Tesla will open a factory in Shanghai to produce its megapack large batteries, cementing another foothold for the American company in China even amid political and economic tensions between Washington and Beijing.
The Chinese factory will be built in Lingang, a suburb of Shanghai that also houses Tesla’s vehicle factory, according to Chinese media. Lu Yu, a Lingang official, told local media that production could begin by the second quarter of 2024.
Tesla’s investment in China comes as factories in China shut down amid strict “zero covid” protocols after the coronavirus pandemic crippled some supply chains. With those hurdles still fresh in the minds of many executives — and amid concerns over alleged human rights abuses and chilling relations between Washington and Beijing — China has struggled to attract foreign investment since the pandemic.
Megapacks differ from most of Tesla’s consumer-focused offerings, such as its widely recognized electric vehicles, in that they are more a piece of energy infrastructure than a consumer product. Batteries are intended to store energy from renewable sources such as wind and solar, allowing energy to be drawn even when the sun is not shining and the wind is blowing.
Batteries like the Megapack are not yet widely implemented in the United States, and purchases of the technology are often hidden. But the Megapack has been purchased for Apple’s renewable energy storage project in California, according to the Verge, and for a storage project outside of Houston, Bloomberg first reported.
Energy stored in this way “can help stabilize the grid and prevent outages,” Tesla says on its website. Coal and natural gas are typically used for power generation in a pinch — such as when warmer temperatures increase demand for electricity in air-conditioning units or extreme weather disrupts part of the power grid.
A megapack, Tesla says, “reliably and safely stores energy for the grid, eliminating the need for gas peaker plants and helping to avoid outages.” Each pack can store enough energy to power 3,600 homes for an hour, Tesla says.
One of the most notable and devastating outages in recent history was the 2021 blackout in Texas that left millions without power after a winter storm hit the state. Unlike other states, Texas operates on its own power grid—leaving it without the ability to restore power by bringing in power from other states, as is the case with other power grids across the country. In theory, storage options like Megapax could help prevent such situations or at least soften the blow of such weather events.
That makes storage options for renewable energy a matter of national security, energy and security experts warn. A report by the Center for Naval Analysis’ Military Advisory Board highlighted energy storage as a solution to “a growing number of threats to our homeland and national security.” It added that “advanced energy storage is a future requirement to meet the full potential of a secure and resilient grid.”
It was not immediately clear how many of the Shanghai-made Megapacks will be sold in China. Chinese media said the megapacks produced in Shanghai will be supplied worldwide.
The announcement comes after the US warned that it would compete with China in computer chips over national security concerns. President Biden signed the CHIPS Act into law last year, boosting investment in domestic semiconductor manufacturing to “strengthen supply chains and counter China,” the White House said.
Lyric Lee contributed to this report.