Tesla Derangement Syndrome
The Tesla is no mere car. It is a movement. One prominent investment analyst told me he was subjected to a — to use the indelicate Scottish phrase – 'shite'-storm the likes of which he'd never experienced when he'd issued an unenthusiastic analysis of Tesla.
There's a lot of discussion about the implications of Nevada announcing it won the multi-state auction to host Tesla's $5 billion gigafactory to produce batteries. Governor Sandoval enthused the deal would “change Nevada forever.” Charles Munger, Vice Chairman of Berkshire Hathaway calls Tesla founder and CEO Elon Musk a genius. Meanwhile, the Wall Street Journal headlined the deal Nevada Gets Musked with an analysis of Nevada's $1.3 billion in subsidies to land the prize.
It will be an enormous facility – when finished in three years, it will produce as many lithium ion batteries as the rest of the world's lithium battery factories combined. But the scale of the energy world is sobering. Herein four fundamental facts to consider in any macro analysis of what the gigafactory means.
1. Start with the subsidies. It bears noting that if today's electric vehicle (EV) subsidies continue, and if EV's accounted for 10 percent of all cars purchased annually in America, taxpayers would be on the hook for $15 billion a year. This is, in a word, unsustainable.
2. Consider the global oil impact. Assume for the sake of argument that the gigafactory is the tipping point in the revolution and batteries get cheap, fast, and EVs account for half of ALL the new cars forecast to be in the world two decades from now – there will still be 500 million more gasoline burners on the roads (added to today's nearly one billion). The world will still need more, a lot more, not less oil than produced today.
3. Then there's the grid. The trope amongst many green pundits is that Tesla “could disrupt the electric utility business” as the gigafactory's cheap batteries wind up in homes for storing solar electricity. The math here: All of the batteries produced annually at the gigafactory could store 5 minutes (not a typo — it is five minutes) worth of annual U.S. electric demand. The sun is unavailable, on average, 720 minutes a day. (For more on such realities see my earlier The Future Electric Grid.)
4. Finally, one additional fact regarding scale, and oil. Just 30 minutes of the energy output at one shale field in Texas, the Eagle Ford, is greater than the entire quantity of energy that could be stored by all batteries produced each year at the gigafactory.
The world is overdue for new battery chemistry. Storing electricity is hard. The last great leap forward was introduced 30 years ago with the lithium chemistry that makes iPads and smartphones possible. Better battery technology will emerge, but not from building bigger buildings deploying yesterday's chemistry. Odds are it will come from some university researcher using big data to unravel chemistry's stubborn quantum mysteries.
This piece originally appeared in Forbes
This piece originally appeared in Forbes