Elon Musk had to resist the urge to strike a Dr. Evil pose Thursday night as he talked about “billions” of batteries like Tesla Motors TSLA -0.01 % ’ new Powerpack effectively ending the energy business as we know it.  But depending on how the heads of traditional power suppliers respond, they could be the ones who end up laughing “MWAH HA HA.”  Tesla Energy, the new battery arm of the electric-vehicle maker that Mr. Musk heads, represents a moment for the distributed-energy industry, albeit not a breakthrough. Its lithium-ion technology is the same well-established one inside Tesla’s Model S car and just one of several competing chemistries.  But Tesla may be taking a page from Apple’s book. Decades ago, Apple took a technically difficult tool used mainly by die-hards, the personal computer, and popularized it. In the same way, Tesla’s sleekly packaged take on distributed power is “talking to the 99% of people who think it can’t be done and making something people think can be done,” says Rob Day, partner at Black Coral Capital, a clean technology venture-capital fund.  Like its cars, though, Tesla’s battery is too expensive right now for mass adoption. The bigger near-term opportunity will be businesses that often pay punitive utility fees when demand is high. A battery could help offset that. The proposition becomes even more enticing when coupled with software that helps companies better manage their energy usage. This means they could use a smaller, cheaper battery.  For utilities, though, batteries represent an existential threat over the long term. Right now, the grid and power stations are the battery, providing power on demand. When that demand shifts to a customer-controlled battery, the utility sells less electricity.  Alternatively, utilities could get on board. While their instinct is often to slow the adoption of distributed energy—for example, in the form of special charges for solar-panel owners—this is politically difficult. And, over time, it actually encourages grid defection.  Instead, utilities could join with Tesla, or its many competitors, to install batteries at a large scale in their service areas. They could be compensated through the existing model of spreading the cost across customers’ bills, while meeting renewable-power obligations. Batteries, by storing surplus solar power, also address any lingering perceptions about distributed generation destabilizing the grid.  For Tesla, selling in bulk to utilities would be a faster route to boosting demand for batteries. From that, it would reap economies of scale. Such a future is probably not what many of Tesla’s true believers had in mind as they cheered on Thursday night: Distributed energy is supposed to be about individual empowerment.  But don’t be surprised if some utilities embrace batteries. They could prove a means to effectively maintain control of what distributed energy threatens to take away from them: the customer.  Write to Liam Denning at liam.denning@wsj.com
Elon Musk’s new battery packs are a threat to utilities, but also represent an opportunity to maintain relevance.