Does Tesla Motors Inc (NASDAQ:TSLA)’s good fortune also mean the same to other companies such as those in the energy distribution and the renewable energy production sectors?
Andy Draga, CEO of Momentum Dynamics, thinks this is a possibility. In a dialog with Cory Johnson on Bloomberg West, Draga said that it is entirely possibly that a boom for Tesla Motors Inc (NASDAQ:TSLA), particularly in the development of battery technology, can also mean an upside for the mentioned industries.
According to Draga, generating electricity is “pretty cheap”. However, different factors such as the different stages in energy’s path to the home make electricity far more costly for the consumer.
He says that transmitting electricity is pretty expensive because of the infrastructure needed to do so. It is even more expensive when it goes down to the distribution side since you need to have transformers and such near homes and other facilities that need electricity.
Johnson and Draga were talking about how a breakthrough in battery technology at Tesla Motors Inc (NASDAQ:TSLA) can mean that the company, and consequently its stock, can soar. If the company brings down the cost of technology so much that batteries will become commoditized, Draga says that the company will indeed breakout. Furthermore, he notes that Tesla can also get into reusing batteries that are not viable for cars anymore into less demanding uses like storage units for electricity for the home.
Johnson asks Draga if repurposing batteries from cars, or using batteries that cost way less to store energy at the end of the line will mean huge cost savings for electricity companies. The Bloomberg host says that for example, instead of having capital outlay of $500 million for increasing generation capacity, power companies can just buy batteries from Tesla Motors Inc (NASDAQ:TSLA) for $400 million to store energy from power plants when the grid is not drawing that much of power.
Draga says that this one possibility which is why he believes that it will be great not only for Tesla Motors Inc (NASDAQ:TSLA) if it improves battery technology while bringing down cost.
Another possibility, Draga says, is that better and less costly battery technology will boost the renewable energy sector since there is now a way to store energy in great amounts. He says that one of the criticisms about renewable energy is that generation does not coincide with the need for power. Say for example, solar power is not present at night. This is changed by massive power storage capabilities, he notes.
Daniel Benton’s Andor Capital Management owned 1.25 million Tesla Motors Inc (NASDAQ:TSLA) shares by the end of 2014.
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