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Übermensch

Übermensch


As you probably know, Musk also has these electric cars that people seem to like to drive… with the potential to put all the major car manufacturers out of business. Oh, and the dealerships too.

Musk also has a spaceship company. It is his stated goal to leave Earth and set up shop on Mars. He has already put the US government out of business when it comes to space.

How did he manage to do all this stuff? He made $34 million selling a software company when he was 24, which he freerolled into PayPal, which he made $165 million selling in 2002. He then freerolled that into SpaceX and Tesla.

Oh, and another thing. Musk thinks the state of California is incompetent to build a choo-choo train going from San Francisco to Los Angeles, so he drew up plans for a “Hyperloop,” basically a giant pneumatic tube that can get you there in 35 minutes for $20.

He said he didn’t have time to build it, so he gave the plans to the state for free. (Jerry Brown is going ahead with the snail rail. Unions need to get paid, you know.)

Feel Terrible About Yourself Yet?

I’m not done. He is chairman of a company called SolarCity, which is the second-biggest residential solar panel maker in the country. They will come to your house and install solar panels, so you don’t have to buy electricity from the grid.

Now—if you watch the video of Musk’s Powerwall speech, you’ll start to see the genius of his plan.

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You have these giant batteries you keep in your house (which take up little space and hang flat on the wall).

You have solar panels on your roof to generate electricity.

You store the electricity in the battery when the sun goes down.

You charge your car off the battery.

Everything—every house, every car, every business--is now powered by what Elon Musk calls a “giant nuclear fusion reactor in the sky, which runs all the time.” Not oil or gas or coal.

I wouldn’t consider myself a big environmentalist, but still, this excites me. Have you ever heard of something called “Moore’s Law” where computing power grows at an exponential rate? It applies to solar panels too. It won’t be long before solar power is cheaper than conventional energy sources.

The politics of it are a little tricky. I don’t like subsidizing solar, and SolarCity’s entire business model is based on solar tax credits. But soon, it won’t matter—the technology will exist for solar power to compete directly with fossil fuels. And the higher oil prices go, the better solar will look.

Growing Eyes in the Back of Your Head

Elon Musk is a pretty inspirational character, but he seems to have made a lot of enemies along the way. Democrats don’t like him because he’s a creature of business and finance. Republicans don’t like him because he lives off subsidies. Not bad for a guy who calls himself half-Democrat, half-Republican.

The car companies sure don’t like him. If oil gets back above $100, they will like him even less. The history of the auto industry is full of all kinds of backstabbing and intrigue (see Preston Tucker).

If everyone starts driving electric cars, the oil companies aren’t going to like him very much, either.

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And the utilities are really going to have it out for him. But they suck. Of all the terrible businesses out there, including the tobacco companies, I despise the utilities the most—even if it isn’t really their fault.

The utilities generate and distribute electricity pretty much the same way they have for the last 100 years. No innovation at all. Why not? Well, because we decided they were utilities! If you put a cap on the rate of return someone can earn, there isn’t a lot left over for innovation. So be very careful what you start calling a public utility.

SolarCity gives us the promise of distributed generation, where electricity is generated at the home or business, and if it’s generated in excess, it’s sold back to the grid. This already happens in dribs and drabs, and is starting to have an impact on the power trading business.

If enough people generate their own electricity, you don’t really need utilities anymore.

It’s not hard to see where this is going. The utility companies are going to fight back, hard. But not in the free market—on Capitol Hill.

If Musk is permitted to succeed—which is a big if—there’ll be no more carbon emissions and a cheap, endless power source.

Yes, We Can

This is save-the-world type stuff. Pretty ambitious. But will it work?

I can’t say this cynically enough: A lot of it depends on Musk managing the politics… not the engineering.

I owned both Tesla (TSLA) and (SolarCity) SCTY for a time. I traded them pretty well, which doesn’t happen often. I don’t currently own them.

One thing I love to say: Whenever you have a disruptive innovation, it’s a lot easier to bet against the losers than on the winners. And the utilities are clearly the losers.

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It’s a long-term thesis, maybe 20 years, but this is like betting against BlackBerry (RIMM) in 2008—one of those trades that will seem really obvious seven years from now.

Then again, utilities have never been a growth business. It’s all about the dividends. And stupid dividend investors will hang on to a trade far longer than economic sense dictates. See tobacco.

I have a hunch that 20 years from now, we won’t be burning coal for electricity. But not because of any government decree, but because the free market will have done what the politicians couldn’t do for themselves: make renewable energy sources cheaper.


Discussion

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Tom Brennan
May 7, 2015, 10:58 p.m.

Steve K. has quite a point. The Tesla home Powerwall is rated in 7 kWh or 10 kWh; Steve’s estimate of 10c per kWh is close enough, so we’re talking about storing 70c to $1 worth of power in a $3000-3500 battery.  Which needs an inverter and electrician installation; experience with electric car chargers suggests an additional $1500 for this.  (And car chargers work in the easy direction, as a grid load, not a power source which has to negotiate with the utility lines, survive lightening strikes, have the intelligence to not backfeed the lines and electrocute linemen when the power goes out, etc. So $1500 may be low.)

The 10c price per kWh is an overall average; we will be moving to time-varying prices, and the times when solar is most productive happily coincide with the times when the price is usually highest (eg, 2PM on July afternoons). So that is a kinda-hard to gauge benefit of a solar system.

But reading about the value projections for Tesla’s batteries, a LOT depends on the estimated endurance. Tesla’s spec’ing 10 years, which would be great but has not been seen in real world battery packs yet.  And extensive experience with lead-acid UPS batteries and lithium ion laptop batteries suggests that “10 year life” doesn’t mean “100% of the battery capacity in year 10 that you had at purchase”, which effects the value projection in really hard to estimate ways.

This is a good thing that Musk is attempting; cost-effective energy storage has been the hardest nut to crack in energy storage systems. But there’s plenty of risk in this attempt, so caution is in order. Caveat Investor, Mr. Dillian.

L M C Clark
May 7, 2015, 7 p.m.

Hey Jared, a couple of points you missed.

a)  Batteries are insufficient energy storage for PV that has an annual effective irradiation period in sunny regions of about 6 hour per day.  With no reasonable storage to put away energy for when the sun doesn’t shine, this means stand-by power plants that are paid for by the “folks” through infrastructure.  There’s no free lunch.  By the way, have you checked into how much energy these “giant batteries hanging on the wall” will power in your house.  The basic one for $3500 is quoted as running your lap top for 4 days.  Wow!  Total these up for your whole house energy needs for a day, and consider days where the sun doesn’t “come out”.

b)  Moore’s Law has to do with putting more transistors onto to a chip, within an area.  Solar has a delineated area for collection and for a prescribed area in high sun this is about 1000 w/m2.  Sharing the area, miniature PV you get miniature power (exception of solar concentrators which still require large area to intercept sunlight but use mirrors or fresnel lenses, a different ball game).  So how is it you think Moore’s Law enters the equation?!

Full disclosure … I am a fan of solar PV, huge proponent … but please, let’s deal with reality.  The BIG issue is storage, not collectors.

dewitt_payne@yahoo.com
May 7, 2015, 3:16 p.m.

Moore’s Law does not apply to batteries.  Even if solar panels were free, the cost of the batteries would still make solar electricity more expensive than, say, a combined cycle natural gas fired power plant.  And you still face the same problem as the gambler’s ruin problem.  Your battery capacity is finite and there will always be a situation where the batteries run out.  What then?

By the way, forcing utilities to purchase excess rooftop solar power at anything close to retail is a ripoff of the rest of the rate payers and is therefore morally questionable.  Subsidizing the purchase is, of course, even worse.  it’s wealth transfer from poor to rich.

James Housel
May 7, 2015, 1:35 p.m.

Hi Jared,

As a guy who lives w/solar panels and batteries (on a little island) I’m looking forward to my Powerwall. But…and there is a big but, very few people could live w/the energy that falls on their solar panels. We also need to use a lot less, something our economic system will hardly welcome.

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