Tesla's shift to LFP batteries: What to know

In 2020, Tesla announced that they would be manufacturing their Model 3 cars in China using lithium iron phosphate (LFP) batteries, moving away from their traditional nickel-based chemistries they use in US-based car manufacturing. Tesla doubled down on their bet on iron batteries in the spring of 2021, announcing an intent to use LFP batteries in their grid-scale energy storage solution: the Megapack.

On the energy storage front, Tesla will now make its Megapack with iron-based battery cells. The Megapack is a three-megawatt-hour (MWh) battery that stores large amounts of electricity on the grid. Tesla's website advertises the Megapack as being applicable for "giga-scale projects" that can supply thousands of homes with electricity. It works best when paired with a non-dispatchable renewable resource like wind or solar to help deal with the intermittency of these resources – meaning when the sun isn't shining, a solar plant with a Megapack installation on site can still discharge stored electricity to the grid.

Tesla already ships its Chinese-made Model 3 cars with LFP batteries, but CEO Elon Musk has hinted that the company is looking to expand its products with LFP batteries over time. Two-thirds of all Tesla vehicles will allegedly get a battery with "iron chemistry" – a.k.a. LFP cells – and one-third will be planned with nickel-heavy chemistry.

Beyond Chinese-made Model 3 cars and the Megapack, Tesla doesn't use LFP batteries in other products. As we mentioned above, however, they seem to prioritize LFP chemistries in a larger swath of their cars, and we could potentially even see LFP chemistries in other storage products from Tesla, like the Powerpack and popular Powerwall home battery.

The primary reason for a big company like Tesla to shift towards iron-based batteries is cost. Although they're more energy-dense, nickel and cobalt-based batteries rely on more expensive materials (namely cobalt, as it's less abundant than those needed for an LFP battery). This drives up the price of manufacturing and the end price of batteries. As Tesla continues trying to bring affordable storage and electric vehicle products to market, filling them with less expensive components is one clear path forward.

For renters and homeowners, Tesla's decision to increase their LFP battery cell use won't impact you. LFP and nickel-based batteries are safe and effective at storing electricity, and your home batteries and electric cars will work just the same. Down the line, Tesla's car prices may drop a little, as LFP batteries are less expensive to produce, but it's hard to say by exactly how much or when.

Tesla certainly thinks so, at least at the "giga" scale. Cobalt-based batteries are more energy-dense than iron-based options, meaning they can store more electricity in a smaller physical space. Still, space doesn't matter as much for large-scale storage installations. Home batteries like the Tesla Powerwall might still rely on non-iron chemistries for a while, as the compact nature of those products can be a big selling point. But for low to mid-performance electric cars and grid-scale energy storage, LFP may be the way of the future.

Battery chemistry aside, there are plenty of factors to consider when choosing a home battery or solar panel system to install. The best way to make sure you're getting the best deal? Compare multiple options on the EnergySage Marketplace. On EnergySage, installers compete for your business, so you can know you're getting quoted high-quality products for competitive prices. Start your home energy journey today.