FRenergy's Profile

While Tesla is a leader in providing battery technology, it may have to be more transparent and proactive about mitigating its own carbon footprint. As an illustration, a recent Swedish study found that the manufacture of a Tesla kWh battery emits 17.5t of CO2. [1] Although the report’s findings and assumptions are open to challenge, the fact remains that Tesla’s manufacture is not currently carbon neutral. In light of the larger objective to reduce carbon emissions in fighting climate change, does Tesla get a “free pass” for not directly addressing the carbon footprint of its own processes?

Probably not. One way the company could address this concern: Tesla could conduct a carbon audit of its production processes and associate carbon costs with specific products. Even simple transparency in allocating and disclosing emissions impact could change consumer behavior and even improve demand for Tesla. For example, the Energy Star labeling scheme has by some accounts reduced US carbon emissions by 150M metric tons over a decade. [2] Similarly, Tesla’s adoption of a label system could drive consumer’s decisions and, as other companies enter the market, provide an early differentiator that preserves its incumbent advantage. While a short-term cost, measuring and disclosing the carbon impact of its product lines could be an investment in strengthening Tesla’s position.

[1] Rob Bushway, “New Study: Large CO2 Emissions From Batteries Of Electric Cars,” Climate Depot, June 2017, http://www.climatedepot.com/2017/06/12/new-study-large-co2-emissions-from-batteries-of-electric-cars/, accessed December 1
[2] Mark A. Cohen and Michael P. Vandenbergh, “The Potential Role of Carbon Labeling in a Green Economy,” Resources fro the Future, April 2012 http://www.rff.org/files/sharepoint/WorkImages/Download/RFF-DP-12-09.pdf, accessed December 1

As you point out, the impact of this trade barrier if imposed will definitely favor suppliers with more domestically oriented supply chains such as First Solar. However, I wonder if the specific form of the trade remedy also has an impact on what Sunrun’s strategy ought to be.

As the final detailed report to President Trump has not yet been made public, the question is still open as to which kind of measure the administration will ultimately impose. Might Sunrun’s response vary based on the type of barrier? While prices will rise under virtually any scenario, a potential quota in addition to tariff furthermore restricts the supply of modules beyond just pricing out certain panels. For example, two of the four commissioners on the USITC favor a 1GW tariff-free quota, with 30% tariff applied to any additional import. [1] The effect might exacerbate the decline in installation growth that we would expect from purely a price increase due to tariffs. If a quota goes through, Sunrun might consider striking concessions or longer-term contracts with its existing suppliers, so that it can capture a larger share of imports (if the tariff design permits). On the project development side, it could also prioritize its most profitable geographies to preserve margins, stunting the growth in less regulatory-friendly or lower solar-potential states.

Given the declining attractiveness of distributed and residential solar in many markets (e.g., diminishing net metering regimes), it would interesting to see whether the share of total PV in the US re-balances more into utility-scale installations such as the ones that First Solar specializes in.

[1] Sunrun Inc, SEC Filing, Form 10-Q, http://investors.sunrun.com/node/8096/html, accessed December 1

Your suggestion to aim operational efficiencies makes sense and is likely more palatable to fruit-loving consumers, but I wonder whether Driscoll’s could also move in a different direction in its supply chain.

Consider re-balancing Driscoll’s sourcing to include more domestic suppliers e.g., those southeastern growers in the U.S. whose season overlaps with Mexican berry farms. How liquid are supplier contracts for berries, so that Driscoll’s could use its scale to offer a slightly higher price to farmers, while remaining below the tariff-loaded import price and stealing cheap domestic farmers who produce better in winter away from its competitors? Perhaps the company could relax its margin requirement not from the end-consumer’s price, but from the price that it offers to the primary grower.

Great potential but challenging implementation, as you pointed out. Given the low margins and cyclicality of the shipping business, a roll-out of blockchain that is not met by timely customer adoption (e.g., due to the delays you mention) could cost Maersk much in the meantime, especially if it chooses not to passing the added cost as a premium to customers.

A second concern that comes to mind is the competitive response of other companies. As the first mover in its value chain to do blockchain, how does Maersk solidify its starting advantage from erosion by other players? If Maersk does the heavy lifting of educating its customers and its supply chain about blockchain, a competitor could enter later at a lower cost (given the more advanced stages of the technology) and build off the groundwork that Maersk has already laid. Will blockchain be an effective way to increase customer value proposition while also upping switching costs? Or is it destined to be a platform-wide technology, and Maersk is disproportionately investing to build a market that will benefit shipping companies beyond itself?

Thanks for sharing this CPG example. The idea that P&G can go further in these digitization efforts to eventually cut off parts of the supply chain is intriguing. If this is the case, how and why are their supply chain partners currently collaborating in ongoing digital efforts, if the ultimate result might be to dis-intermediate them? Do you see a future where current supply chain actors remain in a partly digitized world, while P&G pursues a different segment of customers altogether through a P&G-only, truly digital approach? While there likely is enough gross demand to support multiple supply chain types at first, we can imagine that if the direct-to-consumer is superior, the impact of factors such as network effects may favor an winner-take-all shift to that model.

You raise interesting points, and I like how action-oriented this is in providing a prioritization of plants to be examined for.

However, I’m not quite whether the first category of prioritization should be plants where increasing temperatures drive up regional generation and transmission costs. While I don’t disagree with the phenomenon you describe (you may have come across this source already http://iopscience.iop.org/article/10.1088/1748-9326/11/11/114008/pdf), it’s probably not the most urgent in the short-term. For example, the rising cost of generation v. the cost savings promised by renewables is probably a more compelling driver to contract for non-fossil fuel capacity and favors taking care of prioritized categories two and three (energy intensive and carbon-intense fuels). By the time St-Gobain does this, it will likely have already tackled category number one as well.

Separately – as you cite, the impact of a rise in sea levels isn’t something that contracting for greener energy can directly counter – might there be a strategy where St-Gobain looks at manufacturing footprint consolidation and relocation, so that they move away from coastal exposure and reduce logistics cost? While the current plant network is likely optimized for shorter, regional distribution, we could also imagine that the company partners with lower-emission logistics providers and reduces its overall plant count to force energy efficiencies.