Hero worship of a corporate welfare king – Elon Musk
A May 30, 2015 story in the Los Angeles Times titled Elon Musk’s growing empire is fueled by $4.9 billion in government subsidies provides an enlightening look at the basis for Musk’s recent business success. His visionary — and generously subsidized — enterprises including Tesla, Solar City and SpaceX have resulted in his elevation to hero status among the technorati.
Here is the basic story line.
Tesla Motors Inc., SolarCity Corp. and Space Exploration Technologies Corp., known as SpaceX, together have benefited from an estimated $4.9 billion in government support, according to data compiled by The Times. The figure underscores a common theme running through his emerging empire: a public-private financing model underpinning long-shot start-ups.
“He definitely goes where there is government money,” said Dan Dolev, an analyst at Jefferies Equity Research. “That’s a great strategy, but the government will cut you off one day.”
The story provides plenty of details about the monetary flows from the government to Musk-led enterprises and also indicates how a fair portion of the money flows to people at the top end of the income ladder. It even provides some insights about the way that the government policies have forced Musk’s competitors in the automotive industry to write large checks to Tesla to purchase environmental credits awarded for each all-electric vehicle sold.
The Palo Alto company has also collected more than $517 million from competing automakers by selling environmental credits. In a regulatory system pioneered by California and adopted by nine other states, automakers must buy the credits if they fail to sell enough zero-emissions cars to meet mandates. The tally also includes some federal environmental credits.
Those credits are on top of the $7,500 federal tax credit and $2,500 California state tax credit given to buyers that can afford to purchase his $100,000 + automobiles — a group whose average household income is $320,000.
This tale caught my attention partially as a result of having been a long time listener of Leo Laporte’s This Week in Tech podcast. That weekly conversation program features between two and four invited “tech” journalists that spend a couple of hours sharing their reactions and opinions to news stories from the previous week.
In the past couple of years Musk and his enterprises have been discussed on that show at least as often as Apple and Tim Cook. With rare exceptions, the discussion takes on the tone of hero worship on the par of that accorded to the late Steve Jobs.
It’s worth discussing here because Musk’s Solar City and Tesla’s foray into the energy storage business are described by some people as evidence that there is a diminishing need for nuclear energy to address the challenges caused by CO2 and the more noxious waste products produced by the massive hydrocarbon enterprise that currently powers most of the industrial world.
Aside: Musk fans that see the combination of solar energy and storage as a killer app that obviates the need for nuclear overlook the fact that Musk favors nuclear energy as an important emission free power source. End Aside.
Please don’t misunderstand me. I admire some of the technology that has been created in Musk enterprises. Pay Pal is one of my more frequently used banking tools, and I think that the battery configuration for the Tesla is nothing short of a brilliant use of high volume production and exceptional control technology along with a keen understanding of the importance of weight distribution in an automobile.
However, Musk has been an enormous beneficiary of government largess and some of his enterprises would close their doors tomorrow if the subsidy spigot that supports them was turned down even a little bit.
One of the frequent charges thrown at nuclear energy is that it is a subsidy-driven enterprise that wouldn’t exist without a constant stream of payments from taxpayers. The reality is that nearly all monetary subsidies for nuclear energy in the United States ended about a quarter of a century ago. The only program that recent analysis can identify that provides a financial benefit for nuclear plant operators is somewhat favorable tax treatment for income generated by decommissioning funds investments. The value of that treatment in 2013 was computed to be about $1.1 billion spread over more than 100 plants with substantial assets in their decommissioning funds.
Most of the recent, highly publicized, programs that supposedly provide assistance to nuclear energy developments are little more than future promises. For example, there are no current production tax credits being paid to operators of emission free nuclear plants. The Energy Policy Act of 2005 included a tightly limited PTC for new nuclear plants, but those future payments won’t start until 2018 at the earliest.
Here are some other subtle limitations from Section 1306 of the Energy Policy Act of 2005.
- Unlike the PTC provided for wind and solar, there is no option to take a 30% investment tax credit instead of a series of payments stretched over a period of time.
- The nuclear PTC is fixed at 1.8 cents per kilowatt hour, unlike the wind and solar credit that was indexed for inflation in 2005 and now stands at 2.3 cents per kilowatt-hour.
- Only 6,000 MW of new nuclear plants could qualify for the credit, and only plants whose design was certified after December 31, 1993 were included. (This provision prevents the soon-to-be-completed Watts Bar 2 from being eligible.)
- The maximum annual payment for any individual plant is capped at $125 million, which means that a 1150 MWe AP-1000 operating at a 90% capacity factor will receive a PTC worth just 1.38 cents per kilowatt hour.
- In a year where an AP1000 doesn’t have a refueling outage and achieves a 100% CF, the PTC payment will amount to just 1.2 cents per kilowatt hour instead of the more frequently mentioned 1.8 cents.
- Even if there is room remaining under the 6,000 MWe limitation, qualifying plants must be placed in service before January 1, 2021.
In contrast to the nearly $5 billion that Elon Musk has collected from taxpayers — largely on the promise [dream?] that his enterprises will produce sustainable jobs for people engaged in the admirable enterprise of lowering CO2 emissions and reducing fossil fuel dependence — the widely touted Department of Energy small modular reactor (SMR) grant program is worth just $452 million over a six year period split between two grant awardees.
DOE SMR program grant recipients will still pay the federal government the full cost of obtaining an NRC license at the going rate of $274 per professional staff hour, with billable hours starting for all work after the introductory meeting. Unless operating before January 1, 2021, which is highly unlikely under the current regulatory construct, their systems will not qualify for any tax credits under current law.
One more thing worth mentioning. While doing some reading by the community pool yesterday I found the following relevant quote.
The finance minister was concerned that industry not earn too much money too early, if at all. “Privatization of profits” and “socialization of losses” were terms much used, even at that time. Schaffer insisted that industry have no voice beyond providing funding and that all negotiations be conducted strictly according to the principles of the federal finance ministry and the court of audit.
Source: Winnacker, K and Wirtz, K, Nuclear Energy in Germany, American Nuclear Society, 1975.
Note: For context, “even at that time” in the above quote refers to the first German nuclear program begun in 1957.
Earning money the old-fashioned way … get it from the government.
California leads the nation in residential roof top solar installation. Per this article, “Among those who installed solar in 2007-14, the wealthiest customers were likely to get the largest savings.” Mostly due to CA’s complicated tiered pricing system and cushy net metering policy, that favors a larger consumption of energy.
Is there any data to support that driving the Tesla S reduces net CO2 emissions? How much additional coal is burned to manufacture all those batteries? And if the energy to recharge the vehicle comes from FF?
Considering grid penetration of unreliables is capped at their capacity factors, the mind boggles at the generous subsidies paid to the affluent to support energy sources that can only supply ~20% of grid electricity. While SONGS is replaced with a natural gas plant. The Sheriff of Nottingham would have been the hero of the story, if only he would have discovered the photovoltaic effect.
Getting subsidies is normal business practice even in the USA – see Dell North Carolina etc.
The SpaceX piece is a non-issue – a small subsidy from Texas and cheaper launches for Nasa and the US Airforce.
Good to see the canard of nuclear subsidies being exposed.
“The nuclear PTC is fixed at 1.8 cents per kilowatt hour, unlike the wind and solar credit that was indexed for inflation in 2005 and now stands at 2.3 cents per kilowatt-hour.”
Just a clarification, the wind PTC expired at the end of 2014, and wind projects which started construction in 2015 are not eligible. Also solar does not get the PTC, they get the ITC.
The ITC will ramp down at the end of 2016, with residential solar put in service in 2017 getting no benefit, and commercial/utility solar going down to 10%.
Though not well known, essentially all new wind projects since 2009 have availed themselves of the option to take a 30% ITC in lieu of the PTC. It is a much more useful (lucrative) financial arrangement because the money comes within one year of commercial operation instead of being spread over a 10 year period. It is also not directly tied to production and it is not completely clear what happens if the installation stops producing or fails to produce the expected quantity of electricity. The ITC is 30% of the total project cost.
I’m hoping you are right about the PTC/ITC sunsetting. So far, there have been numerous last minute or even ex post facto extensions. (For example, projects started in 2014 were not supposed to be eligible until legislation that was passed in the last two weeks of the year and retroactively applied to the whole period since the expiration in December 2013.)
Sour grapes from someone in the dying nuclear energy space. What is the “half-life” of a lithium battery?
Do you mean before or after it bursts into flames?
A lithium battery “bursting into flames” is perhaps less damaging then a nuclear meltdown but nice try.
If you really believe that I would consider traveling by rail rather than air. Long way down in that flaming missile.
The toxic waste materials from producing lithium for lithium ion batteries have infinite half lifes.
Perhaps technology will continue to improve, but the very best lithium ion batteries on the market today experience serious capacity degradation within about 400 cycles of charging/discharging.
If used to fill in the time that the sun is not shining strongly enough to provide adequate power, a typical lithium battery installation would thus last just a few years.
Of course, if you don’t use a full charge/discharge cycle every day, that lifetime will be a bit longer.
And yet the market has numerous examples of daily cycles and ten year warranties. I suppose those that offer these warranties know less than you?
Please enlighten me with product names and/or links so I can learn more.
Tesla Powerwall for example. Time will tell if it lasts.
A 220 lb (100 kg) battery costing $3,000 will provide continuous power for 3.5 hours at its rated 2 kw output. If you would like to have power for the rest of the hours when the sun is not shining with enough intensity to make a collector work, you would need 3 or 4 of them.
That is close to 1,000 pounds of battery costing $9,000 to $12,000.
Do you know if the warranty is pro-rated; it’s terms and conditions are not clear on the current iteration of the site.
Hidden on there site (I could not find it just now or would provide a link) is the fact that only the 7Kw is rated for daily discharge and the 10Kw is rated only for weekly discharge (50 per year), Both of these assume “only a partial discharge is expected ….. ” and other nebulous fudge words. I do not think you could live “off grid” with either of these. And the ten kW would only get you through the night in the typical loss of power during a snow storm or thunderstorm power loss. (assuming you leave the fridge, freezer, heat/AC. etc on.)
The worst case scenario from a Chernobyl, Three Mile Island, Fukushima event, or worse, can kill millions and is infinitely worse than the worst case scenario from manufacturing, or using, lithium batteries. Not even close.
We have already had the worse case scenario from those three sites and they didn’t “kill millions”. In fact Three Mile Island and Fukushima have not killed anyone. Chernobyl elevated the potential of an increased number of people dying by radiation exposure. The original estimate was 4000 using mathematical modeling but that number has been dramatically lowered based on actual data which means less people will have died from nuclear accidents then Bhopal or Banqiao.
However, the local economic conditions around the Chernobyl area results in high poverty living conditions. Then add in stress from radiation scare stories outsiders and issues not directly related to the reactor accident have potentially contributed more to the threats for the local population then the radiation exposure from the accident itself.
Large scale production of lithium ion batteries will present its own environmental challenges in both the front end mining and manufacturing activities and then at the back end when it comes time for disposal.
Lithium ion batteries use known carcinogens. Those carcinogens are a higher contributor to cancers in the overall population then nuclear power has been over the past 6 decades we have been using nuclear power for electrical generation.
Will Tesla be forced to do a full scale shutdown or recall when the first house fire occurs due to thermal issues? Or will the media gloss over the story has they have when wind towers come tumbling down, solar panels catch fire and lithium car battery start on fire?
Would you care to tally up all the fatalities and injuries incurred by non-nuclear energy production for the nearly 60 years that nuclear’s been around including “worst” accidents during the 60 years worth of chances for the anti’s ever-wished-for nuke mega-death to occur? It blows my mind how antis turn documented tens of millions of fossil fuel related deaths worldwide into small potatoes but howl like wounded virgins if just a couple of atomic workers get irradiated. I mean that you can pack all the normal and worst case nuclear plant fatalities in the world since the first one on ONE Greyhound bus, but you can’t build enough OCEAN LINERS to accommodate the documented and recorded direct and indirect heath casualties of fossil fuels. Not even solar and wind can claim a safety record like that, so why the sheer health/safety hypocrisy against nuclear here — unless you want to chalk it up to sheer blind mindless irrational monster-movie driven fear in which case one’s excused.
U.S. electricity generation in 2014:
Coal = 39%
Natural gas = 27%
Nuclear = 19%
Hydropower = 6%
Other renewables = 7%
Biomass = 1.7%
Geothermal = 0.4%
Solar = 0.4%
Wind = 4.4%
Petroleum = 1%
Other gases < 1%
( http://www.eia.gov/tools/faqs/faq.cfm?id=427&t=3 )
'Dying" – yea….
BTW for those of you keeping track of German energy:
They were finally able last year (2014) to cut emissions by around 7 percent!! Most of it was attributed to weather.
On a overall power output REDUCTION of 4.2 percent, combustible fuels dropped 8.2 percent – non hydro renewables were up 14.2 percent (including biofuels??). Hydro was down 7.8
NUCLEAR output dropped by only .4 Percent last year !!
( http://www.iea.org/media/statistics/surveys/electricity/MES201412.XLS ) – Germany Table 16
As usual I am still looking for the details which are always buried – like the electricity sector numbers specifically, Industrial output and the biofuel/forest fuel numbers.
Here is a good one for electricity emissions:
German Emission Trend graph ( http://www.cleanenergywire.org/sites/default/files/styles/lightbox_image/public/images/factsheet/ghg-emissions-sector-1990-2014-update-mai-2015-uba.png?itok=Au_jP64B ) It came from this article and listed sources – note the other graphs ( http://www.cleanenergywire.org/factsheets/germanys-greenhouse-gas-emissions-and-climate-targets ). I think they are probably being more open about it now that emissions are finally down! lol.
Industrial output ( http://www.tilastokeskus.fi/til/ttvi/2014/11/ttvi_2014_11_2015-01-09_kuv_003_en.html )
More good graphs with up to 2013 biofuels numbers ( http://www.bioenergytrade.org/downloads/iea-task-40-country-report-2014-germany.pdf )
So around ~36 percent (??)of non hydro renewable is probably a good (conservative) estimate for biomass considering trends ( Figure 1.9 of last link and P 7 of next ). ( http://www.agora-energiewende.de/fileadmin/downloads/publikationen/Analysen/Jahresauswertung_2014/Agora_Energiewende_Review_2014_EN.pdf ).
So nuclear was 15.4 % of electricity production. Non biomass/non hydro intermittent wind and solar was 14.4 %. Coal and gas was 53 %.
Don’t forget that France reduced electricity sector emissions by much more than that. It went from 29Gt down to 19Gt, all fossil being down 40% and coal down 58%. Once again a helpful weather and low consumption level is the main explanation.
Germany will not have good 2015 numbers again. They made sure this would have no chance to happen by deciding the closure of one more nuclear reactor.
JM – Dont get me started. Also dont mention now on almost every “green” website, the “miracle” of Germany’s “energy surplus” is lauded in “Europe’s largest electricity exports.” The LARGEST COMPONENT fuel for their electricity being STRIP MINED LIGNITE !! More burned now than much of the last two decades and it is producing DOUBLE the electricity of wind and solar now in Germany. Then there is the habitat and land use thing along with the pollution mess, infrastructure expense and intermittent unreliability.
The bizarro world of contemporary populist “environmentalism.” Its a fraud.
The LA Times article is basically a hit piece, trying to pile up diverse and perfectly normal business incentives to make them look like something they aren’t. The kind of false accounting that is routinely undertaken by anti-nukes.
There are subsidy issues here, but they are nothing to do with Elon Musk. He is meeting a demand which the government have decided is worth stimulating. If you think the subsidies are wrong, that’s an argument about the government, not about Musk.
He has not received “government largesse”, as the article tries to paint it. He’s delivered services and products in sectors that happen to also attract government subsidy, and delivered services directly to government in the form of space delivery that no-one else is actually capable of.
He’s a businessman. He negotiates for the best deal possible. He innovates to reduce cost for his products. That is emphatically not a problem.
I would love to see him take on nuclear power plant construction – although I doubt he would choose to do so in the US, where the NRC sits as a roadblock to innovation. He probably isn’t rich enough yet though, quite apart from not having the time to spare from current projects.
Your comment supports my headline contention.
Musk has chosen the products and services that his companies provide. Some of the programs providing the incentives were in place before he entered the field; the existence of large government payments are part of what made the segments attractive to him. Some of the programs have been enhanced or extended since his companies entered them; any bets on whether or not his lobbyists were involved in the process?
Questionable, Rod. They could have purchased credits from other companies such as Commuter Cars (which has been starved for a few million for crash-testing), or built their own. Ford has the Focus EV, for example; does it need to purchase credits from Tesla? The only reason to do that is if they are cheaper than an in-house effort.
BTW, I’ve now seen my first Tesla Model S here at 45 N 89 W. Sweet ride.
They’re thick as flies where I live. I see several every day, as well as Leafs.
Do you see ’em parked or actually moving? Is it possibly they can actually be operated for 16 hours /day or more, or do they have to spend 16 hours / day parked?
Inquiring minds want to know – where do you live?
Can you send me a photo of a thick swarm of Tesla Model S autos? It would make a cool illustration for a future post.
Tell your inquiring minds that I live ten minutes from the Tesla dealership in Seattle, and 20 minutes from the one in Bellevue. This Tesla fad reminds me of when the Hummer was at its pinnacle of popularity. I once spent a day in Bellevue and counted nine brand new Hummers running about. Both cars are/were ostentatious displays of wealth/status. Tesla just announced that they have several used cars for sale now, so apparently, they’re wearing thin for some owners.
There are at least six Leaf owners that I’m aware of within a block or two of my house.
Seattle and Bellevue (on the other side of Lake Washington) are electric car hotspots.
I’m assuming that your retort was sarcasm, which can sometimes be hard to detect in the written word. You misinterpreted my original comment.
Or the Saab fad among the “professorial class” in the late 1980’s/early 1990’s. For some reason, those cars always seemed to be red and always seemed to be convertibles.
It was a hallmark of the Liberal, “educated” elite — almost like a uniform. You couldn’t be upwardly mobile in that world without owning one.
Sorry for the misunderstanding. I was serious about wanting a photo with several Teslas in it. I confused the request with a failed attempt at humor by extending a metaphor structured to allude to your “thick as flies” description.
As far as the SpaceX subsidies, the objective is really to establish a colony on mars. The subsidies will then no longer be required for space travel, which will accelerate development. I believe SpaceX would be profitable even without the subsidies, simply because it is the cheapest launch provider in the world today.
The other two companies, Tesla and Solar City, are dependent on subsidies. In fact, Tesla is not even profitable with the subsidies. But what I have said is that what matters is not whether the products are economical, but whether he can sell them. And he can sell them.
Of course, a carbon tax would be the most efficient policy. However, that will probably not happen. The best that nuclear can probably hope for is to get the same investment tax credits that wind receives and to have the EPA rule changes.
Chemical rockets physically cannot improve significantly over 450 seconds of specific impulse obtained by the Saturn V and similarly projected by the Delta V Heavy Lifter.
If you want a Mars Colony, you need nuclear thermal rockets capable of 850-1150 seconds of Isp. This increases the payload fraction from 20%, and subsequent dollars per pound to low earth orbit from ~$3300 to ~$115. (compared to $15,000/lb. for the space shuttle!)
If Musk was actually an innovator he would be pushing the issue on nuclear powered space flight. Reusable chemical rockets are a wash!
Now, there is quite a bit of potential in the Reaction Engines Ltd. air breathing rocket engine concept! Use that to get to the upper mesosphere (100,000m) and then detach your nuclear rocket! Put a few extra canisters of hydrogen in LEO, then combine them with the waiting rocket.. and fly your fancy self to Mars and back in 2 months!!
Orion all the way, baby!
And not the wimpy new “orion” concept.
With the original Orion, one could put an entire industrial city in space in one go, probably for the cost of a couple of a few aircraft carriers.
Just a nit… building an airtight industrial city would take more material than an aircraft carrier, and almost certainly cost a great deal more.
Not that I don’t like the idea.
Well, I did write a couple or a few (‘of’ should have been ‘or’) aircraft carriers. It’s hard to say exactly what it would cost and it depends on what one means by an industrial city.
How close to being an industrial city is an aircraft carrier?
Secondly, one needs an airtight shell around the thing, and perhaps a double hull would be a good idea. But it’s not like the whole thing must be build with air tight compartments. And mass is not a large issue with an Orion, so one can build a little heavier and a little less smart…
The problem is later getting anything you forgot at the beginning at chemical rocket costs.
my god, across seven companies he’s taken almost a sixth as much subsidy as the hinkley point reactor?
(subsidy isn’t welfare. when the government puts up a pile of money and says “whoever gets this job done gets this money,” that’s not welfare. this kind of false polemic is destructive.)
ANY intervention by government in the natural system of supply and demand and freely negotiated prices, is a “subsidy”. Even if it’s just a tax that is imposed selectively, that means the rest of the economy is being subsidized by not having to pay that tax.
Subsidies for Hinkley Point can only be understood when looking at the CONTEXT: With all the actions by government against nuclear, mainly by letting anti-nuclear activists have their way and make impossible demands, and starving the industry of its talent by not building new nukes for decades, with all that it takes a subsidy to “undo” the damage they did. UK politicians are trying to rebuild the house they themselves tore down.
Anti-Nuclear hypocrites love to take things out of that context, citing subsidies when their own entire fantasy world of renewables is nothing but a subsidy phenomenon from the very first to the very last solar panel and wind turbine.
A couple things.
1) I’m not an “anti-nuclear hypocrite.” I’ll be at the TEA conference tomorrow, because I’m an ardent supporter of nuclear energy, if you’d like to talk this out.
2) No, not any intervention is subsidy. If you’re not able to use basic economic words correctly, then it won’t surprise me if you’re not able to sort this out. Hinkley Point was bailed out because they low-balled their costs by 17 billion UK pounds and needed help. The US Government said “hey, if someone wants to solve this problem, we’ll pay for it,” and Musk accepted. Misrepresenting that difference is a critical problem.
“Anti-Nuclear hypocrites love to take things out of that context, citing subsidies when their own entire fantasy world of renewables is nothing but a subsidy phenomenon”
I’ve heard this claim a lot, but I’ve never seen satisfactory support of it. I have, however, seen support of this being said about nuclear.
Since I don’t have the sophistication to judge, all I can do is say “well, they’re making their case, and you aren’t making yours.”
I’m not totally opposed to subsidies (given that a free market is a utopian goal right now). The money for Tesla/GM/others for EVs/battery development was a “subsidy” in my mind, but it was “strategic” and well spent! The results speak for themselves. Tesla’s Model S and the GM Volt have been a huge success in terms of demonstrating the viability of EVs and high customer satisfaction (at partially subidized prices). The few billions spent as a one-off subsidy for this development is a ridiculously small amount compared to many other subsidies.
My point is that subsidies for Hinkley Point C, even large generous subsidies, are ALSO “strategic” and well placed, just like those for Tesla. Nuclear has been held back for an extremely long time, to an extreme degree. We could have 80% nuclear power just like France, worldwide right now, if it hadn’t been for the anti-nuclear movement and the hidden hand(s) behind the scenes giving it money, power and leverage.
Hinkley Point C is the first of a kind, not just because of the EPR reactor, but because it’s the first reactor build in a new era, where for the first time there is (at leats in UK politics) a considerable backlash against the anti-nukes, and a new generation of engineers is in the workforce. If Hinkley Point C gets built, and doesn’t have too much cost/time overruns, MANY new nukes will follow in western Europe. If it should fail, it won’t happen. The anti-nukes fully understand the significance of this project, so they are suing against the “subsidy” (as if they would care about that) and have launched specialized media campaigns against it. – To coin a motto, don’t let Hinkley Point be “Shorehamed”!
My biggest beef with the specific subsidies for the Tesla automobile is that the recipients have an average household income of $320,000. In a former life, I was the GM for a small factory mainly staffed by high school dropouts or grads who made a bit more than minimum wage. They worked very hard, but many of them could not afford a car at all and walked or biked to work. Of the cars that were in the parking lot, I would have guess that less than a handful had market values above the $7,500 tax credit paid to owners of $100,000 + Teslas.
I’m not opposed to success, but I really dislike a system where people like my workers are taxed to pay for luxury status symbols for people who could afford to pay the full freight.
True, but this effect is much more common than just the EV credit. Student loans, tax deductions for homeowners, etc., all benefit the wealthier class disproportionally. I see subsidies as a “necessary evil” in a system that already redistributes half of all the money for either a social or other purpose.
As far as the EV credit for the Tesla cars go, I doubt the 7.5% makes a difference for someone buing one. It could and should be abolished right now. Even the Volt, now in it’s second iteration with the 2016 model, should no longer need it. The strategic goal has been achieved, the subsidies should be abolished (a politically near impossible goal, but once again, it’s a necessary evil)
Most of government support for EVs is to a great extent misguided and unnecessary. Public charging for example isn’t popular, yet cities spend huge sums of money just providing very few of those. It’s not even needed. Tesla has their own charging stations, and the Volt/other PHEVs charge at home and run on gas for longer trips. Then there’s the campaigns (mostly on the city level) to tie EVs to “renewable” energy, when it has absolutely nothing to do with it. Most EV owners just want to save on gas. All we need is cheap electricity (which isn’t going to happen with renewables).
Your workers at the bottom of the wage scale on a percentage basis paid far less in taxes than the rich and wealthy corporations who are taxed at a far higher rate. Indeed, it is likely that at tax return these workers made up for much of their tax loss. Under the false guise of fairness and equality you actually preach the gospel and doctrine of envy. If things were really equal and fair, then your workers would have been taxed at the same percentage basis as the wealthy. Thank God that life is neither equitable nor fair.
That is a myth.
Workers at the bottom of the wage scale in the above ground economy – where every dime they make is reported to the federal government – pay 15.3% of their wages starting at the very first dollar they make. Sure, “officially” they are only tapped for 7.65% and their employer pays the other 7.65% of the FICA taxes, but the reality is that most of the employers would gladly have paid that additional tax to the worker. Granted, everyone with a job and earned income pays a similar tax, but after the first $117,000 of earned income, the rate drops to just 2.9% (Medicare only). At $200,000, the total rate drops again to 2.35%, but the employee picks up the whole amount while the employer’s share drops to zero.
Your interpretation is only true for people that believe the myth that Social Security is a savings program and not simply a regressive income tax program where some people only pay the full percentage for a small portion of their income and people whose money comes from capital gains, interest, dividends or bonuses don’t pay anything at all.
PS – It is becoming more and more common for workers to be officially classified as independent contractors and paid piece work rates reported on IRS form 1099. Those people will understand very clearly the fact that they have to pay 15.3% of every dollar they make up to the $117,000 level.
“That is a myth.
Workers at the bottom of the wage scale in the above ground economy – where every dime they make is reported to the federal government – pay 15.3% of their wages starting at the very first dollar they make.”
Also add in the fact that the pay-as-you-go taxes affect the poor disproportionately. For example, they pay the same sales tax rate as rich folks, but a much larger percentage of their income is spent on things for which they pay sales tax. So, nearly 100% of their income is taxed again at the sales tax rate, while for rich folk that number might be under 10% of their income or less.
Calculate how much money you would have after investing 15% of your income for 45 years assuming nothing more than a pay raise each year that equals the increase in inflation (use CPI) and a promotion every 10 years that gives you another 5% more in total income. A very conservative measure. (SS tax is over 7% from the employee and 7% from the employer which totals 15% ) For the “Average” worker, that money invested in a guaranteed 5% annuity (close to the 20 year average) would be close to if not over $1,000,000 and would provide you with an annuity payment of over $50,000 per year for the rest of your life (starting at 65). That is more than twice the maximum payment that any person can receive from SS. And many times more that the “Average” worker gets back. Plus, my heirs can get some of that back if I die before the Mortality table on the date I start this withdrawal with certain annuities. So just what do the Feds do with the money? SS is as big a cash cow as any of the actual income taxes workers pay. And worse yet. over 1/3 do not live long enough to collect the money they “invest.”
Same calculation can be made for Medicare. Similar results Similar loss to the worker.
Your calculation supports my contention – FICA is just another tax that provides resources for the Treasury. As such, it is horribly regressive, despite the sales pitch of it being an investment vehicle.
Not only do wealthy people escape the tax on a substantial portion of their income, but they receive the transfer payments after achieving the required age no matter how much money they are receiving from pensions and investments.
On the other hand, if a poor person decides that they need to supplement their SS income with money that is earned by WORKING at a job, there is a big penalty that docks their SS income.
So a standard definition of a subsidy is the following:
A sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive.
Now did Musk go to the government and request the subsidies that benefit his businesses? No.
But has he built his business around the government subsidy programs that were put into existence to jump start battery technology? IMO – yes.
And the reason I say yes is that if those subsidies were to disappear, his EV and battery business would disappear as well or if not disappear would suffer significant financial harm.
Subsidies are different then bailouts.
I have no doubt there could be academic discussions about whether or not the deal made over Hinkley could be considered a subsidy or a bailout. However since the project is not yet built, the power plant is not in a position to be “saved” as were the financial institutions or car businesses here in the US after the 2008 crisis. The price per megawatt-hour guarantee is a case of a special subsidy, not a bailout based on standard definitions.
Most of the hype around Elon Musk isn’t originating from the man himself. Even with his home battery, he only said it’s meant to help a solar home become self sufficient. The hype, the claims that this is the “killer combo” that is going to make large power stations obsolete, solve all of renewables problems etc., comes from the internet echo-chambers of the renewable/green movement, which is desperate to find proof for their claims of constant progress being made with renewables.
Fact is, the Tesla Model S was a success (a new automaker already competing very much with the big premium brands), Space X was a success (ISS cargo deliveries).
Extrapolating Musk’s successes and assuming all the other projects of him are going to be a success, is naive. Some of them sound like megalomania, a solar powered mega battery factory, “Hyperloop” high speed tubular travel cheaper than rail.
A cynic like me would say that the PowerWall is aimed at the homeowner who wants to be protected against the rolling blackouts and other grid disruptions almost certain to result from California’s “renewables” policy.
If you have 2 kW of essential loads, and your PowerWall can handle 30-minute outages once or even twice an evening 3 days a week, you’re pretty well set. Sucks to be the poor consumer, though.
I agree with Engineer-Poet.
Additionally, the consumer public are fools, or foolishly mal-informed to think that renewables are a good idea. Compare the cost of everyone buying their own Power-Wall in order to maintain reliable power vs. the utilities just building reliable nuclear as the method of reducing CO2 emissions.
My impression of the hype around Mr. Musk is that he learned a few lessons from Steve Jobs and Apple’s PR machine.
Mr. Jobs was able to develop new product lines then start the PR machine in motion. Mr Musk has done the same thing.
I agree though that the echo chamber effect is taking his initial claims about his battery system into extreme territory. But Musk isn’t going to stop that level of hype since it just builds the anticipation as Apple has done with its watch despite Samsung having a similar product available.
I would agree that Jobs apparently bequeathed his “reality distortion machine” to Musk. However, though Jobs was apparently willing to push the boundaries of tax law (and push past those boundaries at times) I don’t remember hearing about any taz credits being offered to Apple customers to subsidize their purchases of expensive computers.
If there had been such a program, I would have heard about it since I’ve been buying their products since 1987 and have been a stockholder on and off – currently on – since the return of Jobs to the company.
My article about Musk, despite the attractive headline, is really more of a commentary on the views that many modern Americans have about the role of the federal government in continuing the exacerbate the already uneven distribution of rewards and luck that is not based entirely on effort, skill or accomplishment.
People who barely have enough to eat and who make do in substandard housing can get demonized if they are on the dole; people and companies that buy lots of advertizing and make lots of political contributions get celebrated and put on a pedastal even if their total government largess can be measured in billions vice thousands.
Make Solar as Safe and as emissions free (including all supporting/backup/storage power needs) throughout it’s life cycle as Nuclear and see how much it costs.
Don’t forget to add a decommissioning fund to dispose of worn-out panels and a disposal fund to store or recycle the dangerous chemical wastes inherent in solar panels.
I freely and proudly admit that the US government has generously provided for both my undergraduate and graduate education. It has also provided me with a comfortable salary/pension since 1977 along with work assignments that provided much of the basis for the insights I share here.
Granted, I ask for voluntary contributions, but the vast majority of US taxpayers that want to can freely access essentially all of the IP I developed during my years of service.
@JohnGalt “… but in the mean time I think indirect fusion, being solar power, is a good thing to do.
Solar is getting less expensive…
By the same logic, if donkey wheels could be mass produced and “become less expensive” and be cheaper per kilowatt hour than solar, should that be pursued too? Pretty clearly the human boot heel on the biosphere is of little consequence as indicated by so many people willing to rely on “natural energy flows”. Why not then go back to donkey wheels? It’l be cheap and with subsidies and mandates, it’d become far cheaper than it currently is, just like solar! Donkey wheels have the added benefit of being dispatchable, while Solar is absolutely not. If a grid operator needs more power and calls to a solar operator for another 5 MW, the solar operator would have nothing to do to take advantage of the opportunity to provide the high value and priced peaking power unless he had donkeys that he could apply to the financial opportunity. Oxen are even much more powerful than donkeys or solar panels.
How many donkey wheels would it take to provide 5MW? Say 4 Donkeys per wheel? How many oxen wheels at 4 per wheel? An ox can go 6 hours according to this:
<a href=" http://www.tillersinternational.org/farming/resources_techguides/Animal-DrivenShaftPowerRevisitedTechGuide.pdf"
For those who want the masses go all pastoral with sunshine and breezes, why not Animal power too? With subsidy and mandates, the price will absolutely go down, and most likely much more than solar. With subsidy and mandates, it will even "scale" in a similar way too!
Yet everyone else has either escaped this, or is trying to. Now why is that?
I love it when I get a chance to point out that someone is projecting.
The real question with the Tesla (or any electric car) is what policy-wise are we getting with the rather lavish subsidies? What is the point of it? A reduction in foreign oil imports? This could be more cheaply achieved with OEM dual-fuel NGVs or simple retro-fitted CNG tanks placed in the usually ample trunk space of a typical sedan. At the typical residential cost for natural gas ranging from $10-$20MMBTU, a gasoline gallon equivalent (GGE) would range from $1.25-$2.50.The 8-yr warranty replacement cost on the 85-kWh capacitance Tesla battery is $12,000; however if you “brick” your Tesla by allowing its battery to drain all the way down it’ll cost you more like $40,000 for the replacement. Assuming you drive your Tesla a typical 12,500/yr over 8 years or 100,000 miles the battery replacement alone (ignoring the cost of the electricity itself) will cost 8¢ mile vs 10¢ mile in a NGV with natural gas @$20MMBTU (assuming average 25mi range). Of course adding the cost of the electricity @250 watt/mile you are easily paying at least 10¢/mile, same as a NGV. But a CNG retrofit or OEM vehicle adds only a few thousand dollars and lasts the life of the vehicle.
If the reason is CO2 abatement the math makes even less sense. Over its estimated 100,000 mile battery lifetime it’ll displace ~37 tons of CO2 vs the typical car according to Tesla’s own computations. That’s costing the US Federal Gov’t ($7500 credit) ~$200 per ton in CO2. Advocates of taxing CO2 typically range from $15-$30/ton. The highest carbon tax in the world I believe is Sweden @$150/ton.
VY NPP displaced ~2 million tons of CO2/yr vs NGCC generation which would be worth over $400 million/yr in Tesla-equivalent subsidies, far more than the wholesale market price of the electricity that it generated.
I read that total sales of Tesla Model S reached 25k units as of Jan last year; that’s 2 years of production on the road, assuming they all reach the 100,000 mile mark prior to battery replacement that would be nearly 1 million tons of carbon abatement over a decade vs VY’s >2 million tons/yr.
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