Tesla Motors Inc. (NASDAQ:TSLA) stock has been a hot commodity in recent years. Its founder and CEO Elon Musk is never short on daring ideas and the will to turn them into reality. Earlier this year, he introduced Tesla’s battery systems, “Powerwall” and “Powerpack.” With an influx of good news in the renewable energy sector, Tesla’s battery business could get a huge boost, and so might TSLA’s stock price.
TSLA Stock: Renewable Energy Boom to Boost Tesla’s Battery Business
The first piece of good news comes from the United Nations COP 21 summit in Paris. At the conference, 196 countries signed an agreement to limit the rise in global mean temperatures to 2°C (3.6°F) by the end of the century. Also, every country agreed to come up with a carbon reduction plan and renew it every five years. Moreover, rich countries provide $100 billion a year in climate finance for developing countries by 2020, with a commitment to further finance in the future. (Source: “2 Degrees, $100 Billion: The World Climate Agreement, By The Numbers,” NPR.org, December 12, 2015.)
Also, on Friday, December 18, both the U.S. House of Representatives and the U.S. Senate passed the omnibus spending bill, which includes a five-year extension on solar subsidy. The bill suggests an extension for wind and solar tax credits under the Solar Investment Tax Credit (ITC).
According to analysis by GTM Research, the extension of tax credits would bring an additional 25 gigawatts of solar photovoltaic capacity to be installed in the U.S., which is a 54% increase compared to the no extension case. Moreover, GTM predicts that the biggest gainer will be the utility solar sector, where the ITC extension could increase deployments by 73% through 2020. (Source: “GTM Research: U.S. Investment Tax Credit Extension Would Increase Solar PV Installations 54% through 2020,” Solarserver.com, December 17, 2015.)
This type of news is tremendous for the renewable energy sector. Following the results of the Paris conference, solar stocks such as SolarCity Corp. (NASDAQ:SCTY) and SunEdison Inc. (NYSE:SUNE) shot through the roof. But why would these be good for Tesla?
Other than making electric cars, Tesla also makes batteries. These batteries can be paired with products made by companies in the renewable energy sector. For instance, both SolarCity and SolarEdge Technologies Inc. (NASDAQ:SEDG) have partnered with Tesla Energy, which makes battery systems.
In particular, Tesla makes battery system Powerwall for homes and Powerpack for businesses and utilities. With the extension of the solar subsidy, the solar industry is going to get a solid boost. Since solar panels need battery systems to store energy, the boom in solar industry could bring increasing demand for Tesla’s Powerwall and Powerpack products.
Note that Tesla is in the process of building its $5.0-billion Gigafactory in Nevada. The factory would have the capacity of making 35 gigawatt hours of battery cells, which would be more than all of today’s lithium-ion battery plants in the world combined. With such enormous capacity, the factory could fulfill Musk’s ambition of producing as many as 500,000 vehicles per year.
The company also has serious plans in Europe. After opening a vehicle assembly plant in Tilbrug, Netherlands, Tesla might bring a Gigafactory to the continent as well. Due to overwhelming demand from Austria and Germany, Tesla is in talks with the German government about building a battery factory in the country. German Vice-Chancellor and Economy Minister Sigmar Gabriel said on Tuesday that they were in discussions with Musk about a possible plant. (Source: “Tesla in Talks with Germany over Possible Battery Factory,” Bloomberg, November 17, 2015.)
The Bottom Line on TSLA Stock
Since its initial public offering in 2010, TSLA’s stock price has climbed a mind-boggling 1,264% from $17.00 to $231.87 today. As renewable energy becomes more and more popular across the globe, Tesla could have greater success in its battery business, and the upward trend in Tesla stock could continue.