Tesla’s Energy Ecosystem and Its Connection to VPP

1. Tesla’s Sustainable Energy Ecosystem

In April 2023, Tesla announced its plans to establish a new super factory in Shanghai dedicated to producing its energy storage product, Megapack.

The Tesla Energy Megafactory will initially focus on producing large-scale commercial energy storage batteries known as Megapack. The initial production capacity is set at 10,000 units per year, with an energy storage capacity of nearly 40 GWh. These products will cater to global markets. The Tesla Energy Megafactory project is scheduled to commence construction in the third quarter of 2023, with production expected to start in the second quarter of 2024.

Tesla is committed to creating a closed-loop sustainable energy ecosystem encompassing solar generation, energy storage, and electric vehicle services. Elon Musk unveiled Tesla’s “Master Plan” in 2006, outlining the company’s long-term vision, with steps including automotive and solar energy. Tesla’s energy system can be divided into upstream, midstream, and downstream components:

  1. Upstream: Electricity generation using solar energy to meet residential and commercial needs, with products such as Solar Roof and photovoltaic inverters.
  2. Midstream: Energy storage through the installation of batteries to store clean energy, including Powerwall and Megapack, available in different sizes.
  3. Downstream: New energy vehicles and their services, including Model 3/Y/X/S, Cybertruck, Roadster, Semi, as well as autonomous driving and supercharging services.

Tesla’s journey in the energy storage business began in 2015 with products like Powerwall for homes and Powerpack for commercial use. After acquiring SolarCity in 2016, the company enhanced its residential solar storage offerings and introduced upgraded versions, Powerwall 2 and Powerpack 2. In 2019, Tesla officially launched the Megapack, a large-scale energy storage system targeting utility markets. In 2022, the company upgraded all Megapack products to use lithium iron phosphate (LiFePO4) technology, solidifying its presence in the energy storage sector.

In 2022, Tesla’s energy storage business experienced substantial growth, with shipments reaching 6.5 GWh for the year, a 64% YoY increase. In the fourth quarter alone, shipments reached 2.5 GWh, a 152% YoY increase. Tesla’s backlog of orders continues to grow, and as of February 2023, the earliest delivery date for Megapack orders on the official website was extended from the third quarter of 2024 to the fourth quarter of 2024. This includes contributions from the new 40 GWh Megapack production capacity established in California in November of the previous year.

Megapack primarily serves utility and large-scale industrial sectors. In 2022, the Megapack using LiFePO4 technology had a single-unit capacity of 1.9 MW/3.9 MWh. Multiple battery systems can be connected to meet larger capacity requirements. The primary sales regions for Megapack include the United States (63%), Australia (23%), and the United Kingdom (5%), focusing on mature commercial energy storage markets. By the end of 2022, global Megapack orders exceeded 10 GWh, with the United States, Canada, the United Kingdom, and Australia accounting for 69%, 13%, 10%, and 8% respectively.

While Tesla’s Megapack single-unit price on its official website is $2.6272 million (approximately $0.67/Wh or about ¥4.6/Wh), significantly higher than the domestic system unit price of ¥1.5-1.6/Wh, the mature commercial model in overseas energy storage markets ensures the economic viability of large-scale energy projects in the United States.

Previously, Tesla unveiled its “Master Plan” at an investor event, outlining a global need for 240 TWh of energy storage capacity (including grid storage and electric vehicle batteries). Tesla aims to increase its fixed energy storage capacity to 1 TWh per year. In 2023, Tesla plans to deploy GWh-level energy storage projects, expand energy product manufacturing, and introduce two new products.

Based on Tesla’s Megapack capacity and disclosed order backlog, it is estimated that in 2023, Megapack energy storage installation could range from 10 GWh (pessimistic) to 20 GWh (optimistic), with Powerwall installations ranging from 2.0 GWh to 2.6 GWh, resulting in an estimated revenue of $8.7 billion for Tesla Energy in 2023, representing a 123% YoY growth.

2. Tesla’s Commitment to a Closed-Loop Sustainable Energy Ecosystem and Its Relationship with Virtual Power Plants

Tesla is dedicated to creating a closed-loop sustainable energy ecosystem encompassing electricity generation, energy storage, and electric vehicle services. This ecosystem is closely related to the concept of virtual power plants (VPPs).

A VPP is a system that aggregates and optimizes distributed energy resources (DERs) like distributed generators, energy storage systems, controllable loads, and electric vehicles through advanced information and communication technologies and software systems. It participates in electricity markets and grid operations as a specialized power plant coordination and management system.


Tesla’s sustainable energy ecosystem already covers the entire energy cycle, making it a perfect fit for VPP applications. Imagine this scenario: Tesla, with its extensive network of Superchargers and solar installations, creates a network of small off-grid systems during long journeys, reducing infrastructure costs compared to traditional power facilities. These small systems can be interconnected to balance energy within an area or even feed into the grid, providing power to nearby cities. If this trend continues, Tesla could become one of the largest energy companies in the United States.

Tesla already boasts the largest electric vehicle charging network in North America, with Superchargers established in major cities. Furthermore, other automakers and charging infrastructure companies have announced plans to use the North American Charging Standard (NARCS). This alignment between charging stations, solar energy, and energy storage will support the growth of electric vehicles in North America.

solar ev charging

In Europe and other markets, the solar and energy storage industries are flourishing. The development of electric vehicles and charging infrastructure go hand in hand. It is believed that the combination of solar generation, energy storage, and charging will become a prevalent model in the future. Miles’ Vali series and IO series charging stations already support solar grid charging and energy storage battery integration, contributing to the development of charging infrastructure. These products have undergone extensive testing, ensuring both performance and stability. Customers can trust us for product supply while they focus on the market.

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