Here’s what’s important about Tesla Investor Day
I should start by saying that I’m not a Tesla investor — or maybe I am, I don’t know. My investments have been managed through an index fund for a long time now, not only because it seems to me the best way to get consistent long-term returns (lest we forget, as a Nobel prize demonstrated, nobody beats the market), but also because it saves me from having to disclose whether or not I invest in the companies I write about.
In any event, I’m not going to write about whether the 2023 Tesla Investor Day was good or bad for the company, whether its stock went up or down, or whether there was a lack of clarity about its stated targets. Analysts’ reactions, frankly, bore me, mostly because I don’t believe the vast majority of them are smart enough to understand the magnitude of what happened. If you want to see for yourself, I recommend a condensed video of the event, the first third is relevant, from the beginning to minute 14:20. I really recommend watching that quarter of an hour, and not because Elon Musk is a good speaker; in fact, he is terrible.
It’s worth watching because in a quarter of an hour Musk highlights Tesla’s commitment to an energy transition that will save us as a species, and that is going to happen anyway, simply due to competition, efficiency and the markets. A series of undeniable truths on which the company has promised a detailed white paper, but which is not really necessary except to see the details of the assumptions it has made for its numbers.
But in practice, both the numbers and assumptions are unnecessary, because we are talking about something as simple as the laws of physics. Things that I have been explaining for years in my classes, and that are now available in a presentation (bad, but a presentation nevertheless… I promise I’ll improve it :-) For now, here’s a list of points that can be digested easily. But remember: these are not up for discussion.
- First and fundamental point: we can now generate enough energy on the planet to support not just the current population of eight billion, but a much higher number. We can argue about the pros and cons of growth, but we could, hypothetically, grow much more sustainably on this planet.
- Of course, that means moving from our current energy model, which is absurdly dirty and inefficient and in which 80% of energy comes from fossil fuels, to a radically different one.
- Why is our current model dirty and inefficient? Very simple: because it is based on burning fossil fuels. And as we now know beyond any doubt, combustion is a disaster energetically speaking. Only one third of the energy ends up being used as a useful source of movement or heat, and the remaining two thirds are wasted.
- This is one of the most important truths to understand above all else, and is thermodynamics: in your internal combustion car, only 20% of the energy from the gasoline is converted into motion. The rest is wasted as heat, completely useless. And to that you would have to add the energy needed to extract the oil, refine it, convert it into diesel or gasoline, and send it halfway around the world.
- In a thermal power plant or a blast furnace, the equation is different, but even so, a lot of energy is still wasted — in addition, of course, to generating the emissions that have caused the climate emergency. That’s the big difference between a combustion-based economy versus an electricity-based one.
- Anyone who assumes that we are going to need the same amount of energy if we change our energy model in order to decarbonize is wrong. We will need much less. It sounds counter-intuitive, I know: people think that if we all drive electric vehicles, we will need much more energy… well, it’s not true. It’s a matter of efficiency: electricity is far more efficient than burning fossil fuels. In fact, the total energy needed for a renewable energy-based civilization would be about half as much, and that’s a very conservative assumption. Half. Remember that.
- Governments around the world are already building the renewable infrastructure needed to fully supply our planet’s energy needs, including the batteries for when the sun doesn’t shine or the wind doesn’t blow. They are doing it not because Elon says so, but because they know it is the most cost-effective energy. We’re seeing 60% year-on-year growth in some countries; in time for you to see it, not your children or grandchildren. Unless you die very quickly, you are going to see a world powered almost entirely by renewable energy. Repeat it slowly, because it is not the message you have usually received. But it is, and it is because the market and costs say so.
- The investment in solar farms, wind farms and batteries needed to supply us with all the energy we need, heavily oversized, is equivalent to about $10 trillion. That’s approximately 10% of the world’s GDP. If you spread that investment over ten years, we are talking about 1% of global GDP per year. But the question is not whether we are going to do it or not: it is that we are already doing it. It may be Putin’s fault, or fear, or the price of gas, but it is already happening.
- How much surface area is needed for so many solar panels and wind turbines? Only 0.2% of the world’s surface. That’s not small, but it is perfectly feasible, and above all, much less than what the current generation infrastructures occupy in the combustion economy. Again: efficiency, the key word. No, electricity is not a religion, nor have we been affected by the neo-conversion rage: it is thermodynamics. If you don’t understand it, read a book.
- And where do we get the minerals, lithium, rare earths and the rest? We will need far fewer mines than we currently exploit. Fewer, not more. And there are enough resources. In fact, there are plenty. The more we look for them, the more they appear and the more we realize how wrong the forecasts of just a few years ago were. You can read what you want about the “terrible shortage” of many things, but… they are lies. And dirty, self-serving lies at that.
- What is to be done? Well, apply this to the five areas that use the most energy. One, the generation of energy itself: solar panels, wind turbines and batteries. Two, automotive: electric cars, four times more efficient — with all possible factors included. Three, heating: heat pumps. Four, industrial uses, including the use of green hydrogen. And five, sustainable fuels for large ships and transoceanic aircraft, at least as long as the density of batteries does not yet make their use practical (a substitution that will eventually happen).
- It can be done. And in fact, it is being done. The reason why the discussion about the climate emergency is beginning to change is because of the realization that the economy that replaces a fossil-fuel based one is much more efficient, and therefore can be done with far fewer resources. This is something that the countries that have understood this are already doing through all kinds of incentives, but also through investment by those who see this as an economic advantage.
- The rest of the presentation up to minute 14:20 are more detailed explanations (very little more detailed, because it is just a presentation, not a doctoral dissertation) on these points. And from there, “Tesla stuff”, which may or may not interest you, about its economies of scale, its gains in efficiency or how it intends to lower its costs to manufacture cheaper models (of which it does not give any details, so don’t waste your time).
But the first part is really worth it. Because it’s real, because it’s based on arguments as solid and as beyond doubt as physics, and because nothing, nothing else you can think of, is going to be more relevant to your future. And everyone else’s. Seriously: it’s not about selling anything, much less a Tesla. It’s about understanding why some of us have been so enthusiastic about this project for a long time, and why, no matter whether you love or loathe Elon Musk… he’s right about the future of energy.
This article is also published on the author's blog. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
Photo by Paul Steuber on Unsplash
About the author
Enrique Dans is Professor of Innovation at IE Business School in Madrid, and Senior Advisor for Innovation and Digital Transformation at IE University. Through his writing and speaking, Enrique has established himself as a global leading voice at the intersection of technological innovation and sustainability, providing insights and commentary on the latest trends and developments in the fields. He writes daily in Spanish on enriquedans.com, and in English on Medium. He has written two acclaimed books: “ Todo va a cambiar” (2010) and “Living in the Future” (2019).