Tesla’s Subsidy Shuffle: Big Public Costs With No Public Benefit

In mid-November, the stockholders of Tesla Motors (NASDAQ:TSLA) and SolarCity approved a plan to merge SolarCity into Tesla, thereby creating “the world’s first vertically integrated, end-to-end sustainable energy company.” It was almost enough to warm the cockles of this skeptic’s heart. Then I started compiling a list of the Federal and State subsidies and interventions the merged companies will enjoy as they pursue a sustainable future. It was a fascinating exercise.

Before digging into the surprisingly large subsidy numbers, I’ll start by describing the model integrated sustainable energy system I’ve use for this article, a system that combines rooftop solar, energy storage and an EV. To keep the analysis simple, my model system only has enough power generation and storage to support an EV. The numbers will be significantly higher if a consumer wants to serve part of his non-transport energy needs with a Tesla solution.

For a recent article, I calculated that the 170,000 Teslas on the road worldwide have averaged 33.4 miles per vehicle day. While the battery-to-wheels power consumption of a Model S is 3.5 miles per kWh, there’s about a 10% round-trip efficiency loss between total charge energy and total discharge energy. So if a consumer plans to collect energy from a solar panel, store it in a Powerwall and subsequently use it to charge an EV, the total round-trip efficiency loss will be about 19%. To get 33.4 miles of range out of an EV, he will need to start by storing about 12 kWh in a Powerwall.

While I’ve rounded some numbers to keep the analysis simple, 2 kW of rooftop solar panels should be able to provide an average of 12 kWh per day under optimal conditions. Likewise, a 14 kWh Powerwall should provide adequate storage capacity for the first couple years. That being said, a second Powerwall will probably be needed as the storage capacity of the first one degrades. I can’t accurately predict the capacity degradation of a “Powerwall 2,” but Tesla’s January 22, 2016, Powerwall Manufacturer s Warranty Certificate (Germany) used the following graph to summarize the expected capacity degradation for a “Powerwall 1” used in a daily cycling regime.

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Elon Musk seeks more California gold

“We don’t have a crystal ball,” Hector De La Torre, an Air Resources Board member, told me. “We don’t know what will take off. Fuel cells, electric, and anything else, as long as it is zero or pretty close it. That’s always been our mantra.”

The issue confronting the state is not what’s good for Tesla, or any other manufacturer, but rather how to persuade consumers that zero-emission vehicles make sense. After reaching 3.2 percent of the roughly 2 million new cars sold in California in 2014, the percentage has fallen to 3 percent. With pump prices low, gasoline sales are rising.

Musk has built a sleek car. But Tesla hasn’t turned a profit yet. Subsidy will remain important to his company’s future. That helps explain why he is building the massive battery factory in Nevada. Gov. Brian Sandoval provided $1.25 billion in subsidies, far more than California was willing to offer.

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Elon Musk is not the answer for Democrats

Taxpayers also heavily bankroll Musk’s businesses. Last year, the Los Angeles Times reported that Musk’s corporate empire had received a total of $4.9 billion in government subsidies.

For example, the federal government gives each Tesla buyer a $7,500 tax credit. Many states give additional credits as well.

So, yes, Musk has made billions of dollars because taxpayers are subsidizing the purchase of $85,000 dollar sports cars and costly solar panels. I doubt that will sit well with working-class voters.

The only reason Tesla was profitable last quarter stems from the sale of $139 million dollars worth of “clean” tax credits to companies that make money from the sale of traditional, gas-burning cars and trucks.

Undoubtedly, Donald Trump is also a product of coastal elitism. However, Trump was able to overcome this hurdle with working-class voters by channeling their frustrations with elites.

Democrats hoping that Musk will be their billion

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Coal Miner’s CEO Calls Tesla a ‘Fraud’ and Elon Musk Tweets It

For its part, Tesla was downgraded to neutral from a buy rating by Goldman Sachs Group Inc. last week. The company’s shares have dropped as it moves forward with its plan to buy rooftop solar installer SolarCity Corp., which some analysts have deemed a risky bet. Musk is chairman of SolarCity, and his cousin Lyndon Rive serves as its chief executive officer.

Customers who purchase an electric vehicle can claim a $7,500 federal income tax credit and several states offer additional incentives, according to Tesla’s website.

Tesla will let Musk’s tweet “stand as a comment,” spokeswoman Alexis Georgeson said in an e-mail. The Clinton campaign didn’t immediately respond to a request for comment.

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CNBC Tears Down Elon Musk’s Snarky Response To A Coal CEO

CNBC corrected Tesla CEO Elon Musk Monday after he falsely claimed in a tweet that the coal industry receives more government handouts than renewable energy companies.

Musk, who owns more than 20 percent of Tesla, tweeted out a response to comments made by Murray Energy CEO Robert E. Murray on “Squawk Box” suggesting that Tesla “has gotten $2 billion from the taxpayer,” and “has not made a penny yet in cash flow.”

The government could shutter every single coal plant in the country, Murray added, and not see any discernible reduction in the Earth’s temperature.

Musk apparently didn’t take kindly to the inference that one of his companies is failing despite being recipients of heavy government subsidies, so he took to Twitter, and wrote: the “real fraud going on is denial of climate science.” He attached the video of Murray to the tweet.

Tesla receives far less in subsidies than the coal industry, Musk added, “How about we both go to zero?”

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Major Updates For This Month

Tom Pyle from the Institute for Energy Research (IER) wrote a great blog on The Hill about the high cost of private solar subsidies. Tom’s conclusion: “…our public utility policies don’t reflect the costs that net metering imposes. It’s time to reform net metering policies so that the general public no longer subsidizes those wealthy enough to afford solar panels. The sun, it seems, is not free after all.”  Check that out here.

• Consumer Energy Alliance released the most comprehensive study to date on solar incentives. A fantastic read and shows where your state stacks up in regards to subsidies for rooftop solar. The key takeaway I got is that net metering acts as a very large subsidy but also that there are so many subsidies stacked on top of subsidies. As you will see, the total incentive as percent of cost is over 100 percent in many of the states studied. CA is at 208%. MA is at 185%. Check out the executive summary hereand the full report here.

• Those IER folks sure are working hard. IER also released a report called “The High Cost of Rooftop Solar Subsidies: How Net Metering Programs Burden the American People”. Although the title kind of sums up the conclusion, it is well worth the read and sharing with the folks you know. Check this one out here.

• The Council of State Governments West (CSG West) passed a resolution at their Annual Meeting last month that addresses consumer protection for rooftop solar customers.  You can view that resolution here.  FYI CSG West is a non-profit, non-partisan organization that serves the western legislatures of Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming, the Pacific islands of American Samoa, the Commonwealth of Northern Mariana Islands, and Guam. Associate members include the Canadian provinces of Alberta and British Columbia.

• As mentioned the past couple of months, Nevada made some major decisions in 2015 and 2016 regarding their net metering program. NV Energy (the major utility in the state) and SolarCity (one of the major rooftop solar companies) reached an agreement on grandfathering existing rooftop solar customers. These customers will now be grandfathered for 20 years despite a recent updated report from Energy and Environmental Economics stating grandfathering would cost roughly $15 million per year.

• Democratic nominee Hillary Clinton’s plan to install half a billion solar panels by the end of her prospective first term. Check out the Daily Caller article on that here.

• Remember the Buffalo Billion? It is a New York government plan to attract a SolarCity manufacturing facility by footing the bill with taxpayer dollars. It turns out when there is that much money on the table, it may attract some unsavory characters. Check out the corruption article here.

• Zerohedge wrote an excellent rundown of the Musk subsidy issue and money shifting issue. Check this short but interesting read here.

What could wreck Elon Musk’s plan to colonize Mars isn’t science, technology, or money—it’s ethics

Musk’s dream to colonize Mars is not about science, though. It is an insurance policy. “History suggests there will be some doomsday event,” he said. “The alternative is to become a space-going civilization and a multi-planet species.” When your belief is that you’re saving humanity from annihilation, you may not care too much about a few alien microbes.

But Musk also admits that he can’t achieve the colossal task alone. “Ultimately, this is going to be a huge public-private partnership,” he said. Even if Musk doesn’t have ethical qualms, as a publicly funded body, NASA most certainly will.

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Tesla Sued Because ‘Insane Mode’ Isn’t Insane Enough

According to 126 Tesla customers, the Model S sedan P85D performance version can eat dirt, because its “insane mode” isn’t as insane as the company claims.

Bloomberg reports that the customers, who live in Norway, have now filed a lawsuit against Elon Musk’s automotive company. They’re looking for “unspecified reimbursements” because they believe the car’s “insane mode” isn’t exactly as advertised.

“[It] has too low horsepower,” Kaspar N. Thommessen, a lawyer for the customers, told Bloomberg. “And of course, it affects the car’s performance, according to the consumers.” One customer told the Norwegian newspaperDagens Næringsliv that the car’s advertised horsepower—700—and its acceleration claims—0 to 60 mph in roughly 3.3 seconds—were total bullshit. (In 2015, Consumer Reports noted that it took 3.5 seconds.)

Tesla, for its part, said that tests from both the company and outside groups show the stated specifications are indeed accurate. “[The tests have] demonstrated that the Model S P85D’s acceleration and motor-power numbers have always been accurate … [and] confirmed as accurate by European regulatory authorities,” a Tesla spokesman told Bloomberg.

In June, Norway’s Consumer Council ruled against Tesla in a similar case, awarding Model S P85D buyers about $6,000 each over claims the car didn’t meet its power specifications. But as the website Electrek explained at the time, that dispute may have been more a symptom of deceptive advertising rather than outright lying:

The issue revolved around the way Tesla was listing the power of its motors for the Model S P85D, which has two motors. When first introducing the vehicle, Tesla was marketing the vehicle as having a combined motor output of 691 hp (467 in the back and 224 in the front).

While those are indeed the correct outputs of each motor, the vehicle was never able to achieve those numbers due to several other limitations than only the combined potential output of the motors.

Tesla claimed that they always made it clear that the numbers were for the motors and not the vehicle itself. The automaker also highlighted that it didn’t actually change the actual performance ratings of the Model S P85D, but some owners still felt deceived.

Either way, for upwards of $100,000, it’s not surprising at least a few customers are quibbling over the car’s performance. According to Bloomberg, the Oslo District Court will hear the case in mid-December.

The most recent dustup is yet another in Tesla’s long line of new headaches. Yesterday, we reported that hackers were able to infiltrate the Model S from 12 miles away; last week, the company and Autopilot supplier Mobileye got into a public fight over safety concerns. And then there was the lawsuit Tesla filed last week against an oil executive, claiming he impersonated Elon Musk using a dumb Yahoo email address.

Hey, Elon, you doing okay, buddy? Do you need a facial or something? Maybe some wine?

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