Simon Watt | 213573083
Carbon emissions are increasing at frightening rates. Entire nations are being threatened by rising sea levels. Urgent action needs to be taken to avert economic and humanitarian disaster. The problem seems daunting; too big, and too difficult to solve. Or is it? There is one brave company that believes it has the product that provides the solution, and it is on a pioneering path to free the world of its reliance on fossil fuel.
To remove fossil fuels from the energy equation, an alternative must be found. Australia has the highest average solar radiation of any continent in the world and the highest rooftop solar. The extent to which solar technology is being embraced by Australians is demonstrated by our steadily increasing solar energy production.
Figure 1. Home solar PV capacity by state and territory (Jacobs Group 2016)
However, the issue of matching electricity generation to demand continues to vex. A new product is needed to bridge the generation/demand time gap to make a significant impact on the 18 tonnes of carbon each Australian household produces.
The product that promises to revolutionise the energy market has recently been released by Tesla, and it comes in the form of a humble battery. The Tesla Powerwall is a system that utilises lithium ion technology to store energy generated by solar systems during the day, to be utilised in the evening. This significantly increases efficiency, and reduces, or eliminates, reliance on the grid. Battery storage systems are not new however, so what is it about Tesla’s offering that promises so much?
Tesla has been able to benefit from second mover advantage with its Powerwall. It has innovated to make affordable, attractive next generation batteries an appealing reality. Observing the actions of market pioneers has allowed Tesla to identify that the need for attractive, low-cost efficient lithium ion batteries has not been met. To meet this need, Tesla has adopted an operational efficiency strategy (large volume, low cost), the most tangible evidence of which is their gigafactory, which has the largest footprint of any building on Earth, and promises to reduce the cost of lithium ion batteries by 30%.
Image 1. The Tesla Powerwall looks great.
British multinational market research firm Millward Brown (2016) believe salience, difference, and meaningfulness are the key factors that drive brand value. Tesla’s innovation, brand purpose, and brand experience, are all rated highly by consumers. Through their electric cars, Tesla has built a differentiated, meaningful brand that is increasingly salient in the minds of consumers. And it is paying off. Tesla’s brand value was recently estimated at $4.4 billion USD.
Figure 2. Top ten global car brand value (Burke 2016)
Tesla’s growth strategy is now to develop the Powerwall as a new product for a new market and leverage its brand power to penetrate it. Tesla’s brand is further strengthened by its green credentials, and moralistic mission which is gaining popularity amongst consumers as they become more conscious of the environment. From early Powerwall enquiries in Australia, it would appear to be working a treat.
Whew, humanitarian and economic crisis avoided, right? Perhaps not yet. The Powerwall is expected to cost $9300. When installed as part of a 4kW solar system, this price will rise to $16,500 with an average payback period of 24 years, or almost two-and-a-half times the length of the warranty. This is likely to serve as a barrier to the mass adoption needed to save our planet, but never fear: a well-known marketing dynamic will come to Earth’s rescue: diffusion of innovation.
The motivation of early adopters differs from mainstream adopters. Early adopters are less price sensitive, and more interested in innovation, novelty and status. This means despite the price tag there will be a core of (often zealous) early adopters keen to leap at the Powerwall for the moral and ethical high ground and status this provides.
Figure 3. A model of how innovative products are adopted (Iacobucci 2013)
In paving the way for their more conservative counterparts, consumer innovators and early adopters absorb the high costs associated with new technology. This will fund further development and mass production leading to increased efficiencies, lower cost, and eventually mass market adoption.
Figure 4. Cost trends of solar PV and lithium ion battery technology (Stock, Stock and Sahajwalla 2015)
Amidst the dire predictions of climate scientists, and varying levels of government interest, there is light at the end of this carbon-black tunnel. On the back of its green credentials and brand power, Tesla has generated unprecedented levels of consumer interest in home battery energy storage, and shown us all a pathway to reducing our carbon footprint. Our grandchildren will thank us for the decisions we make today. It just got easier to do the right thing by them. Will you?
Burke, K 2016, Tesla breaks in to the top 10 most valuable car brands, MarketWatch, retrieved 27 August 2016, http://www.marketwatch.com/story/tesla-breaks-into-the-top-10-most-valuable-car-brands-2016-06-08
Iacobucci, D, 2013, Marketing management (MM4), 4th Edition, Roche, M, Cengage Learning, United States of America.
Jacobs Group 2016, Projections of uptake of small-scale systems (project number RO040000), Jacobs Group (Australia) Pty Limited, retrieved 27 August 2016, https://www.aemo.com.au/Electricity/National-Electricity-Market-NEM/Planning-and-forecasting/National-Electricity-Forecasting-Report
Millward Brown 2016, Driving brand growth, retrieved 28 August 2016, http://www.millwardbrown.com/brandz/top-global-brands/2016
Sakurai, S, 2016, The psychology of the early adopter, Saren Sakurai, retrieved 27 July 2016 http://sarensakurai.com/presentations/the-psychology-of-the-early-adopter/
Stock, A, Stock, P and Sahajwalla, V 2015, Powerful potential: Battery storage for renewable energy and electric cars, Climate Council of Australia Ltd, retrieved 27 August 2016, http://www.climatecouncil.org.au/category/reports