At the conference CodeCom 2021 Elon Musk was interviewed. Towards the end he was asked whether he thought the electricity supply could be an obstacle for the further growth of electromobility. The interview is time stamped and the question and the reply given by Musk is approximately one hour and one minute into the video. (1:01:00)
The reply given was that electromobility will require power generation to double and that investment will be needed in all parts of power grids. He also mentioned that there would have to be an increase in local power generation from solar.
The Implications of Musk’s Statement
The expansion of electromobility down the road will require dramatic investment in new power generation and distribution, expansions that to a large extent have not even begun to be discussed in most countries. This means that without such investment in expansion the further growth of electromobility will be at risk. If there are shortages of power that make it difficult for owners of electric cars to charge the amount of electricity they need, the growth of electromobility may suffer and fewer people may want to buy electric cars.
In the United States the Security and Exchange Commission that oversees stock-markets require companies to disclose important information pertaining to the future business opportunities of a company. The information about the dependence by Tesla and its competitors on large-scale expansion of power production and infrastructure that has not yet started to be discussed or planned, would probably fall into this category. It is information that Musk apparently has access to and has thought of, and that he has now shared with the public, albeit at the very end of a one-hour interview. Maybe the question was impromptu, coming from a member of the audience working at a utilities company or industry organization. Maybe the person who asked had thought about these things himself, or it may have been agreed upon beforehand that the person who asked the question should ask it at this point, in order for Musk to tick off the need to disclose this information in a video where he had this on record.
The statement has vast implications, not only for Tesla. In case utilities do not make the necessary investment in the expansion of power production and grids the development of electromobility may be disrupted.
The First Signs of a Future Shortage
This is not likely to happen in the way we may envision, so that suddenly the latest person to buy an electric car will not be able to charge it. Instead, people may notice the signs of future shortages by increases in demand for electricity that cause prices to spike, in the way they have been doing in Southern Sweden in the past few months, but for other reasons than the charging of cars.
In a future situation that is likely to appear in different countries at different times, if the prediction of Elon Musk turns out to be correct, some utilities are likely to be unable to grant new power subscriptions or increase existing subscriptions to install fast chargers and large numbers of normal speed chargers.
As it in most countries take several years to receive permission to build new power generation or make significant expansion of grids it is too late to start expansion activities when customers start to notice capacity constraints. When this happens expansion projects need to be well under way.
The Main Issue
One of the issues with the expansion is that it is not one national organization in every country that can be held responsible for expanding power production and grid capacity. Thousands of organizations and households need to be involved in the large-scale expansion of electromobility.
In the case of the Apollo Program John F Kennedy made the decision to send a man to the moon and bring him safely back to earth, before the end of the decade. He then made it NASA’s business to manage the entire program and procure the services of different suppliers and partners to make it happen.
In the case of the transformation to e-mobility a government organization in each country can be assigned the responsibility of coordinating the transformation. But to build the necessary charging infrastructure, expand power production through investment in nuclear plants, wind turbines, solar panels, and other types of power generation, a large number of companies, utilities, municipalities, and households will have to become involved. There is not even one organisation in each country at present whom Elon Musk could contact to discuss all the activities that need to be performed to pave the way for the future expansion of electromobility. I have for 17 years tried to identify such organizations in countries to start a dialogue but failed to find any. If Elon Musk has tried the same he most likely has come to the same conclusion.
The same is true for the expansion of power grids in all local regions in all countries that want to embrace electromobility. In addition to power production and grids, charging infrastructure will also need to expand, and the business models for running these need to be developed. All of these developments are at very early stages and in most cases they have not even started.
The Role of Governments and Government Agencies
Governments and government agencies can create incentives and impose regulations that entice or force companies, municipalities, utilities, and households to make certain investments. They can map the need of activities to expand charging infrastructure, grids, and identify which players that will be responsible for each. They can also start development and change programmes and assign tasks to regional organizations to finance activities, monitor progress, or nudge players to start taking certain measures, but they can mainly take the role of coordinator or programme manager.
The Role of Companies
What Musk is talking about is the progress toward a future situation when all cars, and a large number of buses and trucks will be fuelled by electricity. He is not talking about the present situation or the situation one or two years onward, when the constraints of power systems have not started to become noticed.
Some necessary activities, such as developing vehicles and expanding production, are taken care of by the market forces without a problem. For companies developing electric vehicles becomes necessary you’re your competitors are doing this.
Expanding charging infrastructure, power production, and power grids is more complex. Expansion activities in some areas need to be started a decade or more before the need arises and in the development of charging infrastructure on a local basis, a large number of different companies, the municipality, the grid owner, parking companies, real estate companies, and shop owners need to be involved in the planning and execution. One aspect is that someone needs to coordinate activities locally and make sure that dialogues are started, and installations begin. Another aspect is that companies cannot be forced to invest as long as the expansion is highly uncertain. To reduce uncertainty, plans need to be made and investment programmes need to start. Just like they were for Apollo in 1962, only that a lot of different organizations need to be involved.
What Did Elon Musk Really Say?
Did Elon Musk really say that the future growth of Tesla and of other manufacturers of electric cars and vehicles is uncertain? Did he say that the growth of Tesla beyond a certain point does not primarily depend on the quality of the cars or the abilities of Tesla’s management?
I believe that what Musk really said is that the future of the company and of the growth of sales of electric cars, buses, and trucks in general, will depend on the activities of a large number of public organizations and companies over whom he or anyone else in the automotive industry has little or no control.
Elon Musk probably said that the future of electric car manufacturers and other suppliers of equipment for e-mobility depends on a large number of different factors from government decisions, investment decisions by utilities and operators of charging infrastructure, and tens of thousands of decisions by other organizations.
He may even have implied that there is no way of knowing when or if some of the activities that are needed in order to drive the expansion will be taken care of at all. After all, the government and other organizations and companies in one country may take on their roles, while the government and other players in another country may not and the development may slow down or come to a halt there.
He may even have said that it is difficult to put a value on Tesla, because of the difficulties to forecast the future of electromobility. Did he say that it could be wise for him to diversify his ownership by buying into a social media company or some other firm with a more controllable and possibly more predictable future and reduce his ownership of Tesla? Is the purchase of Twitter only a first step towards a gradual reduction of his ownership in Tesla?
Musk has a golden opportunity now, when Tesla is still very highly valued, to buy stakes in large and promising companies in other industries. This opportunity will disappear if Tesla becomes valued at a more modest level.
Most likely, Musk still believes that electromobility will continue to make progress for a number of years. However, he may also think, based on his answer at the conference, that it may be difficult for the company to continuously deliver on the very large growth expectations that are built into the market valuation. The activities that will have to take place in order to expand power production and grid capacity to facilitate a complete transformation to electromobility are so complex in terms of their organization and financing that it is likely that they will not be completed in a structured way ahead of the need.
Based on the present author’s experience from discussing the future of electromobility with people who are actively promoting various aspects of the transformation, Musk may have concluded that the knowledge about the requirements of electromobility is not widespread enough for a continuous, rapid, conversion to take place.
What Elon Musk Most Certainly Did Not Say
It seems relatively clear that the message from Musk was not that the development of electromobility will be automatic and will go without problems in all countries. In the best of worlds, it could do this in some countries, but that the necessary players in all countries line up and make exactly the right decisions at the appropriate point in time does not seem probable.
Regardless of what Elon Musk meant to say it is my conclusion that the structured and timely implementation of electromobility will require from governments that they take on the role of managing the overall programme to make sure that all necessary activities get done.