Posts

Is Elon Musk a welfare king?

Elon Musk is a darling of libertarians and free-market advocates because he is proposing to change the way Americans drive their cars through purely private effort. But he is now coming under fire for accepting gobs of government assistance in the process.

Critics charge that he has already accepted $4.9 billion in federal and state assistance and is angling for more. One article even asks if Musk has not become a “welfare king.”

Well, let’s take a look at the charges and see how they stack up:

The original article appeared in Mother Jones and was not entirely unfavorable. Staff reporter Josh Harkinson thinks the Tesla is a marvelous car and quotes all the accolades from Consumer Reports and Motor Trend. He even thinks Musk may be the next Steve Jobs and quotes New York Times blogger Jim Motavalli to that effect: “Individuals come along very rarely that are both as creative and driven as that. Musk is not going to settle for a product that is good enough for the marketplace. He wants something that is insanely great.”

What Harkinson objects to is simply that Musk hasn’t given the government enough credit for helping him on his way. He quotes Fred Turner, a Stanford professor and author of From Counterculture to Cyberculture, as saying: “It is not quite self-delusion, but there is a habit of thinking of oneself as a free-standing, independent agent, and of not acknowledging the subsidies that one received. And this goes on all the time in the Valley (i.e., Silicon Valley).”

It’s important to note that Harkinson is not just talking about Tesla. Musk’s other enterprise, SolarCity, which is installing rooftop panels on private homes, actually gets more federal and state subsidies than Tesla. And SpaceX, Musk’s venture into space travel, has a $4.2 billion contract with NASA to build a launching pad in Texas, which does not count as a subsidy but still comes from the government.

As far as Tesla is concerned, here’s what Harkinson counts as government assistance:

• Everyone who buys a Tesla gets a $7,500 tax credit from the federal government. Buyers in California get an additional $2,500 tax credit. Tesla buyers have an average income of $320,000. The federal tax credit will go to the first 200,000 customers. So far, Tesla has sold only one-quarter of that.

• The state of Nevada gave Tesla $1.2 billion in tax benefits to build its Gigafactory outside Reno. The offer came as Nevada was in competition with seven other states for the siting. The factory is expected to produce 6,000 jobs.

• Tesla’s principal source of income in recent years has come from selling Zero Emission Vehicles credits to other manufacturers in a program particular to the state of California. All auto manufacturers are required to produce ZEVs. When they can’t meet their quota, they can buy credits from other manufacturers. Tesla has pocketed $517 million in recent years. Harkinson counts this as a government subsidy, although Musk points out that the money comes from other car companies, not the government.

Musk has been quick to fire back: “If I cared about subsidies, I would have entered the oil and gas industry,” he told the media after The Los Angeles Times ran a story repeating the Mother Jones charges.

He points out that the$1.2 billion from Nevada will be spaced out over a period of two decades. It will also be contingent on the factory having an output of $5 billion every year for the 20-year period. He notes that hiring and other aspects of the Gigafactory will make it a profitable venture for the state of Nevada. And of course he notes that the fossil-fuel industry has received huge subsidies over the decades.

It really isn’t fair to say that Musk is “living off welfare.” His original entrepreneurial success, PayPal, rose to a valuation of $1.5 billion without the slightest assistance from the government. Tesla did receive a $465 million loan guarantee from the Department of Energy under the same program that funded the ill-fated Solyndra. But Musk made a grand gesture by paying back the loan ahead of time.

The fact is, it’s almost impossible to start a business these days without becoming involved at some level with the government. If Nevada hadn’t offered tax abatements, some other state would have – and did in fact. Many other factors were involved in the selection of Nevada, and states obviously benefit from such facilities.

Musk is a unique visionary whose reach extends far beyond making money. His ambition is to completely remake America’s automobile system and end the dominance of fossil fuels. He also wants to see America succeed at space travel. He plans to build a colony on Mars and has said he hopes to die on the Red Planet.

“Just not on impact, he added.

(Photo credit: J.D. Lasica, posted to Flickr)

4 Non Blondes, The King and I and alternative fuels

4-non-blondes-650-430“Twenty-five years [lots more years for me] and my life is still
Trying to get up that great big hill of hope
For a destination”

Combine the lyrics from 4 Non Blondes with the personal frustration suggested by the “it’s a puzzlement” comment from the King of Siam in “The King and I,” expressed when he was perplexed by a changing world, and you will understand why many are confused by three relatively recent actions that limit or impede the growth of alternative fuels.

Most advocates of consumer choice at the pump and the end of Big Oil’s near-monopoly concerning transportation fuel praised the president’s State of the Union address a couple of years ago. He proposed that the nation wean itself off of oil. Wow, some fuel choice advocates were thrilled, almost orgiastic. Just think, in a couple of years customers might search for fuel stations selling a range of lower-cost alternative fuels, instead of only gasoline. Environmentalists welcomed the president’s comments. Less pollution and fewer GHG emissions! Most economists were pleased. They saw more jobs and further GNP growth. Servicemen were happy. They would be asked to fight fewer wars for oil.

In this context, there was hope that the cheaper cost of oil, and its derivative, gasoline — both of which are now rising in cost — juxtaposed with the regulations resulting from the BP Deepwater Horizon oil spill, Shell’s failure to use its original drilling permit to drill successfully and the availability of less expensive competitive fuels, would end the prospect of drilling in the pristine Arctic Circle off of Alaska’s coast. It would be just too costly. Good news! We can dream, can’t we!?

Similarly, some of my colleagues and friends who support fuel choice and a better shake for consumers than gasoline (concerning costs and GHG emissions), were hoping that improved technology, lower prices, and inventions like Elon Musk’s just-announced solar storage unit, could soon generate an increased ability for solar energy to power many coal-fired utilities, homes and even vehicles. In the aggregate, the U.S. would produce significantly fewer emissions and pollutants. What a welcome, possible, short-term happening! Musk for president!

The increased popularity of battery electric vehicles (BEVs) from Tesla (among those who can afford them) and the emergence of cheaper battery-powered vehicles from Detroit have also lent hope to those who are fuel agnostic or favor a long-term, robust renewable fuel market and more consumer choices at the pump. While electric cars offer a vision of the future, their broad acceptance by the public depends on design and technology improvements to both end the fear of running out of battery power while on the road, and provide more internal space — both at costs most Americans can afford. Both problems seem to be on the way to resolution, based on the pronouncements from Tesla and Detroit. We can only hope!

But despite the optimism gene internal to most Americans, the great “big hill of hope” has recently become even bigger to climb. While alternative fuel advocates remain relatively quiet and often unable to speak with one effective voice, federal and state policies and regulations have been changed to limit the ability of alternative fuels to secure significant market penetration. Despite large subsidies to the oil industry, neither the administration nor Congress has been willing to seriously try to weaken the ability of Big Oil to restrict alternative fuel sales at local gas stations. Indeed, several attempts to enact open fuels legislation have failed to even get out of Congressional committees.

Although the country seems awash in oil, just this week, the president gave conditional approval to Shell to drill in the Chukchi Sea off of Alaska, despite the company’s mismanagement of earlier attempts to do the same, and despite the objections of many environmental groups and Alaskan natives. Both industry and critics of the permits note that drilling will be risky, given very high waves, icy seas, strong winds, bitter cold weather and the need to protect the routes of migration and feeding areas for marine mammals. As The New York Times indicated this week, the permit is a “major victory for the petroleum industry and a devastating blow to environmentalists,” and for consumers, I would add. Estimates of the oil in the Chukchi Sea range all over the place. However, if oil companies are able to overcome high drilling costs and secure a significant flow of oil, even for a relatively short time, they will increase their ability to limit sales of alternative fuels among their franchises and through differential pricing, the sales of alternative fuels by independent retailers.

It doesn’t get any better. Just as opportunities to secure and store solar power — power that could be used to power homes, autos and utilities — seem almost ready for prime time, many of America’s utility companies — another great supporter of competition (excuse the cynicism) — have begun to seek legislative relief to impede solar’s growth. Their argument deserves discussion. If solar power grows, it could well be at the expense of improvements in the grid. But the use of their political power with state legislatures to seek ad-hoc remedies, different in each state, is not in the public interest. Legislative efforts to lower the price solar users secure from utilities when they put excess power on the grid may or may not be good policy or practice. Shouldn’t we know before such policies are enacted by states? Similarly, putting up regulatory impediments impeding the sale of solar units, including storage units, would likely really hurt what is now a risky start-up industry. The net result of poorly conceived state-by-state initiatives to protect the utility industry would be to limit the capacity of solar energy to substitute for coal in powering utilities and to reduce options to produce cleaner electric cars with almost zero GHG emissions. Similarly, restricting the storage of solar energy would end up slowing down the development of another alternative fuel — one based on solar-derived power.

Finally, the continuing efforts by several states to change Tesla’s business model have and will reduce competition for fuels and the use of electricity as a fuel. Why? Several state legislatures, under political pressure from auto dealers, have banned its direct-sales approach. If Tesla wants to sell its electric-powered cars in Texas, for example, it must sell through an auto dealer. Remember, some Texans recently wanted to secede from the union in order to free the state from “federal dictatorship” and, ostensibly, extend personal freedom and its corollary market competition! (I thought of signing the petition that was floating around to let Texas go.) Passing laws to protect one kind of business from another is un-American…almost like sending the Texas National Guard to monitor the training of U.S. soldiers to be sure they are not digging tunnels under Walmart and engaging in other nefarious activities contrary to the interest of the good citizens of Texas. Davy Crockett would be offended. The bottom line is that Texas and other states with similar regulations are limiting fuel choice by placing a Berlin Wall around their boundaries and not letting Tesla and its electric vehicles in. Ah. Freedom!

So, supporters have some big hills to climb and sometimes it may be a puzzlement to the climbers. But, as the singer Billy Ocean once vocalized, “When the going gets tough, the tough get going.” Building a coalition among the willing supporters of alternative fuels should not be difficult. They share goals concerning the need for increased consumer choices and the value of open fuel markets. If they reach out to include, rather than define boundaries to exclude; if they acknowledge that absolute wisdom concerning strategies does not exist; if they are willing to work toward consensus and bring their respective constituencies along with them; and if they recognize that time is of the essence concerning achievement of key public interest and quality of American life objectives, following Robert Frost, they will travel the road less traveled, and will likely soon begin to see light at the end of their travails and travels.

 

Photo Credit: Getty Images

Is this golf cart more ‘disruptive’ than Teslas?

In the May issue of the Harvard Business Review, Clayton Christensen and Tom Bartman tackle the question, “Is the Tesla a truly disruptive innovation?” The answer they come up with is “no,” but they have some interesting things to say in the process.

Christensen is the author of The Innovator’s Dilemma, one of the most highly regarded business books in recent memory. It originated as an article in the HBR exactly twenty years ago, and was published as a book in 1997. Christensen pointed out that established companies were often beaten at their own game by cheaper imitations that performed the same service at a much better price. He cited steel mini-mills and personal computers as examples of innovations that created whole new markets and ended up displacing previous technologies. The “innovator’s dilemma” is that established companies cannot compete at first without undercutting their own products. By the time they make the shift, however, they might be left behind.

An investor challenged Christensen as to whether Tesla was truly disruptive. (“Game-changer” is another popular term for the electric-car company.) Christensen has been feeling defensive about his work recently after a critical 2014 article in The New Yorker, and so he decided to take up the challenge. He assigned the task to Bartman, one of his assistants.

Bartman posed five questions: 1) Does the product target overserved customers by offering lower service at a lower price? 2) Does it create “asymmetric motivation” in that existing competitors aren’t motivated to initiate change? 3) Can it improve performance fast enough to keep pace with customers’ expectations? 4) Does it create new value networks, including sale channels? And 5) Does it disrupt all incumbents, or can an existing player exploit the opportunity?

“As Bartman worked through the questions,” says the article on HBR’s website, “it became clear that Tesla is not a disrupter. It’s a classic ‘sustaining innovation’—a product that, according to Christensen’s definition, offers incrementally better performance at a higher price. There’s nothing rudimentary about Teslas, which compete on price against cars by BMW and Mercedes.”

Truly disruptive technologies, so Christensen’s theory goes, start from the bottom up. They offer a cheap substitute, then grab a market and gradually improve until they have become a full competitor to the existing players. At that point, it might be too late for established companies to adopt the innovations.

Tesla is doing the opposite: It is starting at the high end of the market, competing only with luxury cars, and working its way down. The Model X, a family SUV scheduled to sell for $60,000, is due out this year; and the Model 3, which has a target price of $35,000 is scheduled to be showcased next year for 2018 sale.

It makes a big difference. “If Tesla is following a disruptive innovation strategy, theory predicts that it will continue to see no strong competitive response,” Bartman told HBR. “However, because it’s a sustaining innovation, theory predicts that competitors will emerge. Our analysis concludes that a competitive response won’t happen until Tesla expands outside its current niche of people who prefer electric vehicles to gas-powered cars—but if it expands by creating more variety (such as SUVs) and more-affordable vehicles, competition will be fierce.”

This seems like a pretty good assessment. Right now, Tesla is welcoming competitors. Musk even invited Apple to join him in the automobile business last week. There have been persistent rumors of Apple and Tesla joining forces in automobile manufacture, although Apple seems content to stick with personal electronic devices. But if Tesla succeeds in selling a $35,000 electric vehicle, it is certain it will face competition from GM, Nissan, BMW Volkswagen and the entire established industry.

So is there a vehicle out there that would be truly disruptive to the auto industry? In fact, there is. Bateman and Christensen identify it as the “neighborhood electric vehicle” – the NEV – and say there are already signs of it bubbling up from the bottom.

“In 2011, Polaris, the Minnesota-based manufacturer of snowmobiles and all-terrain vehicles, bought Global Electric Motorcars, a small division of Chrysler that makes battery-powered neighborhood electric vehicles,” writes the HBR. “Although NEVs cannot exceed 35 miles per hour and lack many features of cars, they could eventually steal enough market share to disrupt the automobile industry.”

Polaris CEO Scott Wine told HBR that his company has tightened up the braking system and added heaters and stereos in an attempt to upgrade toward regular automobiles. But the modified golf carts remain extraordinarily cheap –$2,000 to $12,000 — and are now being used in retirement communities. Bateman also points out that 200,000 of these vehicles are being sold in China each year. “When we launch our new model, in the not-too-distant future, it will be an opportunity to do exactly what Clay Christensen’s work says,” Wine says. “It’s going to be a significant disruption.”

So will the modified electric golf cart turn out to be the truly disruptive innovation that upends the internal combustion engine? We’ll soon see.

(Photo credit: Polaris.com)

Can energy storage assure Tesla’s survival?

Elon Musk’s bet that he can sell 50,000 versions of the Model 3, the $35,000 version of the Tesla, due out in 2017, still seems like a long shot, given the somewhat limited market for electric cars.

But he might have one more card up his sleeve. The development of solar energy for home use offers an alternative market for his batteries that could be enough to save Tesla from a market collapse.

Musk is unveiling a new home storage unit that will allow homeowners to move their electrical consumption from expensive peak rates to the rock-bottom rates of overnight power. If nothing else, this will create a secondary market for the millions of lithium-ion batteries that Tesla will be cranking out from its $5 billion Gigafactory in Nevada, which is scheduled to be operational in 2017.

Early indications are that the demand for batteries to power the mid-priced roadster might be thinner than anticipated. Musk was counting on big demand from China, and already there are indications that it’s a much tougher market than he realized. As reported here last week, China already has 100 manufacturers turning out 400,000 undersized vehicles a year that can reach 48 miles an hour. They certainly wouldn’t sell in the United States, but for a million Chinese, it’s just what they need to putter around their small villages and cities. China also has 90 million electric scooters on the road and 120 million electric bicycles — an entire electric-vehicle market that doesn’t exist in this country. Making a dent in this market with a $35,000 scaled-down version of a luxury vehicle is not going to be easy, which is why Musk cut his China effort in half only a few weeks ago.

But there’s an out here in the burgeoning market for home electric storage that is taking shape in the United States, particularly in California. The Golden State has established a goal of getting 33 percent of its electricity from renewable resources by 2020, and 50 percent by 2030. Now powering with renewables isn’t just a matter of putting up solar collectors and windmills. You have to store that electricity for a time when it’s needed. Otherwise, most of it is wasted. And that’s where Musk’s plan to power electric vehicles with large complements of relatively small lithium-ion batteries enters in, because such a system also will be ideal for storing electricity in household-sized units.

Without any fanfare, Tesla already has installed such a system in more than 100 homes in California. It also has a deal with Walmart to install it on a commercial scale. “Tesla has been able to install more than 100 projects, really without anyone noticing,” Andrea James, a Dougherty & Co. analyst, told Bloomberg. She also estimated that the home-storage business could add $70 to Tesla’s stock, about one-third of its current value.

The effort already has paid off for Tesla in that it has collected $65 million in state incentives under the advanced storage technology portion of California’s Self-Generation Incentive Program (SGIP), which rewards users for coming up with ways of generating their own power. With household units running anywhere from $2,000 to $10,000, they’re going to need plenty of help from the government.

Tesla is not the only company working on battery storage. Bosch, General Electric and Samsung all have experimental systems going. There are also research projects being conducted at Harvard, MIT and other universities.

In Notrees, Texas, Duke Energy Renewables, with the help of the Department of Energy, has built a project that is using thousands of lead-acid batteries to store the electricity from a large wind farm. The lead-acid batteries are more expensive, however, and require frequent repair. Also, Duke has found that there is not as much of a market for their product as it had anticipated, mainly due to the costs. “There was little interest from customers willing to pay for that,” said Greg Wolf, president of Duke Energy Renewables, according to The New York Times. “That has not evolved as much as some folks, including ourselves, thought.”

But there are other opportunities that could enhance Tesla’s overall business model. One is that when lithium-ion batteries begin to lose their power so that they are no longer capable of driving a car, they still remain strong enough to power a home storage system. That could mean there will be a secondary market for Tesla’s car batteries.

Another dream that has always been in the back of people’s minds is that the electric vehicles themselves could serve as storage for utility power, drawing on cheap nighttime power and then reselling it to utilities during the day. This would involve an elaborate infrastructure, however, and this would mean the cars would not be available for a good part of the day if their stored power was being fed to the grid.

Altogether, however, the storage potential of the batteries means that Tesla will have an alternative means of income in addition to the electric cars. This means the company could diversify enough so that it will not depend entirely on the success of the Model 3. In the long run, this might mean that the company can survive long enough to make the electric vehicle a standard item for the American consumer.

Alternative fuels and vehicles: Good news on all fronts

If we’re going to replace the gasoline in our tanks, we’re going to need help from all kinds of directions. None of the alternatives is likely to do the whole job by itself, but every little bit helps.

That’s why it’s so encouraging that there was good news on all fronts this week, and why each little success gets us closer to having legitimate alternatives to take the place of gasoline.

Here’s a sampling of some of the news:

Batteries. A team at Stanford University announced it had developed a high-performance battery out of aluminum. This is important because aluminum is much cheaper than lithium, the current favorite among battery-makers. Aluminum has been used to make batteries, but the problem has always been keeping the voltage high after repeated charging and recharging. Now the Stanford team believes is has found the answer.

“We have developed a rechargeable aluminum battery that may replace existing storage devices, such as alkaline batteries, which are bad for the environment, and lithium-ion batteries, which occasionally burst into flames,” said Hongjie Dai, professor of chemistry who headed the team. “People have tried different kinds of materials for the cathode. We accidentally discovered that a simple solution is to use graphite, which is basically carbon. In our study, we identified a few types of graphite material that give us very good performance.”

This raises the question of whether Elon Musk can substitute aluminum batteries in his Gigafactory, a work in progress that is set to build lithium batteries for the new Tesla.

Hydrogen. Hydrogen cars are clean, producing only warm water for exhaust. But the problem is getting the hydrogen. The only known methods to date have been electrolysis of water, which is expensive and energy intensive, and “reforming” natural gas, which produces carbon dioxide and makes hydrogen just another fossil fuel. But now a team of scientists at Virginia Tech has come up with a catalyst the can make hydrogen quickly and cheaply from biomass.

“Researchers from Virginia Tech have developed a way to drastically cut the time and money necessary to produce hydrogen fuel,” reports The Christian Science Monitor. “By using discarded corn cobs, stalks, and husks, they have improved on previous methods deemed too inefficient by energy experts. Their research, which was funded in part by Shell, was published today in Proceedings of the National Academy of Sciences.”

Using genetic algorithms, Percival Zhang and Joe Rollin developed an “enzymatic pathway” that speeds up the reduction of hydrogen from biomass. By including two simple plant sugars, glucose and xylose, they were able to increase the rate of hydrogen production while emitting an “extremely low amount” of carbon dioxide.

“Cost effective and productive in volume, this method could breathe new life into the hydrogen car,” says the CSM.

Biofuels. And speaking of enzymes, another team of researchers working for the Department of Energy has come up with a bacterium that efficiently breaks down biomass without pretreatment. The team has been using the system to extract ethanol from switchgrass, a fast-growing weed that has long been a favorite of biofuels enthusiasts. The strategy, called consolidated bioprocessing, uses the Caldicullulosiruptor beseii bacteria to split cellulose and then ferments it into ethanol. The strategy eliminates the very expensive pretreatment that requires heat and more enzymes. Several facilities are now trying to break down cellulose and convert it into ethanol, but this one-stop process would be a huge saving.

EVs. A study at the Stockholm Environment Institute says that electric vehicles may be coming into their own much faster than everyone thought. This is because the price of batteries is coming down faster than anticipated. EV batteries now cost approximately $300 per kilowatt-hour. They weren’t expected to fall much lower than that over the next five years. But the authors Bjorn Nykvist and Mans Nilsson say that recent developments have brought the price down as low as $150 per kilowatt-hour, which could make electric vehicles appealing for a much wider range of customers. Since the batteries normally make up at least half the price of the vehicle, it could reduce costs significantly. Or manufacturers might use the new low price to load up on batteries, increasing the range of the electric vehicle. Either way, the package becomes more attractive.

And that doesn’t even include the possibility that the aluminum battery developed at Stanford could be making batteries more efficient and lowering prices even further.

There’s a tremendous synergy going on in these fields, as researchers pursue numerous pathways in exploring alternative vehicles. One way or another, it means that alternatives to foreign oil are soon going to be making their way into the customer’s field of vision very soon.

PUMP debuts on Netflix, so stream at your leisure

PUMP the Movie is now available on Netflix, giving millions of Americans the chance to watch an important film that shows the patch forward to ending our dependence on oil.

The documentary, produced by Fuel Freedom Foundation and narrated by Jason Bateman, was originally released in theaters last September. In fact, it’s still showing on big screens around the country, as the foundation has worked with partners to host screenings on college campuses and for nonprofits.

(For a full schedule of showings, as well as movie reviews and other content, check out PUMPtheMovie.com.)

But Netflix is a whole new level. The video-on-demand service is now available in 36 percent of U.S. homes, compared with 13.5 percent for Amazon Prime and 6.5 percent for Hulu Plus. Thirty-five million people watch movies and TV shows using Netflix’s streaming service, while another 5 million still get DVDs by mail. (We have DVDs for sale too, in an attractive blue case, on our website).

PUMP charts the century-long story of oil and how it built its monopoly on the U.S. transportation-fuel industry. There are interviews with major energy and auto-industry players like John Hofmeister, former president of Shell Oil Company, and Tesla Motors founder Elon Musk.

Much of the film is dedicated to solutions to our oil addiction: For example, ethanol, which is cheaper than gasoline and burns cleaner, with fewer toxic emissions, can be made from plenty of “feedstocks” besides corn.

Here’s a clip from the film featuring alcohol-fuels expert David Blume, telling us about the possibilities:

Another voice in that snippet belongs to Marc Rauch, editor of the Auto Channel website, who says: “Ethanol is not just any competitor [to gasoline]. It is the better fuel. It has always been the better fuel.”

The point is choice: American drivers deserve more than just one. To learn how we can achieve it, in the cars, trucks and SUVs we drive today, pick up the remote and watch PUMP.

Is Tesla really all that disruptive?

Elon Musk’s dream of revolutionizing the auto industry seemed to lose some of its luster last week as the fledgling electric car company ran into a few roadblocks in getting its new models into consumer hands.

The $35,000 Model X is scheduled to be leaking out to a few early customers late this year. Then full-scale production will begin in 2016. But already there is talk of delays and missed deadlines, so there might be an asterisk attached to those numbers soon.

The ultimate goal is selling 50,000 Model X’s by 2017, which still seems way over the horizon. A lot of those sales were supposed to come from China, and that’s developing into a problem. Musk was in China last week talking things over with Zhao Kuiming, head of Tesla’s China sales division, but Musk has already decided to “reboot.” It appears that Chinese buyers are still spooked by the lack of recharging stations, even though there have been a few grand openings around Beijing. Tesla was hoping to sell between 4,000 and 8,000 models in China in 2015, but only 120 cars were sold in January. Musk has cut the China staff from 600 to 420 and is recalculating just what can be expected from the Middle Kingdom. The tastes of the few Chinese millionaires who could be counted on to purchase the Tesla as a status symbol aren’t going to get him very far.

All this has spooked investors as well. They’ve driven the price of Tesla stock down nearly 20 percent since the start of the year. Once the highest flyer on the market, Tesla peaked at $293 a share last September, but it’s been a long descent ever since. Prices lingered around $180 per share last week. Even then, Tesla is trading at 232 times its expected earnings for 2015. The average stock on the NASDAQ, where it trades, is 21 times earnings. All this has lifted the short interest on Tesla stock to 27 percent of floating shares. The average on the NASDAQ, once again, is only 5 percent.

Nevertheless, all this could turn around quickly. Tesla already has 20,000 pre-orders on the Model X, and there is every reason to think its release could revolutionize the industry, much as Musk says. As it is emerging, the Tesla is going to be a device much more attuned to electronics and Silicon Valley as it is to Detroit and the auto industry. Musk is already introducing over-the-air (OTA) updates of the car’s software in a model, much more like an iPad than a Ford Focus. All those features you see advertised by the major automakers — rearview cameras, automatic emergency braking — will be standard in the Tesla. Musk is already talking about an automatic driving feature that will allow drivers to guide the car hands-free on Interstate highways. Of course, there are lots of state regulations that will have to be satisfied before this feature can go into effect. California, Nevada, Michigan, Florida and Washington, D.C., already have laws allowing driverless vehicles driving, but it’s unclear how Tesla’s system will be judged under these statutes.

Also decided at the state level is the question of whether Tesla can sell directly to customers or must work through established car dealerships. These laws are generally put into effect at the behest of local dealers to prevent the major auto companies from setting up their own shops. But Tesla has run afoul of the law in many states. The company just won a major victory when New Jersey Gov. Chris Christie came down in favor of Tesla. Georgia has also opened its doors to direct sales at five stores. But West Virginia has gone in the opposite direction, banning sales of Tesla altogether. There probably aren’t that many potential Tesla customers in West Virginia anyway.

Perhaps the unkindest cut came from Wall Street Journal columnist Holman Jenkins, who wrote a piece titled “Tesla: Just Another Car Company.” If you wanted to insult Elon Musk, you could hardly do better. “Elon Musk has proved that a market exists for electric cars, despite their many inconveniences, especially if they come wrapped in taxpayer subsidies,” Jenkins wrote. “But he hasn’t proved he can make a profit.”

Jenkins sees the Tesla operating in a niche market, in which a small percentage of customers are willing to ignore the problems in order to be “green.” Once this niche is filled, however, the market will thin out quickly. “Uber is disruptive,” he writes. “Tesla isn’t. Tesla is disruptive mostly of a driver’s confidence that he’s going to reach his destination without needing a tow.”

Yet this perspective is probably too negative of Tesla, and electric cars in general. There are people whose driving needs it fits perfectly. “I own a Tesla. It is beyond spectacular,” wrote one of the commenters to Jenkins’ piece. “The car has Di Minimus maintenance as there is nothing to break.” “That is why I bought a Tesla,” says another. “At 270 miles to start with, range anxiety is not my problem, yet. I rarely drive over 100 miles in any given day, and if I needed to, my Chevy Tahoe is still in the garage.” I have friends in Baltimore who bought a Nissan Leaf as a second car to tool around the city and love it.

So Tesla may just be filling a niche, but it is still a sizable one. Infrastructures can change a lot faster than we anticipate, especially where there is a demand for it. Tesla’s stock may be overvalued and due for another nosedive. But the company is still making big changes in the way we power our cars.

Toyota, California go for hydrogen

California, the home of Elon Musk and his Tesla venture, is about to embark on another technological initiative as well — a car driven entirely by hydrogen.

In late February Toyota began producing and selling the Mirai (the name means “future”), a hydrogen-powered vehicle that will be available in Tokyo this year and go on sale in the U.S. in December. Always conscious of its history and ready to make amends, Toyota made the announcement five years to the day after it testified before Congress about a sudden accelerator problem that caused the company a great deal of embarrassment and led to a recall. “Every Feb. 24, we at Toyota take the opportunity to reflect on the recall crisis, doing everything we can to ensure its lessons do not fade from memory,” company CEO Akio Toyoda said. “For us, that date marks a new start.”

To say that Toyota is being cautious in entering the hydrogen car market would be an understatement. The Mirai won’t even be mass-produced but is being hand-crafted by Japanese workers who are turning out three cars per day. The model will sell for $57,000 in Tokyo and is not designed to take off like a rocket. The company only plans to sell 2,000 individual models in Japan this year. “The Mirai program, especially once all the research and development costs are factored in, is clearly unprofitable at this point, and even selling a few thousand units at $57,500 each is not going to turn the tide,” the Motley Fool’s Alexander MacLennan wrote. “But the Mirai is not about short-term profits; it’s about long-term market advantage through brand acceptance and technological development resulting in better vehicles.” Even Japanese Prime Minister Shinzo Abe got into the act, saying we are headed into a “hydrogen era.”

Right now Toyota’s main rival as an alternative to gasoline will be Elon Musk’s all-electric Tesla Model 3. Musk is not taking the challenge lightly. He has called the hydrogen car “an extremely silly idea” and mocked its fuel cells as “fool cells.”

But Musk might have reason to worry. The Mirai will offer drivers a range of 300 miles and take only three minutes to fill its tank. Tesla’s Model 3, due out in 2017, will offer only a 265-mile range and consume 40 minutes to offer an 80 percent recharge of its batteries. (Ideally, EVs should be recharged overnight.) Of course, the big test will be the availability of refueling stations, and here electric vehicles have a big head start. Tesla already has 393 Supercharging stations nationwide and is building them out as fast as possible.

There are only a dozen hydrogen stations now, all of them in California, as a result of Gov. Arnold Schwarzenegger’s “hydrogen highway” initiative of 2004. But California has seized the gauntlet again and is promising to spend another $20 million in building out the Hydrogen Highway with 28 new stations in the next few years. The Mirai will be initially aimed exclusively at California and its requirements for zero-pollution vehicles, then try to expand to the East Coast as well. Hyundai’s hydrogen-powered Tucson is already being sold in California.

Where Toyota and Tesla have found agreement is in opening up their patents to rivals to try to promote the technology. Musk famously made his EV patents available last year, and now Toyota is doing the same with its hydrogen research. The obvious aim is to get other manufacturers involved in order to increase the demand for fuel outlets. “We think this is a different way to look at the market and collaborate and hopefully with this get a lot more people coming into the game,” Nihar Patel, Toyota’s vice president of North American business strategy, told Forbes.

Still, the switch to hydrogen vehicles has some challenges ahead. Musk’s main criticism — echoed by many others — is that hydrogen fuel is too difficult to handle and transport. Hydrogen is, after all, the smallest molecule and leaks through everything. One of its biggest critics is Joseph Romm, who worked in the Clinton administration promoting the technology and finally became so disillusioned that he wrote a book critical of the technology called The Hype About Hydrogen. Romm is now a senior fellow at the left-leaning Center for American Progress and heads the Climate Progress blog. Another problem with hydrogen, of course, is that it is not available as a free resource but must be manufactured from other resources, principally natural gas. This, of course, requires costs and energy.

Still, hydrogen vehicles have the advantage of producing no air pollution (its exhaust is water vapor) and will be able to reduce the release of carbon into the atmosphere, since the CO2 is easily captured in the reforming process. Overall, hydrogen is likely to be a big plus for the environment.

It also offers car buyers what may be the most important factor in reducing our foreign oil dependence — free choice. It hardly matters if electric vehicles prove to be more popular than hydrogen vehicles or vice versa. The important thing is that they will both be available as alternatives to gasoline-powered cars. They could also open up the door to other alternative fuels: compressed natural gas, E85, and the dark horse of them all, methanol manufactured from natural gas. All these alternatives cannot help but make a dent in our current dependence on foreign oil.

Tesla hits some speed bumps

Tesla’s stock was down around $200 again after its fourth-quarter report disclosed that neither its sales nor profits had met analysts’ expectations. At the same time, the company went into what one analyst called its “insane mode” as founder Elon Musk predicted that by 2025 the company’s market capitalization would reach $700 billion, matching the current value of Apple.

Analysts were scratching their heads as Musk’s vision seemed utterly at odds with the difficulties that are starting to pile up with Tesla’s ability to meet current goals. The company’s 2014 revenues rose to $3.2 billion, up from $2 billion the year before. However, expenses continued to mount, and losses widened from $74 million to $294 million last year. For the fourth quarter, Tesla delivered only 9,834 of the 12,000 cars it had predicted. Musk blamed the winter weather and customers’ holiday travel for the shortfall. A bigger disappointment has been sales in China, where Tesla sold only 120 cars in January. Musk has supposedly messed up by insisting that the cars be sold only by dealers, whereas the Chinese want anyone to sell them. He also says that concerns about home chargers and the lack of public charging stations have made it extremely difficult to crack China’s notoriously tough market. Musk now says that the company is now not counting on any sales in China to help it reach its goals.

But those goals are wildly ambitious. Musk told analysts that Tesla is anticipating a 30 percent increase in revenues per year for the next 10 years, which is the pace needed to put Tesla’s market value on par with Apple’s. “That would imply sales volume of well over 5 million vehicles per year,” Edward Niedermeyer wrote in Bloomberg View. “That would have Tesla surpassing the 2014 sales of such familiar names as Nissan, Honda and Fiat-Chrysler – at highly significant profit margins – within a decade.” Needless to say, Niedermeyer and many others find this prospect unlikely.

But Tesla isn’t standing still. It announced last week that it will produce a battery for home electricity storage. This will fold nicely with its partnership with SunCity, run by Musk’s cousin. People who install solar panels on their roofs will welcome a battery system that allows them to store electricity for times when the sun doesn’t shine. Just as solar seems to function best when distributed across a wide variety of users, so energy storage may ultimately work best when it is distributed over a wide variety of users.

Whether Tesla will be able to survive all this, however, is still an open question. The main threat to Musk’s vision seems to be coming now, not from predictable delays and bumps in the road, but from healthy competition from experienced automakers. Chevrolet has announced the Bolt, a successor to the Volt, which will be swinging right in Tesla’s wheelhouse – the $30,000 market for electric vehicles that can travel 200 miles or more on one charge.

General Motors has moved the introduction date up to 2017 (the same as the Tesla 3) and seems deadly serious about entering the EV market. “The Bolt EV concept is a game-changing electric vehicle designed for attainability, not exclusivity,” General Motors CEO Mary Barra said in a statement. “Chevrolet believes electrification is a pillar of future transportation and needs to be affordable for a wider segment of customers.”

Besides the Bolt, GM will have an improved version of the Volt, plus the $75,000 Cadillac ELR, a plug-in model. Daniel Miller of Motley Fool isn’t terribly impressed with any of these efforts, noting that the ELR has already had little success competing with Tesla’s Model S in the luxury-car category. “Because of that premium, first-mover brand image that Tesla created with its Model S, it’s hard to imagine how the Bolt will steal much of Tesla’s Gen 3 market in 2017, even if it is price-competitive,” Miller writes.

But if Tesla really has something to worry about, it’s the rumors that Apple, its Silicon Valley rival and the world’s largest company, is preparing a secret plan to enter the car market as well. Just this week it was revealed that Apple has a secret project employing 1,000 people to come up with some kind of concept car that will rival the Tesla Model 3.

“Apple has batted around the idea of developing a car for years,” reported Adam Satariano and Tim Higgins of Bloomberg Business. “Phil Schiller, Apple’s senior vice president of marketing, said in 2012 court testimony that executives discussed building a car even before it released the iPhone in 2007. Mickey Drexler, an Apple board member and head of J Crew Group Inc., also said in 2012 that Apple co-founder Steve Jobs had wanted to build a car.”

Apple has worked on batteries for the iPhone and iPad and also has a supply chain that could easily be applied to vehicles. “The mapping system it debuted in 2012 can be used for navigation. Last year, Apple also introduced CarPlay, a software system that integrates iTunes, mapping, messaging and other applications for use by automakers,” Satariano and Higgins wrote. Of course, that’s a long way from turning out thousands of vehicles, but Apple has invaded other businesses before. It basically knew nothing about the music business when it started on iTunes, and had no experience with telephones when it invented the smartphone.

In any case, even if Tesla finds itself in competition with much larger established companies – something Musk predicted at the start – it is revolutionizing the field of automobiles by making the electric car seem practical. Although Musk’s dream may prove to be overblown, he has certainly advanced the search for alternatives to the internal combustion engine.

Alternative and renewable fuels: There is life after cheap gas!

usatoday_gaspricesSome environmentalists believe that if you invest in and develop alternative replacement fuels (e.g., ethanol, methanol, natural gas, etc.) innovation and investment with respect to the development of fuel from renewables will diminish significantly. They believe it will take much longer to secure a sustainable environment for America.

Some of my best friends are environmentalists. Most times, I share their views. I clearly share their views about the negative impact of gasoline on the environment and GHG emissions.

I am proud of my environmental credentials and my best friends. But fair is fair — there is historical and current evidence that environmental critics are often using hyperbole and exaggeration inimical to the public interest. At this juncture in the nation’s history, the development of a comprehensive strategy linking increased use of alternative replacement fuels to the development and increased use of renewables is feasible and of critical importance to the quality of the environment, the incomes of the consumer, the economy of the nation, and reduced dependence on imported oil.

There you go again say the critics. Where’s the beef? And is it kosher?

Gasoline prices are at their lowest in years. Today’s prices convert gasoline — based on prices six months ago, a year ago, two years ago — into, in effect, what many call a new product. But is it akin to the results of a disruptive technology? Gas at $3 to near $5 a gallon is different, particularly for those who live at the margin in society. Yet, while there are anecdotes suggesting that low gas prices have muted incentives and desire for alternative fuels, the phenomena will likely be temporary. Evidence indicates that new ethanol producers (e.g., corn growers who have begun to blend their products or ethanol producers who sell directly to retailers) have entered the market, hoping to keep ethanol costs visibly below gasoline. Other blenders appear to be using a new concoction of gasoline — assumedly free of chemical supplements and cheaper than conventional gasoline — to lower the cost of ethanol blends like E85.

Perhaps as important, apparently many ethanol producers, blenders and suppliers view the decline in gas prices as temporary. Getting used to low prices at the gas pump, some surmise, will drive the popularity of alternative replacement fuels as soon as gasoline, as is likely, begins the return to higher prices. Smart investors (who have some staying power), using a version of Pascal’s religious bet, will consider sticking with replacement fuels and will push to open up local, gas-only markets. The odds seem reasonable.

Now amidst the falling price of gasoline, General Motors did something many experts would not have predicted recently. Despite gas being at under $2 in many areas of the nation and still continuing to decrease, GM, with a flourish, announced plans, according to EPIC (Energy Policy Information Agency), to “release its first mass-market battery electric vehicle. The Chevy Bolt…will have a reported 200 mile range and a purchase price that is over $10,000 below the current asking price of the Volt.It will be about $30,000 after federal EV tax incentives. Historically, although they were often startups, the recent behavior of General Motor concerning electric vehicles was reflected in the early pharmaceutical industry, in the medical device industry, and yes, even in the automobile industry etc.

GM’s Bolt is the company’s biggest bet on electric innovation to date. To get to the Bolt, GM researched Tesla and made a $240 million investment in one of its transmissions plan.

Maybe not as media visible as GM’s announcement, Blume Distillation LLC just doubled its Series B capitalization with a million-dollar capital infusion from a clean tech seed and venture capital fund. Tom Harvey, its vice president, indicated Blume’s Distillation system can be flexibly designed and sized to feedstock availability, anywhere from 250,000 gallons per year to 5 MMgy. According to Harvey, the system is focused on carbohydrate and sugar waste streams from bottling plants, food processors and organic streams from landfill operations, as well as purpose-grown crops.

The relatively rapid fall in gas prices does not mean the end of efforts to increase use of alternative replacement fuels or renewables. Price declines are not to be confused with disruptive technology. Despite perceptions, no real changes in product occurred. Gas is still basically gas. The change in prices relates to the increased production capacity generated by fracking, falling global and U.S. demand, the increasing value of the dollar, the desire of the Saudis to secure increased market share and the assumed unwillingness of U.S. producers to give up market share.

Investment and innovation will continue with respect to alcohol-based alternative replacement and renewable fuels. Increasing research in and development of both should be part of an energetic public and private sector’s response to the need for a new coordinated fuel strategy. Making them compete in a win-lose situation is unnecessary. Indeed, the recent expanded realization by environmentalists critical of alternative replacement fuels that the choices are not “either/or” but are “when/how much/by whom,” suggesting the creation of a broad coalition of environmental, business and public sector leaders concerned with improving the environment, America’s security and the economy. The new coalition would be buttressed by the fact that Americans, now getting used to low gas prices, will, when prices rise (as they will), look at cheaper alternative replacement fuels more favorably than in the past, and may provide increasing political support for an even playing field in the marketplace and within Congress. It would also be buttressed by the fact that increasing numbers of Americans understand that waiting for renewable fuels able to meet broad market appeal and an array of household incomes could be a long wait and could negatively affect national objectives concerning the health and well-being of all Americans. Even if renewable fuels significantly expand their market penetration, their impact will be marginal, in light of the numbers of older internal combustion cars now in existence. Let’s move beyond a win-lose “muddling through” set of inconsistent policies and behavior concerning alternative replacement fuels and renewables and develop an overall coordinated approach linking the two. Isaiah was not an environmentalist, a businessman nor an academic. But his admonition to us all to come and reason together stands tall today.