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Who needs new models when you have chargers and price cuts?
“It doesn't matter if you win by an inch or a mile. Winning's winning.”
I’m reluctant to call Vin Diesel’s Dominic Toretto one of the great philosophers of our time, but his line in the inaugural Fast & Furious movie is as true about street racing as it is about anything else. And in the current electric vehicle sales race, Tesla is the clear winner in mid-2023—this, despite an aging lineup of vehicles, tactics that make the rest of the car business nervous and a dependence on non-car products to entice buyers.
Things could’ve gone very differently this year. I certainly thought so about six months ago. This was supposed to be the year that Tesla’s slew of increasingly dated cars faced real, direct competition for the first time ever; when its CEO’s objectively disastrous foray into social media ownership took attention away from his core business; and when most other car companies got truly serious about creating a future without gasoline.
But now that we have insight into what EVs people bought — or didn’t buy — in the first and second quarters of this year, the numbers tell a different story. Tesla is still the clear leader in EV sales, moving almost half a million cars globally in just the past three months. The Model Y is the best-selling car in the world. The rest of the competition that was supposed to show up and eat Elon Musk’s lunch? Not even remotely close.
According to data from Automotive News, the rest of the EV landscape looks sad by comparison. After the Model Y and Model 3, the bronze medal finish went to the Chevrolet Bolt — an EV that’s generally excellent and affordable but outdated and soon to be discontinued. (By the way, Tesla sold almost six times as many Model Ys as Chevy sold Bolts.)
Right below the Bolt, there’s the expensive and also aging Model S, followed by the Volkswagen ID.4, finally hitting its stride somewhat due to EV tax incentives. After that, the Ford Mustang Mach-E, which has had a slew of production problems this year; then the Hyundai Ioniq 5, a superb EV but one that does not qualify for any tax breaks unless it’s leased; and then Tesla’s own Model X, also long in the tooth.
Keep in mind that the freshest product in Tesla’s lineup these days is the Model Y, which went on sale in 2020, followed by the Model 3, which is now six years old — at the point when another car company would replace it with an entirely new model. The point is, the hottest-selling EVs in the world aren’t fresh, new products at all. (And to be fair, Tesla’s had its own share of headaches with the Cybertruck, which has been pushed back so much it’s starting to feel like the Half-Life 3 of cars.)
Finally, questions are arising about EV demand in general. Monday morning, Axios reported on “the growing mismatch between EV supply and demand,” meaning that while EV sales are steadily climbing and making up more and more of the U.S. market, those sales aren’t matching what car companies are actually building and putting up for sale. In fact, the time EVs spend sitting on dealer lots — a measurement of demand for a car, traditionally — is now nearly double the industry average, Axios reports. In other words, they’re sitting there, unpurchased, about twice as long as gasoline cars.
That’s disheartening news for the climate, especially given how palpably horrific the heat and weather events have been this summer. The world cannot wait for people to switch to electrified and lower-emission vehicles. But there are a lot of reasons this is happening, and the biggest factor is still cost.
With rising interest rates, an uncertain economy ahead and the average EV still costing almost $60,000 — which actually went up this year despite Tesla’s price cuts and all the new cars on the road — can you really blame buyers for sitting this out until things get cheaper?
Simply put, Tesla is offering the best deals right now. As old as the Model 3 and Model Y are, they’re still fun to drive, high-range EVs boasting the best charging network in the business (we’ll get to that in a bit.) They’re also still cutting-edge in most ways that count for EV newcomers; they just don’t look new and are beginning to lack key features offered by many new competitors like bidirectional charging or more predictable automated driving assistance.
This year, Tesla has dramatically slashed their prices and positioned them to take advantage of the full EV tax credits when other car companies cannot. Tesla’s lead remains a solid one in 2023; it has the experience, production capacity, and scale to slash prices on these cars while remaining profitable. Other automakers are sweating their ability to make money on EVs at all right now.
Generally, car companies are wary of slashing prices too much or relying too heavily on discounts. They tend to water down a brand’s image while cutting into profit margins, and the auto industry is very much a business of margins. Now, Tesla has taken a hit to its gross profit margins amid these price cuts, but it’s still doing well and Musk doesn’t seem to care. In the meantime, more than likely, a person’s first EV will be a Tesla.
And then there’s America’s new EV tax credit scheme, which may actually be backfiring to some degree right now.
In short, to get the full $7,500 tax credit on an EV, a car and its batteries must be now made in North America. On a long enough timeline that will help build a robust electric car and battery manufacturing infrastructure here, so that both aren’t dependent on China — exactly the goal of the law. The problem is, local battery factories alone will take years to set up; it’s going to be a long time before the majority of EVs Americans can buy meet both qualifications.
At the beginning of this year, EV demand seemed to be booming because those “buy local” rules hadn’t taken effect yet. Now, a bunch of automakers, including BMW, Volvo, and Hyundai, are left out of the credits because their EVs aren’t made here yet. While well-intentioned, the stringent rules of the tax credit scheme run the risk of dampening EV demand and killing the momentum the car industry had in January.
Finally, car companies now seem to be struggling to reconcile their big environmental promises — you know, vowing to go all-electric by 2035 — with the cold, hard realities of public-company capitalism.
Take General Motors, for example. While it’s made that all-electric commitment, its promised EV lineup has barely materialized yet; the Bolt is the best representation of this promise and it’s on the way out. The Cadillac Lyriq? MIA. The other EVs? Delayed. And the GMC Hummer EV is so environmentally unfriendly, they may as well have just given it a V8 engine. Speaking of, GM has said it’s committed to making gasoline heavy-duty trucks and SUVs for a long time to come; they’re far too profitable to phase out, planet be damned.
Or take the Volkswagen Group, the original “pivot to EVs” automaker in penance for its diesel-cheating sins. It’s dealt with a ton of delays, production problems, and software issues, and it too is reluctant to phase out its most profitable ICE vehicles. And both companies are due to have massive fights with their labor unions over EVs and jobs soon enough.
Essentially, pivoting to EVs is hard. It’s not just about making battery-powered cars. Automakers must retool how cars are designed, built, and sold while focusing on software and revamping their entire supply chains. Deep down, most auto executives would probably rather not do this. It will be an expensive, messy, and complicated process that runs counter to just making shareholders happy each quarter with the status quo until you comfortably retire.
And Tesla’s most powerful weapon keeps proving to be its charging network. There’s perhaps no greater signifier of car companies’ EV trepidation than their willingness to say “You know what? You deal with this” while handing the charging keys to Tesla. GM, Ford, Volvo, Rivian, Volvo, and now Mercedes-Benz have all said they’ll switch to Tesla’s charging standard in North America, giving EV buyers access to that network in the coming years. Perhaps that will drive up EV purchases and make buyers consider things that aren’t Teslas. I think that it probably will.
But in doing so, Tesla will reap significant income in public funding for EV charging stations made possible by the 2021 infrastructure law. It’s unclear whether doing that — and getting revenue from the charging itself — will outweigh potential lost future sales to Mercedes or Volvo or whoever, but one thing seems clear: the biggest winner of the Biden-era tax incentives so far is Tesla.
Short of dramatic price cuts — which are unlikely to happen because these things are so unprofitable as-is — or radically new cheaper battery technologies, it feels unlikely that Tesla will lose the lead in the electric drag race this year or anytime soon.
Who cares if it’s winning on price cuts and its charging network? Ask Dom; a win’s a win.
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The rapid increase in demand for artificial intelligence is creating a seemingly vexing national dilemma: How can we meet the vast energy demands of a breakthrough industry without compromising our energy goals?
If that challenge sounds familiar, that’s because it is. The U.S. has a long history of rising to the electricity demands of innovative new industries. Our energy needs grew far more quickly in the four decades following World War II than what we are facing today. More recently, we have squared off against the energy requirements of new clean technologies that require significant energy to produce — most notably hydrogen.
The lesson we have learned time and again is that it is possible to scale technological innovation in a way that also scales energy innovation. Rather than accepting a zero-sum trade-off between innovation and our clean energy goals, we should focus on policies that leverage the growth of AI to scale the growth of clean energy.
At the core of this approach is the concept of additionality: Companies operating massive data centers — often referred to as “hyperscalers” — as well as utilities should have incentives to bring online new, additional clean energy to power new computing needs. That way, we leverage demand in one sector to scale up another. We drive innovation in key sectors that are critical to our nation’s competitiveness, we reward market leaders who are already moving in this direction with a stable, long-term regulatory framework for growth, and we stay on track to meet our nation’s climate commitments.
All of this is possible, but only if we take bold action now.
AI technologies have the potential to significantly boost America’s economic productivity and enhance our national security. AI also has the potential to accelerate the energy transition itself, from optimizing the electricity grid, to improving weather forecasting, to accelerating the discovery of chemicals and material breakthroughs that reduce reliance on fossil fuels. Powering AI, however, is itself incredibly energy intensive. Projections suggest that data centers could consume 9% of U.S. electricity generation by 2030, up from 4% today. Without a national policy response, this surge in energy demand risks increasing our long-term reliance on fossil fuels. By some estimates, around 20 gigawatts of additional natural gas generating capacity will come online by 2030, and coal plant retirements are already being delayed.
Avoiding this outcome will require creative focus on additionality. Hydrogen represents a particularly relevant case study here. It, too, is energy-intensive to produce — a single kilogram of hydrogen requires double the average household’s electricity consumption. And while hydrogen holds great promise to decarbonize parts of our economy, hydrogen is not per se good for our clean energy goals. Indeed, today’s fossil fuel-driven methods of hydrogen production generate more emissions than the entire aviation sector. While we can make zero-emissions hydrogen by using clean electricity to split hydrogen from water, the source of that electricity matters a lot. Similar to data centers, if the power for hydrogen production comes from the existing electricity grid, then ramping up electrolytic production of hydrogen could significantly increase emissions by growing overall energy demand without cleaning the energy mix.
This challenge led to the development of an “additionality” framework for hydrogen. The Inflation Reduction Act offers generous subsidies to hydrogen producers, but to qualify, they must match their electricity consumption with additional (read: newly built) clean energy generation close enough to them that they can actually use it.
This approach, which is being refined in proposed guidance from the U.S. Treasury Department, is designed to make sure that hydrogen’s energy demand becomes a catalyst for investment in new clean electricity generation and decarbonization technologies. Industry leaders are already responding, stating their readiness to build over 50 gigawatts of clean electrolyzer projects because of the long term certainty this framework provides.
While the scale and technology requirements are different, meeting AI’s energy needs presents a similar challenge. Powering data centers from the existing electricity grid mix means that more demand will create more emissions; even when data centers are drawing on clean electricity, if that energy is being diverted from existing sources rather than coming from new, additional clean electricity supply, the result is the same. Amazon’s recent $650 million investment in a data center campus next to an existing nuclear power plant in Pennsylvania illustrates the challenge: While diverting those clean electrons from Pennsylvania homes and businesses to the data center reduces Amazon’s reported emissions, by increasing demand on the grid without building additional clean capacity, it creates a need for new capacity in the region that will likely be met by fossil fuels (while also shifting up to $140 million of additional costs per year onto local customers).
Neither hyperscalers nor utilities should be expected to resolve this complex tension on their own. As with hydrogen, it is in our national interest to find a path forward.
What we need, then, is a national solution to make sure that as we expand our AI capabilities, we bring online new clean energy, as well, strengthening our competitive position in both industries and forestalling the economic and ecological consequences of higher electricity prices and higher carbon emissions.
In short, we should adopt a National AI Additionality Framework.
Under this framework, for any significant data center project, companies would need to show how they are securing new, additional clean power from a zero-emissions generation source. They could do this either by building new “behind-the-meter” clean energy to power their operations directly, or by partnering with a utility to pay a specified rate to secure new grid-connected clean energy coming online.
If companies are unwilling or unable to secure dedicated additional clean energy capacity, they would pay a fee into a clean deployment fund at the Department of Energy that would go toward high-value investments to expand clean electricity capacity. These could range from research and deployment incentives for so-called “clean firm electricity generation technologies like nuclear and geothermal, to investments in transmission capacity in highly congested areas, to expanding manufacturing capacity for supply-constrained electrical grid equipment like transformers, to cleaning up rural electric cooperatives that serve areas attractive to data centers. Given the variance in grid and transmission issues, the fund would explicitly approach its investment with a regional lens.
Several states operate similar systems: Under Massachusetts’ Renewable Portfolio Standard, utilities are required to provide a certain percentage of electricity they serve from clean energy facilities or pay an “alternative compliance payment” for every megawatt-hour they are short of their obligation. Dollars collected from these payments go toward the development and expansion of clean energy projects and infrastructure in the state. Facing increasing capacity constraints on the PJM grid, Pennsylvania legislators are now exploring a state Baseload Energy Development Fund to provide low-interest grants and loans for new electricity generation facilities.
A national additionality framework should not only challenge the industry to scale innovation in a way that scales clean technology, it must also clear pathways to build clean energy at scale. We should establish a dedicated fast-track approval process to move these clean energy projects through federal, state, and local permitting and siting on an accelerated basis. This will help companies already investing in additional clean energy to move faster and more effectively – and make it more difficult for anyone to hide behind the excuse that building new clean energy capacity is too hard or too slow. Likewise, under this framework, utilities that stand in the way of progress should be held accountable and incentivized to adopt innovative new technologies and business models that enable them to move at historic speed.
For hyperscalers committed to net-zero goals, this national approach provides both an opportunity and a level playing field — an opportunity to deliver on those commitments in a genuine way, and a reliable long-term framework that will reward their investments to make that happen. This approach would also build public trust in corporate climate accountability and diminish the risk that those building data centers in the U.S. stand accused of greenwashing or shifting the cost of development onto ratepayers and communities. The policy clarity of an additionality requirement can also encourage cutting edge artificial intelligence technology to be built here in the United States. Moreover, it is a model that can be extended to address other sectors facing growing energy demand.
The good news is that many industry players are already moving in this direction. A new agreement between Google and a Nevada utility, for example, would allow Google to pay a higher rate for 24/7 clean electricity from a new geothermal project. In the Carolinas, Duke Energy announced its intent to explore a new clean tariff to support carbon-free energy generation for large customers like Google and Microsoft.
A national framework that builds on this progress is critical, though it will not be easy; it will require quick Congressional action, executive leadership, and new models of state and local partnership. But we have a unique opportunity to build a strange bedfellow coalition to get it done – across big tech, climate tech, environmentalists, permitting reform advocates, and those invested in America’s national security and technology leadership. Together, this framework can turn a vexing trade-off into an opportunity. We can ensure that the hundreds of billions of dollars invested in building an industry of the future actually accelerates the energy transition, all while strengthening the U.S.’s position in innovating cutting- edge AI and clean energy technology.
Almost half of developers believe it is “somewhat or significantly harder to do” projects on farmland, despite the clear advantages that kind of property has for harnessing solar power.
The solar energy industry has a big farm problem cropping up. And if it isn’t careful, it’ll be dealing with it for years to come.
Researchers at SI2, an independent research arm of the Solar Energy Industries Association, released a study of farm workers and solar developers this morning that said almost half of all developers believe it is “somewhat or significantly harder to do” projects on farmland, despite the clear advantages that kind of property has for harnessing solar power.
Unveiled in conjunction with RE+, the largest renewable energy conference in the U.S., the federally-funded research includes a warning sign that permitting is far and away the single largest impediment for solar developers trying to build projects on farmland. If this trend continues or metastasizes into a national movement, it could indefinitely lock developers out from some of the nation’s best land for generating carbon-free electricity.
“If a significant minority opposes and perhaps leads to additional moratoria, [developers] will lose a foot in the door for any future projects,” Shawn Rumery, SI2’s senior program director and the survey lead, told me. “They may not have access to that community any more because that moratoria is in place.”
SI2’s research comes on the heels of similar findings from Heatmap Pro. A poll conducted for the platform last month found 70% of respondents who had more than 50 acres of property — i.e. the kinds of large landowners sought after by energy developers — are concerned that renewable energy “takes up farmland,” by far the greatest objection among that cohort.
Good farmland is theoretically perfect for building solar farms. What could be better for powering homes than the same strong sunlight that helps grow fields of yummy corn, beans and vegetables? And there’s a clear financial incentive for farmers to get in on the solar industry, not just because of the potential cash in letting developers use their acres but also the longer-term risks climate change and extreme weather can pose to agriculture writ large.
But not all farmers are warming up to solar power, leading towns and counties across the country to enact moratoria restricting or banning solar and wind development on and near “prime farmland.” Meanwhile at the federal level, Republicans and Democrats alike are voicing concern about taking farmland for crop production to generate renewable energy.
Seeking to best understand this phenomena, SI2 put out a call out for ag industry representatives and solar developers to tell them how they feel about these two industries co-mingling. They received 355 responses of varying detail over roughly three months earlier this year, including 163 responses from agriculture workers, 170 from solar developers as well as almost two dozen individuals in the utility sector.
A key hurdle to development, per the survey, is local opposition in farm communities. SI2’s publicity announcement for the research focuses on a hopeful statistic: up to 70% of farmers surveyed said they were “open to large-scale solar.” But for many, that was only under certain conditions that allow for dual usage of the land or agrivoltaics. In other words, they’d want to be able to keep raising livestock, a practice known as solar grazing, or planting crops unimpeded by the solar panels.
The remaining percentage of farmers surveyed “consistently opposed large-scale solar under any condition,” the survey found.
“Some of the messages we got were over my dead body,” Rumery said.
Meanwhile a “non-trivial” number of solar developers reported being unwilling or disinterested in adopting the solar-ag overlap that farmers want due to the increased cost, Rumery said. While some companies expect large portions of their business to be on farmland in the future, and many who responded to the survey expect to use agrivoltaic designs, Rumery voiced concern at the percentage of companies unwilling to integrate simultaneous agrarian activities into their planning.
In fact, Rumery said some developers’ reticence is part of what drove him and his colleagues to release the survey while at RE+.
As we discussed last week, failing to address the concerns of local communities can lead to unintended consequences with industry-wide ramifications. Rumery said developers trying to build on farmland should consider adopting dual-use strategies and focus on community engagement and education to avoid triggering future moratoria.
“One of the open-ended responses that best encapsulated the problem was a developer who said until the cost of permitting is so high that it forces us to do this, we’re going to continue to develop projects as they are,” he said. “That’s a cold way to look at it.”
Meanwhile, who is driving opposition to solar and other projects on farmland? Are many small farm owners in rural communities really against renewables? Is the fossil fuel lobby colluding with Big Ag? Could building these projects on fertile soil really impede future prospects at crop yields?
These are big questions we’ll be tackling in far more depth in next week’s edition of The Fight. Trust me, the answers will surprise you.
Here are the most notable renewable energy conflicts over the past week.
1. Worcester County, Maryland –Ocean City is preparing to go to court “if necessary” to undo the Bureau of Ocean Energy Management’s approval last week of U.S. Wind’s Maryland Offshore Wind Project, town mayor Rick Meehan told me in a statement this week.
2. Magic Valley, Idaho – The Lava Ridge Wind Project would be Idaho’s biggest wind farm. But it’s facing public outcry over the impacts it could have on a historic site for remembering the impact of World War II on Japanese residents in the United States.
3. Kossuth County, Iowa – Iowa’s largest county – Kossuth – is in the process of approving a nine-month moratorium on large-scale solar development.
Here’s a few more hotspots I’m watching…