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Tesla’s move from Silicon Valley to Texas makes sense in many ways: The company’s CEO, Elon Musk, and the conservative lawmakers who run the state share a libertarian philosophy that favors little regulation and low taxes. There’s also room in Texas for a company with big ambitions to grow.
“There is a limit to how big you can scale in the Bay Area,” Mr. Musk said Thursday at Tesla’s annual meeting at its new factory near the Texas capital. “Here in Austin, our factory is like five minutes from the airport, 15 minutes from downtown.”
But Texas may not be the natural choice that Mr. Musk has revealed.
Tesla’s stated mission “accelerate the world’s transition to sustainable energy” and there are many customers among their customers who want sporty cars that do not emit greenhouse gases from their exhausts. But Texas is dominated by conservatives who are skeptical or opposed to efforts to address climate change. They also fiercely protect the state’s large oil and gas industry.
And despite the state’s business-friendly reputation, Tesla cannot sell vehicles directly to customers there because of a law that protects it. Car dealerships that Tesla doesn’t use.
In February, a rare winter storm caused the Texas power grid to collapse, leaving millions of people without electricity and heat for days. Soon after, the leaders of the state called – wrongly, According to many energy experts – Blaming the cut in renewable energy, a growing business for Tesla.
“This shows how the Green New Deal will be a deadly deal for the United States” Governor Greg Abbott He talked about the outage on Fox News. “It just shows that fossil fuel is needed for the state of Texas as well as other states to make sure we can heat our homes in the winter and cool our homes in the summer.”
Mr Musk, who has been a resident of Texas since last year, seemed to offer a very different approach on Thursday, suggesting that renewable energy could actually protect people from power outages.
“I was actually in Austin for a snowstorm in a house with no electricity, no lights, no electricity, no heating, no internet,” he said. “This went on for a few days. But if we had the sun and the Powerwall, we would have lights and electricity.”
Tesla is a leading manufacturer of solar panels and batteries, one of their products called Powerwall, used by homeowners and businesses to store renewable energy for use when the sun goes down, electricity rates are higher, or during power outages. The company reported revenue of $1.3 billion from solar panel and battery sales in the first six months of the year.
Mr. Musk’s announcement that Tesla would move its headquarters, currently located in Palo Alto, California, came with a few details. For example, it’s unclear how many workers will relocate to Austin. It is also unknown whether the company will be able to maintain a research and development operation in California in addition to its facility in Fremont, which it says will expand, a short drive from its headquarters. The company has about 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 from hypothermia, smoke inhalation and other causes, Mr. Abbott doubled his fossil fuel use.
In a letter to state regulators in July, the governor directed the Public Service Commission to encourage the state’s energy market to “encourage the development and maintenance of adequate and reliable energy sources such as natural gas, coal, and nuclear power.”
Mr. Abbott also ordered the acceleration of transmission projects to increase connections between natural gas, coal and nuclear power plants. Texas operates its own electrical grid, which is managed by the Texas Electricity Reliability Council, in part to avoid federal oversight. Many energy experts said the regulation limits the state’s ability to import electricity from elsewhere in February.
The governor also ordered regulators to charge “reliability” fees from wind and solar suppliers because, given the natural variability of wind and solar, suppliers could not guarantee that they would be able to provide power when needed.
Mr. Abbott’s letter made no mention of battery storage.
While Texas is one of the nation’s leaders in solar and wind power use, largely due to the low cost of renewable energy, it doesn’t have a clean energy mandate. The state produces more wind power than any other.
Tesla also struggled for years to find a way to sell its cars directly to Texans.
Like some other states, Texas has long had laws protecting auto dealers by preventing automakers, including Tesla, from selling directly to consumers. California, the company’s largest 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 showrooms cannot accept or process orders. Texans can buy Teslas online and pick up the vehicles from service centers.
Once the Austin factory starts making vehicles, including a new pickup truck that Tesla is calling the Cybertruck, these vehicles will need to leave the state before being delivered to customers in Texas.
Tesla lobbied for years to change the law, but made little progress, largely because car dealers had enormous political influence in Texas.
State legislators proposed changing this law, but efforts went nowhere. during the legislative session that ended this year. Maybe once Tesla moves to Austin and starts making cars at its factory with thousands of employees, Mr. Musk will have enough political clout to get the Legislature to act. But Texas lawmakers only meet every two years, so it will take at least until 2023 for the company’s customers to receive a car directly from its factory there.
Michael Webber, a professor of mechanical engineering at the University of Texas at Austin, said Mr. Musk’s decision to move to Texas may have been partly influenced by his ability to pressure the state to change its law.
“The Texas auto market is the second largest auto market in America after California, so if you’re selling cars it makes sense to be closer to your customers,” said Mr. Webber. “The Texas auto market is particularly difficult outside of cities due to legal hurdles.”
Susan C. Beachy contributed to research.
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