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Was Elon Musk’s Poll a Regulatory Snafu?

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Elon Musk’s poll to survey his Twitter audience about whether or not he should sell 10% of his Tesla stock (TSLA) has caused a media frenzy, and the company’s market valuation to plunge. The stock — which was already identified as driving up the S&P 500 index’s exposure to disruptive technology — is again volatile. With about a $60 billion reduction in the company’s market value on Monday, questions started to be raised as to whether the CEO may have violated his settlement with the US securities regulator (SEC). [Full disclosure: I own some Tesla stock. Nothing in this article is investment advice of any kind.]

The strange series of events began after Senator Ron Wyden (D-OR) floated a proposal to tax investments every year for the country’s billionaires — US stock investments are taxed currently only when they are sold. Wyden walked back the idea, acknowledging that his party’s narrow Congressional margin would make passing such a bill very difficult. However, he pursued the argument that the US tax system is unfair, insisting that the über rich should pay a percentage of their net worth to the US government every year, whether or not they sell their shares.

Billionaires have been able to pay low effective tax rates, in part, because the value of their company stock holdings is not subject to capital gains taxes until they are sold. Many, like Musk, also don’t make much “income” — they simply borrow millions or billions of dollars at low interest rates, with the loans secured by their high wealth in shares. As long as the value of their shares grows more than the interest on their loans, their wealth climbs and they live as luxurious of a life as they want while paying very little in taxes.

Musk vehemently opposed the plan Wyden proposed and shared his discontent in a tweet. “Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock,” he wrote to his 63.1 billion Twitter followers. “Do you support this?”

In subsequent Twitter give-and-takes, Musk noted, “I will abide by the results of this poll, whichever way it goes” and “I do not take a cash salary or bonus from anywhere. I only have stock, thus the only way for me to pay taxes personally is to sell stock.” The poll garnered more than 3.5 million votes, and 57.9% of the people voted in favor.

Last month, Tesla became the fifth company to reach $1 trillion in market capitalization, joining Apple, Microsoft, Amazon, and Alphabet. But Tesla shares fell sharply on Monday. By the start of day Wednesday, Tesla stock was listed at $1023.50 per share. Editor’s note: at the time of editing this article, just before publishing, the stock is down 10.3% in the past 5 days and is at $1030.34 (see image at top).

Musk’s Poll Could Move Markets & Spark New SEC Monitoring

Two weeks ago, CNBC commented that the Tesla CEO may soon become the first person with a net worth of $300 billion. That prediction came after Musk added more than $36 billion to his fortune with the Hertz announcement that it would be ordering 100,000 Tesla vehicles to build its electric rental fleet. Tesla shares soared 12.7% soon afterward. Musk, with his recognized ability to move markets with his tweets, noted subsequently that the Hertz deal hadn’t been finalized, and Tesla shares fell sharply afterward. (Though, Hertz responded that it had already started receiving cars. …)

Time passed, memories were short, and, on Monday of this week, Forbes estimated that Musk was the world’s richest person, with a net worth at $304 billion.

Musk owns about 17% of the 1 billion outstanding Tesla shares, according to CBS News. If he sold 10% of his holdings at their current price or so, it would net him somewhere around $20 billion. So the tweet polling his audience reopens the controversy over whether Musk remains in compliance with a US Securities and Exchange Commission (SEC) settlement. In 2018, the SEC charged Tesla with failing to have required disclosure controls and procedures relating to Musk’s tweets. The summation said that Tesla had no disclosure controls or procedures in place to determine whether Musk’s tweets contained information required to be disclosed in Tesla’s SEC filings. The subsequent agreement stated:

Musk will step down as Tesla’s Chairman and be replaced by an independent Chairman. Musk will be ineligible to be re-elected Chairman for three years;
Tesla will appoint a total of two new independent directors to its board;
Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications; and,
Musk and Tesla will each pay a separate $20 million penalty. The $40 million in penalties will be distributed to harmed investors under a court-approved process.

Tesla lawyers agreed to vet some of Musk’s tweets in advance. The settlement was later amended to clarify when pre-approvals were required, prompted by an unvetted tweet by Musk about Tesla’s vehicle production forecast.

The SEC again admonished Tesla and Musk for allegedly violating terms of the 2019 revised settlement agreement, according to the Wall Street Journal. In a May 1, 2020 tweet, Musk said that Tesla’s stock price was “too high,” and the company valuation promptly fell more than $13 billion. The SEC also at the time pointed to Musk tweets from 2019, where he discussed solar roof production numbers without obtaining pre-approvals. CNBC notes that, while the securities regulators monitored Musk’s use of Twitter amid the pandemic and confronted Tesla via correspondence, the SEC did not file a motion to compel enforcement of the settlement agreement.

Now the new 2021 Musk poll raises questions about whether he is, indeed, in compliance with the 2018 SEC settlement.

Bloomberg suggests that Musk is unlikely to incur the wrath of regulators within the SEC with the recent Twitter poll. Don Langevoort, a securities law and corporate governance expert with Georgetown University Law School, told the Washington Post he thinks Musk’s weekend tweet is unlikely to draw SEC action, given that a Twitter poll isn’t binding. “The SEC in high-profile cases is usually pretty careful to select cases that they are highly confident in winning,” Langevoort said. Ensuring that Musk is acting in the interest of investors would fall to the company’s board, he added.

SEC action may not be initiated for another reason. Musk’s poll may have less to do with a populist vote and more to do with a looming multi-billion-dollar tax bill. CNN reported that Musk is just months out from a deadline to exercise the 22.9 million stock options he received as part of his 2012 compensation package. Performance-based options generally are taxed at the lower capital gains rate, with an important exception — Musk owns more than 10% of Tesla’s total shares.

He had to use them by August 13, 2022 or lose them. And so he did. Musk sold roughly $5 billion worth of Tesla shares on Monday, according to SEC filings. This was his first such sale since 2016 — just days after conducting a Twitter poll asking his fans if he should dispose of 10% of his stake in the electric carmaker. The motivation for Monday’s sale was “solely to satisfy [Musk’s] tax withholding obligations related to the exercise of stock options,” the filing said.

CNN Business posits that the share price also could have fallen Monday partly because of Musk’s sales of almost 1 million shares that took place that day.

By exercising his shares, though, they will be treated as regular income subject to income tax. He’ll find himself facing a tax bill between nearly $11 billion to as much as $16 billion at current share prices. Continued increases in the value of Tesla stock could have pushed his tax bill even higher.

Also, Musk may face California state taxes on top of the federal bill as he still has a major factory and offices in Palo Alto, and Musk spends time working there. Or, perhaps, Musk’s move to Texas means that he will pay no taxes in California on this sale.

Final Thoughts

A major stakeholder announcing plans to sell shares is rarely a good thing for a stock. But many analysts are still bullish on Tesla and Musk, predicting further price increases in the year ahead.

Musk’s poll and tweets aside, it’s important to remember that Tesla is a company that is changing the way we think about transportation. Its influence is moving more than markets — legacy automakers are doing a fast shuffle to remake their manufacturing capabilities to embrace electric vehicle production.

If you want to have a fun retrospective on the power of Musk’s tweets, Fortune outlines “7 Elon Musk tweets that have sent Tesla shares on a rollercoaster ride.”


 

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Electric Car FAQs: Do EVs All Use the Same Plug?

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Electric cars are mostly like regular cars. You step on the pedal on the right and the car goes, you turn the wheel and the car turns, and the only real difference is what kind of fuel goes in it. We say stuff like that all the time. If we’re being completely honest, though, that’s only mostly true. 99% of the time the only difference is what kind of fuel goes into the car, but that last 1% probably needs explaining.

To provide that explanation, we’ve launched a new segment called “Electric Car FAQs” that hopes to answer those oddball questions that come up 1% of the time. Today’s question: do EVs all use the same plug?

EV FAQs: Do EVs All Use the Same Plug?

Even if you don’t know anything about how electric cars work, you could probably guess that they run on some kind of battery. You’d be right! That battery acts like a gas tank in a conventional car, storing “electric fuel” in reserve until it’s needed. You even fill it up like a gas tank — the main difference is you’re plugging the car into an EV charging station, not a gas pump. Sounds easy, right?

The good news is that it is easy to plug in your EV! But one thing that many people don’t realize is that there are different types of electric car plugs, and different types of chargers. Each one has different capabilities, costs, and charging speeds, and that’s where some confusion can sneak into the conversation.

As ever, we’re here to clear things up for you — starting with the chargers.

EV Charging Levels

Image courtesy of GM.

Level 1 is basically a standard 3-prong outlet, like the kind you have your phone charger plugged into. These work the same way, providing a slow trickle of energy to your electric car battery to basically replace a few miles of driving. You’ll usually get 2-4 miles of range per hour of charging, and it usually won’t increase your monthly electric bill by a noticeable amount, making level 1 home charging an extremely cost-effective charging solution.

Level 2 charging stations use 208 or 240 volts of electricity — more like the big plug your clothes dryer is plugged into. These are to charge your vehicle up to 10 times faster than a level 1 station. If you drive more than a few miles per day and want the convenience of knowing you’re starting each day with “a full tank” from charging at home, installing a level 2 charger in your garage is the way to go, and you can expect to get up to 200 miles of range from an 8 hour, overnight charge.

Because level 2 power is usually available in most commercial locations, many businesses that want to incorporate EV charging stations into their parking lot deploy level 2 charging stations. Whether you’re putting a level 2 one in at your home or at your business, be sure to check with your local utility for rebates and incentives to help keep costs down.

Level 3 DC Fast-Charging

DC fast-charging plugs are typically considered “level 3” and have significantly faster charging speeds than the level 1 or level 2 “AC” chargers. With enough juice, a DC fast charger can charge an electric car battery to 80% from almost empty in about 20 minutes (depending on the vehicle) … but this is a good time to tell you that not all “level 3” charging is created equal.

“Level 3” is a generic term that used to be quite clear. As technology has advanced, though, it’s a term that has led to more confusion that anything else, because it could mean anything from around 25kW of power to more than 300kW (!?).

That’s why some electric car owner apps like Chargeway have “split” Level 3 charging into levels — 3, 4, 5, 6, and 7 — to highlight that difference. At a local (well, local to Chicago, anyway) “level 3” station in Chargeway, it would take about three and a half hours to go from 10% to a 90% charge in a car like the 2021 Ford Mustang Mach E

Screencap from Chargeway app.

… at another local charger, a “level 6” to use Chargeway’s naming system — the time drops significantly. You can get the exact same charge in under 40 minutes (below), instead of (quick math) 2015 minutes. That’s a lunch stop or a grocery run, and knowing ahead of time what to expect when you get to a fast charger is going to make a big difference in your experience.

Screencap from Chargeway app.

The National Auto Dealers’ Association recently partnered with Chargeway to help train electric car dealers to use this more intuitive “level 1–7” power system as they talk about EV chargers … but they also want to use Chargeway to help simplify the conversion about plugs, which we’ll get to next.

Different Types of EV Plugs

CHAdeMO was the first type of DC fast-charging system on the market, and helped early e-mobility adopters reduce range anxiety. Cars with CHAdeMO plugs can fast charge a battery to 80% in about 60 minutes at a rate of roughly 2 miles of range added per minute of charging.

Image by CleanTechnica.

Today, the Nissan LEAF and Mitsubishi Outlander PHEV (shown, above) are the most common CHAdeMO vehicles, but even they are switching to the more common J1772 with their next generation of electric cars. Still, there are hundreds of thousands of used EVs on the market that use this standard, so it’s worth knowing about.

Most “modern” electric vehicles (the notable exceptions being cars built by Tesla) use the J1772, and the J1772 plug can charge your car using 120, 208, or 240 volts of electricity, depending on the type of charger station you’re using. These are those “level 1” and “level 2” we talked about earlier, and it’s the most common type of charging you’ll find.

For fast charging, those same cars use the SAE Standard Combined Charging System, or CCS. Developed by the society of automotive engineers (SAE, natch), this is the most widely used fast charging standard globally, and works with most fast chargers — just not, currently, the Tesla Supercharger Network, will.

Tesla cars on the Tesla Supercharger network use proprietary standards that, while also called “level 3” by most networks, typically fall into the “level 6” or “level 7” range offered by Chargeway. Tesla drivers have exclusive access to the national network of Tesla Superchargers to charge their vehicles, but they have to use an adapter to charge at other DC fast-charging stations that use CCS or CHAdeMO plugs and at Level 1 and Level 2 charging stations.

Tesla Supercharger in Florida, by Zach Shahan/CleanTechnica.

Colors & Numbers

We already talked about the way that a charging app displays information can have a huge impact on your expected wait times while you’re charging. Chargeway also simplifies the process of finding charging stations that work for your car. Instead of showing a “generic” charging map that shows all the chargers in your neighborhood, Chargeway only shows you the stations that will work for your specific car, reducing anxiety and making it easier to “fill up faster” with electric fuel.

Blue for CHAdeMO, green for J1772/CCS, and red for Tesla.

Image courtesy of Chargeway.

Higher numbers equal faster charging, so if you have a Chevy Bolt, that’s a Green 4. A Mustang Mach-E? That’s a Green, too, but it will go up to level 6. A brand-new Tesla Model S? Red 7.

It’s intuitive, and it’s the language that many dealers will soon be using. “Because the 16,000+ NADA member dealers represent nearly all the major automotive brands, their adoption of Chargeway will create a de facto ‘standard dictionary’ of EV charging terms,” reads the official NADA press release. “‘Green’ plugs, ‘Level 6’ chargers, etc. That will make it easier for EV dealers and buyers to communicate, regardless of brand.”

With all that said, we hope we’ve made it clearer for you to understand the different types of EV charging and chargers. If you want to hear about more clever ways to visualize or talk about EVs, you can tune into Chargeway’s founder, Matt Teske, on the Electrify Expo podcast with CleanTechnica’s Jo Borras (me!) on Apple Podcasts, Spotify, or anywhere you get your podcasts.

Original content from CleanTechnica.


 

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Diess Survives Volkswagen Board Review — for Now

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Herbert Diess, CEO of the Volkswagen Group, was put under the microscope recently after he suggested publicly that as many as 30,000 manufacturing jobs at the company could be lost if it fails to meet the challenge from competitors, principally Tesla. His remarks were interpreted by some, especially Daniela Cavallo, the head of the works council, as a threat to fire 30,000 employees.

Diess further inflamed the passions of company insiders when he invited Elon Musk to call in to a meeting of 200 Volkswagen senior managers. That annoyed just about everyone in the company who wasn’t already annoyed by the job cuts thing and resulted in a call to convene the rarely use mediation committee of the Volkswagen management board. That committee is made up of representatives from the company’s largest shareholders as well as the head of the works council (worker union).

A meeting was held last Tuesday but no announcements were made afterwards. The only things Reuters could uncover about the meeting were two statements from anonymous sources. The first said, “This topic is so hot, it is on a knife edge. I can’t say anything further.” The other said, “As expected, there is nothing new.” The most that can be gleaned from this kerfuffle is that Diess has been called on the carpet and warned that he must change his management style or face possible termination.

Changing his management style appears to mean he should stop pissing off the works council. Cavallo is on record as saying, “We’re tired of hearing time and again that the works council is apparently only concerned with preserving the status quo.” She insists that all the workers and labor representatives are fully supportive of the proposals Diess has put forth to speed up the transition to electric vehicles, including a major rethink of how they build cars at its largest factory, in Wolfsburg.

The crux of Diess’ recent remarks is that Tesla will soon be building electric cars in Grünheide in much less time with fewer workers. Stripping away all the emotional content of his recent remarks, it should be intuitively obvious to the most casual observer that you can’t compete successfully if your cars cost more to build than the cars your competitor is making. It’s as plain as the face on your nose, and yet Diess has been called to account for saying out loud what should be evident to everyone.

Sources tell Reuters that the committee is working to craft a position that will satisfy all parties — which means it will probably satisfy no one. Diess will be asked to change his management style, which is a little like asking a leopard to change its spots, while new board members will be announced, new assurances on job prospects for employees will be given, and new investment plans for Volkswagen Group will be put forth.

There are rumors — unfounded, unconfirmed, and uncorroborated — that if Diess is tossed overboard, he could wind up being tapped to run the automotive division of Tesla, which would allow Musk to focus his considerable talents on other things like SpaceX, energy storage, and tangling with Bernie Sanders on Twitter.

Part of Diess’ problems may stem from the fact that he is an outsider. From 1996 to 2015, he worked at BMW, where he was a member of its management board. Volkswagen, like any major corporation, has a culture of promoting from within. No doubt, bringing Diess in from outside the company — and from a competitor in the German auto industry at that — rankled lots of loyal Volkswagen managers who maybe thought they should have been promoted when the diesel cheating scandal hit in 2015 and Martin Winterkorn was given the heave ho.

Sometimes it’s not what you say, it’s how you say it. Has Diess learned his lesson? “We’ll see,” said the Zen master.


 

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Hydro Versus Batteries: Tasmania Pushes Its Undersea Cable Plan

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There is no question that hydroelectric power is a wonderful thing. It’s green, it’s renewable, it’s emissions-free, and it’s relatively inexpensive.  There is also no question that water can be stored behind a dam for days, weeks, months, or even years before it is used to spin turbines that generate electricity.

Tasmania has an abundance of hydroelectric power — quite a bit more than it needs, actually. It would very much like to sell some of its excess electricity to the rest of Australia. The plan put forward by Hydro Tasmania and TasNetworks is known as the Marinus Link — a 500-kilometer-long undersea transmission line linking Tasmania to Melbourne. From there it would connect to the utility grid on the mainland, making Tasmania Australia’s national battery, so to speak.

But there’s a flaw in the Hydro Tasmania plan. According to a report written by the highly regarded Dr. Bruce Mountain for the Victoria Energy Policy Center, the Marinus Link is a money-losing proposition that will only make less economic sense in coming years as the cost of grid scale battery storage continues to decline. Here’s a quote from the Executive Summary that pretty much says it all.

“The main conclusions of that report are that 1,500 MW of four-hour battery can be provided for less than half the cost of Marinus Link; that the same capacity of six-hour battery can be provided for 79% of the cost of Marinus Link and that 1,500 MW of eight-hour battery storage is still cheaper than Marinus Link.

“In other words, even if Hydro Tasmania is able to provide, for no additional cost, 1,500 MW that it could export to Victoria day-in day-out for eight hours at a stretch for the foreseeable future, it will still be cheaper to build 1,500 MW of batteries in Victoria rather than to build Marinus Link. Of course the Tasmanian electrical system has no-where near the power or energy capability needed to provide 1,500 MW of supply to Victoria for 8 hours every day and so many billions will be needed to expand its storages and energy production in Tasmania in order to be able to provide the capacity that Marinus Link claims to offer.”

The ending of the report is just as brutal. “We now feel able to conclude that not only does Marinus Link have no chance of competing with battery alternatives but that if Hydro Tasmania develops pumped hydro capacity in Tasmania it is very likely that, like Snowy 2.0, it will be stranded from the outset.”

Cuanto Cuesta?

So how much would the Marinus Link cost? The proposal calls for building two new 750-megawatt undersea power cables between Tasmania and Victoria at a cost of about $3.5 billion. Hydro Tasmania, which is owned by the state of Tasmania, plans to store power in Tasmanian dams by releasing water to generate electricity for export to Victoria when prices are high, and pumping the water back into dams when power prices are low.

According to MSN, Mountain claims that if the Marinus Link is funded by the Tasmanian or Commonwealth governments, taxpayers will be left paying for an asset that would cost more to build than it can earn. “It would be placing a dead weight on the shoulders of the people of Tasmania, if indeed the people of Tasmania bear most of the cost. If it’s borne by the Commonwealth in some way, it’ll be placing a burden on all taxpayers and energy consumers depending on how the bid ends up, when you build an asset that can’t compete.”

Mountain also expressed skepticism about the the long term benefits of construction jobs associated with the projects. “It would be much better for the community if the government simply gave that money out — frankly, it would be less of a loss for the community. Building a white elephant, a dead weight loss, entrenches disadvantage.” No namby-pamby, wishy-washy words from the esteemed Dr. Mountain. Better to take that money and just throw it in the street.

The Case For Marinus Link

Hydro Tasmania and TasNetworks aren’t giving up the fight. TasNetworks general manager for Marinus Link Bess Clark says both batteries and pumped hydro storage will be needed as Australia’s energy market transitions away from fossil fuels. “Marinus Link presents a once in a generation opportunity to double Tasmania’s clean energy, helps combat climate change, puts downward pressure on power prices and creates thousands of local jobs,” she says, before adding that modeling by the Australian Energy Market Operator shows the Marinus Link will be a key part of Australia’s energy grid in the future.

A spokesman for Hydro Tasmania said batteries wouldn’t be able to meet all of Australia’s energy storage requirements and that deep storage like pumped hydro will be needed. “It’s not a question of having one or the other. We will need all the relevant, cost competitive technologies to play their part to ensure all Australians have a power system that is reliable, secure and affordable,” he said.

Last week the Tasmanian Chamber of Commerce and Industry threw its “wholehearted support” behind the Marinus Link project. “We know that this project will be fantastic not just for employment across the state over the next 50 years but also for the growth of business within Tasmania,” TCCI CEO Michael Bailey said.

All Of The Above

There are two sides to this debate and they both have points in their favor. Pumped hydro can supply power far longer than any grid storage battery in existence. A battery can react in milliseconds; pumped hydro cannot. One of the benefits of battery storage is its frequency and voltage regulation capability. Both save grid operators money but are services pumped hydro cannot provide.

Then there is the question of timing. Bruce Mountain tells the Sydney Morning Herald the Victorian Big Battery, composed of dozens of Tesla Megapacks, will be commissioned shortly, while a similar installation at Jeeralan should be ready by 2026. There are four more storage battery projects in the pipeline as well. A further four major batteries are likely to proceed. Those will all be in place and operational before the Marinus Link becomes operational.

“Battery storage capacity will be built and operational in Victoria long before Marinus Link and the Battery of the Nation developments in Tasmania are close to operational,” the VEPC report says. “Marinus Link continues to have no prospect of competing against battery alternatives in Victoria.” Mountain adds, “Considering the much higher efficiency and responsiveness of chemical batteries than pumped hydro, if pumped hydro is developed in Tasmania it is surely likely that it, not batteries, will sit idle.”

“It’s not a question of having one or the other,” Hydro Tasmania counters. “We will need all the relevant, cost-competitive technologies to play their part to ensure all Australians have a power system that is reliable, secure and affordable.” Tasmania also is investing heavily in the power of wind, something it also has in abundance.

The Trouble With Transmission

Solar power advocates like to say that a gigantic solar farm in a small corner of the Sahara desert could power all of Europe and the UK — if there were transmission lines connecting the two areas. In the US, some people dream of New Yorkers getting solar power from California after the sun sets on the Big Apple. That could happen if there were transcontinental high voltage transmission lines.

That being said, transmission lines can be hugely expensive to construct and maintain. They are also subject to disruption from any number of causes — wind, earthquakes, wild fires, even malicious damage. The world is learning a hard lesson about making stuff in one place for consumption in another place using a flotilla of cargo ships to connect the two. Anything that can go wrong often does go wrong and at the worst possible time. Just ask Puerto Rico about relying on distant generating stations to power its major cities.

Pumped hydro is an important piece of the energy storage puzzle but it can’t just be plunked down close to the places where demand for electrical energy is high. In theory, battery storage facilities can be sited almost anywhere. Ideally, they can go where retired thermal generating stations are located, places with the advantage of already having the connections needed to feed the stored power into the electrical grid.

Planning For The Future Is Hard

The objection is not to Tasmania’s abundant hydro power. The objection is the cost of getting it to distant markets at competitive cost. Then there a time considerations. What may seem like a good idea today may not look quite so appealing a few years down the road when the economics tilt more in favor of one solution than another. When there is not an unlimited supply of money, it is best to invest what you have in solutions that will be fiscally viable for the longest period of time, not one that will be come economically noncompetitive before the end of its useful life.

Perhaps Tasmania would be wise to invest its dollars in technologies that turn its excess electricity into green hydrogen or ammonia, which could then be exported at reasonable cost to anywhere in the world. The issue is not energy storage. The issue is energy transmission. It will be interesting to see how this plays out in Australia, where wise energy planning at the federal level appears to be an alien concept.


 

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