Tesla: Accelerating the Transition to Sustainable Energy
Tesla is accelerating the transition to sustainable energy by launching a more affordable electric car and by acquiring SolarCity
When Elon Musk unveiled the Model 3 on the 31st of March, 2016, he said: “Why does Tesla exist? (..) We have record high CO2 levels (..) Which results in a steadily increasing temperature (..) It makes a difference if we accelerate the transition to sustainable transport”.[1]
The CO2 concentration levels surpassed 400 parts per million in 2013. This growth in CO2 levels shows a very strong correlation with fossil-fuel burning according to Nasa[2]. For this reason, policy makers are working towards reducing the use of cars in big cities. In Mexico City for instance, a regulation was implemented in 2016 called “Hoy No Circula” (No Circulation Today). The program requires that every vehicle that wants to move within the metropolitan area of Mexico City has to go through a verification process in an approved center. According to the evaluation results, the vehicle receives a sticker which states how many days of the week the car can circulate. A “0” sticker means that the car can circulate every day, while on the other extreme a “2” sticker cannot circulate for one day nor Saturdays. The main goal of this initiative is to reduce the levels of pollution.[3]
Figure 1: CO2 levels over time [2]
Similar metropolises are also implementing experimenting with similar road space rationing programs. None of these programs affect electric cars, however. Programs such as these which foster the adoption of electric vehicles while raising public awareness about the negative effects of driving an internal combustion engine vehicle represent an enormous opportunity for Tesla. The Model 3 which will be launched in 2018 can be especially powerful for this purpose, given that it will be more accessible than previous Tesla models (starting at $35,000 USD) and targeted towards the mass market.[4]
Other policies that support sustainability are also being implemented. In Mexico, the “Fideicomiso para el Ahorro de Energía Eléctrica” (Trust for the Savings of Electrical Energy) funds 100% of new projects for the micro generation of energy of up to 500 kW, including solar.[5] In the United States, the Business Energy Investment Tax Credit is a rebate in which the owner of a solar panel can claim 30% of installation expenditures as a tax credit. The expiration date of this policy was extended in 2015 to be valid until 2022.[6] Germany has 40 million kW of installed photovoltaics thanks to the German Renewable Energy Sources Act, which provided a feed-in tariff to increase the investment in renewable energies.[7]
Figure 2: Installed generation of power (bars) and energy (line) from photovoltaics in Germany over time [7]
To fully embrace the mission to “accelerate the world’s transition to sustainable energy”, Tesla announced the acquisition of SolarCity in August of 2016[8]. SolarCity is a company that produces, finances and installs solar photovoltaic systems. The rationale for this acquisition is explained by Tesla as following:
“Energy needs to be sustainably generated, sustainable energy needs to be stored for later use, and sustainable energy needs to be used for transportation. And to be effective, the technology used for generation, storage and transportation all need to work together in an integrated way that makes the experience seamless. (..) First, there will be a solar roof that will generate sustainable energy from a rooftop that looks better and is more durable than a normal roof, that can be easily customized to fit the unique needs of each house, and that will lower costs to the consumer. Second, the Powerwall 2 storage system, which starts production this quarter at the Gigafactory, will take the energy that is generated by any source and use it when it’s most beneficial, such as during the night, during a power outage, or when the customer can make money by doing so. Third, sustainable energy needs to be used for transportation, which is why electric vehicles are so important.”[9]
I believe that Tesla could be more active in lobbying to encourage policy makers to work on more initiatives to foster the adoption of alternative energy. While the efficiency of solar panels has increased while the costs have decreased, the economics still do not support adoption compared to traditional sources of energy. For this reason, the government should further incentivise adoption to help companies such as Tesla/SolarCity grow. This scale will allow them to reduce costs and organically foster adoption of their technologies in everyone’s houses.
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- Tesla, “Tesla Unveils Model 3” YouTube, published March 31, 2016, https://youtu.be/Q4VGQPk2Dl8, accessed November 2016.
- Nasa, “Graphic: The relentless rise of carbon dioxide”, http://climate.nasa.gov/climate_resources/24/, accessed November 2016.
- Gobierno de la Ciudad de México, “Hoy no Circula”, http://www.hoy-no-circula.com.mx/, accessed November 2016.
- Tesla, “Model 3”, https://www.tesla.com/model3, accessed November 2016.
- SEMARNAT, “Guía de Programas de Fomento de Energías Renovables”, http://www.conuee.gob.mx/pdfs/generacion_distribuida/GuiaProgramasFomentoEnergiasRenovablesMunicipiosRepublicaMexicana.pdf, accessed November 2016.
- gov, “Business Energy Investment Tax Credit (ITC)”, http://energy.gov/savings/business-energy-investment-tax-credit-itc, accessed November 2016.
- Bundesministerium für Wirstschaft und Energie, “Entwicklung der Stromerzeugung und der installierten Leistung von Photovoltaikanlagen “, http://www.erneuerbare-energien.de/EE/Redaktion/DE/Textbausteine/Banner/banner_photovoltaik.html, accessed November 2016.
- Tesla, “Tesla and SolarCity to Combine”, https://www.tesla.com/blog/tesla-and-solarcity-combine, accessed November 2016.
- Tesla, “Tesla and Solar City”, https://www.tesla.com/blog/tesla-and-solarcity, accessed November 2016.
Mundo, thank you for the interesting read and specific examples of emissions reduction policies in Mexico City. I also appreciate your final emphasis and challenge for Tesla and governments to partner on building financial incentives to affect consumer behavior. Another barrier I would consider is lobbying competition from other alternative energy technologies and traditional energy companies over the time and attention of key legislators.
Very interesting read on the Tesla/SolarCity dynamic particularly around SolarCity’s attempt to provide economical infrastructure. While I agree it is critical to lobby for incentives to help make these alternatives more critical, I would argue that given the government’s tendency to be slow to act, Tesla/SolarCity should focus more on expediting the development of electric alternatives quickly enough that the choice to go electric becomes more economical than that of traditional means. I would also recommend more partnerships with other automotive manufacturers as ultimately they have now recognized the importance of shifting towards alternative fueling/powering and it would benefit the industry in the long run to achieve scale as quickly as possible.
Edmundo, this is indeed a very important topic. Major governments around the globe are struggling on how to reduce the emissions of GHG into the atmosphere and having companies such as Tesla contributes to create a viable alternative for them.
However, as you said, one big challenge for companies such as Tesla is having the necessary scale and incentives to reduce costs and guarantee that the new sustainable products are accessible on the mass market. Within this context, governments can play an active role on providing the necessary conditions to foster these innovative products (i.e.: electric cars) by offering tax incentives for example.
On the other hand, I think that initiative such as “Hoy no Circula” are important not only to reduce the emissions of gases such as CO2 but also to create the culture of environmental protection. However, it is hard to imagine how such initiative could be implemented in large scale around the world given the fact that most of the public transportation systems (especially in developing countries) do not appear as a viable alternative for the citizens. Before requiring the citizens to not use their cars, governments should give them alternative options for circulation.
Anyways, this issue should be a top priority on the agenda of any government. Thanks for bringing this topic into discussion
Great Post! Such an important topic! The one issue I have with electric cars are the infrastructure governments will need to invest in. Different countries around the world have different views. Will consumers buy such a car in a mass market without such an infrastructure to “plug in” their car? Per a EV Charging Infrastructure report by IHS, Japan is leading the way with EV charging stations and in fact they have more EV stations than for petrol [1]. However, in Germany and France the number of EV charging stations is not many when considering the population and size of those countries [1]. In the United States, the infrastructure is particularly complicated considering that the states not the federal government as the ones spending the money to build the EV stations [1]. So, while I love what Mexico is doing with Hoy No Circula, I wonder how can Tesla push countries like Germany, France, the United States towards more environmentally friendly options. In addition, how does Tesla take success stories like in Japan and Mexico and try to adapt those to other countries? Is lobbying enough to get the governments’ attention?
[1] “IHS Automotive forecasts the global EV charging stations installation base to grow to more than 12.7 million in 2020,” press release, May 28, 2015, on IHS Website, http://news.ihsmarkit.com/press-release/automotive/global-ev-charging-stations-skyrocket-2020-ihs-report-says, accessed November 2016.
Mundo, this was an interesting read and I liked how you ended the article by questioning the efficacy of the actions outlined by Tesla. Solarcity was an innovative project and it did incite a lot of interest. However it seems that operating inefficiencies have not made it the success that it can be. The company is run by Musk’s cousin (Lyndon Rive). Call me a skeptic, but I cannot help but feel that the buy out from Tesla is not going to yield the results that it should and might end up ruining Tesla’s business as well ? [1], [2]
Another thing that interested me was the amount of electricity that will be used to run a Tesla car annually and the source of electricity. I read up a little to get a sense of the estimates and found that the costs are around 25% of the normal fuel costs for the same mileage. I would like to see Musk and co. give an analysis of the actual carbon footprint. This will actually quantify the impact of putting these cars on the road and the subsequent environmental benefits of the same. [3], [4]
[1]. http://money.cnn.com/2016/09/01/investing/elon-musk-cash-crunch-tesla-solarcity/
[2]. http://dailycaller.com/2016/08/24/dont-go-against-the-family-musk-cousins-buy-100-million-in-solarcity/
[3]. http://www.greencarreports.com/news/1090685_life-with-tesla-model-s-one-year-and-15000-miles-later
[4]. https://www.wired.com/2016/03/teslas-electric-cars-might-not-green-think/
Mundo, I’m as fascinated as you are as to what lies ahead in terms of our electric future. As we saw in LEAD, Elon Musk is certainly the “leader as a beacon” type; which was so desperately needed to shake up an industry as stiff as the automotive industry. I keep on wondering what the underlying footprint is of EV’s. While they don’t burn fossil fuels to operate, the truth is most of the electricity generated to recharge EV’s is still coming from burning fossil fuels. On top of that, the environmental issues around making, and eventually disposing of, batteries are also not to be taken lightly. Perhaps Tesla’s impacts should be measured in terms of the green revolution they’re inspiring and not strictly by their CO2 impact on the world.