Tesla Motors (TSLA.US) has secured a significant new order in its energy division, announcing a partnership with independent power company NatPower on Tuesday. The agreement involves constructing battery energy storage projects with a total capacity of 25 gigawatt-hours (GWh) across Italy and the United Kingdom.
This initiative represents the initial phase of a broader plan with a potential total value reaching up to $5 billion. As Europe rapidly expands its intermittent renewable energy generation capacity, nations are accelerating the deployment of battery storage systems to help balance electricity supply and demand.
Under the multi-year agreement, NatPower will utilize Tesla's Megapack large-scale battery storage systems. Furthermore, NatPower will employ Tesla's power trading technology, which is designed to manage the timing of buying and selling electricity on the grid.
The companies indicated that the initial phase will involve five projects. The ultimate objective of the overall plan is to achieve an energy storage capacity exceeding 100 GWh, with an estimated construction cost between $4 billion and $5 billion. They added that the cumulative revenue from the project over the next two decades could surpass $15 billion.
NatPower CEO Fabrizio Zago commented, "The industry is not short of technology or capital, but it still struggles to consistently deliver infrastructure projects on schedule. What we are building with Tesla is an ecosystem that aligns capital with execution, a model that can be replicated across multiple markets."
With Tesla's core automotive business facing growth pressures, the energy storage segment is emerging as a crucial engine for the company's performance. Energy storage has been a key focus area for Tesla in recent years. In the first quarter of this year, Tesla's energy storage deployments totaled 8.8 GWh, a decrease of 15.38% compared to the same period last year.
However, the segment's gross margin for Q1 reached a record high of 39.5%. Despite the year-over-year decline in quarterly deployments, Tesla CFO Vaibhav Taneja stated that the company's full-year energy storage deployments for 2026 are still projected to be higher than those for 2025. Last year, Tesla's energy storage deployments surged by 48% to 46.7 GWh.
Tesla made progress in expanding its energy storage production capacity during the first quarter. Construction is proceeding smoothly at its energy storage Megafactory located on the outskirts of Houston, Texas. This facility will produce the third-generation Megapack system for the Megablock product line, with mass production slated to begin later this year.
In addition, Tesla previously announced plans to establish 100 gigawatts of solar manufacturing capacity in the United States by 2028. Reports also indicate that the company has engaged in negotiations with Chinese suppliers regarding solar production equipment.
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