Tesla recent announced plans to move its corporate headquarters from California to Texas. But there are some ironies associated with this action:
And despite the state’s business-friendly reputation, Tesla can’t sell vehicles directly to customers there because of a law that protects car dealerships, which Tesla does not use.
I would challenge the reporter’s use of the term ‘despite’. Indeed, in a sense the Texas ban on direct sales from auto manufacturers is because they are pro-business, specifically, pro-car dealership business.
Another irony is that Tesla produces a type of battery that can be combined with renewable energy sources, which is not exactly the most popular type of energy in Texas:
In February, a rare winter storm caused the Texas electric grid to collapse, leaving millions of people without electricity and heat for days. Soon after, the state’s leaders sought — falsely, according to many energy experts — to blame the blackout on renewable energy.
“This shows how the Green New Deal would be a deadly deal for the United States of America,” Texas Gov. Greg Abbott said on Fox News of the blackout. “It just shows that fossil fuel is necessary for the state of Texas as well as other states to make sure we will be able to heat our homes in the wintertimes and cool our homes in the summertimes.”
Musk, a Texas resident since last year, seemed to offer a very different take Thursday, suggesting that renewable energy could, in fact, protect people from power outages.
“I was actually in Austin for that snowstorm, in a house with no electricity, no lights, no power, no heating, no internet,” he said. “This went on for several days. However, if we had the solar plus Powerwall, we would have had lights and electricity.”
I am in favor of shifting the economy toward more use of non-carbon sources of energy, such as nuclear, hydro, wind and solar. For that reason, I am pleased with Tesla’s move, as I suspect it might begin to change the impact of the energy industry on Texas politics. Here’s The Economist:
Even without subsidies, wind and solar power are often the cheapest new source available, so sure to grow. They are also popular, having created a lot of jobs, especially in Republican states. Iowa, Texas, Oklahoma and Kansas are the country’s top wind-energy producers. Texas employs almost as many people in wind, solar and electricity storage as the entire mining industry that Mr Trump used to harp on.
A carbon tax would be much better than clean energy subsidies, but apparently a carbon tax is politically impossible at the moment.
In an ideal world, different energy sources could compete on a level playing field, perhaps after Pigovian taxes are implemented. But politics will almost inevitably intrude; as it will be argued that non-monetary considerations (such as power outages) are also important. Thus while many experts blamed Texas’s power outages last winter on problems in the natural gas industry, fossil fuel supporters blamed wind energy:
[Texas governor] Greg Abbott, blamed a catastrophic grid failure in February on intermittent wind power—despite official findings that poorly maintained gas power stations were mostly to blame—and ordered the state regulator to penalise the renewables industry. . . .
The Koch-linked Texas Public Policy Foundation made the running in blaming wind for the state’s recent blackout. Like the pro-gun lobby, another skilful circumventer of public opinion, the fossil-fuels camp has also propagated a powerful conservative mythology. In contrast to cosseted renewables, it claims to be a preserve of wildcatting free spirits, which is half true, and unsubsidised, which is not.
The renewables industry’s ability to fight back has until recently been limited. It was for years too small to lobby effectively and its diverse technologies made it slow to get organised. It was therefore chiefly represented in the battle for influence by environmentalists. This was a good way to woo Democrats. But it helped its enemies on the right misrepresent the industry—now the source of around 20% of America’s electricity and over 400,000 jobs—as a left-wing boondoggle.
It will be interesting to watch how this debate plays out in the next few decades. Major automakers have announced plans to dramatically ramp up the production of electric cars. These cars are becoming much more popular in the area where I live (Orange County.) Just a few days ago, Ford announced plans for a massive new electric car and battery plant in Tennessee. Will Ford be able to convince conservative Texans to buy electric F-150 pickups? The next decade will be very interesting.
READER COMMENTS
MikeW
Oct 16 2021 at 7:26pm
This is a whopping big “if”. I’m pretty sure no one can afford enough batteries for the city of Austin, much less the state of Texas, the U.S., or the world.
One point that I saw made was that the emphasis on renewables (especially wind energy in Texas) led to underinvestment in things like maintaining gas power stations.
Komori
Oct 16 2021 at 7:54pm
As someone who does live in Austin, his comments are pretty much nonsense. I’ve been investigating backup power solutions because of this last winter, and the Tesla Powerwall is a real non-starter.
Even if I could get it separate from the Tesla solar system (which I already have) the pricing is outrageous. It might make sense in areas with higher power costs and a very different price structure, but not here. Austin Energy does Value of Solar Tariff on solar power, and there’s no time-of-day charges, so time-shifting is useless economically. Powerwall, even with my gas heating and low power usage, doesn’t last very long; I’d have needed at least four of them to make it through last winter’s power outage. Even a single Powerwall is the price of a high-end whole-house diesel generator (even with only a 24-hour tank, if it was rated for my summer usage that would easily last four days in winter), and I can get a gas generator for less than a third of that. Extrapolate that to city wide.
Texas’ power situation is a lot more complicated than the mainstream media is willing to talk about (they’ve got a narrative to push), but hopefully having got rid of so many non-local ERCOT people will help. Fundamentally, the incentives haven’t really changed much, though, so I’m not counting on it.
Base load remains the problem. If we don’t fix the regulation around nuclear, and the federal government continues attacking gas, we’ll be in trouble. But make a problem worse then insist you’re the only solution does seem to be the default government option.
Don Geddis
Oct 18 2021 at 2:49pm
Elon Musk said: “if we had the solar plus Powerwall, we would have had lights and electricity.”
MikeW objected:
I’m pretty sure you misunderstood Musk. He was almost certainly talking about the single house he was residing in. Rooftop solar plus a Powerwall or two is a consumer solution for a single-family household. It was within Musk’s private abilities to have provisioned for a loss of grid power, and not have had to endure an experience of multiple days without power.
Musk wasn’t talking about a solution that applied city-wide, or state-wide, or nation-wide, or world-wide.
Mark Bahner
Oct 19 2021 at 11:16pm
The problem is that I don’t think it *is* a consumer solution in that particular situation…unless that house was a very special case. Many, if not most, consumers lost power for more than 24 hours. If one is in a house with a *heat pump,* I don’t think a Powerwall or two will be able to provide enough energy to heat a house for more than 24 hours.
So I think Elon Musk is spinning–as he’s very good at doing–by implying that *all* electricity needs could be met…but that would only be true if the house had natural gas heating (and probably also natural gas for hot water). And that may be true of the particular house he was in…but it’s definitely wrong to imply anyone in Texas could have gotten by with a Powerwall.
MikeW
Oct 20 2021 at 9:49am
Exactly. To get through an event like the Texas disaster, you would need to have enough battery storage to last several days. NO ONE is even looking at something like that.
Mark Bahner
Oct 20 2021 at 10:10pm
Yes, look at what *exactly* what Elon Musk said:
So he said the house had “no heating.” Then he says that with “solar plus Powerwall, we would have had lights and electricity.”
He does *not* say, “we would have had heating.” But the casual reader with a heat pump would probably assume that “heating” would be included in the electricity. But there’s absolutely no way the Powerwall could provide a heat pump with the electricity needed for even one night…let alone “several days.”
He’s a very clever man, and a great salesman. But “caveat emptor.”
MikeW
Oct 21 2021 at 10:44am
Mark Bahner — I’m not very knowledgeable about Powerwall systems, but I doubt very much that he would even have had electricity and lights for “several days”.
Don Geddis
Oct 21 2021 at 5:54pm
You seem to be ignoring both the solar, and also the changes in consumer behavior.
With rooftop solar, you aren’t trying to get the batteries to last for multiple days. Instead, you’re only trying to bridge 12 hours of power until the sun shines again. The batteries recharge every day.
Secondly, when you’re a family in the middle of a multi-day grid outage, but with battery + solar backup, you aren’t trying to match your normal electricity use. You’re well aware of the preciousness of limited power, and you prioritize. You don’t charge a car, you don’t run a washing machine or dryer or dishwasher. One of the best examples is a freezer: they can maintain frozen temperatures for a day or two, but once you get into 3-4 days without power, your frozen food starts spoiling. You can fix this, and keep food frozen indefinitely, with only a few hours of power per day. Which also allows you to recharge laptops, cell phones, etc. And you can have lights at night.
There is a huge, huge difference in personal experience between zero power for multiple days, vs. even a few hours of power each day. You don’t need to replace grid-levels of power consumption, in order to access the highest-value low-power consumption needs.
(Heat is an obvious power hog, but even there you can gather the family in a single room and use space heaters, and only during the day, instead of trying to heat your whole house.)
You radically underestimate the consumer value of solar + batteries during a multiday grid outage.
MikeW
Oct 22 2021 at 1:52pm
A fair point. However, I will also note that if the entire grid were powered by renewables + batteries, as many climate activists want, this would not be an occasional result of a bad storm, but the “normal” way of life. That would mean either living like you describe all the time or having a LOT more batteries.
Philo
Oct 16 2021 at 10:39pm
Two questions: How high a carbon tax would you like to see? How did you arrive at your answer to the first question?
Scott Sumner
Oct 17 2021 at 1:39am
I don’t know how high it should be, but I’d certainly support one that raised $50 billion/year, as it would be less inefficient than the taxes it replaced.
MikeW
Oct 17 2021 at 9:34am
Main problem is it probably wouldn’t replace any taxes, but rather be in addition to the existing taxes and regulations.
Scott Sumner
Oct 17 2021 at 12:01pm
I’m talking about a revenue neutral carbon tax. Taxes are certain to rise because of the explosion in the budget deficit that began a few years ago. The only question is which taxes will rise. I’d prefer a higher carbon tax to higher income taxes.
Thomas Lee Hutcheson
Oct 17 2021 at 7:20am
How old do you have to be to remember a time when Republicans were pro market or pro growth? 🙂
Phil H
Oct 17 2021 at 7:34am
No comments on the content, but thank you for the framing of the title. It’s a point Peter Thiel made as well, isn’t it, that exposure to full and direct competition is pretty horrible for businesses (so, he said, they need to innovate their way out of it). The operation of markets is not necessarily aligned with the interests of the businesses (currently) in those markets.
robc
Oct 18 2021 at 1:54pm
The free market is usually in line with small businesses, but not big businesses.
Not 100% then either, but more likely.
Alan Goldhammer
Oct 17 2021 at 8:37am
There is a nice article in today’s Washington Post on how the power grid is not sufficient to support the move towards a fleet of all electric cars. You have to deliver the electricity to where it is needed which means long distance transmission lines. As the article notes, there are large population dense regions that cannot install local wind or solar solutions hence the ‘juice’ has to be delivered. I’m not sure whether a simple roof top solar set up can charge a Tesla.
I agree about the need for a carbon tax and better nuclear power options.
Jose Pablo
Oct 17 2021 at 8:39am
“A carbon tax would be much better than clean energy subsidies”
what would be the tax base for a carbon tax? We don’t even know how to measure “emissions”. Actually global emission have been reduced in the last years (or, at least, so “they” say) but CO2 concentration on the atmosphere has not … that was easy to predict!!
https://e360.yale.edu/features/paris-conundrum-how-to-know-how-much-carbon-is-being-emitted
MikeW
Oct 17 2021 at 9:30am
I would say to keep it simple and just tax the carbon content of fuels. That is, don’t try to tax things like cow farts and land-use changes, even though they do cause greenhouse-gas emissions.
Jose Pablo
Oct 17 2021 at 2:02pm
The “design” of the tax base has an effect on the kind of “solutions” that the market will put in place since they will be the ones that reduce the “tax base” not the actual CO2 emission.
MarkW
Oct 18 2021 at 7:19am
I would say to keep it simple and just tax the carbon content of fuels.
But then, of course, energy-intensive industries will migrate out of the US to places without carbon taxes — unless industrial users are given special deals (as in Europe) and/or carbon tariffs are imposed on imports. Within the US, a carbon-tax would be quite regressive. Lower-income people with long commutes and older, less energy-efficient homes would be particularly hit. Likewise those living in rural areas. A carbon tax, like Covid, would also have much more impact on the (mostly working class folks) who must perform their jobs in person vs those who can work from home. Then there’s the differential effect on regions of the country — northern states would face a much greater impact than southern ones (heating is much more energy intensive than cooling).
Of course, various subsidies and exemptions might be applied to mitigate some of these problems, but the point is that there’s no way to keep it (politically or economically) simple.
Scott Sumner
Oct 17 2021 at 12:52pm
“Actually global emission have been reduced in the last years (or, at least, so “they” say) but CO2 concentration on the atmosphere has not … that was easy to predict!!”
Certainly easy to predict for those who understand the difference between changes in flows and changes in stocks.
Jose Pablo
Oct 17 2021 at 2:14pm
“According to national declarations, CO2 emissions from burning fossil fuels and industry have been more or less stable since 2014 — the first time that has been achieved since detailed records began. But this good news has not been reflected in atmospheric concentrations of CO2. Since 2014, there have been record annual increases of CO2 levels in the air, which grew by around 3 parts per million in 2015 and 2016 and by an estimated 2.5 ppm in 2017 – all well above the annual average increase in the past decade of 2.1 ppm.”
A good understanding of differences between changes in flows and changes in stocks would leave unexplained the record “increases” in the stock.
But if (a) the flow is a “national declaration” (b) the stock can be “independently” measured with more precision and (c) you put a lot of blame in the “flow” then, the record levels in the increase of the stock despite the reduction in the “declared flow” could have been predicted.
This will, very likely, also be the main effect of a tax on CO2 emissions.
Richard A.
Oct 17 2021 at 1:09pm
Meanwhile, we have high tariffs on solar panels entering the US. Obama hit Chinese solar panels with tariffs and then Trump hit solar with tariffs. Some sources have stated that the Obama/Trump tariffs average to about 40 to 50 percent. Biden has made it more bureaucratic to import solar which also means increased costs.
There are protectionist forces behind the scenes pushing for even greater trade restrictions on solar and it appears that the Biden administration is sympathetic.
The cheaper solar becomes, the faster we solarize. As government intervenes in the market to force higher prices on solar products, the slower we solarize.
Jose Pablo
Oct 17 2021 at 2:19pm
“the Texas ban on direct sales from auto manufacturers is because they are pro-business, specifically, pro-car dealership business.”
The Texas ban is anti-business. It is pro-car dealership business, but anti-business.
It is another example of Bastiat’s “what is seen and what is not seen”. The benefit to one specific business is seen. The damage to business “in general” remains unseen. But it is there.
Scott Sumner
Oct 17 2021 at 6:46pm
I would say it’s pro-business and anti-market.
zeke5123
Oct 18 2021 at 11:29am
Pro-particular business is a more apt description. If something overall hurts commerce, then it cannot be said to be pro-business writ large.
Scott Sumner
Oct 18 2021 at 12:20pm
I am using terms in the ordinary sense that others use the terms, as when people say certain types of labor legislation is “pro-labor”, despite hurting workers as a whole. If you wish to have your own private language, that’s fine.
Mark Z
Oct 18 2021 at 3:07pm
The way these terms are conventionally used isn’t really internally consistent. If the same law were passed but instead done to punish car companies rather than reward car dealerships, would it be anti-business? Just a matter of intent? Usually these terms are used in a context that makes as much as describing a referee who makes favorable calls to the teams he likes as being ‘pro-sports-teams.’ I’m inclined to just avoid using these terms in most cases, at least not without scare quotes.
zeke5123
Oct 18 2021 at 3:29pm
I don’t think there is a common definition of what pro-business means. Sometimes, it means supporting cronyism (generally when large business asks for specific subsidies). Other times, it means supporting free-market ideas (generally when there is an idea to make more limited, simple rules). Indeed, in the very article you are quoting there is this idea that free-market ideals is pro-business and therefore Texas by supporting an aspect of cronyism is anti-business.
So, no I don’t think it is only my “private language.” I think pro-business is a term that is a scissor statement because it can mean different things to different people. When you have scissor statements, the best thing to do is to try to frame the statements more accurately; not insist that one interpretation is correct.
Niko Davor
Oct 18 2021 at 2:04am
<blockquote>Tesla can’t sell vehicles directly to customers there because of a law that protects car dealerships, which Tesla does not use</blockquote>
This is wrong. People in Texas frequently buy Teslas direct over the Internet. The Texas laws prohibit sales at Tesla showrooms or “galleries”. I agree with Sumner that Texas should revoke those laws. I presume most car manufacturers would sell direct to customers and cut out the existing dealerships if they could. And they should have the right.
The rest of Sumner is terrible. This is pure garbage propaganda:
<blockquote>Even without subsidies, wind and solar power are often the cheapest new source available</blockquote>
If this were true that solar and wind power were better, cheaper, eco-friendly replacements, with no trade offs or down sides, customers would just switch over. There would be no political debate, everyone would just switch, and fast. This isn’t just the US and Europe. Look at what India and China are doing. From Reuters:
<blockquote>India may build new coal-fired power plants as they generate the cheapest power, according to a draft electricity policy document seen by Reuters, despite growing calls from environmentalists to deter use of coal.</blockquote>
The left-wing narrative from The Economist is that the only barrier to the perfect cheaper, environmental technology is villain Republicans and right-wing lobbyist goliaths that have far more money than the left. This is nonsense. The reality is that the left has dominated politics, lobbying, and political news.
In Texas, the problem is not mainly the 2021 winter storm, the problem is there is a shortage of power generation. Texas has made heavy subsidized investments into wind power for decades and the results have been disappointing, which is why current power supply is still mostly conventional. Environmental pressures have blocked new conventional coal/nuclear power generation, so there is a shortage.
Donald Trump’s policy was to lift government sanctions and punishments on coal, let it compete, and let the market decide. The Economist and Sumner won’t admit it, but they are taking the anti-market big-heavy-handed-government position.
Scott Sumner
Oct 18 2021 at 2:17am
“Donald Trump’s policy was to lift government sanctions and punishments on coal, let it compete, and let the market decide.”
Based on the data for US coal consumption during the Trump years, what would you conclude the “market” decided?
And are you claiming that the burning of coal does not have important negative externalities? That’s a pretty far-fetched claim.
Niko Davor
Oct 18 2021 at 11:44am
My understanding is that Trump lifted government sanctions on coal, yet coal use dropped anyway and coal companies still went bankrupt anyway. In that sense, the outcomes of Trump’s policies were disappointing and not a roaring success.
Of course, that was not the decision of a mostly-free market. US energy use has been forecasted to grow. Demand for new power plants was there. Coal power works, is cheap, and reliable. Construction of new coal power plants was blocked by political and environmental concerns not by lack of market demand or cost concerns or problems with coal technology.
In recent decades, Texas invested heavily in wind, and those wind energy investments have fallen short of expectations in terms of satisfying Texas power demands. In 2021, Texas and other states in the US, have shortages of production capacity. This is the result of disappointing result from wind power, combined with successful political efforts to reduce investments in coal power. Events like the February 2021 storm are worse when there is a general shortage of production capacity to begin with.
Of course, coal use has negative externalities. And by negative externalities, you mean environmental pollution, including carbon dioxide emission. Of course, wind and solar, pollute as well. The pollution profile is different in terms of different types of pollution.
I’m sure at some point, there will be cost efficient greener alternatives to coal power. At that point, there is no downside, there is only upside, then it’s a no-brainer to use them, and get rid of coal. The narrative you present that wind and solar are cheaper, reliable, greener, options today with no downside, and the only reason to use coal power is because of wicked villains is rather obviously not true.
Scott Sumner
Oct 18 2021 at 12:18pm
“The narrative you present that wind and solar are cheaper, reliable, greener, options today with no downside, and the only reason to use coal power is because of wicked villains is rather obviously not true.”
Yes, it’s not true. You know what else is not true? Your claim that I presented this narrative. Unless the quality of your comments improve, I probably won’t even respond in the future.
steve
Oct 18 2021 at 12:41pm
You have set up a straw man here. If it were true that there were no downsides to solar and wind then you are correct that we would be changing over, though of course you forget that it would not happen instantaneously. However, no one who write seriously about energy claims that there are not downsides. There are a lot of issues that need work so we are long way away from having only renewables, if we ever make it. Still, it is true that in many areas solar and or wind are the cheapest options. That does not mean they can be the only option. In places where wind is a good source they are actually having all source competitive bidding. Wind and solar are doing well but there will still be fossil fuel sources also.
https://www.utilitydive.com/news/xcels-record-low-price-procurement-highlights-benefits-of-all-source-compe/600240/
Niko Davor
Oct 18 2021 at 2:10pm
steve,
Sure it takes time to transition to different energy systems. But wind power isn’t new. I can see big headlines from twenty years ago about Texas making big investments in wind power and how they expected to transition to wind as their primary energy source, and clearly, despite spending many billions of dollars, the lofty expectations didn’t pan out. I’m cheering for wind or solar, I’m pro fun new green tech. I presume it will get better over time, but some of the arguments presented here are “motivated reasoning” type arguments that are unreasonable.
steve
Oct 18 2021 at 5:36pm
You know, I think headlines are not the way to judge stuff. Often when you read an article you find that headlines say the opposite of what the article says.
Steve
Mark Bahner
Oct 20 2021 at 10:37pm
I probably did over 100 hours of analysis of the Texas winter storm as it was happening and in the immediate aftermath. Unfortunately, my memory isn’t what it used to be, and I’m too lazy to look back for the details. But I think this was my general take:
A significant problem is that Texas is not prepared for winter storms, since they happen infrequently.
A winter storm is tough for a renewable energy system, since a significant need is *heat*. The problem is that heat pumps get very inefficient as temperatures get down below freezing. So one needs tremendously more electricity to move the same amount of heat into a home as the temperature declines.
Outputs from wind and especially solar simply aren’t matched well to a winter storm. Solar is absolutely wonderful for a summer heat wave/drought. And wind produces a lot of electricity in the spring.
Since Texas wind turbines experience so little icing, they aren’t particularly well equipped to deal with icing (the way wind turbines in, say, Iowa and Kansas are).
Wind turbine output declined significantly in the early days of the Texas event. That put more and more strain on natural gas, coal, and nuclear. One of the four nuclear reactors tripped. Coal failed to come online. But the thing that absolutely crashed the Texas grid was natural gas power plants going offline. The frequency control for the ERCOT grid (which is not much connected to other grids) was lost, and the frequency went dangerously low. It was necessary to “shed load” (black out customers) in order to keep the frequency from going so low that all the electrical equipment that relies on a frequency of nearly exactly 60 hertz wasn’t destroyed.
I never did figure out the exact details of why the natural gas plants started going offline. I don’t know whether it was that they didn’t get the gas fuel they needed from the pipelines (because of freezing in the pipelines), or because of problems at the natural gas power plants, or some combination of those two…or even something else.
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