Electric vehicles, if they are charged by green electricity, can reduce carbon emissions. Battery technology is a key factor holding back electric cars. Physics Nobel laureate Burton Richter in his admirable 2010 book, Beyond Smoke and Mirrors: Climate change and Energy in the 21st Century, recommends more research into battery technology.
Accordingly, there were national as well as local issues at stake this week, when the Nevada Legislature met in special session. They voted unanimously to give the Tesla company $1.3 B in tax breaks as incentive to build a $5B Gigafactory (battery factory) near Reno. Tesla claims the factory will create 6,500 new jobs, which works out to $200,000 per job.
I hope they got some of that in writing, because verbal promises are worthless. If Tesla ends up creating only half the number of jobs that it touted, are the tax breaks cut in half also?
Nevada's governor, Brian Sandoval, kept the legislature in the dark until the special session met, and presented it to the legislature as a take-it-or-leave-it deal.
Tesla was negotiating with other states besides Nevada, and was in a position to drive a hard bargain. It took a stupendous mount of bribery ($1.3 B works out to $471 per Nevada resident) to get the factory in Nevada.
Skeptics think that Tesla stock is the latest bubble stock. Insiders at Panasonic, VW, and Daimler have expressed skepticism. Analysts say that the factory will only be profitable if it can reduce battery manufacturing costs by 30% from present levels, and must sell 500,000 cars per year. Last year, Tesla sold under 25,000 cars. The company is not currently profitable.
Critics of the deal came from the right and left. The right was represented by the NPRI , Nevada Policy Research Institute, which claims it supports government "transparency". However, NPRI refuses to disclose its funders, so their funding sources remain officially secret (but widely viewed as a front group for at least one big casino.) NPRI thought the governor's calculations of the benefits of the factor were too optimistic. The left was represented by the NPLA, Nevada Progressive Leadership Alliance, which was concerned with funding vital government services. In the short run at least, the result will be a demand for government services for schools, police, fire, roads, etc, but without any additional tax revenues.
Governor Sandoval claims that Nevada will benefit by $100 Billion over the next 20 years, even after the tax breaks. Even if it doesn't happen, he'll still be OK. The factory won't be running before 2017 at the earliest, and Sandoval is widely touted as a potential vice-presidential Republican candidate for the 2016 election cycle.
I wrote to my state legislators, pointing out the price tag of $200,000 per job. I asked politely if I form a company and create five jobs, do I get a million dollars in tax breaks? I will let my faithful readers at Rabett Run when and if I hear anything. Don't hold your breath.