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Since Tesla confirmed last month that it plans to build a massive battery factory in the U.S., there’s been exuberant speculation that the electric car maker will disrupt not just the auto industry, but also the global market for power grid energy storage (the key to solar and wind). But, as is usually the case, the real story is far more nuanced and complex.

It’s true that Tesla plans to sell some batteries for stationary grid applications, and it’s been working on a product with solar company SolarCity for awhile (I first reported this in the spring of 2012). The grid storage market is in its infancy. And Tesla’s battery plans could have a meaningful impact on the market for pairing batteries with solar panels — particularly given the sheer size of Tesla’s factory and the fact that it is supposed to lower battery costs by 30 percent.

But the grid energy storage market is nuanced. All batteries and technologies are not created equal when it comes to batteries being used for the power grid, and there will be different types of batteries for different power grid applications. Lithium ion batteries are some of the most expensive out there. And remember, the cost estimates that Tesla wants to hit three years from now are just that — estimates.

Here are a few things you should know about what Tesla’s massive battery can and can’t do for the power grid market.

1. The market for grid energy storage is just emerging & Tesla is helping open it up: To date, energy storage technology in all its various forms — from batteries to compressed air storage to funkier, more experimental forms of energy storage — is an emerging market throughout the world. There are still just a few hundred energy storage projects built anywhere — 420 as of the end of 2013, according to the Department of Energy’s Global Energy Storage Database.

Most of those energy storage projects are pumped hydro plants built years ago (basically using energy to push water up a hill and then let it flow back down when energy is needed). A couple years ago, researchers at EPRI said that pumped hydro made up 99 percent of the energy storage projects out there. The tech is pretty much the cheapest around, but it can only be built in places with certain changing elevation (hills and valleys).

Another large portion of these projects are sodium sulfur batteries (NAS), an older technology that has been popular in Japan, but that recently faced safety and cost issues. Another set still is traditional compressed air energy storage, where air is pressurized and pumped into a tank or underground cavern and then let out when energy is needed. Finally, a newer chunk of these energy storage projects are demonstration and pilot projects that are being built out to prove new technology at a very small scale — so yes, a bunch of these projects are not commercial scale yet and are only emerging technology.

Just a small segment of these current projects are built with lithium ion batteries — that’s because they’ve just been far, far too expensive historically. According to Navigant Research, there were just around 34 megawatt hours worth of lithium ion battery projects built for grid storage by the end of 2012. That’s tiny. For comparison’s sake, there were 23 gigawatt hours worth of lithium ion batteries made for consumer electronics over the same period (1 gigawatt is a 1,000 megawatts).

I point out that this market is so nascent because the sheer fact that Tesla has said it is interested in it will affect the market. Any ambitious company moving into grid storage with an attractive and competitive technology will influence it — particularly a company that is as innovative as Tesla has been and that is led by a celebrity billionaire entrepreneur like Elon Musk.

There are giant lithium ion battery makers out there today — from Samsung to Panasonic to Sanyo (potentially some of Tesla’s partners) — that are making these batteries at a massive, low cost scale. Those companies could be aggressively packaging up lithium ion batteries and selling them for the power grid. These companies do sell batteries for the grid, but are not doing so at any large scale yet.

So, in effect, Tesla’s focus on grid storage could be very important in opening up the grid battery storage market. It could shine a spotlight on this market in an unprecedented way.

2. Tesla is setting a price ceiling for grid batteries: Lithium ion batteries have long been considered one of the more expensive options out there for grid energy storage. But Tesla could make them a more competitive option for grid storage, and is setting a price ceiling for grid batteries.

Tesla has said that its current costs for lithium ion batteries (the ones it buys from Panasonic) are somewhere between $200 and $300 per kwh, and that its factory could reduce those battery costs by 30 percent. So in theory Tesla could hit between $140 per kwh and $210 per kwh. Navigant Research analyst Sam Jaffe thinks battery packs could end up costing around $180 per kwh.

“They are definitely setting the bar for battery costs,” Jaffe said. “By 2020 every other battery manufacturer will have to get close to or beat the sub-$200 per kwh number that Tesla will be able to accomplish if they meet their goals.”

3). There could be different batteries for different grid applications: Applications? Yep, power companies will buy batteries for the power grid because they want to do certain things with them. One of those things is frequency regulation, which means using batteries to provide short bursts of energy over several minutes to help smooth out the frequency of the grid. Today power companies often use generators and natural gas plants to smooth out that frequency.

Then there’s the application that is being mentioned in most articles on Tesla and the grid, and that’s pairing batteries with clean power, like wind and solar farms. Because the sun only shines and the wind only blows at certain times, the idea is that batteries could store energy and then unleash it when the sun and wind die down.

Lithium ion batteries are pretty good at moving a vehicle, using high power and providing short, shallow bursts of energy. That would make them a good fit for frequency regulation.

But clean power applications generally need several hours’ worth of sustained, lower-power energy. So other battery chemistries could end up being a better fit and also provide a lower-cost option for applications like clean power time shifting.

Lithium ion batteries also degrade significantly over time — the Model S battery has an 8-year warranty on it. Any grid operator will consider the lifetime of lithium ion batteries when gauging them as an option.

Several young companies are working on grid-specific batteries that can provide sustained low-power energy over a long period of time. Some of these companies include Aquion Energy, Ambri and Eos Energy.

Philippe Bouchard, Eos Energy’s VP of business development, tells me the company’s zinc-air battery is designed specifically for multi-hour, full discharge applications, and the battery already costs 3 to 4 times less per kwh than today’s lithium ion batteries.

4. Tesla’s plans are just estimates: Tesla has shared only a few tidbits about estimated prices, scale and timelines for the factory. Many questions remain, and some people are skeptical about the low cost of the planned factory and the aggressive price reductions of the batteries.

Tesla has baked some wiggle room into its battery costs when it comes to making its third-generation electric car for $35,000 to $40,000. Not all of the cost reduction will come from lower battery costs. It also plans to make a car that’s about 20 percent smaller, Musk said recently. And there are other ways to reduce the cost of the car through the materials and such options. So Tesla doesn’t necessarily have to hit those battery cost numbers to hit its overall target of a mainstream, low-cost third-gen electric car.

5. Financing and management software: Tesla will have a real advantage when it comes to the way it can work with SolarCity to not just combine SolarCity’s solar panel systems with Tesla batteries, but also use SolarCity’s financing and management software. Over the past several years, SolarCity has built its business off of developing financing tools and management software to bring down the cost of installing and maintaining rooftops solar panels. In the world of batteries, financing and software systems are relatively new services. To get batteries on the grid at scale, financing systems and management software could be key.