Elon Musk just announced details of Tesla's plan to start pumping out lithium ion batteries like M&Ms at its planned "Gigafactory." 
 
 Obviously, it's big news for electric vehicles as this should bring down the cost of a very expensive component. 
 
 But it has equal and possibly greater significance for renewable energy. 
 
 We've explained that power storage is the key to unlocking widespread renewable energy. For renewables to be truly cost competitive with existing power sources, they need to be able to provide a continuous current flow, something difficult to achieve when the wind isn't blowing or sun isn't shining. 
 
 But the price to do so is currently exorbitant. Tom Leyden, the head of Solar Grid Storage, whose revolutionary container storage system on the side of a Maryland freeway we profiled a few months ago, says batteries currently represent 50% of the cost of one of his systems. 
 
 Which is why he's hailing Tesla's decision. 
 
 "If those prices comes down, our market expands, we can offer a lower priced product and put more storage in our system," he told us. "So this is very important." 
 
 Solar execs are comparing the current environment to where photovoltaic costs were in the last decade, just before their prices plummeted. 
 
 "At that point in time solar modules were very expensive, and the industry was pushing a couple of different alternatives: thin films were going to be photovoltaic of the future," said Tony Clifford, CEO of Standard Solar. His company also worked on the Maryland project. 
 
 But thanks to worldwide government incentives, he said, the price of traditional silicon ended up falling through the floor, paving the way for the current renewables boom. 
 
 In this case, of course, the marketplace is creating the demand for lithium ion batteries. But renewables will again be the beneficiaries. 
 
 "You're going to be able to drive costs out right across supply chain and see some significant cost reductions in storage technology." 
 
 A report from the Rocky Mountain Institute released prior to Tesla's announcement (spotted by GTM) was even more extreme about the possibilities for cheaper storage. 
 
 "Whereas other technologies, including solar PV and other distributed resources without storage, net metering, and energy efficiency still require some degree of grid dependence, solar-plus-batteries enable customers to cut the cord to their utility entirely," they write. "The coming grid parity of solar-plus-battery systems in the foreseeable future, among other factors, signals the eventual demise of traditional utility business models," the authors wrote. 
 
 Tesla's announcement represents a major step towards a larger, cheaper energy storage market that could have huge implications for making renewables more widespread. 
 
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 An attendee looking at a battery charger is reflected on a Tesla Motors Inc. Model S electric vehicle displayed at the 43rd Tokyo Motor Show 2013 in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg 
 
 Tesla Motors Inc. (TSLA:US)’s plan to build what co-founder Elon Musk bills as the world’s largest battery factory could shake up the power industry and trigger a bidding contest between states eager for the 6,500 jobs the $5 billion investment could create. 
 
 The luxury electric-car maker announced yesterday that it’s selling at least $1.6 billion of convertible notes to finance the project and exploring locations in Texas, Nevada, Arizona and New Mexico for a 10 million-square-foot facility. Tesla declined to comment on whether any negotiations had begun. 
 
 “This would rank as the most attractive industrial project out there,” said Dennis Cuneo, president of DC Strategic Advisors LLC and a former Toyota Motor Corp. executive who helped that carmaker select manufacturing sites. 
 
 Tesla has dubbed the project the “gigafactory,” and it would make Musk a force in both U.S. manufacturing and electric power. The plant he envisions would have more capacity than any other to make lithium-ion batteries. 
 
 “This has a huge impact beyond Tesla,” said Harley Shaiken, a labor economist at the University of California, Berkeley. “It gives enormous legitimacy to battery production and the future of the electric car because that lies in the battery. It’s high stakes, high technology.” 
 
 Tesla plans an investment of $4 billion to $5 billion by 2020 and will fund about $2 billion of the total, the Palo Alto, California-based company said in a presentation on its website. The convertible bond offering could grow to $1.84 billion, according to a separate statement. 
 
 Power Storage 
 
 The plant is key to Tesla becoming a mass-market automaker capable of producing 500,000 or more electric vehicles a year from a projected 35,000 this year, Musk has said. Its cheapest vehicle, the Model S, starts at $71,000. 
 
 The 42-year-old billionaire could also get closer to achieving his goal of being a leader in the power-storage industry in the U.S., as utility customers continue to turn to batteries and solar panels to reduce electricity bills. 
 
 The scale of production at the planned factory would be so immense that Tesla estimates it would drive down lithium-ion battery costs by at least 30 percent. 
 
 That possibility for batteries capable of storing large amounts of electricity from wind, solar and other renewable sources is what makes the project appealing, said James Albertine, an equity analyst with Stifel Nicolaus & Co., who rates Tesla a hold. Tesla rose 2.5 percent to $259.30 at 9:55 a.m. New York time. 
 
 “On the vehicle side, I am pretty steadfast in my skepticism at $200 or above. I’m a bear,” Albertine said. “My bull case is in the case that the cars become ancillary.” 
 
 ‘Robust Competition’ 
 
 Tesla, he said, would essentially become a power storage company. That would benefit SolarCity Corp., which is partly owned by Musk and may be a partner in the factory. 
 
 Musk said last week that Panasonic Corp. (6752) -- now the biggest supplier of lithium-ion cells used in Tesla’s batteries -- may also be involved. Panasonic’s participation is “not 100 percent confirmed,” he said in a Bloomberg Television interview. 
 
 While Tesla identified only four states as potential hosts, “it’s going to draw interest from many others,” Cuneo said. He predicted a “robust competition” where “incentives are probably going to be a big factor.” 
 
 A slide-show on the Tesla website includes a rendering of the facility in a desert landscape, with adjacent solar and wind farms to supply electricity. Construction could begin as early as this year, according to the presentation. 
 
 “Without question there will be a very intense bidding war -- $5 billion is a breathtaking figure,” Shaiken said. States want the jobs and “also the research and development related to this. That’s going to be very significant.” 
 
 Up Sevenfold 
 
 Tesla announced the fundraising and plans for the gigafactory after the shares closed at their highest since the company’s initial public offering in June 2010. They’ve gone up sevenfold in the past year. 
 
 The company will offer $800 million of notes due 2019 and $800 million due 2021. The company plans to grant the underwriters a 30-day option to purchase as much as an additional $120 million due 2019, and an additional $120 million, due 2021, bringing the offering to as much as $1.84 billion. The coupon, conversion rate and other terms of the notes haven’t been determined, according to the statement. 
 
 Goldman Sachs Group Inc., Morgan Stanley, JPMorgan Chase & Co. and Deutsche Bank AG are jointly managing the offering, the company said. 
 
 Previous Surge 
 
 Proceeds from the note sale will also be used to produce a “Gen III” vehicle that’s cheaper than the Model S sedan. The offering will also accelerate growth of Tesla’s business in the U.S. and overseas, as the company prepares to enter China next month. 
 
 The fundraising move echoes Tesla’s sale of $1.08 billion of new shares and notes in May 2013 amid a previous surge in the company’s shares. 
 
 “Obviously, they understand the need to strike while the iron is hot,” said Alan Baum, an analyst at Baum & Associates in West Bloomfield, Michigan, who tracks alternative-powertrain technologies. “What they are doing is taking advantage of being looked at as a different kind of company.” 
 
 To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net 
 
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– Elon Musk is working up plans for a battery factory so vast that Tesla Motors has come up with a new name for it: the "gigafactory." Tesla will invest between $4 billion and $5 billion in what it believes will be the world's biggest battery plant, Bloomberg reports, which would not only help it make cheaper, mass market cars, it would make it a major player in the energy industry. Tesla estimates that the factory will single-handedly drive lithium-ion battery prices down 30%, and it wants to put half a million electric cars on the street annually by 2020; that number is 35,000 currently. Rob Wile at Business Insider sees even bigger implications, predicting that Tesla "took the first step towards obliterating the power companies." The problem with renewable energies has always been storing power for less sunny and windy days; Tesla's move will make that much cheaper. Which is why Tesla might have a partner in another Musk-owned company, SolarCity Corp, and possibly Panasonic, which supplies Tesla's current lithium-ion cells. Construction should begin this year and wrap in 2017, Time reports, though it's unclear where: Tesla has named Arizona, Nevada, New Mexico, and Texas as finalists, but expect a bidding war from states for the roughly 6,500 jobs the factory will create. Click for Tesla's outline of the gigafactory (PDF).