Solar installer SolarCity announced on Tuesday that it plans to use batteries from electric car maker Tesla for a solar project that it has been working on in Hawaii.
The partnership shouldn’t be a surprise for industry-watchers. Billionaire entrepreneur Elon Musk is both the founder and CEO of Tesla (TSLA), as well as the Chairman and major investor in SolarCity (SCTY). Musk’s cousins Lyndon and Peter Rive run SolarCity.
SolarCity says in a release that the company “made the selection after conducting a comprehensive competitive solicitation in the battery marketplace.” The project will be built on the island of Kaua’i for the local utility Kaua’i Island Utility Cooperative.
For years, Tesla has taken the lithium-ion batteries that it uses to power its cars and repackaged them up to be used with solar panels, plugged into the power grid, or connected to buildings. Since late 2010, Tesla has been working with SolarCity on installing battery pilot projects for commercial buildings, utilities, and home owners.
Last year, Tesla said it officially planned to sell these batteries as the smaller Powerwall, and the larger Powerpack, under a new division called Tesla Energy. Musk showed off the curvy Tesla battery at a buzzy event last April, which made power cells cool for perhaps the first time in the history of the battery industry.
In recent months, Tesla has said it has already been churning out these grid batteries at its battery factory outside of Reno, Nevada. The company plans to make a second version of the batteries soon, potentially available as early as this summer. Musk has said that demand for Tesla’s grid batteries has been massive.
WATCH: Tesla to make batteries for homes and businesses:
SolarCity’s Tesla collaboration will make up a solar and energy storage system across 50 acres just north of the Hawaiian city of Lihue. The company plans to install 13 megawatts, or 52 megawatt-hours, worth of Tesla batteries. While 13 megawatts is relatively small in terms of power generation, it’s actually quite large for a grid-connected battery project.
The utility will use the batteries to generate power at night, when the sun goes down between the hours of 5pm to 10pm, and when the solar panels are no longer producing energy. The utility will pay SolarCity 14.5 cents per kilowatt hour over a 20-year contract for the combined solar and storage project.
Utilities in the U.S. are more commonly commissioning battery projects to help them manage the grid during the day, tapping into batteries during extreme peak grid times (like a hot summer afternoon). In that scenario, batteries can help utilities avoid using dirty and expensive power plants that are only turned on during peak times. The project on Kaua’i suggests how utilities can also pair batteries with solar panels to make solar more competitive.
The islands of Hawaii have historically had some of the most expensive and carbon-intensive electricity in the U.S. Much of the power generated comes from oil that’s been shipped onto the islands. Even when clean power has been more expensive than grid-power (from natural gas or coal) in states across the U.S., it’s been competitive in Hawaii because of the unusually high electricity rates.
SIGNUP: For Data Sheet, the daily newsletter for the tech industry.
That’s why many of the utilities across Hawaii have been aggressive in adding clean power, both wind and solar farms, as well as new types of energy storage projects.
And ecause the islands now expect such a substantial transition to clean energy, many local utilities are willing to experiment with early battery projects. For example, battery startup Ambri, which makes a liquid metal battery, has been working on a pilot project next to a wind farm on Oahu’s North Shore.
SolarCity says the project on Kaua’i has received the necessary state and county approvals, but the company is now waiting for the nod from the regulators at the Hawaii Public Utilities Commission. SolarCity is hoping to begin construction by April, and finish the project by the end of 2016.
