As the U.S. moves to energy policy that emphasizes renewable energy development, we would be wise to consider the impacts on land use and agriculture policy as well as recognize that the relationship between state and federal governments cannot and should not be trampled in process.
My new column, Cleantech Counterpoint, on Gigaom’s Earth2Tech blog debuted today, with the first installment focusing on California’s AB32 carbon emissions law and a retrospective look at what is going on in Spain.
I have, like many others, been fascinated with energy technology and agree with many of my peers that this is the next wave of Silicon Valley. While I am an enthusiastic supporter of renewable energy development, conservation technology, and energy storage, I just can’t get on the bandwagon with those advocating that we do this at any cost.
A sustainable energy proposal that bankrupts an economy is by definition itself unsustainable. We live in the real world and in that real world are people who pay for things with something called money and the less money they have to support their families because they are paying more to drive their cars, heat their homes, and turn on their lights, well that’s bad for all of us.
The other motivation for me is that the energy economy is far different than any other economy, except for maybe semiconductor manufacturing, in that the capital outlays and supply chain risks are enormous. This isn’t a market where you, as an investor, put $10m into a deal and wait patiently for an exit. We need rational analysis that looks at technology development, raw material supply chains, regulatory issues, and lastly, consumption dynamics and that is a far more complex type of investment than a straight software deal.
Lastly, I am very wary of the law of unintended consequences applied to energy markets. We have already seen what happens when food crops are diverted to fuel crops and when government subsidies sustain and otherwise unsustainable approach, and this should cause us all pause as it relates to large scale energy investments. We simply cannot take the approach of “well this seems like a good idea so let’s do it”.
There are many really good ideas for developing renewable energy, conservation, and allocation of energy resources, and all of these developments are worthy of consideration. It should be clear to everyone that better utilization of our resources is a universal value and that those economies that develop energy intellectual property will be well positioned in the future.
I want to thank Om and Katie for giving me a forum to publish my writings, it says a lot about their editorial integrity that they seek out voices from different perspectives.
So the City of San Jose is distraught that Tesla pulled the plug on their planned factory in San Jose. Check out their math.
Construction would mean 600 jobs and $40 million in wages, according to an analysis by city staff, and the facility ultimately would employ 525 people with an annual payroll exceeding $100 million.
Let’s look past the construction jobs and focus on permanent payroll… the average employee at the Tesla factory, according to San Jose officials, would earn $190,000. We could speculate on bonus structures and additional taxable compensation components, but at any rate that is a lot for per employee at a car factory, it pretty much puts GM’s $78 per hour cost to shame. Okay, it’s also company HQ and has R&D but that is still a lot of coin.
I also question city officials for the wisdom of basing these projections and plans on a company that has failed to meet any of the original targets they set for themselves in the timeframes made public and to date has delivered a mere 160 cars.
PS- I pulled up behind a Tesla yesterday at stop sign, the car has some wicked acceleration.
The good news is that solar is still growing at a pretty good clip, the bad news is that like almost every other durable good and infrastructure industry it is tied to pedantic factors like financing. I find it incredibly troubling that an entire industry is banking on increasing federal subsidies, on top of what is already a generous subsidy, in order to remain viable.
Barry Cinnamon, chief executive of Akeena Solar in Los Gatos, said his firm’s solar installation business has slowed from a growth rate above 40 percent to something more in the 25 to 30 percent range. He hopes that falling prices for solar arrays, coupled with more generous federal tax incentives, will re-energize orders.
We still don’t have the right mix of incentives and structural accommodations for solar in the U.S., which reflects a non-existent national energy policy. Even with tax incentives the cost of solar is prohibitively high and the strategy of feeding the power grid until your bill goes to zero is not enough to deliver a reasonable pay back period. If you are generating electricity you should be paid for it, period.
The other related technology that requires a national push to establish technology leadership is batteries. For homeowners the appeal of solar is dented by the fact that you don’t have access to it during peak hours. I am skeptical that the Federal, or any state government, can pull off such a feat because we lack precedent in organizing technology investments by government directed at a specific industry. Remember that effort in the 1980′s by the Feds to retain U.S. dominance in the RAM business? Failed, big time.
I saw these today at Home Depot, solar powered attic ventilation fans. This is really smart for a couple of reasons, the first being the fact that heat built up in the typical house attic results in excessive AC usage in the summer as the attic heat keeps the house warm even with insulation. Ventilating attic air also ensures that moisture is evacuated and the attic environment stays generally healthy, so attic fans are just plain old smart building practice.
I have one in our house and it’s set to a thermostat that kicks the fan on when the ambient air temperature reaches 115 degrees in the attic. Basically this is everyday during the summer. These fans are lower power consumption fans but they are running continuously for at 7-10 hours on a typical summer and autumn day.
Here’s why a solar powered attic ventilation fan is a no-brainer, the fan only runs on days that the sun is out and then the fans only run during the day time hours. An attic fan is mounted as either a roof mount or a gable mount, meaning it’s always installed in a location that is sun exposed and if you roof is not sun exposed then you probably don’t need an attic fan to begin with. In short, this is a perfect application for a solar powered appliance.
The price is about $100 more than a line current option but if you are doing this yourself and would have to hire an electrician for a non-solar powered unit then the cost savings alone more than cover the premium for the solar option. This is clean tech that I like, not only does it reduce your energy consumption but it does so in a package that is well tuned to the application and for a price point that is really quite fair.
Luxury car manufacturers are always trying to convince themselves that they are recession proof. It’s foolish.
Let’s take a look at Ferrari, they sell an average of 600 new cars a month… in November they sold 92, laid off up to 300 employees and announced plans to idle their Maranello factory for 20 days in December. Despite coming into the summer with a 2 year waiting list, the company is now watching vehicles pile up in markets like the UK and US.
This a perfect storm for Tesla: inability to access credit markets for expansion and vehicle financing, gas prices plummeting distract buyers from the advantages of plug-in vehicles, and taxpayer dollars being funneled to companies like GM. The company also suffers from a self-inflicted wound, the hype that they built up made it impossible to exceed expectations once they started delivering cars, and in many ways this is exactly what Segway did to themselves and they have never recovered.
Tesla shouldn’t fool themselves, retail sales numbers for december are showing luxury goods plummeting 37%, more than any other category. Tesla may need to sell just 1k to break even but they need to sell a lot more than that to invest in R&D in order to drive future sales and given the questions surrounding the viability of this company I think they have a tough road ahead, no pun intended.
A recession might seem like the wrong time to be selling luxury cars of any kind, much less ones that use an all-electric technology unfamiliar to most Americans. But sales of unique, high-end vehicles usually don’t plunge during downturns, according to auto industry analyst Jesse Toprak.
Facts are facts, it’s hard to avoid the reality that hydrocarbons are very efficient energy supplies. Given the choice between buying an expensive new technology electric vehicle that has serious range and “refueling” constraints, or a moderately expensive gas burning vehicle that is cleaner (ULEV or better), well I’d choose the latter. This is the dilemma for technologies that rely on renewables, they are competing against a very low cost and very efficient fuel that is primarily constrained by political correctness at the moment.
Oddly, nothing better illustrates the overall efficacy of gasoline than an electric car. In 1900, when electric, gasoline, and steam cars were vying with one another, an article in American Monthly Review of Reviews pointed out that the gas car had “developed more all-round good qualities than any other carriage,” not the least of which was that “it carries gasoline enough for a 70-mile journey and nearly any country store can replenish the supply.” It was true back then and it remains true today. The standard to which electric cars aspire—for speed, flexibility of operation, and range—is the gasoline standard.
[From Why Gasoline Is Still King — The American, A Magazine of Ideas ] Link via TTAC
BTW, I’ll still buy a Volt when they become available but it won’t be my primary vehicle. If it were I would have a much more complicated purchasing decision and most likely would not buy. If my concerns were affordability, there are many vehicles that are competitive to the Volt in terms of styling, size and performance that offer “good enough” fuel economy that would be higher up on my list. If California follows through on the Democrats plans to raise sales tax and registration fees by 3x, I will probably reconsider my desire for a Volt.
Beware of people who claim that forcing a shift to renewable energy will result in an economic boom. The technology boom of the last 30 years did not come as a function of forced change but rather efficiencies and cost advantages that were self-evident. If you want renewables for reasons other than economics then great, but don’t try to sell me on the notion that a massive and costly shift to a less efficient resource will result in an economic boom and millions of jobs… that’s just pissing on my leg and telling me it’s raining.
Then came the release of a scathing “peer review” of the scoping plan. Harvard’s Robert Stavins wrote that the ARB’s “economic analysis is terribly deficient in critical ways” and could not be relied on. Janet Peace and Liwayway Adkins of the Pew Center for Global Climate Change wrote that the analysis “gives the appearance of justifying the chosen package of regulatory measures rather than evaluating it.” Wesleyan University’s Gary Yohe wrote it was “almost beyond belief” that the agency could claim vast economic gains and decried the “spurious precision” of its forecasts. UCLA’s Matthew Kahn noted the considerable evidence contradicting the ARB’s claims that manufacturers, who employ 1.5 million Californians, would not be hurt by higher energy costs. Dallas Burtraw of the Resources for the Future group said the models used by the ARB underestimate costs, wrongly anticipate a “frictionless,” easy transition to new energy sources and are in troubling “harmony” about the economic upside of the scoping plan.
Get ready for the new Congress and a dedicated push for cap-and-trade carbon emissions legislation. I’ll leave it to the comment section to debate the merits of the underlying problem that cap-and-trade attempts to address, but for me the big loser here are workers because for such a system to work the initial credits will be auctioned off by the government, so it’s essentially a tax and for those that can afford it they take their costs up front while those that can’t will take it in small doses through penalties and a market mechanism. In the end I fear this is nothing more than a job killer.
No matter which man leads the committee, Pelosi said she would pressure him to move a “cap and trade” bill that would limit greenhouse gases and allow emitters to trade credits to emit gases. She acknowledged it might take Congress time to put together the complex and controversial legislation.
Lastly, I can’t help but find the irony given recent events involving open markets that trade hard to value intangible assets, that the Congress would suggest setting up a market for… hard to value intangible assets. Imagine the mark-to-market implications of having carbon credits on your books?
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It’s interesting to look at this one statement regarding Tesla’s finances, $9m in the bank after taking deposits on 1,200 orders. I picked a number at random, a number between the $4k and $60k deposit required when placing an order calculated that they have taken $20m in deposits, which means they have burned through half of the money committed by customers before delivering but a fraction of the orders they took.
This might not be a bad thing because I’d bet that a very large percentage of those customers would still have placed an order with a deposit even knowing that Tesla lacked all of the capital to deliver on the cars they committed to selling.
You couldn’t do it because of SEC regulations covering the number of allowable investors (as well as being accredited investors) but it would be quite dramatic if Tesla had come out and said from the get to that the first 1,000 customers would in fact become investors in the company in exchange for a larger upfront deposit. That could have generated the additional $20m that Musk says he needs to break even without all of the drama they are experiencing right now.
In an employee meeting, Musk shared the company’s finances, which indicated that Tesla has about $9 million in cash.