PG&E and Tesla announced this week that they have broken ground on a huge lithium-ion battery energy storage facility. The system will be designed, constructed and maintained by both companies, and owned and operated by the California power utility.

But, didn’t PG&E just get out of bankruptcy? Does this investment makes sense for the company and for ratepayers in the long run?

One reason PG&E was motivated to build this storage facility in Monterey County, California, is that it’s mandated by the state to provide energy storage capacity. And Mark Specht, an energy analyst at the Union of Concerned Scientists, said, from the utility’s perspective, this partnership makes a lot of sense.

“Tesla is quite advanced with their battery technology, and PG&E was looking for someone who can supply them with good batteries,” Specht said.

The batteries will be used by PG&E to provide power to customers. When the facility comes online, the utility can shut down inefficient natural gas power plants it has wanted to take offline for years. That efficiency should make it cheaper for PG&E to produce energy, which should, eventually, trickle down to ratepayers.

But, “it’s not clear how much and when utility ratepayers will actually start seeing savings in their bill,” said Paul Denholm, with the National Renewable Energy Laboratory.

He said that’s because power systems are multibillion dollar assets that are paid for over several decades.