Tesla Megapack energy storage units sit at Gigafactory Texas outside Austin on April 22. The company’s energy storage business has reported record battery installations over the past 12 months.
Jay Janner/Austin American-Statesman
As Tesla Inc. recovers from low car sales in 2025 that resulted in the company losing its title as the world’s bestselling EV maker, the Austin company is rapidly investing in a sector of its business that continues to have reliable demand.
The Austin-based company reported record energy storage installations last year, driven by its Megapack battery. In 2025, Tesla said its home battery network supported more than 1 million installed units that allowed homeowners to save on electricity bills.
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And it’s only gaining momentum in 2026.
In the latest quarter, Tesla said its energy storage business achieved its second-best quarterly deployment total. Over the past 12 months, deployments reached a record high. Revenue from energy generation and storage reached $3.1 billion, a 13% increase year over year.
Tesla said the growth was driven largely by increased Megapack deployments, though lower Megapack prices and fewer Powerwall installations partially offset those gains. The company also recently announced it has begun delivering its first in-house-designed solar panel to customers.
Tesla is also spending. In 2026, it expects its capital expenditures to be more than $25 billion, largely on its AI initiatives, but with a portion spent on its energy business as well.
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Tesla solar panels are installed on a home. Tesla is expanding its energy business as it increases investments in solar and battery storage.
Tesla/Courtesy of Tesla, Inc.
New Texas plant and partnerships
Tesla said its new factory outside Houston, which will begin producing its latest Megapack battery later this year, is almost complete. The manufacturing facility is expected to create 1,500 jobs by its third year, and Tesla has told local officials that the facility will resemble a similar one in California where it produces 10,000 Megapacks a year.
In June, Tesla said it would work with Sunrun and Renew Home on a plan to form the largest distributed power plant in the country, using home batteries and other devices to supply power to the grid during periods of peak demand. The companies described the plan as a combined 16-gigawatt resource that draws from home battery systems operated by Sunrun and Tesla, alongside smart thermostats and devices managed by Renew Home.
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“The grid of the 1800s cannot power the innovation of 2026,” said Sunrun CEO Mary Powell. “Americans deserve innovation that does not create unnecessary energy costs. When data centers are asked to throttle down operations during the most expensive and stressful hours of the day, we can activate our distributed power plants to help provide them the power they need while also protecting American families from footing the bill for costly new infrastructure.”
The company’s recent focus on its energy business arrives as Austin residents are being encouraged to invest in renewable energy.
Austin Energy offers incentives for customers who install battery systems and allow the utility to use stored energy during periods of high demand. Tesla’s Powerwall currently has the most enrollments, with about 1,000 systems installed in the area since 2017, Austin Energy said.
Still, recent changes to federal solar tax incentives could slow renewable energy growth. Austin Energy said the elimination of residential credits and early phaseout of commercial incentives have contributed to a sharp decline in new solar projects.
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In response, the utility announced in July that residential solar rebates would increase from $2,500 to $4,000 per project, along with higher incentives for commercial projects. Tesla is among the eligible solar contractors.
“These incentive updates are designed to accelerate local solar adoption, support the local solar industry and support Austin’s climate goals,” said Austin Energy General Manager Stuart Reilly. “It’s the definition of a win-win when you can also help customers offset energy costs by generating clean electricity on-site.”
Tesla Superchargers and other electric vehicle chargers are seen at dusk at a charging station, in the Kendall area of Miami, Thursday, April 2, 2026.
Rebecca Blackwell/AP
Megapod and more
Meanwhile, Tesla is also eyeing new energy products. In June, Tesla made a trademark filing for AI data center hardware referred to as Megapod.
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While still not formally announced, Aditya Akella, a professor of computer science at the University of Texas at Austin, said it’s an interesting direction for the company.
Akella said it could be thought of as a small collection of servers that would be about the size of a couple of generators, as opposed to a massive data center. By breaking up large infrastructure into smaller parts, it can be more easily integrated with energy storage, especially considering Tesla already has energy products.
“You could imagine that they could take these little modules and deploy them next to battery storage that’s co-located, let’s say with a charging center or supercharger, and that stored energy could be powering these tiny little data centers next to the supercharger,” Akella said. “When there is a lot of load you could imagine that a battery system that’s co-located with these clusters could buffer some of the fluctuations in energy.”
A megapod, Akella said, could smooth out some of those peaks by offloading some of the computation demand from nearby data centers to pods located elsewhere. And while data centers draw water for cooling, but something like a Megapod could be made with its own internal cooling system, reducing water demand.
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Still, Tesla would be entering a market that’s already filled with products from Dell, HP and Chinese companies, Akella noted.
But as some Texas cities push back against data center development, Megapods could supplement new data centers that are built.
“It’s kind of like a way of smoothing out demand, reducing stress on the grid, and because there is battery backup, it also kind of stores power and kind of doesn’t actually draw power from the grid at peak times to power this computation because of battery use,” Akella said. “So it’s a nice kind of sustainable alternative, or addendum, is how I would think of it, of a traditional data center architecture. On the energy side, this is win-win in my mind.”
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Still, Tesla’s energy business also faces potential challenges. The company noted in a recent filing that the current tariff regime will have a relatively larger impact on its energy business compared with its auto business, saying import tariffs could significantly increase battery cell expenses and impact costs for consumers, negatively affecting consumer demand.
“Despite these challenges, as AI infrastructure drives rapid load growth, we see opportunities for our energy storage products to stabilize the grid, shift energy when it is needed most and provide additional power capacity,” Tesla said in the filing.