Tesla’s multiple vehicles to becoming an integrated cleantech company

This past July, Tesla’s original mission statement, “accelerate the world’s transition to sustainable transport,” was amended to “accelerate the world’s transition to sustainable energy” [1]. Although Tesla is better known for its electric vehicle innovation, I believe Tesla has the potential to disrupt adjacent markets by becoming an influential player in the renewable energy generation, storage, and distribution space.

Back in June, Elon Musk announced Tesla’s bid to acquire Solar City for $2.6Bn. In just two weeks from now on November 17, shareholders will vote on the deal. Although many investors are criticizing the deal as an attempt by Musk to use one of his businesses to bail out the other, deal economics aside, I think there are powerful synergies to be realized [2]. Integrating Musk’s solar rooftop business with Tesla is an important step towards a future in which green energy can be generated and stored efficiently in order to sustainably power transportation, and more. Given that transportation is directly responsible for 26% of greenhouse gas emissions in the US, powering transportation with clean energy alone would drive considerable progress towards stagnating and ultimately reversing climate change [3].

Through what vehicles (pun intended) is Tesla working towards becoming an integrated sustainable energy company? 

Transportation

Electric vehicles were Tesla’s first step towards climate change mitigation. Musk recently posted on the Tesla blog that with the production of the Model S, Model X, and upcoming Model 3, Tesla has arrived at step three of the master plan he drafted ten years ago, which started with: “1. Create a low volume car, which would necessarily be expensive, 2. Use that money to develop a medium volume car at a lower price, 3. Use that money to create an affordable, high volume car” [4]

Tesla has future plans to roll out more consumer vehicles to address more market needs. And although Tesla — along with the help of the Corporate Average Fuel Economy (“CAFE”) standards and ZEV credits — has catalyzed other automakers to offer more consumer options, it’s not stopping there. Of US transportation-driven GHG emissions, we know that while passenger cars account for approximately 34%, light-duty trucks account for 28%, and medium-to-heavy-duty trucks account for another 20%. Overall, vehicular transportation accounts for 84% of transportation-driven GHG emissions [5]. Tesla has plans to announce heavy-duty trucks and high passenger-density urban transport solutions by 2017.

Power Storage

In developing charging solutions for its Model S owners, Tesla has developed the Powerwall, a residential-grade lithium-ion battery. Last week, Tesla announced a utility-grade version — the Powerpack. Musk spoke at the 2015 United Nations Climate Change Conference, stating “the world has somewhere between two to three times as many power plants as it actually needs. If you can buffer the power with big stationary battery packs, then you can actually shut down the worst half of the power plants in the world” [6]. Tesla could play a huge role in energy efficiency in its diversification into energy storage at scale.

Sustainable Manufacturing

Tesla projects that the world’s current lithium ion battery production is insufficient to support forthcoming EV demand. So Tesla built the Gigafactory, a manufacturing facility that by 2018 will have doubled the world’s 2013 capacity of lithium-ion production, and is designed to be net energy zero. Tesla could eventually set a new standard for manufacturing facilities if the Gigafactory proves successful and financially sustainable [7].  

Not only will the Gigafactory contribute to the energy industry by producing batteries that allow for efficient clean energy storage, but it could also serve as a proof of concept that manufacturing facilities can also be powered with clean energy.

Power Generation is next

The opportunity for Tesla to thrive will continue to increase with the urgency of global climate change and as other industry players rise to the challenge. But Tesla’s opportunity is not without challenges: increased regulatory support plus corporate and individual behavioral change will be needed for Tesla to operate profitably and displace conventional players. And our global energy needs will keep increasing to keep pace with a rising middle-class in developing nations and explosive growth in computing needs.

Despite the volatility of solar power being dubbed the “solarcoaster,” I believe that with the support of regulation, decreasing costs of solar PV, and the synergies between Tesla and SolarCity, Tesla can drive tremendous progress as an integrated renewable energy company [8]. If in two weeks shareholders vote in favor of the Tesla-SolarCity integration, I think we could see even greater impact through Tesla’s combination of energy generation, energy storage, and transportation.

While Tesla fans drool over the next vehicle release, I’m more excited about Tesla’s multi-pronged approach to tackling global climate change with a portfolio of clean energy solutions.

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Citations:

[1] https://www.tesla.com/about

[2] https://www.ft.com/content/6d795348-9cf3-11e6-a6e4-8b8e77dd083a

[3] https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions

[4] https://www.tesla.com/blog/master-plan-part-deux

[5] https://climate.dot.gov/about/transportations-role/overview.html

[6] http://www.autoblog.com/2015/12/05/full-text-of-elon-musks-paris-cop21-speech/

[7] https://www.tesla.com/presskit/#gigafactory

[8] https://www.ft.com/content/6d795348-9cf3-11e6-a6e4-8b8e77dd083a

Cover image: http://www.carscoops.com/2016/08/solarcity-to-launch-complete-solar-roof.html 

Exhibit: https://climate.dot.gov/about/transportations-role/overview.html