Tesla home battery roll-out close: Vector

The first two container loads of high-tech Tesla batteries will be deployed in homes and businesses in the first quarter of next year and 10,000 could be installed in the next few years.

The innovative distributed power technology was in the spotlight at Vector’s annual meeting in Auckland today as the company briefed shareholders on its vision of the future.

Vector sees Tesla’s Powerwall and Powerpack domestic and commercial batteries as a way to reduce the burden of network investment while offering customers a way to save money.

The system allows customers to store power when it is cheap or freely available from solar panels for later use.

Vector chief executive Simon Mackenzie told shareholders the company’s commitment to understanding the technology and leading its introduction put it in front of the queue to get supplies from Tesla.

“Vector is not a mere distributor of the battery systems. We are developing the engineering that adapts batteries to local conditions, including the control systems, the interface with local networks as well as the appropriate health and safety protocols and systems,” he said.

Speaking after the meeting, Mr Mackenzie told NBR demand for the technology was strong.

 “As it stands at the moment we’ll be getting two container loads full, which will be round about 150. They’ll be deployed probably in the first quarter of next year.

“We would envisage anything between 5000 and 10,000 different devices across the country quite easily, because a lot of them will likely be partnered up with people who have already put solar on their roofs and want a battery to support it.”

Pricing for Tesla installations was not yet finalised, he said.

“Revenue for us will be around how we offset a lot of capital expenditure, but with regards to providing those battery solutions out into the market, I guess we’re talking in the 10s to 20s of millions as opposed to hundreds of millions.

“We’ll have a more accurate read on that in six to nine months.”

Large scale commercial batteries are also planned for deployment at substations.

During shareholder questions, Vector chairman Michael Stiassny said he was “a bit of a zealot” about the technological change, which was transforming the economics of energy distribution.

“We’re one of the companies that actually understands what’s going on,” he said.

In other business, shareholders were also told about Vector’s deployment of electric vehicle charging infrastructure around Auckland.

Smart meters

Last year's acquisition of smart metering company Arc Innovations added almost 140,000 smart meters, lifting Vector's installed base to more than 900,000. It's contracted to install a further 1.2 million nationwide.

The company has been eyeing a move into Australia's mass smart meter roll-out for some time and Mackenzie told shareholders the potential is significant.

"We are looking initially at Queensland, New South Wales, and Tasmania. The regions offer an opportunity of well over six million meters," he said.

Vector has forecast about $1.8 billion of capital investment will be required in its Auckland energy networks in the coming decade. However, Mr Mackenzie said the company needed confidence the regulatory environment would enable it to recover capital costs, earn a fair return, and that the rules won't change across the investment period.

The Commerce Commission is reviewing key inputs that determine the prices Vector can charge for network use. Mr Mackenzie said infrastructure providers should be able to reach binding, long-term "special undertakings" similar to those used in other countries to support the economic growth Auckland needs.

Vector's wholesale gas business continues to face headwinds due to increased competition through reduced demand for gas used in electricity generation and uncertainty over the quantity of gas reserves in the Kapuni field.

However the company remains "comfortable" with its guidance provided in August for adjusted ebitda ranging from $605 million to $620 million in the 2016 financial year. Excluding capital contributions, adjusted earnings before interest, tax, depreciation and amortisation is expected to range from $550 million to $565 million.

The shares slipped 0.3% to $3.34 during the day, valuing Vector’s equity at $3.3 billion.

The stock has dropped about 20% this year.