Will Tesla save the planet?

Highlights

  • Sustainability is a major sales argument for Tesla’s products and Elon Musk’s master plan. 
  • Unfortunately, Tesla’s products have a low fundamental potential to address our global sustainability challenges.
  • This article presents some numbers to illustrate this point covering electric cars, autonomous vehicles, solar roofs and distributed battery storage. 

Introduction

Elon Musk has already achieved more than most of us can ever dream of achieving in a single lifetime. His great success stems from an almost inhuman ability to tolerate risk while raising tremendous amounts of capital to pursue his visions. A good summary of the stress and strain Mr. Musk had to endure to get to where he is today is available in this interesting Bloomberg article.

Needless to say, I have tremendous respect for Mr. Musk as a businessman. As a leader in the sustainability movement, however, I have serious problems with his approach. Mr. Musk now has a substantial direct and indirect influence on global investment spending. If he only attracted investment earmarked for up-market cars and attractive homes, it would be great. Unfortunately, sustainability is one of his principle arguments for raising capital for his investments in electric cars and residential solar – two of the highest hanging climate mitigation fruits at our disposal.

In so doing, Mr. Musk attracts a lot of funding earmarked for sustainable development into initiatives that have a low fundamental potential for addressing our great 21st century sustainability challenge (quadrupling global economic output while avoiding catastrophic climate change). Yes, the famous master plan really sounds very attractive – but only until you start to crunch the numbers. This article will present some of the most important crunched numbers on four key Tesla initiatives: electric cars, autonomous vehicles, solar roofs and battery storage.

Battery electric cars

Few people understand just how small the climate change mitigation potential of battery electric cars is. Battery-powered electric drive is best suited to light-duty vehicles that are mostly used for shorter travels. Light duty vehicles consume about 40% of global transportation energy (below), which accounts for about 55% of global oil consumption. This equates to only about 7% of global energy related CO2 emissions.

global-passenger-car-energy-consumption

Electric car forecasts are all over the place, but the seemingly reasonable forecast from BNEF (below) gives about 20% electric cars on the road by 2040. By that point, new conventional cars and hybrids should be averaging 50 MPG, aided by the fact that electric cars will take over predominantly city mileage where internal combustion engine efficiency is quite poor. Average electricity carbon intensity might have fallen to about 350 kg/MWh by that time. When assuming 50 MPG for conventional cars and 300 Wh/mile (including charging losses) for electric cars, it can be calculated that 20% electric cars in the fleet will avoid about 8% of PLDV CO2 emissions in 2040 (ignoring the higher embodied carbon in BEVs and the potential of biofuels and synfuels to reduce gasoline carbon intensity). 8% of 7% amounts to only 0.56% of total energy-related CO2 emissions.

bnef-ev-projection

The BNEF forecast suggests that electric cars will sell well without subsidies in about 10 years’ time. Based on subsidized sales statistics from the US and Norway reviewed in a recent article, however, this seems unlikely. For example, the enormous electric car incentives in Norway bring the costs of owning a Tesla S60 down to the unsubsidized costs of owning a future Chevy Bolt (below), but still electric cars command only 15% market share.

tesla-bolt-cost-comparison-norway

The expiration of the US federal tax credit for electric cars from automakers such as GM and Tesla over the next couple of years will give a first indication of the effect of subsidy cuts on electric car sales. My guess is that the pattern will be similar to the US wind industry: regular subsidy-driven boom-bust cycles even after 20 years of commercial deployment of the technology. As a climate change mitigation measure, this scenario is very costly and inefficient, especially when the reward is just over 0.5% of the CO2 reductions required by the IEA 450 ppm scenario relative to the current policies scenario (below).

iea-senarios

Finally, we need to consider that BEVs shift the cost structure of cars more towards up-front costs. This is a problem in developing countries where low up-front costs are critical to enable the increased mobility required for continued exponential economic development.  As quantified in this article, decarbonizing a developing economy with capital-intensive technology results in truly enormous opportunity costs.

It is also important to consider that the average developing world car is about half the price of the average developed world car (e.g. the most popular car in China costs $7000). A sufficiently large battery pack will therefore cause a large relative increase in up-front developing world car prices. Given that the developing world will be a much more important player than the developed world in the great 21st century sustainability challenge, this is a very important point to consider.

Autonomous vehicles

Earlier articles have estimated the potential economic benefits of autonomous driving technology to be more than one order of magnitude greater than the benefits of electric cars. It therefore appears to be an area worthy of investment from a purely economic perspective.

As discussed in the aforementioned article, however, the bulk of the economic benefits from autonomous driving technology only become accessible when full autonomy is achieved. And the list of technical and political challenges between now and full autonomy is long and daunting. For example, this article estimates that Tesla is currently about 5 orders of magnitude away from full autonomy when measured by the frequency at which human intervention is required. Other companies like Google are much more advanced (below) and are therefore “only” about two orders of magnitude away.

miles-per-disingagement-for-autonomous-driving

When it comes to sustainability, the benefits are more questionable. If my assessment of the potential of autonomous driving technology to enhance the attractiveness of carless personal mobility options like telecommuting and small electric vehicles is correct, this technology can potentially lead to small-but-significant emission reductions (possibly in the same order as estimated for electric cars above). If I’m wrong about this, however, full autonomy could increase transport energy use and emissions due to increased demand. In any case, I doubt that global deployment of full autonomy will happen within the timeframes required by the 450 ppm climate change scenario.

The seemingly default link between autonomous driving technology and electric cars is also questionable. In fact, full autonomy will decrease the attractiveness of electric drive relative to the internal combustion engine because traffic flow should be much smoother and acceleration will be as gentle as possible. This will invalidate two of the biggest electric car advantages: high efficiency in stop-and-go traffic and a limited trade-off between power and efficiency. This was discussed in more detail in an earlier article.

Solar roofs

In a long-term future scenario where Gen IV nuclear power has failed to deliver, rooftop solar can become an important player in densely populated sunny countries such as India (see the red bars below as discussed in a previous article). However, this will be more out of necessity than because of the relative attractiveness of this option.

Regional wind and solar resource

The fundamental problems with small rooftop PV relative to utility scale PV will always be higher installation costs and lower capacity factors, substantially increasing the levelized cost of generated electricity. Yes, rooftop PV can potentially avoid grid capacity in regions where electricity demand always peaks when the sun shines at its brightest, but this advantage fades quickly with increasing market share and does not apply to grids that are already built. These effects have been reviewed more thoroughly earlier.

The solar roof (illustrated below) will further accentuate these problems. I can see no clear reason why a solar roof will cost less than a normal roof with solar panels installed (and plenty of reasons why it will cost more). Also, the capacity factor of a solar roof will definitely be less than a roof with solar panels. For these simple reasons, many companies have tried and failed with solar roof tiles simply because they are not cost competitive with solar panels.  In addition, solar roofs only make economic sense on new roofs, greatly restricting the potential market size.

tesla-solar-roof

Yes, the solar roof will look a lot cooler than a roof with solar panels. And yes, Tesla’s brand could potentially sell cool roofs (although a cool roof will be a much harder sell than a cool car). But the fundamental potential of solar roofs to solve our 21st century sustainability challenge is very small. In the IEA’s 450 ppm climate change mitigation scenario, distributed solar grows to about 4% of total electricity generation by 2040. Given that solar roofs will only be applicable to new roofs and will probably be more expensive than solar panels, the potential of this technology should be about an order of magnitude smaller, i.e. around 0.4% of electricity or less than 0.2% of energy related CO2 emissions. Hirth - wind and solar fall in value

The low fundamental potential of solar roofs is further compounded by the fact that they will generate electricity at the same time as utility scale PV. Continued buildout of utility scale PV will therefore strongly reduce the value of electricity from solar roofs. Utility scale PV will be able to handle the decline in value shown above better than solar roofs simply because it is more cost-effective.

Distributed battery storage

Battery storage like Tesla’s Powerwall can certainly sell when the highly unsustainable practice of net-metering comes to an end. In this case, owners of distributed solar will get a low rate for electricity they generate, but don’t use themselves (e.g. at noon when solar panels generate at their peak and no-one is home). It is therefore better to store this energy for use during the evening or next morning (below).

solar-home-power-profile

As a business opportunity, this seems interesting, especially when residential electricity prices are very high (e.g. Germany or Hawaii). When considering the fundamental potential for economically avoiding CO2 emissions, however, the numbers just don’t work. A solar home with battery storage will need about 5 kWh of storage capacity per kW of solar power. I’d be impressed if such a system can ever be profitably installed on the scale of an average home for less than $2000/kW (Tesla’s Powerwall 2 together with the average residential solar system in the US will cost about $5500/kW next year). The levelized costs for a future $2000/kW system would be about $0.14/kWh under assumptions detailed here (assuming that the batteries last as long as the solar panels with no degradation).

This could be acceptable if the home could go completely off grid, but what about long cloudy spells or wintertime? Because of these longer-term variations in solar panel output, the vast majority of solar homes will still be connected to the grid. They will just be using the grid infrastructure at a much lower capacity factor (i.e. less efficiently). This optimistically priced future system will therefore double energy costs, while grid costs stay largely unchanged.

Such systems can still sell in the developed world where a sizable portion of the population can afford such inefficiencies. But this cannot be afforded in the developing world (the part that really matters). I mentioned earlier that rooftop solar PV may be mandatory in a renewables-powered India. In a hypothetical scenario where India builds out its electricity system exclusively with $2000/kW rooftop solar+battery systems achieving a 16% capacity factor (including battery losses), fully half of India’s economic surplus would go to solar and batteries instead of economic growth (e.g. decent housing, roads, commercial outlets, factories, hospitals and schools). The resulting compounding GDP losses look like this (following the methodology described earlier):

india-effect-of-electricity-choices-on-gdp-growth

Specifically, India’s 2015-2040 GDP growth under the hypothetical electricity system buildou8t through distributed solar+batteries would be $3.2 trillion as opposed to $9.2 trillion under the conventional fossil fuel pathway. Obviously, this is simply out of the question.

Conclusion

Over the first half of this century, we will have to facilitate a quadrupling of the global middle class while actually reducing CO2 emissions. To have any chance at meeting this tremendous challenge, we have to be very pragmatic in terms of our investments, focusing only on the lowest-hanging fruits. Tesla’s products of electric cars and distributed solar+batteries are some of the highest hanging sustainable development fruits in terms of total cost, cost structure and potential CO2 abatement. Despite them being excellent and very cool products, they will not save our planet and it would be prudent to stop investing as if they will.

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