Tesla Energy, the electric vehicle company’s solar and storage arm, has a volatile history. During its formative years, the division faced immense pressure from both Tesla’s leadership and customers to churn out new products with limited capital and resources.
But that pressure ultimately led to a revolutionary suite of stationary storage projects, launched between 2015 and 2016, including the Powerwall and the Powerpack. And they were effectively bootstrapped by a small, scrappy engineering team led by Drew Baglino.
It wasn’t an easy process. The company’s lack of resources often resulted in delayed product shipments and upset customers in those early days.“It actually happened more than once…where we got a lot of people really excited in lots of markets that really wanted the product and then we couldn’t really deliver the product,” Baglino said in an interview on The Green Blueprint podcast. “It burned a lot of relationships.”
In the years since, though, the company’s products have become some of the most well-known batteries on the market. But the hurdles keep coming — and with them potentially a need for Tesla Energy to be resourceful once again. As Baglino — who worked at Tesla in a number of roles for 18 years before leaving in 2024, and recently announced the launch of Heron Power, an advanced power electronics company — reflects on the events of a decade ago, the company’s supply chain and broader financial outlook are being threatened by both geopolitical tensions, and by the reputation of its CEO Elon Musk.
Launching the Powerwall
Baglino joined Tesla in 2006 as an electrical engineer working on the infamous Tesla Roadster, the company’s first highway-legal car. He helped re-architect the car’s power electronics.
By 2013, he had worked his way up to director of powertrain systems, architecture, modeling and controls, a long title that essentially means he led the team that worked on how Tesla’s EV generate and move power. Most notably, his team developed the battery management system, control electronics, and powertrain in the Model S.
So, in 2014, when Solar City — a commercial and residential solar company closely connected to Musk — asked Tesla to make a battery system to pair with its rooftop solar installations, Baglino was put in charge of the engineering for the project.
“You could call it a Powerwall Zero. It was like a sort of cobbled together Model S battery module,“ said Baglino about the first prototype developed for SolarCity. “I think we did a thousand of these early systems with Solar City, and it was like a self-generation incentive program, a trial program really, to see if residential batteries could work.”
Listen to Drew Baglino’s whole interview on The Green Blueprint:
The product requirements for the prototypes created a lot of work for Tesla; the battery had to be compatible with all of SolarCity’s vendors, which meant multiple inverters. “Tesla at the time didn’t have a channel to the end customer in the residential space necessarily,” explained Baglino. “We didn’t have the time to develop a grid interactive inverter that could back up a house.”
Around this time, the residential solar market, and by extension the residential storage market, were starting to shift. Net metering policies in key markets like Hawaii and California were being overhauled because of the rapid adoption of rooftop solar. And California was moving toward using the public safety power shutoff mechanism to mitigate wildfire risk and grid failure. Both changes helped spur the need to store energy at home.
So in 2015, Tesla decided to go directly to consumers with their own home battery: the Powerwall 1.
“A home battery wasn’t just about making residential solar valuable and affordable, but also about providing you some amount of energy resiliency, energy security,” said Baglino. “That Powerwall one system I think showed all of that to the end customer.”
The response to the Powerwall 1 — broad enthusiasm, especially for the product’s sleek design — pointed to a big opportunity in the market: a direct-to-consumer business model for a home battery. And Tesla jumped at the opportunity. The company launched the Powerwall 2 just a year after the Powerwall 1, in late 2016; and it also acquired SolarCity.
Fighting for resources internally
While Tesla was busy building up its energy business and launching a new suite of products, the situation behind the scenes was fraught. The vehicle side of the business was ramping up for a new launch of their own, sucking up capital and resources across the entire company.
“We had to be extremely scrappy because in this period of time, from 2014 to ultimately 2019, Tesla was definitely not sustainably profitable on the car side,” said Baglino. “We went through some very challenging times like the Model 3 ramp in 2017 and 2018.”
A home battery wasn’t just about making residential solar valuable and affordable, but also about providing you some amount of energy resiliency, energy security.
To move products through difficult ramping periods, Tesla’s habit is to dedicate as many resources and attention to the product as possible. Which is how Baglino’s energy engineering team was able to get the Powerwall 2 production line to crank out 2,000 battery modules per week in 2016. In fact the first products made at the company’s flagship gigafactory were the Powerpack and Powerwall, Baglino said: “It was a real rallying point to get everybody up there, ramp the line, make it happen.”
The expectation was for employees to help whenever and wherever they could. In some cases, software engineers were working on the manufacturing line, physically putting products together. Baglino’s core energy team that had gotten the storage products out into the world, he said, then spent “a good six to nine months” working on the Model 3 ramp-up.
“For some people that wasn’t for them, but for a lot of people I think it was super rewarding when it worked to go through that,” said Baglino.
Searching for supplies
Resources were tight. The big point of tension for Tesla Energy hit in 2017, when Panasonic started struggling to supply the company with cells for both the car and stationary storage batteries.
“We didn’t have enough cells to go around between vehicles and energy, and so we had to pair back on the Powerwall build plan, which was tough” recalled Baglino.
But he tackled the supply shortage head on. “Myself and other members of my team kind of volunteered to go in and help debottleneck their ramp up of their new line,” he said of the partnership with Panasonic. “We simplified their life by telling them they didn’t need to make the energy cells anymore, even though that was hard for Powerwall. But it was necessary for them to ramp vehicles.”
Then Baglino started looking for alternative suppliers, which was difficult because there weren’t a lot of “well-renowned, high quality cell suppliers” at the time.
He approached LG, who were making cylindrical cells — the kind Tesla uses — for its laptops. “I remember going and spending a lot of time in Korea and explaining, what is residential battery? Why would somebody want it? What is a good battery? What are these things for?” said Baglino.
Baligno’s time spent in Korea courting LG paid off when the company agreed to supply Tesla Energy with its cylindrical cell technology. “Ultimately they took a bet on Tesla,” said Baglino; and it was a bet that proved mutually beneficial. “They ended up getting an opportunity to participate with the vehicle business in China.”
But just a few years later, when the COVID pandemic hit, Tesla, like many other manufacturers, faced supply chain shortages again — except this time it was semiconductors. “It was kind of like, ‘Hey, Vehicles is the breadwinner. Energy, you’re going to have to get the scraps and figure it out,’” said Baglino.
And these constant battles for resources and supply chain constraints took their toll on the energy team, despite their successes.
“It burned a lot of people out in the team that were really sad,” said Baglino, “But this is the sausage making of building a company. You can’t win ’em all.”
Today’s turmoil
The supply chain challenges Baglino navigated eight years ago are rearing their head again — but the challenges for Tesla are more far-reaching than those initial internal growing pains.
In Tesla’s latest earnings report, the company acknowledged that “uncertainty in the automotive and energy markets continues to increase as rapidly evolving trade policy adversely impacts the global supply chain.” The company’s overall profit fell by 71% in the first quarter of the year.
Tesla’s automotive revenue slumped 20%; and while Vehicles still make up more of the company’s earnings than Energy, the balance is beginning to shift. Energy generation and storage revenue rose 67% in the first quarter, to $2.73 billion.
But this growth for energy faces new threats. Executives specifically noted that tariffs would impact Tesla’s energy business more severely than its automotive segment. While Musk has generally been a vocal supporter of President Trump, who continues to give the CEO enormous power over his administration, Musk said on a Tuesday call with analysts that he “will continue to advocate for lower tariffs rather than higher tariffs, but that’s all I can do.”
Musk also vowed to spend less time in Washington and more time on Tesla — he said he plans to spend “a day or two per week” on the Trump administration, likely for the rest of the presidency.
However, the problems facing Tesla aren’t only a matter of tracking down the right supplies.
“Changing political sentiment could have a meaningful impact on demand,” the company said in a statement. It’s a reference to how dramatically consumer sentiment has soured on Tesla while Musk leads President Trump’s Department of Government Efficiency, responsible for cutting tens of thousands of government jobs, and for sweeping cuts to programs from home energy assistance to international climate resilience help.
