If Elon Musk Loses This Bet, Tesla Could Be Out Serious Cash

Tesla CEO Elon Musk, with a Powerpack system in the background, unveils a suite of batteries for homes, businesses and utilities. Musk thinks Tesla could help Australia with its energy problems and quickly. Kevork Djansezian/Getty Images

It's a slow news cycle if there aren't at least a few stories about Elon Musk, founder of Tesla and SpaceX, making a grand prediction or promise. Just a few weeks ago, he was in the news when SpaceX announced plans to send two space tourists on a trip around the far side of the moon and back. Now, he's in the headlines because of a bet related to an energy crisis in Australia.

Here's the backstory: A gas supply shortage in Australia has been causing big problems. Analysts believe that the 2018 summer season could bring with it brownouts and blackouts, particularly in southern regions Australia. A robust storage plant, however, could help to alleviate those energy shortages. In other words, if Australia had some massive batteries, the country could store excess electricity when production allowed and draw upon the stored electricity whenever gas shortages occurred.

Batteries also allow for alternative approaches to energy production. Renewable sources like solar energy or wind energy are great, but if it's nighttime or the wind isn't blowing, you're often out of luck. Storage solutions allow you to pack away produced energy for later use, even when the sun isn't out or the air is calm and still.

That's where Tesla, Elon Musk's company famous for its electric cars, comes into the picture. Lyndon Rive, who is vice president of Tesla's energy products division, said that the company would be able to deliver batteries capable of storing 100 to 300 megawatt-hours of electricity within 100 days of a contract signing.

That's a big claim. The storage batteries in question are enormous, industrial-strength monstrosities. Mike Cannon-Brookes, an Australian billionaire, asked Musk if he really thought he could back up Rive's promise and deliver that much energy storage that quickly. Musk's response?

The two followed up on cost. Musk revealed that Tesla would charge $250 per kilowatt-hour of storage capacity, meaning a 100 MWh battery storage plant would come in at a cool $25 million. That doesn't necessarily include costs like shipping and labor. However, it's a heck of a deal. According to Rive, previous large-scale installations were closer to $50 million for 100 MWh storage capacity.

If the agreement goes through, it will give Tesla an opportunity to demonstrate the power of its Gigafactory. That's the enormous battery manufacturing facility the company built in Nevada. Think of it as the Death Star II of battery storage manufacturing — it will be an awesome sight to behold once it is fully operational.

Tesla has a history of installing big projects. At the end of 2015, Tesla began a project to build an 80 MWh battery storage plant near Los Angeles. The company finished construction in three months. You can check it out in this Tesla promo video:

If the Australian government signs a contract with Tesla, the company has a chance to impress the world. If Tesla fails, Australia gets a shiny, new battery storage facility free of charge. Whose side would you bet on?

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