DNC Energy Platform Long on Commands, Short on Hope

The most important sentence on energy in the Democratic National Committee (DNC) platform document is the one it took out: this version of the platform no longer supports an “all-of-the-above” energy strategy.

Coal is out. Nuclear energy and hydropower aren’t even mentioned once in the platform. This version seeks to pick winners and losers in the energy space and remake the energy mix the way the DNC platform committee sees fit, regardless of what the market wants.

You know why that’s a bad idea? Because just about every time the government tries to pick winners and losers in the energy space, the government gets it wrong—like really, really wrong.

Source

Elon Musk’s Goes Defensive on Twitter

Last week, news broke of the first fatal car crash involving a Tesla running in autopilot mode. But while the world only just learned about the accident, which killed a 40-year-old man in Florida, the accident itself occurred in May — a potentially material piece of information, first noted by Fortune’s Carol Loomis, that Tesla did not disclose to its investors at the time.

Given that a significant component of Tesla’s appeal is the potential safety benefits (and cool factor) of its highly touted autopilot system (which is still, remember, in beta mode), it’s at least worth asking why the company did not feel the need to tell investors and buyers about the Florida crash. Which is all that Loomis wanted to do when she began an email conversation with a Tesla PR exec.

And then Tesla founder Elon Musk himself got involved.

From Fortune:

Then Elon Musk himself suddenly entered the email conversation. He first thought, mistakenly, that Fortune was criticizing the price at which Tesla and he had sold stock. This writer replied that was not the case and that the issue was the non-disclosure of a material fact. That, Musk replied in a second e-mail, “is not material to the value of Tesla.”

He continued, “Indeed, if anyone bothered to do the math (obviously, you did not) they would realize that of the over 1M auto deaths per year worldwide, approximately half a million people would have been saved if the Tesla autopilot was universally available. Please, take 5 mins and do the bloody math before you write an article that misleads the public.”

Musk wasn’t done. When Fortune editor Alan Murray tweeted the story, Musk replied with another zinger, clearly displeased that the publication had run the story despite his impassioned pleas for bloody math.

Twitter argue copy

The incensed-CEO-directly-contacting-reporters is a tech-industry trope dating back at least to Steve Jobs, who’d famously reply to personal emails with blunt answers to reporters. But what felt somewhat refreshing five years ago has become tiresome as Silicon Valley has emerged as an economic and political power to rival any other industry (or institution) on the planet. Musk’s not wrong — traditional cars and their traditional human drivers are likely a bigger danger than their self-driving counterparts — though, as a math teacher might say, show your work. But wildly flailing at reporters doing their jobs no longer feels like a democratic bypass of multiple layers of spin and publicity. Instead, it comes across as desperate and insecure: an immensely powerful man objecting to legitimate questions (on a holiday weekend, no less). The power imbalance between the tech industry and the media industry has become too glaring for CEO-versus-reporter tête-à-têtes to seem anything but pathetic.

And why would he respond, anyway? As a rep from Tesla’s PR team also pointed out to Fortune, after news of the crash broke last week, Tesla stock dropped only temporarily before rising back up to a price of $216 per share. A price $4 higher than the stock was before the Autopilot crash made headlines. The company (which Musk has claimed could be worth over $700 billion by 2025) wasn’t exactly hurting for money. And now, it’s not hurting for unnecessary bad press either.

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Elon’s Ridiculous Plan to Nuke Mars

If you’ve ever watched the movie Wall-E, then you probably  remember how the world looked after humans over-saturated the atmosphere with satellites and pollution. Because of this, the planet was no longer habitable, resulting in the humans having to live in a massive spaceship. Although this is a very exaggerated scenario, the issue of climate change is a very real global concern, and scientists are researching the best remedy for our decaying environment. One of these researchers is a billionaire futurist named Elon Musk.

Well-known for his success in creating PayPal, as well as the electric car company Tesla and space exploration company SpaceX, Musk certainly has a lot of experience in the technology and innovation field. However, it’s his newest idea that is causing a lot of scientists to “heat up.” In an interview with Stephen Colbert on the Late Show, Colbert brought up that Musk wants to send a handful of people to Mars to colonize the planet in hopes that it will provide a “plan B,” in case our environment ever deteriorated.

When asked how we can make the “fixer-upper of a planet” ready and able to support human life, Musk responded by saying that “you can warm it up. The warming could happen quickly or slowly. The quick way is to drop thermonuclear weapons over the poles.” Colbert jokingly responded by calling Musk a super-villain.

Before you can dive deep into how unfeasible the idea of nuking a planet is, it’s worth pointing out the fact that SpaceX has never had a successful takeoff and landing in a reusable rocket mission. If that doesn’t discredit Musk’s idea for Mars, then statements from researchers committed to space exploration will. NASA responded to the interview by saying “we are also committed to promoting exploration of the solar system in a way that protects explored environments as they exist in their natural state.”

Another expert in atmospheric sciences, Michael Mann, who is the director of the Earth System Science Center at Penn State University described the issues with nuclear weapons. He said that rather than warming Mars to a habitable temperature for humans, thermonuclear weapons would “generate so much dust and particles that they literally block out a significant portion of the incoming sunlight, cooling down the planet.” Another astronomer, Christopher Impey from the University of Arizona, commented on the terrible idea of nuking the poles.

”Even if we could afford to launch thousands of thermonuclear warheads to Mars, we shouldn’t. You would sort of Chernobyl-ize the whole planet. A radioactive cloud would quickly disperse all around Mars making it hazardous for anyone who went there,” Impey said.

Clearly the idea of “dropping thermonuclear weapons on the poles” is scientifically implausible. The idea of using our vital scientific resources to get a few eager humans to Mars is a lot to handle, but to then suggest that we should waste more resources and money to bomb the planet and most likely ruin any chances of permanent colonization is even more ridiculous. The ethics behind us going to a planet that has never been walked on and making such a drastic change to its environment are dubious at best. We should try to fix our own climate before we ruin the climate of another planet by setting off thermonuclear weapons on the surface of Mars.

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SolarCity Using Inmates as Workers

“And about those green jobs…”

Though they saved the tax credits, state university officials didn’t show the same ambition to save the new jobs promised by Kitzhaber.

After the Redco debacle, the university system quickly hired its third developer in the spring of 2012.  SolarCity was no solar rookie. It had been around for five years and billed itself as the largest installer of solar systems in the world.

Under the new contract, SolarCity would do all the engineering, site prep and installation for Oregon. The company would own the project, selling power to the universities to recoup its investment.

Their partner was another seeming solid name in green energy – SolarWorld. The company arrived in Hillsboro in 2007, investing hundreds of millions of dollars in a state-of-the-art solar panel factory. Potential new jobs for the company were part of the lure of the university project.

Kitzhaber, taken with the buy-local strategy, authorized a $60,000 state study to assess the project’s impact on the local economy. The study concluded that buying the solar panels in Oregon would generate $10 million in local wages.

It was common knowledge in the solar industry, though, that SolarCity and SolarWorld were bitter rivals in an international trade war.

SolarWorld was building solar panels in the U.S. and took the lead in defending American manufacturing from perceived illegal trade by the Chinese. SolarWorld complained to U.S. and European Union entities that Chinese companies were dumping solar panels in the U.S. below cost to kill competitors.

SolarCity, meanwhile, depended on those low-cost panels for its own business success. Any effort to stanch their flow into the U.S. was a threat. SolarCity and others in the industry mobilized against SolarWorld.

The U.S. Commerce Department stunned the industry when it sided with SolarWorld and imposed stiff tariffs on solar panels from China. It was the first of 10 such wins for SolarWorld, and came just two months after SolarCity started working on the Oregon project.

Despite such victories, SolarWorld struggled in 2011-2012. The solar panel business had become a bloodbath as Chinese firms dominated the industry. At least 14 American solar companies failed or shuttered manufacturing plants.

The company’s $5 million share of the university project was a rare bright spot.

“We were really excited,” said Mukesh Dulani, CEO of SolarWorld Oregon. “A five-megawatt project like this was crucial to us. We weren’t producing big volumes at the time.”

SolarCity quickly took the shine off the contract, telling state officials that they were troubled by SolarWorld’s shaky financial condition. Shain, the state’s project consultant, echoed that view.

“Deep concerns in the financial community about their liquidity are creating very difficult project finance issues,” he said in a Feb. 26, 2013, email to Maureen Bock, the Energy Department incentives program manager.

Industry analysts at the time predicted SolarWorld was headed for insolvency and questioned its decision to manufacture solar panels in the West.

SolarCity also claimed SolarWorld was backing away from its product warranties and wanted an additional $250,000.

Dulani vigorously denied his company demanded revised terms or that it was stepping away from its warranties.

Faced with the threat of cancellation, SolarWorld beseeched state officials to intervene to keep the contract alive.

“This is a travesty and there truly is no good reasons for this, contrary to what you may have been told by SolarCity,” said SolarWorld salesman Matthew Lind in an April 2013 email to OSU Sustainability Director Brandon Trelstad. “We have the industry-leading premium product coming out of Hillsboro and we can meet the price that SolarCity wants to pay, delivery capacity, volume, timing, etc.”

OSU did nothing.

“There was a lot of tension between the two companies,” Trelstad said in an interview. “I expressed interest in staying out of it. I didn’t think it was OSU’s place.”

Trelstad wasn’t the only state official in the loop. Managers of the Energy Department’s incentive programs, including Anthony Buckley, Bock and Elias, also knew SolarWorld was losing the contract.

There is no record anyone in either agency lifted a finger to help.

Layoffs followed at SolarWorld.

“We had to make some hard decisions,” Dulani said. “You have to do that when you lose five megawatts of production. This affected our people and their families. SolarCity screwed us.”

Firing SolarWorld was just business, said Will Craven, SolarCity spokesman.

But if workers in Hillsboro weren’t going to make the state’s panels, who would?

Shain assured state officials that SolarCity had found “alternative modules of U.S. manufacture, and very possible Oregon manufacture.”

SolarCity’s alternative: Prison labor.

Selected portion of a source document hosted by DocumentCloud
What project consultant Shain doesn’t tell state officials is that the alternative modules would be assembled by convicts at the federal prison in Sheridan making 93 cents an hour.

Under a subcontractor, Norcross, Georgia-based Suniva, the panel work went behind the walls at the Federal Correctional Institute in Sheridan. Inmates paid 93 cents an hour assembled the panels. That was in contrast to SolarWorld factory pay — $11 an hour to start.

Craven acknowledged that using inmate labor “may not have been in the spirit” of the tax credit program. He said state officials knew prisoners were involved.

State officials said they were unaware of the inmate component until questioned recently by The Oregonian/OregonLive.

“They used inmates?” Simonton asked. “That’s unfortunate.”

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Elon’s Corrupt SolarCity Acquisition

Stocks Plummet and Musk seeks Bail-Out

What is the SolarCity Controversy?

For many consumers, the installation of solar panels means clean energy and savings in the long-term, so what’s the controversy and why has Tesla offered to acquire the company if it is such a success?

SolarCity leases solar panels to consumers for home installation, and one-third of the costs for each panel are subsidized by the government. This means taxpayer money.

The panels provided do not include the latest up-to-date technology, and because technology for panels is constantly changing, consumers agree to a 20 year lease on a panel that fails to account for future technological. Meanwhile, the numbers are telling us that, while its market value has surged tenfold in a two year time frame, stock value is down by 70% from its 2014 peak, and the company has acquired 4.9 billion in subsidies to help finance a mission that might be doomed for failure.

Who are the Key Players involved?

Elon Musk is the founder, CEO and CTO of the corporation SpaceX, and the co-founder of SolarCity and Tesla Motors- a company with a longstanding record of sustainability and success. Recently, given the plummeting stocks on SolarCity, Musk proposed a deal with his cousin Lyndon Rive, the CEO of Tesla Motors, which may be a game-changer for investors. According to USA Today, the deal involves Tesla buying SolarCity for $2.8 billion. Not only does the familial relationship between the companies pose as a potential conflict of interest, Tesla’s stock has gone down by 10 percent since buzz about the deal began. It’s no secret that SolarCity is banking on the promise of short term success while operating in a volatile and changing industry, but will they take Tesla Motors down the same doomed path?

Sources

http://www.politico.com/states/new-york/albany/story/2016/06/cuomo-bullish-on-solarcity-acquisition-analysts-skeptical-103166

http://www.wsj.com/articles/valuing-companies-like-solarcity-requires-bold-assumptions-1466620974

SolarCity Destined for Bankrupcy

Why Solar City has a date with destiny.

Point 1:

Basically: Solar City is deceiving investors.

Stated differently, you can run a company that burns $100s of millions of dollars in cash, yet take on massive amount of debt/leverage, and include this in your definition of free-cash-flow, and Abracadabra you’re a good business. At best this is financial illusion, and at worst outright deception (i.e., trying to get investors to accept a new definition for free-cash-flow). I guess, in this world where central bankers are solving massive leverage problems with even more leverage, perhaps SolarCity feels no one will call them out for this. But, I think it’s a very important dynamic to focus on as the narrative the company is telling people is built on an assumption of free-cash-flow which, at its core, is based on an improper definition.”

Point 2:

Basically: SolarCity keeps on changing the way they calculate cost.

“[SolarCity] has restated the way it calculates its cost/watt (i.e., the key metric that derives their costs); and, in each quarter they’ve restated, their newly reported costs are lower. Their specific verbiage, as detailed below, is: “cost calculation methodology has been updated to exclude costs associated with operating the PowerCo portfolio that are now included and presented in our Recurring Cash Generation of PowerCo memo and to include cancellation costs that had not been previously included”.”

Point 3:

Basically: The renewal deals are not forward looking. You rent a solar panel that will get outdated. 

“A lot of people want to give SolarCity value for renewals in their portfolio While we are assuming a value for SCTY’s “renewal portfolio”, which, again, assumes 20yrs into the future, 100% of the SCTY customers with SCTY systems on their roof will opt to renew the contracts with SCTY at prices that will be above the prices of technology 20yrs into the future; stated differently, it’s the equivalent of assuming you will buy a computer from 1996 today for more than you would pay for a 2016 model? Probably not… thus, in reality the renewal value is not worth much, if anything – it’s an option.”

Point 4:

Basically: who will be paying this debt? American taxpayers through 4.9 billion in subsidies.

“They had talked about a 4.5% blended cost of debt 4 months ago – rates have barely moved – and now, their capital costs are much, much higher at about 8.23%… if rates go up, then what happens?”

Point 5:

Basically: 2.8 billion in debt that somehow needs to be paid off

“Last year, SolarCity burned over $800mn on 870MW of installs, or $0.92/W; this, or a loss on installations, is not being included in anyone’s cost calculations.

Overall, SolarCity is a company that perpetually burns OCF, FCF, and generates grossly negative EBITDA, with $2.4bn in net debt and business model predicated on perpetual capital issuance/needs (they buy solar systems, then lease them out to you/me over a 20yr period collecting cash over the lifetime of the project [which is why they perpetually burn money – it’s simply an asset vs. liability duration mis-match]).”

* * *

“While we agree that it is only a matter of time SolarCity becomes the next SunEdison, perhaps the real question for this typical Elon Musk construct is not whether the company is the next SunEdison, but whether Tesla will be the next SolarCity…”

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