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SolarCity to offer Tesla-made batteries to business customers

A logo of Tesla Motor Inc is seen on the wheel of its Model S car, on display at the 43rd Tokyo Motor Show November 20, 2013. REUTERS/Yuya Shino

By Nichola Groom

LOS ANGELES (Reuters) - SolarCity Corp (SCTY.O) on Wednesday said it will begin offering Tesla Motors Inc-made batteries with its commercial solar systems, allowing businesses to cut what they pay to their local utility by using stored electricity.

The batteries made by Tesla (TSLA), which can also provide backup power during blackouts, are available to business owners who put up new solar installations with SolarCity and finance them through a lease contract or power purchase agreement.

Similar to its financed solar systems, the batteries will be installed at no upfront cost to the customer. SolarCity will price them at about 20 percent below the local utility's demand charges.

So-called demand charges are calculated based on the maximum amount of energy used during a customer's billing cycle. The charges are intended to help the utility recover its investments in power generation and transmission equipment.

Solar systems typically do not generate all the power a business needs to operate, so commercial customers still receive utility bills for at least a portion of their energy usage.

The batteries will only be available in areas where utility demand charges are high enough that SolarCity can guarantee cost savings. Those areas include parts of California, Massachusetts and Connecticut.

"The goal is to have a significantly differentiated commercial product," Chief Executive Lyndon Rive said in an interview. "There is nothing out there that we have seen that can compete against this."

SolarCity is the top U.S. solar installer, and commercial customers make up about 20 percent to 30 percent of its business. Its business customers include Wal-Mart Stores Inc (WMT.N), Walgreen Co (WAG.N), eBay (EBAY.O) and Intel Corp (INTC.O), among others.

The San Mateo, California company has been working with Tesla on batteries for three and a half years, according to Rive. He is a first cousin of Tesla founder Elon Musk, who is also SolarCity's chairman.

The company has been testing Tesla batteries in a few hundred residential systems in California but has no imminent plans to roll them out widely.

(Reporting by Nichola Groom; Editing by Steve Orlofsky)