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Big talk, big cost, big battery but small result

By Russell Grenning - posted Thursday, 25 January 2018


On 1 December last, South Australian Premier Jay Weatherill flipped the on switch for the giant lithium-ion battery at Jamestown and this facility went online.

It was a huge celebration all round for the South Australian Government which is facing what promises to be a very difficult election and the US company Tesla which constructed and installed the battery – well, actually, lots of smaller batteries – known as the Hornsdale Power Reserve.

The Reserve is designed to store 129 megawatt hours of power for use at times of acute shortage and is supposed to provide 30,000 South Australian homes power for more than an hour in the event of a failure. For the record, the 2016 Census reported that South Australia had 767,267 dwellings. Even the battery facility’s loudest champions can’t escape the unfortunate fact that a very small number of homes could only be supplied for a very short time if the facility was working at peak efficiency.

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Premier Weatherill must be hoping that these lucky 30,000 homes are strategically scattered among Labor’s marginal seats.

The facility is linked to a wind farm owned and operated by French firm Neoen. Power produced there is sent to the battery facility and stored for future use.

Australia generally and South Australia in particular have been treated to a masterful public relations blitz by Tesla’s US boss Elon Musk who has long shown a remarkable ability to con money from governments and the public when both have been dazzled by his non-stop self promotion.

Typical of his behaviour was the extravagant bet that he would have the battery facility up and running within one hundred days of the contracts being signed or, he solemnly promised, it would be free. Other companies who tender for projects and then sign contracts for fixed-price projects within a required time do so quietly as a matter of course and don’t feel the need to shout about bets and gambles. They know what their contract requires and they do it or suffer penalties – just like Mr Musk’s contractual obligation. But the “bet” was good PR and everybody – including the South Australian Government lapped it up. And guess what? Mr Musk won his bet. What a surprise!

However, when very hot weather struck southern Australia in January, the battery facility proved to be seriously wanting.

On the two January days of highest temperatures, the wind was blowing so little in South Australia that it was only producing about 6.5 per cent of its capacity. South Australia was relying on Victoria for 31 per cent of its power, 23 per cent of which was provided by hydro-electricity.

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According an Institute of Public Affairs analysis, wind contributed only 3.5 per cent of national energy generation on the second day of highest temperatures.

The South Australian Government has refused to say what this battery facility cost although it is generally accepted to be at least $50 million. The mere matter of taxpayers’ money is nothing compared to what Premier Weatherill calls “history in the making”.

Meanwhile in the USA, Mr Musk and his company are having a terrible time.

Last December, Tesla announced its largest quarterly loss in its history and started sacking more after an earlier round of sackings earlier in the year. By the middle of January, the value of its share price had fallen by more than 10 per cent making a total loss of 20 per cent per share or about $12 billion in the last quarter of 2017.

Musk and Telsa have built their reputations on their highly hyped electric cars. This reputation took a terrible battering when Navigant, a highly respected independent management consultancy and risk management company reported that Tesla’s electric cars ran dead last in the driverless car race.

It was reported that Navigant had ranked ten major companies developing AV technology based on 10 criteria including vision, market strategy, partnerships, production strategy, technology, product quality and staying power.

It stated in its report, “Tesla’s autopilot system on current products has stagnated and, in many respects, regressed since it was first launched in late 2015.”

Tesla has repeatedly failed to meet its own production projections. Last October, for example, it only produced 260 cars despite an announced target of 1,500. In the December quarter Telsa delivered only 5,000 Model 3 units versus the 15,000 target set in November which was revised down from a July projection of 80,000 units. The company has been burning cash reserves at an alarming rate spending $US13 million more each day just to deliver an extra 12 more cars each day.

With the disastrous profit fall news, Tesla announced that it would be slashing production of their Model X and Model S cars to focus resources on their new Model 3 vehicle. The US “Consumer Reports” have rated the Model X as the “absolute least reliable vehicle made.”

The fact is that Tesla has never ever met any of its production targets or actually made a profit in its thirteen years. Now US analysts predict that Musk will soon dilute shareholders holdings by selling another $US5 billion of stock at a huge discount. Musk and Telsa need that sort of cash to keep the company functioning and might even get it given that many existing investors and shareholders are almost cult-like in their slavish devotion – or suspended belief.

Predictably, Mr Musk went on the attack taking to Twitter to spin fanciful dreams of a full-sized electric pick-up truck.

And he even went one better than that – he floated the idea of a flying car. Mr Musk very obviously believes that attack is the best form of defence.

Despite never meeting previous production targets, Musk said that the new Tesla Roadster, retailing for a modest $US250,000 each could go “from 0 to 100 KM per hour in 1.9 seconds” and there was the ability to buy a “special option package that takes it to the next level”.

Just what that “special option package” costs remains a secret as does what exactly it might do at “the next level”. In any case, the new Tesla Roadster is not due until 2020 although pre-orders are already being taken with a $US50,000 deposit. After reviewing what this vehicle allegedly might do, the US magazine “Car and Driver” somewhat cynically noted, “We’ll believe all of this when – and if – we see it.”

Mr Musk has blithely ignored his own reluctant admission to shareholders in 2016 that the first Tesla Roadster was a disaster. He’s very good at ignoring realities like that.

“Not saying that the next gen Roadster upgrade package will definitely enable it to fly short hops, but maybe,” Musk declared. “Certainly possible. Just a question of safety.”

It seems that none of this bad news for Tesla has reach Australia. Federal Energy and Environment Minister Josh Frydenberg is tremendously excited about the prospect of electric cars here. Of course, understandably and this is absolutely right, electric cars in Australia should get massive taxpayer-funded subsidies according to the Minister and his allies among the greenies and environmentalists.

If this madness was implemented it would mean that the poor suckers stuck with their petrol driven cars and paying huge taxes for that petrol would be subsidising rich trendies who can afford electric cars. Just why an allegedly free enterprise Liberal minister would want to implement this sort of crony capitalism is unexplained.

One of the cheer squad for electric cars, NSW University Professor Travis Waller, the Director of its Research Centre for Integrated Transport Innovation, wrote in The Australian on 23 January that “electric vehicles make sense” and that “discipline” is needed to encourage the take-up of electric cars.

And what should that “discipline” require? Well – and no surprises here – it means subsidies. Admittedly according to the Professor, “we may need to suffer some short term inequity” which is academic doublespeak for saying that a poor sucker driving an old Holden should subsidise rich trendies into their electric cars. But, heck, no progress is made without sacrifices and no doubt this poor sucker would be very happy to pay the cost to help Professor Waller and his chums get cheaper electric cars. He admits that electric car subsidies “may seem unfair” which is big of him when they actually would be unfair.

He began his piece by saying that we have been trying to succeed with electric cars for almost 200 years adding, “The story of what that has not happened is almost as exciting as a ride on a new Tesla.”    

I gather from that last comment that the good Professor is not aware of the independent conclusion in the USA that Tesla vehicles ran dead last in their field and that Tesla was teetering on collapse. Now, how exciting is that?

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About the Author

Russell Grenning is a retired political adviser and journalist who began his career at the ABC in 1968 and subsequently worked for the then Brisbane afternoon daily, The Telegraph and later as a columnist for The Courier Mail and The Australian.

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