Los Angeles entrepreneur Elon Musk has built a multibillion-dollar fortune running companies that make electric cars, sell solar panels and launch rockets into space.
And he’s built those companies with the help of billions in government subsidies.
The subsidies have generally been disclosed in public records and company filings. But the full scope of the public assistance hasn’t been tallied because it has been granted over time from different levels of government.
New York state is spending $750 million to build a solar panel factory in Buffalo for SolarCity. The San Mateo, Calif.-based company will lease the plant for $1 a year. It will not pay property taxes for a decade, which would otherwise total an estimated $260 million.
The Palo Alto company has also collected more than $517 million from competing automakers by selling environmental credits. In a regulatory system pioneered by California and adopted by nine other states, automakers must buy the credits if they fail to sell enough zero-emissions cars to meet mandates. The tally also includes some federal environmental credits Elon Musk’s growing empire is fuelled by $4.8 billion in government subsidies
One of the problems with government subsidies is that it creates an industry of co-dependent rent-seekers. Sure the government wants to ‘encourage’ a particular method of energy generation. In the future where we will be living in a ‘utopian’ electricity generation free of carbon-dioxide (‘CO2’), there will be no need for government subsidies. The subsidy tap is switched off. The ideal of carbon-dioxide not being emitted by energy producers will be over. The objective has been achieved.
The rent-seekers will kick up a stink. Like all subsidies or industries instituted or protected by government it has not created anything innovative. The green industry may have created industries in making towers and installing green energy equipment. But we haven’t seen the innovation in manufacturing better and more efficient wind or solar. Possibly there there may have been innovations in smart grid software and electricity distribution management.
Nevertheless when we’re supposed to be free of energy producers emitting CO2 as a byproduct, the fitters, installers and others involved in the green industry will also kick up a stink.
Rent-seeking is not unique to the green industry. When we subsidised the car industry, despite building well-made cars, the manufacturers Ford and Holden continued to make cars that people did not want. Toyota made cars that people wanted, but it’s leaving because it was dependent on local parts manufacturers who were dependent on supplying Holden and Ford for cars people didn’t really want. Who suffers? The innocent worker who was at the behest of complacent rent seeking management from Detroit.
In any industry where there is a subsidy or other legislative protection, the industry which is codependent on the subsidy or tariff or general protection may well disappear at the ‘stroke of a pen’.
In the meantime, in the situation for SA’s large public uninterruptible power supply (‘UPS’) made from Mr Musk’s lithium ion batteries will last a few years. Toyota’s Prius and Camry Hybrid uses the same battery technology as Mr Musk’s public UPS. They’re guaranteed for eight years. So SA has to continually replace these batteries every eight years at $100 million. If the dream is to achieve no CO2 produced by electricity generators by 2050, the cost will be (2050-2017)/8*$100 million = $412.5 million, without adjusting for inflation. That will only service a few thousand homes. You’ll get more bang for your buck if you spend $2 billion dollars on a coal-fired or gas-fired station and service millions of homes plus industry. $2 billion is economical, but $412.5 million is false economy. If the batteries were to service a million people, that would be 1000000/15000 * $412.5 = $27.5 billion. The 15000 is the number of households operating at a maximum of 4 hours per day, reference http://www.news.com.au/technology/innovation/confusion-over-elon-musks-battery-offer-for-south-australia/news-story/8f06c79ecc676cb82336ee8f77e91f8b . So to have a UPS operating 24 hours per day, the cost is $27.5 * 6 = $165 billion.
Thank you,
Anthony of Belfield