Beware of the Smooth Salesman

This week the monorail salesman from The Simpsons paid a visit to South Australia. Only this time he was selling giant uneconomic batteries instead of shooting people through vacuum tubes.

His name is Elon Musk and he runs businesses that depend on huge taxpayer subsidies to function. In fact the three businesses he runs have received around $5 billion in US government largesse.

Now he’s set his sights on the Aussie taxpayer and our hapless leaders are falling over themselves to tweet and chat with him.

Why wouldn’t they? After all, he was in Iron Man and the lefties love him so imagine the levels of green cred a pollie can generate just from chilling with Elon.

But hanging with Elon is very expensive for any government. In fact it’s a textbook example of crony capitalism and everything that’s wrong with it.

Let’s consider his main business: Tesla cars.

As a startup in 2008, Tesla needed around $500 million. Elon Musk lent the company $38 million at a 10% interest rate and got another $465 million from the US government at a 3% interest rate. Musk also got stock options that generated a $1.4 billion profit while the government eventually tipped in another $4.5 billion to finance Tesla’s operations.

Tesla still loses money, doesn’t meet its production commitments and every car is subsidised by thousands of taxpayer dollars.

Musk went on to create two more companies, SpaceX which will provide future services related to satellite launches. SpaceX customers have prepaid so technically it makes money albeit from payments for services not provided.

Solar Cities is his other company which makes and leases solar panels to home owners. It loses money.

All three companies get concessional government loans and thanks to intra-company loans, they are only going concerns because of the inflated value of the Tesla stock price (and government subsidies).

Now Musk has promised to solve the political crisis in South Australia caused by a lack of electricity.

Unfortunately Musk’s numbers and promises don’t stack up but the SA and federal governments are already taking the bait.

After years of peddling fanciful green dreams and endorsing windmills and solar panels as the answer to our growing energy needs, they are close to admitting defeat.

SA Premier Weatherill yesterday commissioned a new gas power plant and ‘battery storage’. While the proposed power plant isn’t big enough, if it does run out of juice I calculate that Musk’s batteries will provide several minutes’ worth of power before needing a recharge!

All up, State Labor’s plan costs taxpayers $550 million, which is a half billion dollar admission of government failure. However, as a shameless political fix I expect it will propel Labor to their 20th continuous year in office.

The South Australian government will be seen to be doing something whilst the SA opposition have been enjoying too many long lunches during their 16 years in opposition. They too fell for the hysteria and hype of renewable energy and refused to stand up for the interests of South Australians.

It was a gross failure of leadership for the SA Liberals and it will likely cost them the next election.

However, despite the cunning of Labor’s new announcement, it will not solve the SA energy emergency. It is too little and much too late.

The only thing that will solve South Australia’s and the nation’s energy woes is to stop the subsidies and let the most cost-efficient and effective baseload power be generated.

It means we must stop the irrational ideological campaign against using our bountiful resources and ensure that we value add to our beautiful black coal deposits.

If we are digging it up for export then surely we can use it ourselves to generate the cheapest, most reliable electricity in the world. That would do more to kick-start our economy and strengthen our manufacturing industry than anything else.

An aside would be that taxpayers would also be able to leave the lights on when they need them the most.