Luke: 0:00

Welcome to the curiosity crisis, we challenge ourselves to explore the world of business tech investing and science. Get curious and be part of our journey, as we discussed, challenge and learn crochet going

Khush: 0:12

very, very well. Lukey pretty excited for this episode. How are you?

Luke: 0:15

Good. Good. Do you want to give us a brief rundown on what it is that we'll be talking about today?

Khush: 0:21

Yeah, absolutely. Basically, we're talking about one company's plan to get the world to net zero, their whole business model is based around it, they've released a master plan. So I don't know if that gives it away. But we think it's a very good, like, follow on episode from Episode Three, where we talked about the whole climate and energy transition challenge and what it means for the world to get to net zero. So very, very keen to get into it. Yeah,

Luke: 0:46

that's awesome. So have you got something that's been keeping you curious at the moment? Yeah,

Khush: 0:51

I do. So I've just finished reading, right of a lifetime by Bob Iger. He was the ex CEO of Disney. And now I think he's back to I'll be honest, I didn't love the book, it got a lot better. I got some really good insights and sort of principles on leadership and stuff by the end, and there was some juicy stories about, you know, his work with Steve Jobs and stuff like that. Some bits I didn't love about it, and I think he might have contradicted himself now. But what I'm curious about is, you know, a lot of the suggestions and principles are very high leadership, sort of gestures and, and lessons, but how that can apply into, you know, our day to day lives right now. And, yeah, what value there is in that, and I'm sort of seeing, you know, some of the parallels between that and I'm reading Shoe Dog right now, which is the story of Nikes creation. So, yeah, it's just really interesting. What's keeping you curious, mate? Yeah,

Luke: 1:44

that's awesome. Mons, also a book, actually, I have been, I was gifted a book called hidden genius. And I've started reading it. And it's now forgive me for this pronounciation. It's, it's authored by Polina Marinova, Pompliano. And basically, she has this thing called the profile and she would go and, and research things about certain personalities. So whether it was like, they're famous for something, or they were, you know, an amazing researcher, or investor or whatever it was. And she kind of found some commonalities between all these different people that she interviewed and researched and whatever. And she compiled some of that into a book to just highlight some of the main standout features of the successful people. And yeah, anyway, so I'm reading it, and so far, it's really good. And it's quite, it's quite interesting. Damn,

Khush: 2:34

okay, cool. Like, that's probably what I was hoping to get out of. Right of lifetime. But I might pick that up after after you're done. That sounds Yeah,

Luke: 2:41

no worries. Yeah. So this week, we're looking at, I guess, this this pragmatic approach to get to net zero. And the company that we're looking at specifically is Tesla. So they have released their master plan three earlier this year. And we're going to talk a bit more in depth about that. And I guess, you know, it's, it's a bit different to the previous master plans, like, what is the master plan, it's essentially the corporate plan of the company. But I guess what's different is, you know, in their earlier ones, they were kind of in that startup phase or that scalability phase. And now they're a big successful company, absolutely blowing everyone out of the water in terms of Eevee production and sales. And so now it's like, well, what's the next step? And so what's interesting about this is they're looking at, you know, reducing world emissions to zero from a real pragmatic standpoint, and how it can be achieved, and then they prove that with, well maybe not proved, but they share the maths to how they believe it can be achieved.

Khush: 3:42

Yeah, absolutely. And I think what really excited me about digging into this, I suppose, for me, doesn't really matter about a company per se, it's more just that, you know, we're at a time where a whole company's business model can literally just be how to how to solve the problem of how to get to net zero, and then make products and solutions. And, you know, looking at the macro context of the world, you know, reducing emissions to zero or net zero, then they're the whole business plan, and everything they're doing to make profits and return shareholder value is aligned with that. So I don't know, I was very, very interested in it. To start, I might just quickly go and give a bit of context as to how to frame it so sort of don't as to tell a story. And the the initial story is essentially that the current energy economy is very wasteful. And you got to excuse the numbers here, I'll try and put them into a little bit of context. But in the introduction, there's a really good diagram which you can link in the show notes, but they basically talk about in 2019, the global energy primary energy supply was 165 Peda watt hours of energy use per year, which is a context that's I think kilowatt hours to the power of nine, but times 10 to the power of nine, probably doesn't, you know, that doesn't put it into context, but out of that fossil fuel Your supply was 134 out of the 165. So we pretty much like far fuel. Yeah, we fuel our economy with with fossil fuels. Yeah, 37% of that of that 134 is consumed before making it to the end consumer. So the end product, this includes, you know, the fossil fuels, self consumption during extraction and refining, transformation losses during electricity generation. And then another 27% is lost in efficient end users, such as internal combustion engines, surprise, surprise, you know, Tesla is highlighting that. But that's because you know, there's a lot of energy wasted as heat. So then only 36% of that massive number of primary supply ends up as useful work or energy for the economy. So basically, that is the context that they're sort of going at this about, did you want to frame up, you know, their key findings?

Luke: 6:00

Yeah, so they kind of had five areas of focus, I guess. So one of them was trying to repower the existing grid with renewables. So that transition from fossil fuel generation to, you know, whether it's solar, or wind, or hydro, or whatever it was, and it was, you know, that that was kind of one big area, and that was most of what needed to change. And then the next one was switching to electric vehicles from our traditional combustion engines. And then an interesting one coming from what people would assume is an automaker was switching to heat pumps in residential, business and industry. And so what they're referring to there is, it's essentially more efficient heat transfer, heat transfer, and trying to reduce power consumption, for heating and cooling. And then therefore, finding was electrifying, high temperature, heat delivery and hydrogen. So that's kind of like that next step, as well, and what you could do with with a lot of the energy that you would have, and then finally, it was sustainably fueling planes and boats. So that's looking at like, you know, not just transport because, you know, I want to fly to Europe, but also, how do we ship things around the world? Because we live in a global economy? How do we keep that without, you know, losing any any benefits from that, but then how do we reduce our emissions? Because, you know, you can't just switch those huge shipping boats to be electric, you need to rebuild them from the ground up? Because, yeah, I guess your physics changes with the density of the batteries. And then the benefits of having an electric versus combustion, like diesel. So yeah, that were their main five focus areas. Yeah,

Khush: 7:36

I found that was really interesting. In one thing, we could probably go into each one in a very little bit of depth, and sort of talk about like the percentage of fossil fuels or emissions, each of them are claimed by Tesla to remove. And I found it really interesting comparison to what we talked about in episode three, where we broke down the global economy into the five main ways that we emit, and then sort of translate them to the findings in this report, because they're very similar, but slightly different. And we can talk about, you know, ways that some of these solutions sort of shifted numbers. One thing I did want to highlight before we started and this, this completely caught me out when I was watching it is, so we talked about just before that 165 kilowatt hours per year is the global energy consumption, again, the number the unit or whatever, the magnitude doesn't matter right now. But what they claimed, which I am really interested to learn more about, is that if we electrified everything and did and follow through this plan, they claimed it half the energy would be required, from a fully electrified grid, what they're talking about there is the losses from the sort of fossil fuel based economy that we witnessed now would be nullified so much that even with everything electrified, if we replaced the fossil fuel energy use, you'll end up with half the energy required, because you're facing a lot less in the in the form of losses. Now, I'm not convinced on that I really would like to do some more digging. But that was really, really interesting in that, you know, I thought you think it's a unsurmountable challenge to get to net zero because it's so much energy use. But if you actually do it the right way and efficiently, they're claiming that there'll be a lot of efficiencies and therefore a lot less energy needed to actually run the economy.

Luke: 9:31

Well, yeah, it's a good point that you raise, actually, and, you know, I mean, speculating on it, because I don't think they actually shared exactly why that was that we would require less besides saying there'd be less in efficiencies, I mean, you could speculate that your sources of energy would be more distributed. So rather than having you know significant power stations all in one area, so you might suffer less transmission loss energy generation, and then You know, straight from like solar to battery, and then from battery back to consumption, that it could be things like that where you're not using the overall grid as much because micro grids become more relevant. I'm not Yeah, I'm not exactly sure what they were looking at there. But it's definitely an interesting stat to say, you're gonna use half as much electricity. If you do this, that's, that is pretty crazy.

Khush: 10:20

I think it's a here, it's one of the huge claims of it. And I'm just just going off of that diagram that I was talking about in the intro. So the percentage that goes to waste heat, which again, was more than half in the current in today's energy economy with which is predominantly fossil fuels, there's a lot of waste heat that comes from extraction and refining, and then electricity generation. So that's basically talking about the useful energy that you get out of, for example, burning X amount of coal, or whatever the actual use of energy that's stored in terms of like a central, you know, energy metric, which is joules in that lump of coal to what you actually get in useful electricity at the end. I think that's what they're talking about. But I think, on a fully electrified grid with renewables, you could probably make the same argument that the capacity factor, so the amount of actual energy that you harness from the Sun that you actually transfer into electrical energy through a solar panel is pretty low. So same argument can be made, but very, very interesting again, should we go quickly through each of the main plans?

Luke: 11:25

Yeah. Do you want to start with the first one? Yeah,

Khush: 11:28

the first and biggest so they claim that a 35% reduction in fossil fuel use can be made by surprise, surprise. renewably powering the existing grid. So the only thing I really want to talk about there is why is that higher than in episode three, where we talked about electricity generation only being I think it was 27% of global emissions. And now here, we're saying by renewables, apparently, it's 35% reduction in fossil fuels. I don't know. Sorry, I was teeing you up there. But I think, because it's the electrification thing. So while this is going on, obviously, a lot of uses currently that are probably served, for example, cooking on gas stoves, those stoves would be electrified. And then if they're powered by renewables, that's some of the energy that wasn't included in that initial number of being served by electricity generation. So now that everything in the home for example, is electrified, that can all be sort of decarbonized by renewables. That's yeah, that's the point. The second one is switch to electric vehicles. So 21% I mean, that's fairly self explanatory, but I mean, do you want to talk about the lifecycle emissions of EVs?

Luke: 12:47

Yeah, I mean, we've mentioned that previously. So on episode three, we were talking about, you know, trying to get to net zero, what that entails. And something that we did discuss was, yeah, basically, you know, how does the lifecycle of an Eevee compared to a combustion engine in terms of decarbonisation? Because one claim is that, you know, from manufacturing, because of the process of manufacturing, and Evie, it actually produces more carbon emissions. And it is a fair point. And it's because of the way that we have to manufacture batteries, and then the processing and refining of those minerals, but it doesn't count any form of sustainability. You know, in the future. It's looking at the direct manufacturing right now today with what we have. So and it doesn't look at you know, if the grid was renewable, either, it just takes current carbon emissions, and then multiplies that by the amount of electricity consumed. So basically, it drops off significantly, as soon as you electrify the grid. If you can have a renewable grid, your Evie carbon emissions just drops like a rock. And the other thing is that the lifetime of EVs, I know that it hasn't fully been proven, because we haven't had them around long enough, but there's just a lot less moving parts, there's a lot less to go wrong. And you're also not considering any jumps in battery technology, which you can get into later. But yeah, things like solid state batteries, which can be you know, a third as volume, you know, consume a third of the volume, but have the same capacity as, say, a lithium ion battery. So there's a lot of future improvement as well, and it doesn't consider that. So I think that's what's really interesting here so that 21% By switching to EVs might not be that relevant if you were to run the calculations right now. But if you were to look at a fully renewable grid, the lifetime of having EVs and the recycling of the batteries, you're you're drastically in front of combustion engines.

Khush: 14:37

Yeah, yeah. Yeah, I totally can see that. And again, it goes into that picture of electrifying and renew the grid with renewables changes that a huge portion of it. So the one that I was really interested about, and I don't know heaps, to be honest about heat pumps is that 22% of fossil fuel use can be reduced. According to Tesla, by Switching to heat pumps Now, one thing I learned and they talked about in the in the presentation is that heat pumps just move heat from one place to another rather than actually cooling something. So I think that's, that's where a lot of their efficiency comes from. Do you have any other thoughts or points on heat pumps?

Luke: 15:19

Yeah, so I'm similar to you, I don't know a lot about it. But I think it's just as you were saying, it's the moving of energy, the physics is quite simple. I think a common solution is geothermal heating and cooling, where it's material intensive. So you might have copper or aluminium or something, and you embed pipes into the ground under a house, for example. And then that can warm and cool the concrete or the, you know, the actual building, just to be more stable, you basically have a less volatile temperature, because it's more in line with the temperature of the ground. So when it's really cold, it'll warm it up. Because the ground is very consistent, or when it's really hot, it will call it down. So there's still going to be additional, you know, heating and cooling that isn't considered here. I'm fascinated by the 22% that they got

Khush: 16:06

as big that's,

Luke: 16:07

that's a lot. That's, I mean, just for context, we were just talking about, you know, switching from petrol engines and gas cars to EVs. And we said that was 21%. You know, Tesla is claiming that switching to heat pumps would reduce world emissions by 22%, which is huge. So I'd be very interested, maybe it's something we might have to look into. Yeah,

Khush: 16:29

I mean, I'm really keen to learn more about hate bombs, because there are big topics in the whole transition. The last two, I'm going to group because they I think, in terms of how I look at things, it sort of looks like they're industrial solutions. So they're what we term, I suppose the hard solutions. So the hard things should decarbonize, which are high heat temp delivery, and then green hydrogen, so it's looking at industrial processes. And then the final one is sustainably fuel planes and boats. So 17 and 5%, respectively. So still still pretty material. The first one really, like really high, basically industrial processes that allow us to build the world that we have today. You know, steel, concrete production, plastic production, all really high heat requiring processes and energy intensive. Yeah. Any thoughts? Yeah, that seems like a really hard solution. And one, we're a bit behind on potentially, yeah,

Luke: 17:24

I think we thought, yeah, I think this is one of those areas where we're gonna need some more innovation. And then not just innovation, but the manufacturing of the solutions, you know, so like, solid state boundaries is a really good example of how you're going to get electric planes that it is actually possible the physics works. And we've seen that with some electric plants that do short trips to ski resorts where the price is really high. So they're happy to charge a lot for the customer, the customer is happy to pay, but they don't have to travel super far. But solid state battery, for example, would revolutionize, you know, air travel. But you know, we haven't gotten mass manufacturing of that yet. So there's other concerns there. And I definitely agree, I think it's a really hard solution to solve. It's the same with boats, you know, on paper, it's something that's doable, but you have to re, you know, completely rebuild these boats from scratch and re engineer them from the ground up. And then you think, you know, generating green hydrogen for the making of steel and chemical refineries. And that stuff is very difficult. And there's also safety concerns, because of the way that we've been doing it for so long. And so we know how to deal with the challenges that we have. And if you completely change the way that you're doing things, you're just going to be presented with a bunch of new problems. So I yeah, I'm hopefully, I'm optimistic. But I think that there's a lot of challenges there that probably aren't portrayed in Yeah, Tesla's kind of investor day.

Khush: 18:47

Yeah, I think, I mean, one thought that comes to mind of, when you look at this is like, it's a really awesome bit of work, that they've put a lot of computing power and maths and physics and stuff against, it seems a little idealistic to me, but it's important to do these sorts of studies to see, you know, theoretically, what's possible, obviously, in the real world, and when implementing these solutions, there's a lot to consider. But one thing that sort of caught me out was like in the in the capex, so how much is this all going to cost? They landed on a very nice round number of $10 trillion. Yeah, but the breakdown of that had 70% of it in the switch to EVs, and then for example, decarbonizing, those industrial processes, which we know is pretty high, only had only a say only, but 0.8 trillion and 1 trillion respectively, for the last two. So the breakdown is pretty interesting. But again, I mean, I think all their assumptions and the calculations are laid out in the report. Was there anything else from it that caught your eye? Look,

Luke: 19:48

I mean, I think the Yeah, the capex of, you know, yeah, like you're saying, How much is this going to cost $10 trillion. I think that is woefully underestimated. In my opinion. But but also, you know, their job here is its marketing, right? Like they're trying to say this is very good. And we can capitalize on that. But I think, if you take the perspective that that's what this is, but you, you could look at this as like a feasibility study, right? Like, is it feasible for the world to transition to zero emissions? Is this even remotely possible? Or is this just a dream that we have? And it looks like No, actually, it's definitely possible, I think it will cost a lot more, and it will take a lot longer than the estimating here. But I mean, if you break that down, you know, high temperature thermal solutions, so the ones that were just talking about 0.8 trillion, so we're talking $800 billion, you think you can transition the entire world, essentially all manufacturing and everything to be sustainable and green? I personally don't think that's possible for that amount of money. But right, you know, I think it's very interesting to look at, I think that those estimations are very optimistic. But I think the more interesting things is the process of getting there and less about how much it's going to cost. The fact is, it's going to cost a lot of money. And governments are going to have to put more and more money into this, if it's ever going to be achieved.

Khush: 21:11

Well, like on that the scale up required and how to get there, I did really like this part of it, that they sort of broke it down into what we need by like, in terms of this plan, in terms of the modeling and everything, by 2030. So we can be 100% Sustainable by 2050. And it shows the scale and what we need to do sort of thing. So in terms of solar and wind deployment to match this, this model in this plan, we need three times deployment in terawatt hours of wind and solar development per year from now until 2030. Which, which, okay, that's, that's something within the next one was in terms of vehicle stationary and thermal battery production, in terms of terawatt hour, per year, between now and 2030. What do you think we need to ramp up? But yeah,

Luke: 22:03

I mean, I think you know, 3x sounds like a lot, but I'm gonna guess more.

Khush: 22:08

Yeah, yeah. Yeah. So they, they predict the model, we need a 29x, what we're currently doing in terms of producing these batteries. And obviously, a lot of their the solution is based on energy storage, yeah. And then the electric vehicle production in terms of millions per year, we need to eliminex what we're currently doing by 2030, if we're going to be fully sustainable by 2050. So, I mean, again, these numbers, and it might be a bit tailored to Tesla because, you know, surprise, surprise, again, they produce batteries and electric vehicles. Yeah. But it also it does show that, you know, there there needs to be a hell of a ramp up. And unless, you know, some pretty big change and some some different ways of investing in the economy and building it happen, then it's gonna be hard to get there.

Luke: 22:56

Yeah, I think that the so the 3x deployment of solar and wind by 2030 is actually quite achievable. It sounds like a lot that we have to 3x. You know, that's crazy. But you know, you're not, you're not counting things like, you know, technological improvements, you know, and the deployment of these things, has already been increasing, you know, year on year, it's been increasing. So I think it might not be safe to say, but I think we're probably on a close enough trajectory in terms of that one, I think, for the bigger ones is Yeah, well, how do we 29 XL vehicles, stationary thermal battery production? And obviously, yeah, like you said that there's a bit of an incentive there for them to cause panic. And, you know, but look, I think either way, that's going to be a similar, a similar thing where we're going to have to ramp up lithium production and refining, and we're going to have to Yeah, maybe put more investment into solid state batteries as well. That would definitely be beneficial. But yeah, that one might be a little bit out of reach by 2030. Well, I

Khush: 23:59

suppose I'm not like I'm not convinced as well, every single technology that that could be playing a part is considered obviously, here, it's a master plan, and for their company, but it also takes into the whole macro context of transitioning the economy. So I think obviously, it's biased towards the technologies they actually focus on they produce and they make money off. But you know, there's other solutions that that can come in and provide that storage, for example, to talking about when you're 29x storage by 2030 to meet these targets. Awesome. Well, looky we're nearly at time. Is there anything else that you know really stood out to you from the from the presentation? Yeah, there

Luke: 24:40

are a couple of other things. One thing that they pointed out was the land area required with direct solar land area and direct wind area, and it was actually only a fraction of each country and the global landmass. So that worked out to be 0.19% of land required for solar and 0.02% land required We'll wind well, and they had a bit of a picture of the world. And they had these, you know, these tiles of how much that would take up for each country? And is zoomed in on Australia just to see, okay, well, how big is this? It's, you can barely see it. It's tiny. It's absolutely tiny. Yeah. And that's obviously going to be spread out across the entire country. And so I guess the point here is, you know, to produce huge solar farms and wind farms, it's not actually going to take up much of many countries, like it's not, you're not going to drastically change, you know, you don't have to start logging and, you know, cutting down forests or whatever, just to make room for this. It's not, there's, there's an exorbitant amount of land. And yeah, we don't require that much, which I thought was quite interesting. And the other thing was the breakdown of materials that would be required and the abundance of those materials, and one of the big ones that they thought that they need a lot of is graphite and carbon. And luckily for us, there's a lot of both of those. So that was also another interesting thing, because they thought down to the first principles of what are the materials that we're going to require? What is the land, we're going to require to achieve this? And again, they gave a good demonstration of how it is possible, which I thought was quite interesting. Yeah,

Khush: 26:08

um, well, my key takeaway, I suppose, of all of this, there's two things, it's like one, yes, it's very specific. And it's related to Tesla. So you got to take it with a grain of salt. But on the positive side, I absolutely love the fact that, you know, a company that that business model is completely built around, getting the world to is sustainable places candy, has gone through and done all this work and framed their whole business plan around it. And then they also, you know, like, they can't be discredited for how much smarts they have in the actual company, like, in a summary of what they put into the modeling. It's it basically, you know, focuses on the optimal generation and storage portfolio to meet electricity demand each hour. So that forecasted that out all the way to 2050. And then it's it's designed to minimize the levelized cost of energy by, you know, optimizing the capacity and dispatch of this energy over time. So there's a hell of a lot it's going into it. And I think that's somewhat credible, because of what they have with their audit bit of functions and how much work they actually do. So I think they are subject matter experts that it's very optimistic, and it's probably tailored towards their products. But I think it's it's pretty awesome to see this amount of work and focus being put into it, like they've gone down to a granular level, as you just said, so. Look, it's it's an optimistic view on the world transitioning, but I mean, I'm all for it, I suppose. What was your takeaway?

Luke: 27:38

I 100%. Agree. I think, you know, we talked about the difficulty of transitioning to net zero, and how, you know, it really is a wicked problem. It's a very difficult solution that we're going to have to come up with, but I think, if anything you can take away from this that it's feasible. It might not be easy, but it's feasible. And we can calculate that out. And we know that a lot of resources will be required, but it's yeah, it's doable.

Khush: 28:03

idealistic, but there's a path forward, which is what we need. Yeah. Unreal. Well, I think that's about it. Thanks for listening, finest accuracy, crisis.com and curiosity classes on Instagram. We're all major streaming services so you can listen how you like always quick favor. If you got anything out of this episode, please share it with a friend. So thank you, your recommendation is worth a lot. Thanks and catch you on the next episode. Looky Thank

Luke: 28:28

you. Catch you next time.