Are Tesla and Texas a Perfect Match? It’s Questionable.

While its C.E.O., Elon Musk, and the state’s conservative lawmakers share libertarian sensibilities, they differ greatly on climate change and renewable energy.

Advertisement

Continue reading the main story

Supported by

Continue reading the main story

Tesla’s move from Silicon Valley to Texas makes sense in many ways: The company’s chief executive, Elon Musk, and the conservative lawmakers who run the state share a libertarian philosophy, favoring few regulations and low taxes. Texas also has room for a company with grand ambitions to grow.

“There’s a limit to how big you can scale in the Bay Area,” Mr. Musk said Thursday at Tesla’s annual meeting hosted at new factory near the Texas capital. “Here in Austin, our factory’s like five minutes from the airport, 15 minutes from downtown.”

But Texas may not be the natural choice that Mr. Musk makes it out to be.

Tesla’s stated mission is to “accelerate the world’s transition to sustainable energy,” and its customers include many people who want sporty cars that don’t spew greenhouse gases from their tailpipes. Texas, however, is run by conservatives who are skeptical of or oppose effort to address climate change. They are also fiercely protective of the state’s large oil and gas industry.

And, despite the state’s business-friendly reputation, Tesla can’t sell vehicles directly to customers there because of a law that protects car dealerships, which Tesla does not use.

In February, a rare winter storm caused the Texas electric grid to collapse, leaving millions of people without electricity and heat for days. Soon after, the state’s leaders sought — falsely, according to many energy experts — to blame the blackout on renewable energy, a growing business for Tesla.

“This shows how the Green New Deal would be a deadly deal for the United States of America,” Gov. Greg Abbott said of the blackout on Fox News. “It just shows that fossil fuel is necessary for the state of Texas as well as other states to make sure we will be able to heat our homes in the wintertimes and cool our homes in the summertimes.”

Mr. Musk, a Texas resident since last year, seemed to offer a very different take on Thursday, suggesting that renewable energy could in fact protect people from power outages.

“I was actually in Austin for that snowstorm in a house with no electricity, no lights, no power, no heating, no internet,” he said. “This went on for several days. However, if we had the solar plus Powerwall, we would have had lights and electricity.”

Tesla is a leading maker of solar panels and batteries — the company calls one of its products Powerwall — used by homeowners and businesses to store renewable energy for use when the sun has gone down, electricity rates are higher or during blackouts. The company reported $1.3 billion in revenue from the sale of solar panels and batteries in the first six months of the year.

Mr. Musk’s announcement that Tesla would be moving its headquarters, currently in Palo Alto, Calif., came with few details. It is not clear, for example, how many workers would move to Austin. It’s also unknown whether the company would maintain a research and development operation in California in addition to its factory in Fremont, which is a short drive from its headquarters and which it said it would expand. The company has around 750 employees in Palo Alto and about 12,500 in total in the San Francisco Bay Area, according to the Silicon Valley Institute for Regional Studies.

After the blackout, in which dozens of people died of hypothermia, smoke inhalation and other causes, Mr. Abbott doubled down on use of fossil fuels.

In a letter to state regulators in July, the governor directed the Public Utility Commission to incentivize the state’s energy market “to foster development and maintenance of adequate and reliable sources of power, like natural gas, coal and nuclear power.”

Mr. Abbott also ordered an accelerated development of transmission projects to increase connections among natural gas, coal and nuclear plants. Texas operates its own electric grid, which is managed by the Electric Reliability Council of Texas, in part to avoid federal oversight. Many energy experts have said that arrangement limited the state’s ability to import power from elsewhere in February.

Image

A Tesla factory under construction in Austin, Texas, in September.Credit…Joe White/Reuters

The governor also ordered regulators to charge suppliers of wind and solar energy “reliability” fees because, given the natural variability of the wind and the sun, suppliers could not guarantee that they would be able to provide power when it was needed.

Mr. Abbott’s letter made no mention of battery storage.

Texas has no clean energy mandates, though it has become one of the nation’s leaders in use of solar and wind power — driven largely by the low cost of renewable energy. The state produces more wind energy than any other.

Tesla has also struggled for years to find a way to sell its cars directly to Texans.

As in some other states, Texas has long had laws to protect car dealers by barring automakers, including Tesla, from selling directly to consumers. California, the company’s biggest market by far, has long allowed the company to sell cars directly to buyers.

Tesla has showrooms around Texas, but employees are not even allowed to discuss prices with prospective buyers and the showrooms cannot accept or process orders. Texans can buy Teslas online and pick the vehicles up at its service centers.

Once the Austin factory starts producing vehicles, including a new pickup truck Tesla calls Cybertruck, those vehicles will have to leave the state before they can be delivered to customers in Texas.

Tesla has lobbied for years to change the law but has made little headway, in large part because car dealers have tremendous political influence in Texas.

State lawmakers have proposed changing that law, but the efforts have gone nowhere, including during the legislative session that concluded this year. Perhaps once Tesla has moved to Austin and started producing cars at its factory with thousands of employees, Mr. Musk might have enough political clout to get the Legislature to act. Texas lawmakers meet only every two years, however, so it would most likely take at least until 2023 for the company’s customers to receive a car directly from its factory there.

Michael Webber, professor of mechanical engineering at the University of Texas at Austin, said Mr. Musk’s decision to move to Texas might have been influenced in part by the ability to pressure the state to change its law.

“The Texas car market is the second largest car market in America after California so if you are selling cars it kind of makes sense to get closer to your customers,” Mr. Webber said. “The Texas car market is particularly difficult outside of cities because of the legislative barriers.”

Susan C. Beachy contributed research.

Leave a Reply