What I'm going to talk about is a fundamental transformation of how the world works, about how energy is delivered across Earth. The overall objective of Tesla is really what set of actions can we take to accelerate the advent of sustainable production and consumption of energy. There's a lot of value in accelerating in order to minimize the environmental and economic damage that would otherwise occur. I think it makes total sense and really is a no-brainer. I think the way I would asses the historic good of Tesla is in how many years of acceleration was it? if we can accelerate sustainable energy by 10 years I would consider that to be a great success, even five years would be pretty good. That is the overarching optimization. It's better if we shift transit to sustainable transport 10 or 20 years sooner than might otherwise be the case. I think Tesla's effect has been much greater then the cars made internally.
There’s three legs to the stool. You need to have sustainable energy transport, essentially electric transport, you need to have sustainable energy generation in the form of solar or wind geothermal, and the third critical ingredient is stationary storage. There’s electric cars, solar power, and stationary battery pack. We need to be able to buffer the energy in a stationary battery pack. With those three things we can have a completely sustainable energy future. If you have the electric cars, stationary battery packs and solar power you can completely solve the worlds energy problem in a sustainable way.
Now, the obvious problem with solar power is that the Sun does not shine at night, I think most people are aware of this. This problem needs to be solved. Batteries are critical to a sustainable energy future, the Sun doesn't shine all the time so you got to store it in the battery. We need to store the energy that is generated during the day so that you can use it at night, and also even during the day the energy generation varies. There's a lot more energy generated in the middle of the day than at dawn or dusk. It's very important to smooth out that energy generation and retain enough so that you can use it at night.
The issue with existing batteries is that they suck, they’re really horrible, they're expensive, and they're unreliable. They're sort of stinky, ugly, bad in every way, you have to combine multiple systems, there's no integrated place you can go and buy a battery that just works, which is what people really want to buy. We have to come up with a solution. That's the missing piece. That's the thing that's needed to have a proper transition to a sustainable energy world. The missing piece is a product we call the Tesla Powerwall. I want to point a few things that are very important about this. The fact that it's wall mounted is vital, because it means you don't have to have a battery room, you don't have to have some room filled of nasty batteries. It means that a normal household can mount this on their garage or on the outside wall of their house and it doesn't take up any room. It's flat against the wall, it has all of the integrated safety systems, the thermal controls, the DC to DC converter. It’s designed to work very well with solar systems right out of the box and it addresses all the needs.
What does this provide you? Well, it gives you piece of mind. If there's a cut in the utilities you're always going to have power, particularly if you're in a place that's very cold. You don't have to worry about being out of power if there's an ice storm. You actually could go, if you want, completely off-grid. Very importantly, this is going to be a great solution for people in remote parts of the world where there's no electricity wires, or where the electricity is extremely intermittent, or extremely expensive. You can take the Tesla Powerwall and it can scale globally.
Arguably there's a way to skip ahead with electricity generation in the same way that it happened with cellphones. In fact, I think what we'll see is something similar to what happened with cell phones versus landlines, where the cell phones actually leapfrogged the landlines and there wasn't a need to put landlines in a lot of countries or in remote locations. In a lot of undeveloped countries they didn't do the landline phones they went straight to cellular. People in a remote village or an island somewhere can take solar panels, combine it with the Tesla Powerwall and never have to worry about having electricity lines. So particularly for rural areas being able to have solar panels with battery packs means you don't even need to have electricity lines. I think this is going to be great. Electricity lines are not the most pretty thing in the world. Being able to have this solution that just works where ever you are, I think is going to be incredibly helpful to people who don't have electricity today.
You can take your solar panels, charge the battery packs and that's all you use. It gives you safety, security, and it gives you a complete and affordable solution. It's designed so you can stack them on the wall, so you can have two, you can actually stack up to nine Powerwalls.
I think it's particularly important in cases where there's like a natural disaster, which could be floods, hurricanes, ice storms, earthquakes, fires, anything that disrupts the utility system. Having an uninterruptible power supply in the form of Powerwall gives you security in those situations, it's kind of like insurance, like you only really want it when you really want it, and I think people love that.
With the integrated app you can see the status of your car, your Powerwall, and your solar, and see at any given time of the day how much energy is coming from the Sun, how much is coming from the Powerwall, what your house is consuming. I'm using it myself and it's like, wow, this is great. It also tells you when the Powerwall saved you from utility interruption. People don't realize there are like many small utility interruptions in a given month. And that's why you see the blinking 12 on your microwave oven or whatever the case may be, or your computer suddenly went dark, or you can even get data corruption and that kind of thing, or your food went bad mysteriously. The Powerwall saves you from all of that.
The way the grid works today is you've got coal, natural gas, nuclear, hydro and then wind and solar, but not enough wind and solar obviously. That's the grid typically in most countries, and you'll notice something - there's quite a big difference in peak to trough usage. The peak usage is typically at least twice the trough usage. Please bare that in mind that's an important point. The electricity grid has to be sized for the worst second, of the worst day, of the worst year, with some power plants not functioning. Well, that's how the electricity grid should be sized, but sometimes it doesn't work out that way. Most the time you have huge amounts of excess capacity. In the US there was a study done - there's studies done on all sorts of things, some of them are complete nonsense, I love the words 'studies say..' but I think this study is probably accurate - that you could replace about 70% of the passenger miles in the United States with no change to the grid, assuming charging predominately at night. At some point there will need to be improvements to the electricity grid, because there's a huge disparity in the peak energy use during the day and the energy use at night, and most charging of electric cars occurs at night - we have a quite strong empirical basis for concluding this, because we can look at all our customers and plot their energy usage and it's very predominately at night. It's basically just like your cell phone, you go home, you plug it in and it charges overnight.
The Powerwall is a good solution for homes and perhaps for some small commercial applications, but what about something that scales to much much larger levels? for that we have something else, we have the Powerpack. The Tesla Powerpack is designed to scale infinitely. You can literally make this into a GWh class solution, you could go gigawatt class or higher. One of the exciting potential things with the Powerpack is that it's quite compact, because it's lithium ion it doesn't take up much space, you can get 100 kWh storage in something smaller than the size of a refrigerator, and you can get megawatt hour very easily by putting them in a row. When I say scalable, I really mean scalable. The whole system is literally designed for infinite scalability. We could power a small city, like Boulder, with a GWh class pack. We've got a number of very big storage projects underway with utilities around the world, so both in the U.S. and outside.
The thing that's interesting about the energy storage situation is that even without renewables there's a huge potential to make the energy grid more efficient, and to be able to shut down the heaviest polluting power plants, because the energy consumption through the day usually changes by a factor of two or more. With the exception of hydroelectric you can't store the power, it has to be available in real time. The world has somewhere between two to three times as many power plants as it actually needs. There are hundreds of thousands power plants using fossil fuels, if you can buffer the power with big stationary battery packs, then you can actually shut down the worst half of the power plants in the world. I think that's a very exciting thing that I think a lot of people don't appreciate, and I think it's going to make a big difference. Even if renewables were not part of the picture. The Powerpack is independent of renewables, you can probably take about somewhere close to half the power plants in the world and turn them off if you had batteries.
The interesting thing about the Powerwall and Powerpack is they scale on a global basis a lot faster than cars do, because when you have cars you have to deal with regulatory regime in a wide range of countries. Most countries have a very specialized regulatory regime and you're dealing with entrenched competitors. As for stationary storage, no one is really yet doing it right and the regulations are much more consistent from country to country.
It just became increasingly obvious that as we were developing new versions of the Powerwall, particularly as we integrated more of the inverter electronics and the intelligence in the Powerwall, it really needed to take the solar panels and solar system into account, otherwise you duplicate a lot of hardware that doesn’t work together as well, it’s more expensive. The installation cost is substantially higher. You’ve got to put up the Powerwall, the solar panels, if you’ve got an electric car you’ve got to install the wall connector and a home charging system. Those are potentially three visits or at least two visits. There was really no question about the convergence of Tesla and SolarCity.
In terms of the sales process itself when we were selling somebody the Powerwall, very often if not almost always, they were curious about solar. Not being able to sell them solar directly at Tesla through our stores was pretty inefficient. We really needed to have an integrated product. The Powerwall and the Powerpack need to be designed together with the solar system so it’s a one-piece thing. The problem also was I think we didn’t have a good basis for doing some special deal with SolarCity because that’s effectively a conflict of interest. If we gave a special deal to SolarCity and SolarCity was not part of Tesla, then why were we doing that? Ironically, a conflict of interest goes away if we’re one company, but it doesn’t go away if we’re two separate companies. It was not very good rationale for just offering a special deal, and only working with one company that I also happen to own. I didn’t think we had a good moral or legal basis for behaving a special way to SolarCity unless it’s actually one company. It just made things, the execution, I think, a lot easier and cleaner and more effective. That’s why I said I think it’s really kind of a no-brainer. Like, if we didn’t do this it would make Tesla’s execution harder and worse. It was really just a question of what timing was appropriate for that convergence. It was basically SolarCity’s product roadmap and Tesla’s product roadmap. On the installation and setup side that’s one crew instead of two, and one visit instead of two to three visits. The ongoing maintenance is kind of one point of contact and not sort of two or three points of contact. The cost of the system itself is lower because we’re not duplicating hardware. The timing was, if anything, we maybe should have done this sooner, but I certainly don’t think we did it too early.
I don't think there's a strong product rationale to combine SpaceX and Tesla, as there was for Tesla and SolarCity. It's really quite tenuous for SpaceX and Tesla. There's a little cooperation that happens between the companies, but it's not that would justify merging them into one entity.
I think the word synergy is like almost sort of a dirty word, but I think these synergies are really just common sense. Like, obviously, it’s more efficient to do it as an integrated system at the sale and at the installation, and in terms of just general maintenance and managing the customer relationship. I think that makes it kind of a pretty obvious thing to do, and it’s quite difficult to create an integrated product if you’re forced to be at an arm’s length and be two different companies. If you have two separate companies, you have to have two separate computers, say operating systems. You've got to have separate communication systems interfacing with two separate server networks. You are developing two separate phone apps for the consumer to monitor their system. You've got to do two installation businesses instead of one. Kind of the way I think about it from a gut standpoint is like, first and foremost, this allows us to offer the most compelling product to consumers and businesses and a seamlessly integrated product that all just works together, that’s better. You don’t want to have to have a heterogeneous systems integration problem. That’s just basically where the interfaces break down and then people are pointing fingers like this didn’t work; no, your thing didn’t work. If it’s just one integrated system, there is no finger-pointing, you can iron out all the bugs and it just works. You’re not wondering should I blame the solar company or the battery company or the who knows. It’s just like a pain, a pain in the butt to try to figure that out if you’re the end customer. Then in addition, there’s obvious cost savings to be had if in the same store we can sell twice as much dollar volume. You look to say Model 3, a $35,000 car, well, that same person at the same moment we could sell them roughly an equivalent amount value of solar panels and a Powerwall, effectively doubling or almost doubling the sale at that time, and then putting it all in at the same time.
I think the tide of history very strongly supports a sustainable energy future, primarily solar, and virtually entirely electric vehicles. Maybe things temporarily interrupt that tide of history, but in the long term it will overwhelm everything. Our goal is just to accelerate the advent of that future as fast as possible and this helps us accelerate it. That’s the reasoning. We can't do this well if Tesla and SolarCity are different companies, which is why we needed to combine and break down the barriers inherent to being separate companies. That they are separate at all, despite similar origins and pursuit of the same overarching goal of sustainable energy, is largely an accident of history. Now that Tesla was ready to scale Powerwall and SolarCity was ready to provide highly differentiated solar, the time had come to bring them together. Arguably we should have done it sooner.
It is interesting to look at the feedback that I’ve received since we made the announcement, anyone who is product-focused sent me a congratulatory note and like why didn’t you do it sooner sort of message. Then people that are sort of more finance-focused, they were a lot more worried about it.
If you place yourself in the consumer's shoes, you just want it to work. You don't want to know how it works. You don't care about the details. Most people don't even know what an inverter is. They've never heard of this thing. Most people don't even know what AC or DC is. If you ask, so what's DC current? or what's direct current? or what’s alternating current? they would not be able to tell you. A lot of people don't even know the difference between power and energy, one's in kilowatts, the other one's in kilowatt hours, and they don't need to know, like there's not a good reason for them to know. Stuff should just work and take care of itself. It's just got to work reliably, look good, not take up a ton of space, the buying process has got be easy, you can check up on it with the app on your phone. You want it to be easy, you want it to just work, you want it to be affordable, you want it to look good, so that's what we're going to do. I mean, really like solar and battery go together like peanut butter and jelly.
You obviously need the battery, particularly as you get to scale and you want to have solar be a bigger and bigger percentage of the grid. We've got a huge project in Hawaii. I think it's the biggest solar battery utility scale installation in the United States, maybe the world. I mean it helps to use that as an example of one of the reasons to combine Tesla and SolarCity, in order to do the big Hawaii utility solar battery project, it had to go through the independent committees of both boards, there had to be discussions back and forth, it took a few months to get that all worked down. As we do many more of those deals, if we go to dozens of those deals, hundreds, potentially thousands in the future, this is completely unworkable, I mean no way we could send all that through independent board committees, it's completely unworkable.
One of the things that was missing was having rooftop solar that looks good. I think the one thing on the solar side – on the panel and module side and cell side was to create a high level of product differentiation, in particular with respect to aesthetics, as people care a great deal about that. I mean, technically, you could live in a house without drywall and just have all the insulation and wiring just hanging there, but people care about drywall. People care about remodeling their kitchen. People care about their yard. They care about making sure that their primary asset, typically being their house, is something that looks good and that they are proud to show. I think the aesthetics matter a lot, at Tesla we’re super sensitive to aesthetics.
It's like what if we can offer you a roof that looks way better than a normal roof? What if we could offer you a roof that lasts far longer than a normal roof? like now it's a different ballgame. This is a night and day difference. If let’s say somebody’s got a $400,000 house, if you make the roof look ugly then arguably you’ve made that house worth 5% less or some nonzero percent less valuable. On the other hand, if you make the roof look beautiful you’ve made the house more valuable. Maybe that’s plus 5% or some nonzero plus percent in the value of the house. If it is something on the order of 5% then the value delta there is, call it $40,000 or maybe it’s only like 2% or 3%. and it’s $20,000, it’s like there you have quite a big value delta. So being able to have solar power, that looks great and I think better at cost, at least as good if not better than what’s coming from anywhere else in the world, that’s obviously a winning outcome. That's where we got the glass Solar Roof we developed. It's a Solar Roof as opposed to a module on a roof. Solar glass tiles where you can adjust the texture and the color to a very fine-grained level. Then there's sort of micro louvers in the glass, such that when you're looking at the roof from street level or close to street level, all the tiles look the same whether there is a solar cell behind it or not. You have an even color from the ground level. If you were to look at it from a helicopter, you would be actually able to look through and see that some of the glass tiles have a solar cell behind them and some do not, but you can't tell from street level. We're doing it in different styles so it matches the aesthetics of a particular house or regional style. I think that is actually pretty important.
The conventional flat-panel solar will be for flat roofs and commercial the way to go. Standard flat panel stuff, I think, is still the right solution for any kind of flat roof situation, which is most commercial installations and a lot of houses, or some part of the roof where it's really not visible and therefore, doesn't really matter from an aesthetic standpoint.
We're very confident that the cost of the Solar Roof will be less than the cost of a normal roof plus the cost of electricity. In other words, this will be economically a no-brainer, we think it will look great, and it will last — We thought about having the warranty be infinity, but then people thought, well, that might sound like were just talking rubbish. But actually this is toughened glass, after the house has collapsed and there's nothing there, the glass tiles will still be there. I have it on my house and JB has it on his house we have the Solar Roof tiles installed and working. Looking really good. I think this roof's going to look really knockout as we just keep iterating.
I'd just like to emphasize, I think, this is really a fundamental part of achieving a differentiated product strategy where it's not a thing on a roof, it is the roof. That was quite a difficult engineering challenge, and not something that was available really anywhere else that was at all good.
I think eventually almost all houses will have a Solar Roof. The thing is to consider the time scale here to be probably on the order of 40 or 50 years. So on average, a roof is replaced every 20 to 25 years, but you don't start replacing all roofs immediately. Eventually, if you say were to fast-forward to say 15 years from now, it will be unusual to have a roof that does not have solar.
The cool thing about this is that it actually doesn't cannibalize the existing product of putting solar on the roof, because essentially if your roof is nearing end-of-life, you definitely don't want to put solar panels on it, because you know you're going to have to replace the roof. There is a huge market segment that is currently inaccessible, because people know they're going to have to replace their roof, you don't want to put solar panels on top of a roof you're going to replace. However, if your roof is nearing end-of-life, well, you've got to get a new roof anyway, there's 5 million new roofs a year just in the U.S. and so, why not have a Solar Roof that's better in many others ways as well. For someone that is building a house or where the roof is nearing its expiry date, then the Solar Roof is the right option. If you had our solar system that made your house look better, lowered your cost of electricity and then gave you security against a power outage with the Powerwall, and allowed you to go potentially completely off grid, then that’s kind of a no-brainer, like why wouldn’t you do that? Create a smoothly integrated and beautiful solar-roof-with-battery product that just works, empowering the individual as their own utility, and then scale that throughout the world. One ordering experience, one installation, one service contact, one phone app.
The storage costs are going to drop pretty dramatically with each passing year. We have the best cell at the lowest price. That's a really good place to be, and we're confident we can achieve that same outcome in solar.
Like I said, you just can't get beyond a certain scale with solar unless you have the batteries to go with it to buffer the power. You got to manage all of that because you'll have millions and millions of these batteries, you've got to manage that, integrate it with the utility. I do want to emphasize, there's still a very important role for utilities here, sometimes people think that this is an either/or thing, it's like either rooftops are going to win or centralized generation is going to win, and actually both are going to win, because the electricity usage is going to increase dramatically as we transition away from burning old dinosaurs to electric cars, and then to electric transport.
It's very important to have rooftop solar in neighborhoods because otherwise, they will need to have massive transmission lines built. People don't like having transmission lines through the neighborhood, and I agree. I mean, I don't think anybody wants to have huge new power lines pulled through their neighborhoods. Vast expansion of substations and all the things that would be necessary to fully electrify transport and heating. It's a huge headache to do that. It's not something that, I think, any consumer wants and it's not a headache that utilities want to have to go through, but if you don't have localized generation combined with central, that is what's going to have to happen and that would suck. You want to have some localized energy production combined with utility. You want rooftop solar and utility solar that is really going to be the solution from a physics standpoint. I can’t see any other way to really do it.
I think there is a lot of opportunity at the utility scale, providing integrated solar battery system to utilities so that they can provide sustainable energy that's load leveled and buffered to their customers. I think there's going to be actually a lot of business with utilities, as we provide them with an option to have sustainable, centralized power generation. That's what I want – I really want to emphasize, like, our goal is to work with utilities and it's collectively to solve the future energy electricity demands of the world, as the electricity demand rises tremendously.
The nice thing about solar power is it tends to match energy usage, generating power during the day when you tend to use the most power. So solar actually helps the grid because it generates energy when people use it most. Like electricity demand peaks during the day, because that's when the air conditioning is running at maximum power, that’s when the companies are all operating, machineries are operating. Particularly on summer days when you have air conditioning running, Air conditioning is a huge consumer of electricity. You generally only need it when it's warm and sunny - that's when you need it most. Solar actually helps utilities up to a certain percentage. You can sort of debate that percentage but it's somewhere between like 10% – minimum 10% but it could be up to 20%.
What I want to do is explore what's really needed to transition the world to sustainable energy. Is this actually possible? is it something that is within the ability of humanity to actually do or is it some insurmountable super-difficult impossible thing? it’s not. First of all, it's important to appreciate that the amount of energy that reaches us from this handy fusion reactor in the sky called the Sun is tremendous. It’s 99% plus of all energy that Earth has. Then there’s energy that we need to run civilization. Which to us is big, but compared to the amount of energy that reaches us from the Sun is tiny. If you wanted to power the entire United States with solar panels it would take a fairly small corner of Nevada, Texas, Utah -- you only need about 100 miles by 100 miles of solar panels to power the entire United States. It’s remarkable how little land you need to generate enough power to completely get the United States off fossil fuels. It’s crazy. Like a little corner of Texas or Utah, that’s all the United States’ power. The land area you need to power the United States fits into the little Texas Panhandle. It's really not much and most of that area is going to be on rooftops. You won't need to disturb land, you won't need to find new areas, it's mostly just going to be on the roofs of existing homes and buildings. The batteries you need to store that energy to make you have 24/7 power is one mile by one-mile. One square mile. That is it.
With 160 million Powerpacks you could transition the United States. With 900 million you can transition the world. You can basically make all electricity generation in the world renewable and primarily solar. Then going a little further if you want to transition all transport, and all electricity generation, and all heating to renewable you need approximately two billion Powerpacks. Now that may seem like an insane number and I'm very tempted to do the billion thing that - I must restrain my hand - but in order to - like, two billion Powerpacks is that a crazy number? Is that an impossible number? It is not, in fact. The number of cars and trucks that we have on the road is approximately two billion. The point I want to make is that this is actually within the power of humanity to do. We have done things like this before. It is not impossible, it is really something that we can do.
We’re going to try to grow that as fast as we can and not just in the US, but throughout the world. The advantage of solar and batteries is that you can avoid building electricity plants at all. You could be a remote village and have solar panels that charge a battery pack that supplies power to the whole village without ever having to run thousands of miles of high-voltage cable all over the place.
Then what’s the long-term picture? Long-term picture is a world with sustainable power generation, which is going to come primarily in the form of solar, overwhelmingly in the form of solar energy, stationary storage to buffer that power, and then electric cars. Those are the three parts that are needed. Solar power, stationary storage, electric cars. And those are the three things that I think Tesla should be providing, and Tesla is going to be the leader in all three.
This is the ultimate solution we’re talking about here. This is the solution. This is what the world needs. We’re going to try to make that happen as fast as possible and the fundamental good of Tesla will be measured by the degree to which we accelerate that transition. We’re going to try to make it happen as fast as possible and I think we will have a meaningful impact on that timeframe. We want to show people most importantly that this is possible. If you look at that - that's the future we could have. Where the curve slowly rolls over and goes to zero - no incremental CO2 - that's the future we need to have. That's the path - it's the only path that I know of that can do this, and I think it's something that we must do, and that we can do, and that we will do.