Monthly Archives: March 2016

Autonomy Is Coming Sooner Than Anyone Expects

So, despite missing its Q2 earnings and other targets, as related in a letter released late last week (misses that might have toppled a lesser stock), Tesla’s stock price barely wavered, and in fact seems to have risen upon the bad news. Some analysts have suggested that Tesla stock now trades solely on the success (or failure) of the Model 3. Tesla claims to “have completed the design phase of Model 3 and released Model 3 for tooling, production planning and validation.”

Here are the quarterly details.

  • Tesla had a larger-than-expected second-quarter loss of $1.06 per share — while the Street looked for a net loss of 59 cents a share
  • Non-GAAP sales were $1.56 billion, up from last year’s Q2 revenue of $1.2 billion, but below analyst expectations of $1.63 billion
  • Automotive gross margin expanded, but missed consensus estimates
  • Tesla delivered 14,402 cars (9,764 units of Model S and 4,638 units of Model X) in Q2 and looks to “support 50,000 deliveries” during the second half of 2016
  • According to the letter, “We ended up with $3.25 billion on the balance sheet at the end of the quarter. […] On December 31, 2015, we had $1.2 billion. We raised $1.7 billion in our secondary offering and we collected on our Model 3 reservations.”

Stuff Tesla CEO Elon Musk says

One, make that two, priorities: “So, the focus really is on Model 3, followed by full autonomy — well, it’s our two priorities.”

Ballistic stationary storage: Musk said there are heavy engineering and production constraints, adding, “We’ve got some next-generation technology and we’re going to split off that production line. So it’s going to be heavily concentrated in Q4 and probably even [more] heavily in November and December. But I think it’s going to be really exciting when people see it. So, that’s why I expect kind of exponential growth from there. I think it’s really going to go ballistic.”

He added, “What I’m highly confident of is that the next generation of stationary storage is head and shoulders above anything else that I’ve even heard announced as future plans from other companies.”

Things that are hard: Production, according to Musk:

  • “We’ve just got to scale up production, and production is a hard thing. It’s [really] hard, particularly when it’s new technology. If it’s some standard technology that’s been made for a long time, it’s fine. If it’s cutting-edge technology, it’s really hard to scale up production, because you’ve got to design the machine that makes the machine, not just the machine itself.”
  • “Basically, we were in production hell for the first six months of this year. Man, it was hell. And then we just managed to sort of climb out of hell partway through June. And now the production line is humming and our suppliers mostly have their shit together. There’s a few that don’t — one I’m going to be visiting on Saturday personally to figure out what the hell’s going on there. But we’ll solve it. But the thing that’s crazy-hard about cars is that there’s several thousand unique items, and you move as fast as the slowest item in the whole car.”

Things that are nutty: “It’s important to bear in mind…as a manufacturing company, our percentage growth, I think it’s unprecedented in the modern era. It’s really nutty. I mean, in 2010, we were making 600 cars a year and Lotus was doing the body and chassis. Five years later, we were making 50,000. And it was a much more sophisticated car with Model X, and we were doing the whole car without any partner.”

“So it’s just real important to parse things out and to understand what the real health of the business is. Right now, I mean in a nutshell, we’re shipping $10 billion a year of product on an annualized basis at somewhere around 23 percent to 25 percent gross margin.”

New models: “I think there’s going be some pretty exciting unveils for the Tesla Semi and Tesla Minibus (or bus) — we don’t have a name for it yet.”

Alien dreadnought: “The Model 3 — the internal name for designing the machine makes the machine is…’the alien dreadnought.’ At the point at which the factory looks like an alien dreadnought, then you know you’ve won. It’s like, what the hell is that? So we’ve got alien dreadnought version 0.5, [which] will be Model 3. It will take us another year to get to version 1 and probably a major version every two years thereafter. By version 3, it won’t look like anything else. It might look like a giant chip pick-and-place machine or a super-high-speed bottling or canning plant, and you really can’t have people in the production line itself. Otherwise, you automatically drop to people speed. There’s still a lot of people at the factory, but what they’re doing is maintaining the machines, upgrading them, dealing with anomalies. But in the production process itself, there essentially would be no people. With version 1, not version 0.5. But I don’t want people to think, ‘Oh, Tesla’s going to have a factory without people.’ It’s going be a huge number of people, but they will be maintaining machines and upgrading the machines and dealing with anomalies. And the output per person will be extraordinarily high.”

New Regenerative Energy Technology

In the race to develop driverless cars, several automakers and technology companies are already testing vehicles that pilot themselves on public roads. And others have outlined plans to expand their development fleets over the next few years.

But few have gone so far as to give a definitive date for the commercial debut of these cars of the future.

Now Ford Motor has done just that.

At a news conference on Tuesday at the company’s research center in Palo Alto, Calif., Mark Fields, Ford’s chief executive, said the company planned to mass produce driverless cars and have them in commercial operation in a ride-hailing service by 2021.

Eliminating $4 billion of petroleum subsidies in the U.S. would have only a minor affect on oil production and demand and boost the country’s influence in advocating global climate change action, according to a report for the Council on Foreign Relations.

Withdrawing oil-drilling subsidies could cut domestic production by 5 percent by 2030, which could increase international oil prices by just 1 percent, Gilbert Metcalf, a professor of economics at Tufts University, said in the report. Local natural-gas prices could rise as much as 10 percent, while both production and consumption would probably fall as much as 4 percent, according to the report.

The Guardian: Why Aren’t Ships Using Wind Power to Cut Their Climate Footprint?

Shipping brings us 90% of everything we buy and consume, yet most of us remain blind to both its role in our lives and its contribution to global climate emissions: currently around 3%. The industry has no targets for reducing emissions; the climate talks in Paris last year were skillfully negotiated with warnings that a cap on emissions for shipping would be a cap on global trade and growth.

On current projections, the sector could be contributing upwards of 6% of global greenhouse gas emissions by 2050.

Although the U.N. agency that regulates shipping puts out glowing press releases, its only two policies so far are achieving little. There is an agreement for ships to record and report data on fuel consumption, but not until 2018 at the earliest, and rules to ensure new ships being built are more efficient.

Energy Storage Would Be Needed

A new study from the National Renewable Energy Laboratory attempts to quantify the answer. The authors model several scenarios in which the California grid generates 50 percent of its power from solar by 2030. To do so will require some pretty major changes, including more flexible baseload generation, as well as more deployment of electric vehicles, exports to other states and demand response.

Those can only go so far, though. To meet the 50 percent photovoltaic threshold economically will require energy storage. The state already has 3,100 megawatts of pumped storage, with 1,325 megawatts of additional storage set to be deployed by 2020, per the state mandate. Under the most optimistic flexible grid scenario and with PV prices falling rapidly to 3 cents per kilowatt-hour, California will need another 15 gigawatts of storage by 2030.

That’s more than 11 times the amount mandated currently in California, and 66 times the total megawatts deployed in the U.S. last year. And any delays in the price declines of solar, or the rollout of EVs, or the flexibility of conventional power plants, will raise the bar on the amount of storage required.

That sounds daunting, admitted NREL Principal Energy Analyst Paul Denholm, who co-authored the research with Robert Margolis.

But the challenge becomes more attainable if you frame it as getting storage to a price point where it can take the place of peaker plants, the most expensive form of thermal generation. California had 22 gigawatts of fossil-fueled peakers as of 2014, including 14 gigawatts that were older than 25 years and will eventually need to retire.

“The way to think about it is not necessarily to compare it to existing storage, but compare it to existing peaking capacity, because ultimately that’s what storage is going to have to be replacing,” Denholm said.

Whereas peakers only operate for the tiny fraction of the year when demand surges, longer-duration energy storage can fulfill that role and perform other services the rest of the year. Top candidates for those other services are avoiding new distribution and transmission costs and reducing costs from thermal plant starts and stops, by charging from those plants when low demand would otherwise require them to turn off, Denholm said.

Why this target?

The study’s benchmark of 50 percent PV by 2030 doesn’t come from California’s existing policy, which calls for all types of renewables to add up to 50 percent of generation by that year.

The choice of target for this study came out of the unexpected success of solar manufacturers relative to the Department of Energy’s SunShot goal, which called for reducing solar prices to 6 cents per kilowatt-hour by 2020. That goal now seems readily attainable, Denholm said, which led him to wonder what further price reductions could mean for PV penetration into the grid. Five cents per kilowatt-hour is “totally doable” for California by 2030, he added.

It’s worth noting, then, that this study isn’t optimizing all possible low-carbon grid options and concluding that 50 percent solar is the best way to go; it’s just saying that if California wants really high PV penetration, here’s how much storage it will need to achieve that.

Why The Hybrid Car Motor in Order to Avoid Procuring Rare Earth Metals From China

The quest to find an alternative to heavy rare-earth elements in magnet manufacturing came after a 2010 dispute, during which China temporarily banned exports of rare-earth minerals. Even before that, however, Honda had been working to reduce the use of the materials in its manufacturing, as China began cutting back export quotas starting in 2006.

The motor is not completely without rare-earth elements. It still uses the light rare-earth element neodymium. But neodymium can be sourced from countries other than just China.

Carmakers use neodymium magnets because they have the highest magnetic force of any magnet. Demand for these magnets is expected to soar in coming years as more consumers buy all-electric and hybrid vehicles.

Magnet manufacturers usually add heavy rare-earth metals such as dysprosium or terbium in order for the magnet to have the high heat-resistance properties needed to operate in a car motor. But the reliance on these elements adds price volatility and supply chain uncertainty, especially when they can only be sourced from one location.

Research firm Technavio estimates that the rare-earth metals market will grow at 14 percent annually and will be worth more than $9 billion by 2019. There are 17 elements considered to fall into the rare-earth category. The growth in the global market is largely fueled by the need for magnets for hybrid vehicles and electronics manufacturing.

Japanese companies such as Toyota, Toshiba, Sony and Honda have all been looking to source rare-earth metals outside of China or reduce their reliance on them all together. Even as mineral exploration expands globally, China will remain the dominant producer and consumer of rare-earth metals in the near future, according to Technavio.

To overcome the barrier of relying on these elements, Honda teamed up with Daido Steel, a company with a unique approach to making neodymium magnets. It uses a process called “hot deformation,” which creates nanometer-scale crystals. The nanometer crystal structure is much smaller than the crystal structure formed through the more common method of manufacturing, according to Honda. The nanostructure allows for magnets to achieve higher heat resistance without requiring heavy rare-earth metals.

Honda worked with Daido to reshape the magnet to better suit it for applications in a motor, while also redesigning the motor to accommodate the new magnet.

Honda wants two-thirds of its cars to be hybrids, all-electric or fuel-cell vehicles by 2030, according to Reuters. Japan is one of the top countries for electric-vehicle sales and boasts more charging stations than gas stations.

The new motor will hit the market this fall in Honda’s Freed hybrid minivan, which is sold in Japan and other Asian markets.