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How Tesla Can Hit $280 On Spending Bill Upside, Battery Market

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How Tesla Can Hit $280 On Spending Bill Upside, Battery Market
  • The new $1.1 trillion spending bill that Congress will soon be voting on includes an extension of the solar ITC program.
  • Deutsche Bank believes that this provision will drive a surge in demand for stationary storage.
  • The firm believes that Tesla Motors Inc (NASDAQ: TSLA) is in prime position to capitalize on the opportunity.

In a new report, Deutsche Bank analyst Rod Lache discusses the positive impact that the new spending bill could have on Tesla Motors if it gains approval. The new $1.1 trillion bill contains $629 billion in tax cuts, including a proposed extension of the 30 percent Investment Tax Credit for utility, commercial and rooftop solar and stationary storage installations.

Potential Impact

According to Lache, extension of the ITC could propel renewable generation growth in the US, which is bullish for Tesla’s stationary storage business.

The Energy Information Administration now forecasts that the US will generate an additional 174GW of renewable power capacity by 2040. The EIA also predicts that 27GW of solar and wind capacity will be installed by 2020, partially to replace retired coal-fired power plants.

Stationary Storage Demand

Deutsche Bank believes that stationary storage will play a huge role in this renewable transition. The firm projects that 4.5GWh of stationary storage will be required by 2020 to integrate renewables into the grid. This market represents a $900 million per year opportunity in storage for Tesla and others.

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Residential Opportunity

In addition to the commercial opportunities, Lache also believes that the residential market will drive stationary storage demand.

“Given that the residential installations have been roughly doubling every year over the last 5-7 years, if just 1 in every 10 households installs a 10 kWh backup battery, the annual market for residential backup stationary storage in the U.S. alone can likely reach or surpass ~1GWh by 2020,” he explained.

With the spending bill likely to pass by the end of the year, Deutsche Bank maintains its Hold rating on Tesla ad its $280 price target for the stock.

Disclosure: the author holds no position in the stocks mentioned.

Latest Ratings for TSLA

DateFirmActionFromTo
Nov 2019MaintainsBuy
Oct 2019MaintainsEqual-Weight
Oct 2019DowngradesNeutralSell

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