every stripe) failed, and what happens to adjacent cells in a tightly-packed system. We began to understand the problem more than a year before the famous Sony/Dell fiasco, and we set a corporate requirement that no such cell failure would lead to thermal propagation in our ESS. (See the white paper: The Tesla Roadster Battery System for more information.)

We then had to figure out how to make our system mass-producible – as commenters on this blog have noted, even at Tesla Roadster production volumes, manual cell connection would be unreasonable. And we had to make it light. (I had to eat some crow on this issue recently…)

We went through something like seven generations of design before we had what we consider to be a good, safe, reliable design. We validated this design with outside testing laboratories, and we demonstrated safety to the various cell manufacturers to convince them that they were not at undue risk of liability were they to sell us cells. We soon will demonstrate overall ESS safety in a series of United Nations-mandated tests so that we can ship production ESSes (and cars) over the ocean. We also recently performed the 50 mph rear-end crash test pursuant to FMVSS-305 compliance, which also is primarily concerned with battery safety.

The word leaks out

Martin with TH!NK President Jan-Olaf Willums

Along the way, word got out that Tesla Motors ESS technology is pretty darned good. Unsolicited, cell manufacturers referred companies to us. And other vehicle manufacturers came asking us about our technology.

Jan-Olaf Willums, President of TH!NK (and one-time investor in REC), approached me late last year, and invited me to tour the then-idle TH!NK production line in Oslo. After getting to know and like each other, we began discussing the possibility of a Tesla Motors-designed ESS for the TH!NK car.

Think, as some of you may recall, was once called Pivco, selling economical plastic EVs in Norway. They were acquired by Ford and renamed TH!NK during Jacques Nasser’s tenure at Ford, as part of their efforts to meet the requirements of California’s Zero Emissions Vehicle mandate. Ford pumped well over $100 million into TH!NK, completely redesigning the car to meet DOT requirements, including especially radical improvements to its crashworthiness.

But the redesigned TH!NK never hit the road – Ford ditched TH!NK the moment the mandate was gutted in 2003, selling it off to some wacky Swiss investor named Kamal Siddiqis, who subsequently bankrupted the company. (Ford originally planned to crush the American TH!NKs, but after considerable public outcry, they packed ‘em up and shipped ‘em back to Europe.)

In the mean time, a group of forward-thinking investors created a Norwegian solar panel company called Renewable Energy Corporation (REC). This company went public in Norway with a spectacular IPO in 2006 (Ticker = REC), returning a handsome profit for the visionary investors who made it happen.

Subsequently, this group of investors acquired the remains of TH!NK from bankruptcy in Norway. This was a brilliant move, because the majority of the engineering work was already bought and paid for. The biggest opportunity to improve on the Ford-designed TH!NK was to upgrade its batteries – hence Jan-Olaf’s interest in Tesla Motors.

And TH!NK is certainly not the only company that has approached us with serious interest in our ESS technology.

What to do?

I am a startup guy. I have been successful in past ventures by keeping the company focused on Job One, to the exclusion of any side business opportunities that come along. Here’s what made me change my mind for this case:

1. Working to provide actual ESSes to other companies will raise our own game – the Tesla Motors ESS will be better for having thought through a wider range of issues.
2. The Tesla Motors ramp to high-volume cell purchasing will be steeper, driving down the price of our own ESSes more quickly. (also true for other ESS components.)
3. We can drive up the volume of cells used in cars more quickly, so that we can begin to influence the direction of their evolution. (e.g. each cell would lose a few grams if the can was aluminum instead of steel. This is no big deal for a laptop, but it’s a few kilograms for a car!)
4. Tesla Motors will get an additional revenue stream, allowing us maybe to grow a little faster.
5. EVs will develop more quickly around the world. On the one hand, I definitely want Tesla Motors to become THE electric car company of the future. On the other hand, our mission is advanced if we enable other EVs or PHEVs.

More than any other subsystem on the Tesla Roadster, the ESS has required fundamental invention and clever solutions to tricky problems. Nobody makes anything like the Tesla Motors ESS; it’s impossible to hire people with “prior experience,” so the ESS team is dominated by bright, young engineers with a lot of creativity and enthusiasm. Together, they have filed more patents than any other group at the company. Impossible is a word that has no meaning for them.

Bernard Tse (the former founder and CEO of Wyse Technology) is an old friend and was a Tesla Motors board member since almost the beginning. He has deep experience is in high-volume, low-cost manufacturing, with lots of experience all over Asia. When I mentioned the TH!NK opportunity to the board, he got quite excited by its possibilities. He spent several months researching the idea, persuading me and the rest of the board along the way. He finally decided to step off the board and lead Tesla Energy Group.

We reorganized the company to create Tesla Energy Group late last year, with Bernie at the head. It’s been a big job for him and for the team. His largest challenge has been (and still is) to move our design and processes out of the lab and into production. Wish Bernie the best success – he will need to draw upon all his experience as an entrepreneur, as a manager of a strong engineering team, and as a high-volume, cost-sensitive manufacturer.

Cloaking Off

With today’s announcement of a deal to provide ESSes for TH!NK, I can now admit that Tesla Energy Group exists as an entity within Tesla Motors Inc. This is a big step for Tesla Motors and a good deal for TH!NK. While Tesla Energy Group is talking to other possible ESS customers, we will remain very careful about which deals we consider, and my job is to remind Bernie from time to time that the Tesla Roadster is still Job One.

P.S. Any similarity between Tesla Energy Group (TEG) and our regular blog commenter “TEG” is purely coincidental. And I can’t think of any acronym that adds up to “Anatoly Moskalev.” Sorry Anatoly.

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