The Silicon Valley solar installer
) is diversifying into storage with its new offering. The company
has plans to launch a battery storage device - DemandLogic - for
Tesla Motors Inc.
) battery technology is capable of providing backup power lasting
up to two hours during peak electricity usage or blackouts. The
company's storage systems will be available by the middle of next
year in parts of California that includes the territories of
) and Southern California Edison, along with certain areas of
Connecticut and Massachusetts.
The company has been working with Tesla on these batteries for
more than three years. SolarCity is also testing these batteries
on approximately 300 of its residential customers in California
in a pilot program.
This battery storage system will help businesses to cut their
utility bills during peak demand seasons. Large commercial
clients including big hotels, data centers as well as other
industrial customers have to pay high demand charges to the
The usual electric bills for commercial clients usually consist
of two components - energy charges and demand charges. While
energy charges are derived from the entire amount of energy
consumed during a one-month billing cycle, demand charges are
based on the peak electricity usage during a billing period. So
companies utilizing less electricity can even incur high demand
fees, which help utilities to recover its investments in power
generation and transmission equipment.
Hence, the combination of solar with storage could prove to be an
effective solution to both lower fees and increase green power
usage. SolarCity is cleverly targeting markets where the
utilities collect high demand fees.
The batteries will be installed at no upfront cost to the
business owners signing 10-year service agreements. SolarCity
expects the demand charge to go down by around 20%. SolarCity
will not charge customers for the battery. Instead the company
plans to offer it as a service for a monthly fee.
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SolarCity's commercial customers bring about 20% to 30% of its
business. Well-known names among its client base include
Wal-Mart Stores Inc.
Backed by Tesla Motors founder Elon Musk, the SolarCity stock has
rallied almost 342.5% since its first appearance in the stock
market. The company has a market cap of $4.34 billion. Elon Musk
owns about 73% of SolarCity's 78 million shares outstanding,
while a relatively small proportion is entitled for the public.
SolarCity presently retains a Zacks Rank #3 (Hold).