The Exchanges

Q go back to the grid, then, just to wrap up. Over time, and obviously this will take a long time, but if over time, if we go and start to, one by one, go throughout the transmission distribution system and replace all of these traditional oil-filled transformers that are on the grid right now, ultimately with solid-state transformers, like, big picture, what does that enable from a grid management perspective?

A Well, utilities and grid operators right now are facing, um, a lot of pressure, right? They've got aging infrastructure, growing demand, um, and they, they're in the market for new solutions, and luckily, SSTs can provide a ton of value propositions beyond just voltage transformation. Um, an SST can have a cost similar to a traditional oil-filled transformer, um, but at the same time provide functions that would be That would be provided by popcorn components around the transformer. Functions like overcurrent protection, fault isolation, what an automatic tap changer does for voltage correction, uh, what three phase balancers do to enable higher utilization on the different phases in the distribution grid. They can provide the spinning inertia type functionality that synchronous condensers do for frequency regulation. Um, and they can also take the place of cap banks for power factor correction. So With the choice to go SST the next time they need to place a, uh, a distribution substation down or replace an aging, fifty-year-old, you know, 34 KV to two away transformer. They're at the same time getting all of those other value added functions kind of for free. And what those other value added functions do is enable more utilization of the existing poles and wires. And utilization is the key to affordability. Um, if you look at the rate cases, uh, uh, for public utilities, uh, a…

AI assessment note: “SSTs can provide a ton of value propositions beyond just voltage transformation.”

Q this is, I wanted to get to this. Uh, so, you know, when you were at Tesla, you were working with silicon carbide because it was, it's in every Tesla inverter. Um, was the, were electric vehicles what really drove the supply chain scale up for silicon carbide? What is the supply chain like for silicon carbide, and like, how has it matured over the past, I guess, decade now?

A Yeah, in 2010, the supply chain for silicon carbide was like, tiny. It was, you know, silicon carbide was used in LEDs, um, and nothing else, really. Um, but, but some folks at Wolfspeed and Infineon and a few other, you know, Uh, device manufacturers were like, this is going to be an amazing power semiconductor, you know, platform and started to develop, you know, a whole bunch of different devices first in like the six interval class to support EVs and then later at higher voltages to support great applications. And the first way that we incorporated it into Tesla's was with model three in the onboard charger. You know, we wanted to make the onboard charger more affordable. The best way to make, uh, power electronics Systems that involve isolation more affordable is go up in frequency, because to get isolation, you basically need to use a transformer of some type, and transformers become smaller as you go up in frequency. It's, it's just a, like a linear relationship between frequency and, and, and size, and that's. That's, uh, just based on, like, how much energy you can store in an inductor and, like, how quickly you're, you're, like, charging and discharging that inductor. If you charge and discharge it faster, you can kind of, like, you know, you're moving more energy per unit time, and you can make the inductor smaller. And so we really wanted to make the, the onboard ch…

AI assessment note: “started to develop, you know, a whole bunch of different devices... to support EVs”

Q They co-package sometimes, right? They'll like put, put a transformer in a box with an inverter.

A Yeah, they'll put the transformer on the skid, like the, the, the plinth, so that it's like easy to land, but they usually don't make the transformer. The transformers are, are, are Um, generally made these days in, like, China, India, and Mexico. Um, very few of them are actually made in the US. And, and that total system, you know, you'll have that 99% efficient transformer. And you'll have maybe like a 98% efficient inverter, and so you have like 97% efficient conversion, uh, or maybe, maybe 98.5, uh, if you're lucky, uh, percent inverter. So you'll have like a 97 and a half percent efficient total conversion system. So when we do this with a solid state transformer, we basically move the 60 hertz transformer to a hundred kilohertz transformer, And that makes it much smaller, like, 50 to a hundred times more power dense, and now we have power electronics control on both sides of that hundred kilohertz transformer, and, and we have not a modularity of a megawatt, we have a modularity that is sized to that small isolation transformer, somewhere like a hundred to 200 kilowatts. And the interesting thing about that level of modularity is it gives you Robustness to faults, because if you have a fault, you only lose like a hundred kilowatts, you don't lose a megawatt, or in the case of the transformer that would be on that skid, if that transformer failed, you'd lose four, four me…

AI assessment note: “Yeah, they'll put the transformer on the skid, like the, the, the plinth”

Q I've had a lot of people, when I talk to them about this, express some Mystification about it, because, I mean, sort of as you described it, they're, like, quote, dumb things. We've been producing them for a hundred years. You would think we could solve that problem quicker than we have. What's your perspective on, like, why, absent new technology, like, why haven't we just solved the transformer shortage?

A Yeah, I think there's so many factors, um, so many at play. I'm, I'm not gonna try to get them in order. I'm just gonna start rattling them off though. So first is just straight up demand. So we, we now have growth again at, and it's broad based growth. There's growth of loads that are interconnecting at transmission, like large data centers. Uh, there's growth of large generation, and that's partially because old, some assets are being retired and partially because we have need just in general, more generation. So there's a bunch of generation transformers and large transmission. Uh, load interconnect transformers. And then we have, like, broad-based distribution load growth from electric vehicles, home electrification. Um, some of that is policy-driven. Some of that is pure just demand-driven. Um, so we have broad-based increases in demand. Uh, in fact, I have some statistics here. You know, power transformers, these are generator transformers. Uh, demand is up, uh, is over double since 2019. Uh, for generation step-up transformers, uh, Um, it's up over 250%. Uh, distribution transformers up over, up over a hundred percent. And so, just straight up demand increase. And I think you can't say the demand increase is just load growth, because it's not. Some of it is replacing what you said is, is totally right. We've, a lot of these core transformers on the grid, uh, or for large…

AI assessment note: “first is just straight up demand. So we, we now have growth again”

Q sort of ending with, like, your own personal experience with, with silicon carbides specifically as a, as a class of power electronics, um, within Tesla vehicles, let's contrast that to what's on the grid today. So let's go back to electricity now in the, in the grid. Like, what, what, what do we use today at those branching-wise on the grid? And, like, how is it different from these things?

A We, we, You know, prior to power electronics really becoming a thing in the seventies and eighties, the only way you could Switch electricity or the flow of electricity was with mechanical switches. You know, think of the breakers in your breaker panel, or maybe you've looked into this, uh, your neighborhood utility switch yard and seen these, like, huge armatures that, you know, spring open to disconnect, uh, one feeder or, or reconnect another feeder. Um, you know, these are large, bulky, slow, slow as in, like, It actuates in hundreds of milliseconds, um, and, and can actuate, you know, once every couple of minutes, and, and it's really not meant to actuate more than, like, a couple thousand times in its total, uh, lifetime. Um, that's how electricity is controlled at, at the grid scale. Um, there's really not a lot of real-time You know, millisecond, uh, control. And, and this contrast with, like, the latest generation of battery inverters or, or solar inverters, um, or, like, the way you charge an EV, the power electronics are actively controlling voltage and current, you know, hundreds of thousands of times per second, um, using really small magnetic devices. And it's not just that grid Developed designers and electrical engineers working on power systems , they're really limited on the tools they can use, so they have these slow switches, and then, and, and that, and the…

AI assessment note: “that's how electricity is controlled at, at the grid scale.”

Q Yeah, exactly, right? Like, if that gets a lot worse, it's tough. All right, so you, you have all the power that you want with, with Master Plan III, like, what do you want it to accomplish? For the world, obviously, like, it was, it's, it's Tesla's Master Plan, but, like, what is the, what's the intent from your perspective? Like, what needs to happen tomorrow?

A Yeah. I, I would hope that the takeaway is that we should redirect the resources that are going into, let's say, fighting sustainable energy technologies into finding even better sustainable energy pathways. You know, I, I think that the point of putting together all, all of the arguments in this paper was to say there is a feasible path, and that feasible path actually looks pretty attractive when you look at Investment per year, resource use, um, total energy, uh, total electric electricity production. I mean, one of the interesting stats, uh, in the paper, which I, I honestly, it's almost staggering to me that, that this is the case, but, um, Uh, 1.5 terawatts is the claimed, you know, the paper claims that 1.5 terawatts is the total amount of renewable energy capacity that will need to be deployed on an annual basis to maintain the sustainable energy economy. And that's basically keeping up with plant retirements. So on a steady state basis, 1.5 terawatts is how much you need to deploy. Now, last year, the world globally deployed almost 500 gigawatts, which is Unbelievable.

AI assessment note: “I would hope that the takeaway is that we should redirect the resources”

Q III is that It runs through basically all materials you could possibly need for all this stuff, from, like, concrete to chromium. Um, So, high-level conclusion, unsurprisingly, because I suspect you wouldn't have published it otherwise, is there's enough of everything. But what, what, if anything, gives you pause? Like, as you look at the material requirement question, where do you think we actually have any degree of a bottleneck?

A Well, there, yeah, it's not going to be, are the resources in the ground? It's going to be, uh, do the geopolitics and the permit, permitting authorities that be, uh, mean that those, those resources are Rendered effectively inaccessible, even though they practically should be accessible. Um, that's probably my biggest pause. Um, and, and so, maybe that will be solved through trade agreements or, you know, rationalization of resource policy in, in certain developed economies. Um, that's probably the, yeah, that's probably the thing I'm most worried about. You know, there's a lot of people that just do the straight math, and they're like, well, look at all the neodymium in every magnet, and, and And like all those magnets, we got to multiply that by a billion or trillion or whatever, and there's nowhere near enough neodymium. But the problem with that math is that people are using neodymium because the pricing signals they see in the marketplace make it seem like the best magnet to use. But actually, magnet materials, for example, are incredibly substitutable. And if you, if you think of the design space as not just the magnet, but the magnet plus the, you know, electromagnetic system it's inside of with the steel And the geometry of the, of the, of the rotor and the stator and the whole motor, and actually maybe even the power electronics and the, and the mechanical advantage g…

AI assessment note: “do the geopolitics and the permit, permitting authorities that be, uh, mean that those”

Q it's pretty notably different, right? The first two are about Tesla. It's like, here's Tesla's plan to take over the world. And the third one is very much not specific to Tesla. It's like, here is the plan for the world. So I'm interested in the background of like, What was the thinking behind Master Plan Three being what it, what it was, and the departure from previous Master Plans?

A Absolutely. Uh, The, the thinking was, there's a lot of noise out there about whether a sustainable energy economy is actually feasible, not only technically feasible, but commercially feasible. You know, is it going to bankrupt the globe or something like this? Um, and do the resources exist? And so, you know, for a company like Tesla, where the mission is to accelerate the transition to sustainable energy, the, the broader feasibility Uh, needs to be, you know, settled. It shouldn't be considered a question. And so, you know, myself and a few others, uh, were tasked with kind of putting together why it is feasible, not just technically, but also commercially. Um, and in some ways is more feasible than the alternative when you think about not only the fact that the typical, like, hydrocarbon-based economy is finite in its resources, um, and, and not renewable, um, Um, but also because when you stack it all up and look at the investments and the materials, it's actually quite feasible. And one of the most interesting things about it is when you, when you electrify everything, which is what the master plan part three talks about, you actually get a primary energy, you know, efficiency boost, a pretty stark one.

AI assessment note: “The, the thinking was, there's a lot of noise out there about whether a sustainable energy economy is actually feasible”

Q for solar, right? We're going to have a ton of curtailment in the spring, etc. But is there nothing that we can find that can be a beneficial use of that curtailed power, even though it is available sort of intermittently on those schedules? Like, can we not, can we not find something to soak up a couple terawatts, terawatt hours, of like really cheap, uh, But intermittently available power.

A Yeah, for, for sure. I mean, when we were putting this paper together, we were trying to find the, let's say, the most straightforward kill on the, is this feasible path? And there's so many alternatives, right? Like, we didn't really include long duration energy storage in this paper at all, because we don't have access to any third party costs, numbers that we, that we can, you know, really depend on, or performance. But, you know, there are a lot of companies that are working on that at the moment. Um, And, and that would change probably the amount of curtailment proposed. You'd end up with less, less renewables, um, but, but more, uh, LDES and, and, and, and that would be a different, you know, techno-economic outcome with a similar result in terms of supply-demand balance. The other thing that, you know, we've discussed and others have discussed is, isn't there some useful thing that you can be doing, uh, on an intermittent basis or, or, or an alternative to long-duration energy storage, but, Kind of operates in a similar way where you're doing some chemical process on one side and another chemical process on another. And that might also help with transmission constraints. I think there's some interesting ideas to look at there. Um, but, but I, but the other thing I, I want to say that that is already happening in this paper is there is a lot of use of this intermittent re…

AI assessment note: “we're doing, um, hydrogen and storing hydrogen in the summer and then using that hydrogen”

Q not, is there enough in the ground? At least currently it's where and how is it going to be refined? And currently that's China for the most part. So, What, what learnings have you taken from that as to the question of the big one to me, which is refining and processing of all the minerals, which needs to largely get shifted out of China in pretty much every case?

A Yes, I, I think it's really coming down to capital projects execution and, and where is the excellence in capital projects execution right now? And it, it is in China. They're investing billions, I mean, probably trillions, um, uh, in capital projects across all aspects of the sort of supply chain. Um, and, and, and for that reason, they're just really good at building any kind of capital project. It doesn't matter whether it's a chemical plant or a industrial facility or manufacturing facility or power plants or anything. And so how do we kind of bring that back to other countries in the developed world, uh, that, uh, And countries in the developing world. And, and, and I think there's actually a lot of opportunity here because an ecosystem needs to be created around the, the engineering procurement and construction of these large capital projects. And that, and that industry needs to be competitive. And, and I think there's definitely opportunities for people to start new companies in the United States and other developed countries where there hasn't been a lot of capital project construction over the past many decades to, to just build like a, Ruthlessly competitive execution company to go and get a lot of this stuff done. Um, But, but yeah, the comparison, the stark comparison between, you know, going and trying to get a project executed. I mean, I saw that within Tesla, no…

AI assessment note: “I think it's really coming down to capital projects execution”

Q the place. So let's talk about the markets that you're focused on, starting with, okay, if I'm going to connect a new solar project or a new battery to the grid, what is the, what, what are the list of things that I normally need to go from generator to grid? And then, in contrast, what does it look like if I Install a Heron Link, which is your product?

A Yeah, so I'm building a hundred megawatt solar facility, and, uh, what, my single line diagram, what's on it? So you, you start with, um, trackers in the field and some combiner boxes that are collecting DC, somewhere around 1500 volts DC. That 1500 volts DC is brought into the Most of the time, but not all of the time, central inverters. These central inverters are central inverter skids, and on that skid, you have a DC to AC inverter, Modular to, like, the one megawatt level, so maybe you'll have four one megawatt DC to AC inverters. Um, so the input voltage is 1500 volts, the output voltage is 690 volts AC. Um, and then on the other side of the 690 volts AC, you'll have, uh, some protection devices, maybe a main breaker, some fusing, um, and then you connect to the low side of a step-up transformer, uh, a medium voltage transformer. Usually it's oil, oil filled, um, sometimes it's a dry type transformer, and on the other side of that transformer, you've got 34 kV AC, most typically, um, and there's also some fusing and potentially, uh, switch gear there on the, on the, on the skid, um, and then you connect that 34 kV in, in a, like, Daisy chain configuration to a bunch of these inverter skids, maybe five or six, and then eventually you get to a medium voltage feeder, breaker, feeder breaker, that is about 600 amps worth of 34,000 volt inverters. Uh, usually something around …

AI assessment note: “So you, you start with, um, trackers in the field and some combiner boxes”

Q heavy electrification strategy, right? And those two elephants are, uh, one on the demand side, the rise of, of electricity demand that is independent of decarbonization, in other words, data centers, basically, um, manufacturing to a lesser extent as well, right? So, like, how, how big a challenge is it going to be to, to, like, you're modeling a tripling of electricity Demand, presumably not including any of that, right?

A Yeah, there's no growth included, which you could definitely say is a, is a, um, is, is unfair in the analysis, but, but I think we tried to be, we tried to avoid stating a growth rate, um, a global growth rate, because, you know, there are people that are super worried about population collapse, and there are some real population collapses that are going to happen in Italy, South Korea, Japan, and other highly industrialized nations. That would tend to send the command the other way. Um, but then at the same time, there's, uh, there's, there's, people are always coming up with great new ways to use energy, and some not so great ways, like, uh, but Bitcoin.

AI assessment note: “Yeah, there's no growth included, which you could definitely say is a, is unfair”

Q energy generation. Anyway, um, Yeah, I mean, I think, but I am curious how you think about that. It's a real challenge now, which is all of a sudden load growth looks, um, really dramatic relative to, to recent history, at least in, in some regionally clustered areas where data center regions, regions are going in. Like, From a decarbonization perspective, do you view that as, is that a headwind?

A Uh, it's definitely a change. Uh, It's, it's, it's, it's, I mean, there's so many changes in the electricity sector. If you just go from the nineties to today in the nineties, the electricity sector was flat, just very minimal growth, certainly growth below the rate of GDP. And now there's, there's some potential re well, I don't, let's not say it's potential hopeful reality that by electrifying everything, ignoring the demand growth, Uh, we, we will see the electricity sector grow at higher than the rate of GDP, of global GDP growth. It kind of needs to, to, to achieve this objective. And then, and then there's even additional, uh, demand gen, uh, in the form of, of data centers. I'm not so sure that it is going to be as, um, dramatic as people think, both because I think Uh, there's a little bit of the toilet paper problem going on here, and if you don't know what I mean by the toilet paper problem, it's like, in COVID, COVID happens, and all of a sudden there's no toilet paper anywhere, and it's like, for, for whatever reason, everybody was like, oh, I know I'm gonna have to use the bathroom, and so I, I, you know, and I don't know the next time I'm gonna be able to go to the store, so I gotta buy a lot of toilet paper.

AI assessment note: “I'm not so sure that it is going to be as, um, dramatic”