Tesla Revamps Megapack to Revive Declining Energy Storage Business
▼ Summary
– Tesla has introduced Megapack 3, an upgraded utility-scale battery with increased storage capacity and longer lifespan to attract utilities and data center developers.
– The company also launched Megablock, a grouping of four Megapack 3 units that offers 20 megawatt-hours of storage and reduces installation and construction times significantly.
– Megapack 3 features an improved thermal management system, enabling operation in extreme temperatures from –40°F to 140°F.
– Both products will be manufactured at Tesla’s Megafactory near Houston and are scheduled to enter production in the latter half of 2026.
– Tesla’s energy-storage business has seen two consecutive quarters of decline in 2024, despite being the leading supplier, while the broader industry has been growing rapidly.
Tesla has unveiled a major upgrade to its Megapack energy storage system, introducing the Megapack 3 and a new modular configuration called Megablock. This strategic move aims to reinvigorate the company’s energy storage division, which has faced recent declines despite its leading position in the market. The enhanced products are designed to meet surging demand from utilities and data centers grappling with power reliability and capacity challenges.
The Megapack 3 offers approximately one additional megawatt-hour of storage compared to its predecessor and boasts a significantly extended operational lifespan. A key innovation is the introduction of the Megablock, which integrates four Megapack 3 units into a single system capable of storing 20 megawatt-hours, enough to power roughly 4,000 homes for four hours. Tesla claims this modular approach can slash installation time by 23% and reduce construction timelines by up to 40%.
Engineers have also improved the thermal management system, allowing the Megapack 3 to function efficiently in extreme temperatures ranging from –40°F to 140°F. This broad operational range makes the system viable for deployment in nearly any climate worldwide. Battery cells for these units will be sourced from manufacturing facilities across the United States, Southeast Asia, and China.
Production of both the Megapack 3 and Megablock will take place at Tesla’s forthcoming Megafactory near Houston, though volume manufacturing is not expected to begin until the second half of 2026. Once fully operational, the facility is projected to yield up to 50 gigawatt-hours of storage capacity annually. For context, Tesla deployed 9.6 gigawatt-hours of stationary storage in the most recent quarter.
The refresh comes at a critical juncture for Tesla’s energy segment, which has reported two consecutive quarters of declining performance this year. While the company remained the top supplier of battery energy storage systems in 2024, competitors are gaining ground in a rapidly expanding industry.
Notably, Elon Musk’s artificial intelligence venture, xAI, has emerged as a significant user of Tesla’s storage technology. The company has already installed 168 Megapacks at its data center in South Memphis, Tennessee. However, recent reports indicate xAI is also considering the addition of dozens of gas turbines, with no new battery expansions currently confirmed. This mixed energy strategy highlights the complex balancing act between renewable integration and reliability in power-intensive industries.
(Source: TechCrunch)
