Thought Leaders: Elon Musk & Lyndon Rive on disrupting the utility market

If you’ve ever been to a meeting of the California Public Utilities Commission, you know that they typically feature representatives from the utilities that the CPUC regulates. Think PG&E, SCE and SDG&E in suits.

But on Thursday, the CPUC heard from two Silicon Valley innovators that are disrupting the utility model: Tesla Motors CEO Elon Musk and SolarCity CEO Lyndon Rive. Musk and Rive, who are cousins, appeared at the CPUC as part of the “Thought Leaders” series. Venture capitalist Nancy Pfund, an early investor in both companies, helped organize it.

Rive and Musk appeared on a panel with CPUC Commissioner Michael Peevey, who was overjoyed to see an overflow crowd in the auditorium. The three ostensibly talked about the role of regulation in spurring innovation, but the discussion was wide-ranging. Peevey made the point that at least in California, regulators are trying to stimulate the clean economy through policies like the California Solar Initiative, the loading order and the cap-and-trade program.

I live-tweeted much of the meeting and took notes, but this is far from an official transcript of the event.

I also chased Musk down a CPUC hallway with three other journalists in an effort to ask at least one serious question about this week’s Gigafactory news, but he slipped away.

So for your reading pleasure, I offer my top tidbits.

Musk on the importance of storage: We’re working at Tesla to create stationary battery packs that will last long, be safe and compact enough for houses. So you don’t have to use the guest bedroom.

Rive on regulation: I have a deep appreciation for the importance of regulation; more than I expected. Climate change is a market failure. We have nearly 5,000 employees at SolarCity, half of them in California.

Rive on storage:  Storage is a game-changing product. Those in the game don’t want to change the game. Utilities are trying to delay the game from changing

Peevey: You always have resistance from incumbents. (He then advised Rive and Musk to do more wooing of regulators, utilities and the legislature, saying more foreplay and romance is needed. That got a lot of laughs).

Rive: In 10 years everyone agrees that we need to de-carbonize the infrastructure. The biggest challenge is the next five years. This is the most exciting time to be in energy; everything is coming together. It’s very important to look at the innovation and allow the adoption to occur. As the adoption happens and the old business still continues, then you have two energy infrastructures. At some point someone has to shut down.

Musk on autonomous vehicles: It will be a long time before we get to true autonomous vehicles. We will have autopilot, like on an aircraft; there will still be a driver, but we’re reducing the driver workload.

Musk on the Gen III: It will be 20 percent smaller than the Model S but half the cost, at about $35,000, and with a range of 200 miles. In order to achieve that you have to reduce the cost of the battery. The battery pack will be 20 percent smaller but we’re looking for a 50 percent cost reduction, so we want to drive the battery cost down 30 percent.

Rive: The biggest challenge we face is educating people on how electricity works. They don’t know what the price of a kilowatt hour is.

Musk: Most people don’t know what the difference is between power and energy.

Musk on battery swapping: Model S was designed with battery swap in mind; we are planning to implement between Los Angeles and San Francisco and see what customer interest is. What percentage of people will use battery swap vs. Supercharging.

Musk on the Gigafactory: We hope to have it up and running in three years.

Musk on electric transport: All transport will go electric with the ironic exception of rockets. Planes are the hardest, but planes will transform too.

Peevey: With the cost of solar coming down, we could put solar on homes across southeast Los Angeles instead of the CARE program. That’s a twofer. That’s the kind of thing that will ultimately occur.

During the Q&A, someone in the audience who said he worked at Apple asked Musk about the different battery form factors: pouch vs. the 18650s that Tesla currently gets from Panasonic. What’s so special about the 18650? he asked.

Musk: We’re getting 260 watt hours per kilogram, which is better than any pouch cell I’m aware of, and also with low cost. Those are the two things that matter the most. It doesn’t make sense to go away from it.

Musk on a carbon tax: The right move is a broad carbon tax. Our taxes for gas are very low compared to the EU. We should tax the things that are bad over the things that are good. Like we tax cigarettes and alcohol more than bread. It seems like common sense. It’s time for us to get serious on a carbon tax on a national basis. It’s economics 101. It’s so obviously the right move, but politicians are afraid of it.

Peevey: Politicians don’t like to be associated with taxes. The only supporter of Darrell Steinberg’s proposal is WSPA. This is not the time to tamper with cap-and-trade.

Rive on California’s drought: The average household uses more water in the creation of electricity than the water itself. By installing solar you’ve netted out your water consumption.

Peevey: Vote Democratic.

Official seal of the California Public Utilities Commission.

 

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  • Timothy Leigh

    I would never bet against Elon Musk, but it scares the heck out of me when entrepreneurs talk about taxing “things that are bad.” Who gets to determine good and bad? I’d like that job and invest in the good one day before I announce the tax. Central planning doesn’t work and while Libs and Neocons think they know best, I like the free market. Oh well I liked the tooth fairy back in the day too.

 
 
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