Elon Musk, perhaps the world’s best-known serial tech entrepreneur, has spent the last 15 years creating an empire that has vertically integrated the sustainable energy and transport market and now he is on the verge of bringing it to the masses.
Today, you or I could visit Tesla’s website and order everything necessary to completely and reliably remove ourselves from the national power grid. This includes solar panels complete with full installation, a large lithium battery to store the energy (the Powerwall) and a fashionable electric car to get around in. The entire cost of this? Around $82,000.
The Tesla House: complete with (well-camouflaged) solar roof tiles, Powerwall and Tesla car (image from Tesla.com)
While this may sound like a lot of money, it is marginally more expensive than traditional roof tiles and the equivalent gasoline powered cars. Tesla’s estimation is that once the savings from zero-cost electricity are factored in, their product breaks even when compared to conventional methods. Roofs usually need replacing every 25–35 years so significant take up for the solar panels is expected as people’s existing roofs reach the end of their utility. This could be further accelerated through subsidies.
| The total cost of the Tesla solution | |
| Solar roof tiles | c.$40,000 |
| Powerwall | $7,000 |
| Tesla Model 3 car | $35,000 |
| Total | $82,000 |
To make this all possible, Musk has taken extraordinary steps to minimise the cost of production using vertical integration and heavy automation in the production of his roof tiles and cars. This has included creating the world’s largest single-use building (up to 10 million square feet at completion) in Nevada to ramp up the production of the lithium-ion batteries used in his products. At normal speed, batteries passing along the factory’s production line move so fast that they are only visible to the naked eye with strobe lights.
The Tesla Gigafactory in Nevada: circa 10 million square feet producing more lithium-ion batteries than the rest of the world’s supply combined (image from Tesla.com)
Vision aside, Musk’s real skill appears to be his ability to marry technical genius with commercial savviness (much akin to the fictional Tony Stark – minus the witty one-liners). He has the intellectual capacity to grasp complex topics and yet the business acumen and emotional intelligence to attract the capital required to fund these ideas. His self-expressed hope, alongside making us an interplanetary species, is to make a lasting impact on reducing carbon emissions and he has positioned himself well to do that. While it’s true that household emissions make up a relatively small portion of global carbon emissions, he is providing a convenient and well-designed eco-solution for consumers and empowering them to become more educated on the topic.
The Powerwall: a 14 kWh lithium-ion battery that can take your house off the main power grid when combined with solar (image from Tesla.com)
As one could imagine, it hasn’t all been smooth sailing. Most of Musk’s business interests operate on new frontiers and whilst fresh pastures reap giant rewards once realised, they are worthless if they don’t materialise. Because of the inherent risks and failure rates associated with technological disruption, Musk has come close to insolvency several times. SpaceX, Musk’s rocket ship business, had several very public rocket crashes early on leaving it on the verge of bankruptcy and Tesla actually loses money on its current Sedan when bought at the entry price. He is often criticised for his heavy use of government subsidies as a result, making asymmetric bets with tax payers’ money.
Still, the very presence of Tesla in the market has put pressure on traditional car makers to ramp up development of electric cars. In a bold move, Musk has opened up all of Tesla’s patents in good faith proclaiming:
‘Tesla Motors was created to accelerate the advent of sustainable transport. If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal.’
Currently, less than 1% of new cars sold globally are electric (or emission-free) and so Musk is hoping to reduce R&D barriers, enticing incumbent car manufacturers to scale up their production pipelines. The optimists applaud this as altruistic; the cynics call this out as a PR stunt to further feed Tesla’s cult-like following.
Whilst a permanent renewable energy solution isn’t quite there yet, Tesla’s development as a business will be exciting to watch. Its success will depend on its ability to drive down production costs making itself profitable and its products affordable for the mass market. If Musk is able to achieve this, it could be a significant step in us being able to reduce our personal carbon footprints and I can only wish him luck in this endeavour.
