Elon Musk Defends His Companies’ Subsidies

Elon MuskAlt-energy/transport-tech CEO Elon Musk and his trio of companies (Tesla, SolarCity and SpaceX) didn’t cooperate with the Los Angeles Times on its article that tabulated his businesses’ whopping sum of corporate welfare ($4.9 billion), and he was predictably miffed by the (accurate) portrayal.

So he went about trying to fix things on CNBC and with the Times on Monday, but not by denying the conclusions reached by reporter Jerry Hirsch, but instead by essentially pointing at fossil fuel industries and saying “they do it more.”

“If I cared about subsidies,” Musk told Hirsch in a follow-up to his Sunday expose’, “I would have entered the oil and gas industry.” He added that the financial help he receives is a “pittance” compared to government backing of fossil fuels.

Musk’s resentment (envy?) of oil and gas subsidies is amusing. Would you like to shoot your rockets into space with solar panels, Elon?

“What is remarkable about my companies is that they have been successful despite having such a tiny incentive from the government relative to our competitors,” he told the Times.

“They do it too” is not relevant to the report about Musk, but let’s play along for a moment. In his Monday report Hirsch noted that the fossil fuel industry enjoy $550 billion per year in global subsidies, according to an International Energy Agency report, while renewables get about $120 billion. But that doesn’t explain much, given how much larger the oil and gas industries are.

What does matter is the amount of the subsidy in light of the level of production the sector delivers – if you accept the argument that they are necessary and therefore must be optimized, which I don’t. Based upon government data, it has been shown time and again that under more meaningful criteria, public financial support for renewables such as solar and wind energy far exceed that of fossil fuels. As the Institute for Energy Research reported in 2011 (based upon Congressional Research Service studies), renewable energy subsidies were 49 times greater than fossil fuels’ when compared on a per-Btu (British thermal unit) basis. Further, tax dollars received for renewables exceeded those for fossil fuels by more than six times.

Even more meaningful is the fact that nearly 30 states have some form of mandate for electric utilities to generate a certain percentage of their power from renewable sources. For example, in North Carolina, Duke Energy is required to purchase all energy that is produced by solar generators of a certain size, whether they can use it on the grid or not. How would you like the government to force people or businesses to buy your product, regardless of its real worth? Alternative energy mandates therefore act as an additional subsidy that isn’t measured in dollars.

Thus Musk’s laughable comparison of his subsidies to those of oil and gas is easily debunked. But that was never the point about Musk’s companies that was made in the Times story, which clearly explained that the U.S. economy is rife with government subsidies across all sectors. The article’s theme instead was to detail how heavily Musk’s three companies depend on a wide variety of taxpayer help, delivered in many different forms from all levels of government. On Monday, Musk disputed the notion that Tesla, SolarCity and SpaceX are dependent on public help.

“None of the incentives are necessary,” he said on CNBC’s “Power Lunch,” “but they are all helpful.” He also added, “the (Times) article makes it seem as though my company is getting some huge check, which is fundamentally false.”

The article did nothing of the sort, and was very clear about the nature and delivery of the special grants, tax credits, rebates, discounted loans, sellable environmental credits, nearly free construction and infrastructure for Musk’s companies. But in negotiating with the State of Nevada for the location of its so-called battery “Gigafactory,” Tesla sought a $500-million upfront payment (plus other perks) – that’s after Musk had enticed six other states into a bidding competition for the facility. So the alt-energy tycoon actually did want a huge check (which the Silver State balked at), in addition to as much loot as any state would throw his way, which underscored their necessity to him.

But in his rebuttals to the original Times article Musk contended that the incentives merely were a means to reach a goal (the dubious benefits of electric cars, solar energy and space exploration) faster. Those are all industries that one hedge fund manager dubbed as “fringe.”

Electric car and solar technologies have been around for well over a century – during a time of great industrial innovation and growth. They still fail miserably, even with the massive advantage of billions of dollars in subsidies. That’s the business that Musk really is about, so he might as well admit it.

Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes CarolinaPlottHound.com, an aggregator of North Carolina news.