Tesla's TeraFab Gambit: Bluff or Breakthrough?

Tesla's Semiconductor Leap: Bold Strategy or Calculated Bluff?

Introduction

Elon Musk has a knack for turning corporate announcements into global spectacles, and his recent comments at Tesla's annual shareholder meeting on November 6, 2025, were no exception. There, he outlined plans for a massive Tesla chip fabrication plant, dubbed the "TeraFab," to fuel Tesla's AI ambitions. As Tesla eyes billions of Optimus robots and widespread robotaxis, they'll need an unwavering chip supply. The question arises: is this a genuine push into the treacherous world of semiconductor fabrication, or a clever bluff to prod suppliers like TSMC and Samsung into action? In this post, we explore the drivers, challenges, and stakes of Tesla's gambit. Vertical integration here could streamline innovation, but it demands careful navigation of technical and ecological hurdles.

The Surging Demand for Custom Silicon

Tesla's AI hunger is voracious. The company projects needing millions of specialized chips annually to train models for autonomous vehicles and humanoid robots. Musk emphasized that current suppliers cannot meet this scale without compromising other clients, like Apple or Nvidia. A single Terafab, he suggested, would start with 100,000 wafer starts per month and expand to 10 facilities, each churning out enough silicon to power a robot army.

This urgency stems from Tesla's robotics roadmap. Optimus, the company's humanoid bot, is tentatively planned to start rolling off production lines in late 2026. Each unit requires efficient inference chips for real-time decisions, while data centers demand AI training hardware. Without in-house control, Tesla risks delays akin to the 2021 chip shortage that slashed EV output by 30%. By building its own fabs, Tesla aims to secure supply and customize processes, much like it did with batteries. The question remains: is Musk's rhetoric a strategic pressure tactic, designed to extract better terms or (more likely) higher volumes from their foundry partners, or something completely different?

Navigating the Fab Frontier

Semiconductor fabrication is no casual undertaking. It involves etching circuits smaller than viruses in dust-free environments, with upfront costs exceeding $10 billion USD per plant. Construction typically spans three to five years, and yields can plummet from contamination or process flaws. There are also tremendous ongoing costs, as new process nodes must be introduced every 2 to 3 years to stay on the cutting edge. This requires new lithography equipment costing billions in the quest for smaller and smaller transistors.

Apple and Google, titans of tech, remain fabless. They pour resources into design and architecture, outsourcing production to the likes of TSMC. This model avoids the capital sinkholes and talent wars that plague foundries.

At its peak in the early 2000s, there were 22 companies with their own chip foundries. Today, that number has shrunk dramatically to just 3 major foundries (Intel, Samsung, and TSMC), and all but Intel primarily service the fabless chip design companies. 

During the shareholder meeting, Musk floated the idea of a partnership with Intel. Tesla could leverage Intel's US-based expertise and underutilized fabs as an on-ramp to their effort.

Terafab: Bluff or Breakthrough?

There's a more skeptical view of what motivated Musk's Terafab statements. This skeptic angle is that Musk is bluffing. By invoking a "gigantic" Terafab, Musk is hoping to spur TSMC and Samsung to allocate more capacity, echoing his past supply-chain arm-twists. TSMC's latest earnings hinted at reserved slots for Tesla, but no blockbuster deals have surfaced since the meeting. If real, this Terafab venture would mark Tesla's deepest vertical plunge yet, blending automotive grit with silicon precision.

The Third (and Most Likely) Option

So far, we've only examined this as either Tesla making their own fully owned and operated fab or Musk bluffing to gain more capacity from vendors.

The third, and perhaps most likely, path is a partnership similar to the battery cell partnership with Panasonic. Tesla built a dedicated space for Panasonic in GigaNavada to build cells. This partnership works well for Panasonic because it allows them to build cells using their proprietary technology and gives them an on-hand customer for the cells. Additionally, this works out for Tesla because they have a dedicated supply of high-quality cells. 

If Tesla strikes a similar deal with a major chip fabricator for chips, it could work out for both of them. Let's say the deal is structured similarly to the Panasonic deal. Tesla would buy the land, build the structure, and pay for a portion of the equipment costs (via Non-recurring Engineering or NRE payments). In return, all the production capacity of the plant would be dedicated to Tesla. If Tesla didn't need all of the capacity, the IDM would be able to use the surplus capacity for other customers. Because of the equipment and operating costs, it's very important to keep chip fab utilization near full capacity. 

The Dojo Pivot: Lessons in Adaptation

Tesla's chip strategy evolved rapidly this year. This Terafab announcement comes amid a pivot toward next-generation AI5 chips replacing Dojo in Tesla's training cluster. In August 2025, the company disbanded its Dojo team, scrapping the custom supercomputer Musk once hailed as a training powerhouse. He called Dojo an "evolutionary dead end," too niche and costly to scale against Nvidia's GPUs. Dojo resources shifted to AI5 and AI6, versatile chips optimized for both inference and training. These successors build on Dojo's matrix-math innovations but generalize for broader use, with AI5 production slated for 2026.

This pivot underscores Tesla's agility. Dojo's D1 chip, with its wafer-scale design, taught valuable lessons in parallel processing, now infused into AI6's architecture. Musk noted that clustering dozens of these on a board could mimic Dojo's scale, slashing cabling costs by orders of magnitude. The move conserves talent and capital, focusing on chips that power Optimus's dexterity or FSD's navigation without bespoke hardware traps.

Aspect	Dojo (Pre-2025)	AI5/AI6 (Post-Pivot)
Primary Focus	Custom AI training supercomputer	Versatile inference and training
Architecture	Wafer-scale D1 chips	Generalized SoCs, Nvidia-compatible
Production Partners	In-house prototypes	Samsung, TSMC (2026 ramp-up)
Scalability Challenge	High cost, slow iteration	Modular boards for clusters
Projected Output	Limited to prototypes	Millions of units annually (2027)

This table highlights the shift's efficiency gains, positioning Tesla for sustainable growth.

Conclusion

Tesla's flirtation with a Terafab embodies Musk's high-stakes vision: to control the stack and accelerate humanity's autonomous future. Whether it is a bluff or a blueprint, it pressures the industry toward faster scaling. The Dojo cancellation proves Tesla can pivot, channeling setbacks into smarter path selection. And the Panasonic partnership may foreshadow the Terafab plan. As 2026 approaches, watch for groundbreakings or sweetened supplier pacts. In Musk's world, bold bets often pay off, nudging us all toward a more sustainable horizon.

Solar-Powered Heat Pump vs. Gas Furnaces Showdown - Heat Your Home for Pennies!

RUUD Heat Pump and Air Handler

Our furnace and air conditioner are both 30 years old. They are the original equipment installed when the house was built; winter is coming and it's time to replace both of them. The lifespan of equipment like this is generally 15 to 20 years. Ours have exceeded the typical range significantly, but their age is showing, and the annual repair costs are now real.

Since they both need to go, we're considering a heat pump to replace them. Our 4-bedroom home uses methane (natural gas) for the furnace, cooktop, water heater, and (rarely used) fireplace. Soon after we moved in, our water heater needed to be replaced. This was over 20 years ago, so heat pump water heaters were not a viable option yet, so we installed a tankless water heater. It still used methane, but now it's not heating water 24/7, just in case one of us turns on a tap.

Similarly, with this furnace upgrade, I want to reduce our methane use, but it does not have to go to zero since gas is used in other parts of the home. If I were building a new home, it would certainly be all-electric, but this is a retrofit, and I'm happy with steps to reduce fossil fuel usage. Don't let the perfect be the enemy of the good, and all that; but let's see where the costs land.

When replacing your AC and furnace, there are a lot of options to consider. For cooling, if we have an AC unit or a heat pump, the energy usage would be similar, and electric is the only "fuel" option to run it, so let's call that a wash and look into the more complex side, heating. Heating has a lot of options. We could continue to use a furnace (upgrading to a new, more efficient unit), we could use a low-temperature heat pump (getting rid of the furnace completely), or we could do something in-between with a hybrid system that uses a standard heat pump as the primary heating source and a high efficiency furnace to cover the few subfreezing days and nights we have here.

Background and Assumptions

This analysis will compare home heating options for a 4-bedroom house in a Portland, Oregon, westside suburb. Your mileage may vary depending on your location, utility costs, home size, and factors like thermostat settings and insulation levels. These estimates consider the region's mild climate and current energy prices.

Our home is in a temperate climate with winter lows averaging around 34°F. The area is in USDA Climate Zone 8b. This zone is characterized by average annual minimum winter temperatures that do not go below 15°F. We have wet mild winters and warm dry summers, typical of the Pacific Northwest. It also aligns with ASHRAE Climate Zone 4C (cold, humid, marine), which is used for building energy standards, indicating cool winters with significant (2,500–3,000) annual heating degree-days (HDD) and with moderate cooling needs (unless there's a heat dome).

We have insulation typical of a 1990s build, requires an estimated heating load of 50 million BTU annually. Methane prices are set at $1.60 per 100 cubic feet. Regional electricity average of 13 cents per kWh. Methane contains about 1,030 BTU per cubic foot, and we use HSPF and AFUE ratings to convert heating demand into fuel and/or electricity needs.

The hybrid system uses the gas furnace only when temperatures drop to freezing or below. The heat pump will cover many more days per year of heating than the furnace, but the furnace will cover the coldest days (and nights) of the year. This pencils out to the furnace covering about 20% of the heating load, with the heat pump handling the remaining 80%.

Heating Options Overview

• Old Furnace: A 1994 Carrier gas furnace (model 58RAV115-16) with 80% Annual Fuel Utilization Efficiency (AFUE). As covered at the beginning, this is not an option to continue using, but it is included as a baseline.
• New Furnace: A RUUD R962V Endeavor Line Achiever Plus Series Gas Furnace with 96% AFUE.
• Hybrid (Dual Fuel): Combines a RUUD Heat Pump (4 Ton RD17AZ48AJ3NA, ~9.5 HSPF) with the RUUD R962V furnace, using the furnace below freezing.
• Cold Climate Heat Pump: An extended capacity heat pump (10 HSPF, ~3.5 COP at 47°F, ~2.5 COP at 17°F) with no furnace, relying entirely on electricity. May include resistive heating (electric) as a backup source. 

* For completeness, the calculations for each option are included at the end of the article. 

Comparison Table

HEATING OPTIONS COMPARISON

Home in the Greater Portland, Oregon Region

System	Methane Use (feet³)	Electricity Use (kWh/year)	Total Annual Cost (USD)
Old Furnace	603,000	700	$1,056
New Furnace	502,000	600	$881
Hybrid Heat Pump  (Dual Fuel)	100,400	1,434	$346
Cold Climate Heat Pump	0	4,884	$635

carswithcords.net

Key Considerations

The hybrid system is the most cost-effective at $346 annually, leveraging the heat pump’s efficiency in the region's usually mild climate and minimal furnace use.

I admit the "Heat Your Home for Pennies!" portion of the title is clickbaitish, but when I saw that the result was less than $365 annually, that's less than a dollar per day! And I wanted to stress that point. 

The cold climate heat pump, at $635, eliminates gas usage but increases electricity costs due to full electric heating. It takes more work to extract heat from cold air, but this is still a money-saving option compared to either furnace. The new furnace saves more than $150 per year over the old furnace due to higher efficiency, but this option would have the highest carbon footprint, and if we're replacing the AC unit anyway, there's no reason not to put in a heat pump while there are still incentives to do so.

The dual-fuel system gives us energy pricing resilience. It allows us to change the heat pump to furnace switch-over temperature. For example, if electricity rates climb significantly and gas does not, then we could adjust the switch-over point from 32°F to 34 or 35°F. This would use less electricity and more methane for heating during the coldest part of winter (but also increase our carbon footprint).

Even Better With Solar

As regular readers will know, we have solar panels and batteries on our home. Heat pumps, which run on electricity, pair exceptionally well with solar PV systems because they can utilize the clean, renewable energy generated on-site. The batteries allow us to time-shift our solar energy to avoid peak demand electricity rates. This means that when we are using the grid, we're buying energy at the cheapest off-peak rate. This will mean that our heat pump will be running directly from solar, from stored solar, or from off-peak grid energy. This will keep our heat pump running costs low. This heat pump / solar / storage synergy reduces strain on the grid and lowers CO2 emissions by displacing fossil fuel-based energy, especially in regions with coal and/or gas-heavy grids. This trio also helps mitigate HVAC cost volatility; generating your own power insulates you from fluctuating utility rates. If we were only using grid electricity for a new heat pump, I might regret installing it in a year or two if local electricity rates shot up. With solar, we have a guaranteed fixed cost.

When a heat pump is used for heating instead of a fossil gas furnace, renewable energy can directly displace the burning of fossil fuels.

Conclusion

Each heating system presents a different balance of cost, efficiency, and infrastructure requirements. Here is a quick summary:

• Old Furnace: High gas usage and cost, high maintenance costs
• New Furnace: Efficient, but still relies entirely on fossil fuels
• Hybrid System: Excellent performance in mild climates, lower carbon footprint than above. Flexible fuel choice.
• Cold Climate Heat Pump: All-electric, no gas needed, best for decarbonization, higher upfront cost and slightly higher running cost than hybrid

For our home, the hybrid system offers the lowest annual operating cost at $346, followed by the cold climate heat pump at $635. The new furnace ($933) and old furnace ($1,095) are less economical. Heat pumps provide environmental benefits, making them a forward-thinking choice for sustainable heating. I'm placing my order for the hybrid system now. Expect to see an install post coming soon.

Sources: NW Natural, Ruud Products, EIA Degree Days

Option	Annual Energy Usage	Annual Operating Cost
Old Furnace	603,000 feet³ of gas, 700 kWh of electricity	$1,056
New Furnace	502,000 feet³, 600 kWh	$881
Hybrid (Dual Fuel)	100,400 feet³, 1,434 kWh	$346
Cold Climate Heat Pump	0 feet³, 4,884 kWh	$635

* Detailed Calculations

Old Furnace (Carrier 58RAV115-16)

With 80% AFUE, this furnace converts 80% of fuel energy into heat. The annual heating load of 50 million BTU requires an input of 50,000,000 / 0.8 = 62,500,000 BTU. Gas usage is 62,500,000 / 103,675 ≈ 603 CCF or 17,070 cubic meters. Electricity usage for the blower motor is estimated at 700 kWh annually. Operating costs include gas (603 CCF × $1.60 = $964.80) and electricity (700 kWh × $0.13 = $91), totaling approximately $1,095.

New Furnace (RUUD R962V)

The newer RUUD furnace offers a notable improvement in fuel efficiency, reducing gas consumption by over 100,000 cubic feet annually compared to the older unit. This results in yearly fuel savings. The electric blower fan and control systems are slightly more efficient, lowering electricity use as well. This option balances simplicity with better energy performance. The 96% AFUE furnace is more efficient, requiring 50,000,000 / 0.96 ≈ 52,083,333 BTU input. Gas usage is 52,083,333 / 103,675 ≈ 502 CCF, or  ≈14,215 cubic meters. Electricity usage remains at 600 kWh for the blower. Costs include gas (502 CCF × $1.60 = $803.20) and electricity ($78), totaling approximately $881.

Hybrid (Dual Fuel) System

The heat pump covers 80% of the load (40 million BTU) with a 9.5 HSPF (~3.3 COP). Electricity usage is 40,000,000 / (9.5 × 3,412) ≈ 1,234 kWh. The furnace handles 20% of the load (10 million BTU) at 96% AFUE, requiring 10,000,000 / 0.96 ≈ 10,416,667 BTU, or 10,416,667 / 103,675 ≈ 100 CCF, or ≈ 2,832 cubic meters. Total electricity includes 1,234 kWh (heat pump) plus 200 kWh (furnace blower) = 1,434 kWh. Costs are gas (100 CCF × $1.60 = $160) and electricity (1,434 kWh × $0.13 = $186.42), totaling approximately $346.

Cold Climate Heat Pump

With no furnace, this system uses a heat pump with 10 HSPF (~3.0 COP average). The full 50 million BTU load requires 50,000,000 / (3.0 × 3,412) ≈ 4,884 kWh. No gas is used. The operating cost is 4,884 kWh × $0.13 = $635. Depending on electric resistive heating backup usage, this annual electricity usage and cost could be even higher.

Comparison Table

Option	Energy Usage	Annual Operating Cost
Old Furnace	621,090,000 BTUs, 700 kWh	$1,056
New Furnace	517,060,000 BTUs, 600 kWh	$881
Hybrid (Dual Fuel)	103,000,000 BTUs, 1,434 kWh	$346
Cold Climate Heat Pump	0 BTUs, 4,884 kWh	$635

Ω

HW3's Legacy: A Financial and Logistical Analysis of Tesla's FSD Obligation

Calculating Tesla's HW3 Autonomous Obligation

Tesla started selling cars with Full Self-Driving (FSD) computers and cameras, known as Hardware 3 (HW3), in 2019. This was the standard for all of their vehicles through 2022 until HW4 (now known as AI4) supplanted them. During the HW3 window of time, Tesla made approximately 3 million vehicles that were sold as fully FSD-ready, "all that's needed is an over-the-air update, and these cars will be able to drive themselves." Now that we're on the cusp of autonomy, are these HW3 cars an albatross around Tesla's neck or an opportunity? 

At a mere 144 TOPs, it's becoming apparent that HW3 likely does not have the compute horsepower or camera clarity necessary to achieve unsupervised FSD. So what's Tesla going to do if they achieve FSD (on AI4 or 5) but HW3 proves to be insufficient? Will they retrofit the HW3 vehicles? If so, how many cars will need to be upgraded, and how much will it cost Tesla (or you)? 

Introduction

The promise of FSD is a monumental technological endeavor that goes far beyond software alone; it is inherently tied to the hardware underpinning millions of Tesla vehicles already on the road. After working with Mobileye (Autopilot 1) and Nvidia (HW2/2.5), Tesla designed their own custom chip for HW3. This marked a critical milestone in their journey. HW3 was built into all Tesla vehicles for nearly 3 years. The HW3 chip was championed as the final hardware piece necessary for full autonomy. Now, with the vast improvements in subsequent hardware generations (HW4, AI5), some owners are wondering if HW3 will be able to cross the unsupervised finish line or if it will be like trying to run Borderlands 4 on a Commodore 64.

Today, we'll examine the size of the HW3 fleet, its FSD adoption rate, the retrofit costs, and how Tesla may deal with upgrades. 

The HW3 Fleet: Size and Timelines

Tesla began installing HW3 in new vehicles starting in April 2019 (replacing the Nvidia-based HW2.5) and continued to use HW3 in primary production until the shift to HW4 in early 2023. This production window generated a large population of vehicles. Based on cumulative delivery data, there are more than 3 million vehicles in the HW3 fleet. This is a substantial number of cars.

The following graph illustrates the estimated size of this fleet over time, factoring in the deliveries until Q4 2022, and then accounting for vehicle attrition with an age-dependent scrappage rate (4.5% annually for the first 12 years).

The cumulative number of HW3 vehicle production peaked at 3,054,357 in Q4 2022. Additionally, some HW2/HW2.5 vehicles from 2017/2018 were upgraded to HW3. That brings our estimated HW3 fleet peak size to ~3.1 million vehicles.

For this exercise, we'll assume:

1. FSD is solved in 2027;
2. Upgrades will be required for these HW3 vehicles; 
3. Upgrades will start in Q4 of that year.

Accounting for scrappage, the active HW3 fleet size at that time is projected to be approximately 2.8 million vehicles. This does not mean that all 2.8 million vehicles will require immediate retrofits; the upgrades will only be required for owners who have purchased FSD. In 2019 through 2022, FSD was not available for purchase in most parts of the world. Tesla officially stated that at the end of 2022, there were over 285,000 customers in the U.S. and Canada who had purchased FSD. That's a 9% FSD adoption rate. Again, using standard scrappage rates, that's still more than 225,000 vehicles requiring retrofit upgrades in 2027. However, retrofits are not the only possible solution (more on this later).

Comparing HW3, AI4, (and AI5) 

Hardware	Compute Power (TOPS)	Comparison to HW3
HW3	144 TOPS	Baseline (1x)
AI4 / HW4	300–500 TOPS	Approximately 2–3.5x more raw capable (With real-world FSD inference gains typically 3–5x)
AI5	2,000–5,000 TOPS (expected)	Approximately 14–35x more capable than HW3 (based on TOPS; production expected in 2026; Elon Musk describes it as 10–40x better than AI4 overall on FSD specific metrics)
Overall Comparison		AI4 has approximately 3 to 5 times the compute capability of HW3. AI5 is projected to vastly exceed this, enabling advanced unsupervised FSD and Robotaxi features, though exact real-world results are yet to be seen.

Can HW3 Do It?

This post generally assumes that an upgrade will be required for HW3 vehicles to achieve full autonomy, but it's important to acknowledge that Tesla is still trying to squeeze as much as possible out of HW3. During the Q3 2025 Tesla Earnings Call, this issue was brought up directly. Here's the response from Tesla management about the future of this massive installed base.

The company's CFO explicitly stated that Tesla is "not abandoning HW3" and offered a clear assurance to concerned customers: "We will definitely take care of you guys." Adding, "My personal daily driver is a HW3 vehicle." Furthermore, Ashok Elluswamy, VP of AI SW, noted that a lighter-weight version of FSD V14, will be coming in 2026 for HW3. This V14 "Lite" will provide owners with many the latest advancements in the supervised FSD, albeit months behind the AI4 deployment.

So, whether or not Tesla finds a way to cram all of unsupervised FSD into HW3, those vehicle owners will have a path to a fully self-driving vehicle. Next, let's look at what those path options may be.

Upgrade Options & Cost

In 2027 (when FSD is solved in this example), let's assume the cost to retrofit a HW3 vehicle with parts (AI5 computer, cameras) and labor is $2,500. For customers who've already paid for FSD, Tesla has an obligation to upgrade them at no cost. For owners who have not paid for FSD, this can be rolled into the purchase cost. However, look at another option.

Tesla has offered FSD transfers (off and on) for some time now (I've even used it). If Tesla were to offer current HW3-FSD owners a $2000 "upgrade incentive" credit towards a new AI5 vehicle with FSD transfer as an early adopter award, many of them might opt for this. They'd get a newer Tesla, they'd be trading in vehicles that are between 5 and 7 years old, and they'd drive off in a native AI5 vehicle (or more likely have the car drive them).

This might mean that Tesla receives a lower margin on these vehicles, but it would stop their service centers from being overrun with retrofit requests, while being cheaper than retrofits.

Above, we estimated that there would be 225,000 HW3-FSD vehicles on the roads in 2027. If Tesla had to upgrade all of these at $2500 each, the total cost would be $562,500,000. However, let's assume, by then, half of the owners will have already upgraded to newer AI4 or AI5 vehicles, and then another 50% of the remaining customers will take advantage of the upgrade incentive. That twindles the "free" upgrade number to just 56 thousand vehicles and reduces Tesla's cost to $140,625,000. This will be easily affordable for Tesla in a future quarter where "FSD is solved" and vehicle and FSD orders are pouring in.

FSD Adoption and Pricing Post-Solution

Once FSD is truly solved, the perceived value of the software will fundamentally change. FSD will transform from an advanced driver-assistance system into a fully validated eye-off, hands-off system. This will allow you to sleep, play games, watch movies, or just look out the window while your car chauffeurs you. It will also be a robotaxi enabler, allowing owners to put their cars into service to generate revenue. This certainty will dramatically increase both the adoption rate and the FSD sale price.

We can conjecture the following changes:

1. Price Increase: The purchase price of FSD (currently $8,000) will increase significantly. It's been as high as $12,000, but this is the "killer app" for cars, and this price is likely to skyrocket. At least $20,000 is a reasonable estimate. It's even possible that in 2028, to have an older Tesla (like a 2018 Model 3) where the ability to transfer FSD to a new car is worth more than the rest of the vehicle. 
2. Adoption Rate Increase: As soon as FSD is solved, the hesitancy surrounding the low (9 to 12%) adoption rate will evaporate. Customers will recognize FSD as a utility or an investment, pushing the take rate on all new vehicles to 50% in 2028 and eventually above 80% in the years that follow. 
3. Retrofit Demand: Every Tesla built since October 2016 has the camera placements to allow retrofits to a new FSD system. The HW2, 2.5, and 3 fleet comprises ~3,542,000 vehicles. This vast population of existing non-FSD-equipped vehicles would become the target of a massive upgrade demand. The potential revenue generated from these post-2027 sales and upgrades would quickly eclipse the cost for the 56 thousand "free" retrofit vehicles.

Crisitunity

Vehicles	Count
Native HW3	3,054,357
HW2/2.5 upgraded to HW3	70,000
HW3 already with FSD	285,000
HW3 vehicles that Tesla will be obligated to retrofit Due to owners not upgrading to AI4+	55,000
HW2/2.5/3 FSD Potential Adoption	2,740,000

A naïve analysis might look at the 3+ million HW3 vehicles and see an obligation to upgrade these to FSD-ready on Tesla's dime. Millions of cars, costing thousands of dollars each, would be a huge liability for any company. However, the opposite is true. Only a small percentage (~9%) purchased FSD. Of those, most have (or will) upgrade to a vehicle with newer native HW and transfer FSD. This leaves the vast majority of the HW3 fleet (97%) with no obligation for free retrofits. And each of these vehicles in the 97% can be converted to a self-driving car if the owner purchases FSD at the higher 2027 price (which more than pays for the retrofit).

Conclusion

Our analysis of the HW3 fleet highlights a moment of both challenge and opportunity for Tesla. The obligation to provide hardware retrofits to tens of thousands of customers who paid for FSD is a substantial financial undertaking, yet one that management has committed to. The explicit promise made during the Q3 2025 earnings call, "We will definitely take care of you guys," codifies the company's intent to fulfill the original FSD promise. The early adopters paid for the development of the technology, and there are multiple ways to reward them for this leap of faith without being financially ruinous. 

The early adopters helped pay the cost for unsupervised FSD, allowing Tesla entry into the vast market that this technology unlocks. This commitment, coupled with the development of the V14 "Lite" software to retain HW3 owners in the ecosystem until a complete solution is developed, ensures that the HW3 fleet remains an active and valuable part of the effort. The hardware retrofit, while costly, will be swiftly offset by the massive increase in FSD adoption rate and the resultant multiplication of the FSD purchase price. This transforms the HW3 legacy fleet from a liability into a highly valuable, revenue-generating asset that paves the way for a more sustainable future of shared autonomous mobility. The proactive communications from the company, especially regarding their promise not to abandon HW3, are essential for maintaining customer trust throughout this transition period.

Henry Ford’s Tinker’s Damn: Crafting a Future Through Innovation and Adaptability

In 1916, Henry Ford made the following statement to the Chicago Tribune: 

“History is more or less bunk. It’s tradition. We don’t want tradition. We want to live in the present, and the only history that is worth a tinker’s damn is the history that we make today.” 

This statement captures a mindset that resonates in today's high tech world. Ford, the pioneer of the assembly line and mass production, wasn’t dismissing the past out of ignorance. He was challenging the weight of tradition that hinders progress; he was urging us to shape the future through innovation. His words inspire us to embrace change, adopt new technologies, and create a history that reflects the courage to evolve. In a world where advancements like artificial intelligence, renewable energy, and biotechnology are transforming our world, Ford’s philosophy reminds us that stagnation halts growth, and an open mindset is essential for forging a meaningful future.

Embracing change doesn’t mean chasing every new gadget or jumping on every trend. It’s about cultivating a willingness to question the status quo and explore better ways of doing things. Ford’s own life exemplified this approach. His Model T wasn’t the first car, but it revolutionized transportation by making automobiles affordable for the masses. He didn’t invent the wheel. He reimagined how it could roll for everyone. You don’t need to be the first to adopt every new technology, whether it’s a quantum computer or a neural interface, but you must be open to their potential. A closed mind, tethered to “how things have always been,” risks missing the transformative power of what’s possible.

Consider today’s rapid technological landscape. In 2025, we see AI systems that can draft complex documents, analyze vast datasets, and assist in creative arts. EVs, once a niche curiosity, are now mainstream, with companies like Tesla and Rivian echoing Ford’s vision of accessible innovation. Biotechnology is pushing boundaries, from mRNA vaccines to gene-editing tools like CRISPR. These aren’t just tools. They’re invitations to rethink industries, healthcare, and human potential. Their value lies in our willingness to engage, experiment, and adapt. If we cling to tradition, insisting on fossil fuels or outdated manufacturing methods, we risk becoming relics, sidelined by a world that moves forward without us.

Ford’s “tinker’s damn” quote highlights this urgency. He saw history not as a sacred archive to worship but as a living process we shape through action. Tradition, in his view, was a chain unless it served the present. This doesn’t mean erasing the past. Ford himself learned from earlier inventors’ mechanics. It means refusing to let the past dictate the future. Today, we make history by how we respond to these emerging marvels. 3D printing has revolutionized everything from housing to prosthetics. Those who embrace it, experimenting with its applications, are writing tomorrow’s history. Those who dismiss it as a fad fade into the “bunk” Ford scorned.

An open mindset also fuels innovation by encouraging us to seek better ways to solve problems. Ford’s assembly line wasn’t just a technological leap. It was a new way of thinking about production, breaking tasks into efficient steps. Today, innovators follow suit, whether it’s SpaceX rethinking space travel or startups using blockchain to secure supply chains. These advances come from asking, “What if we did this differently?” This question drives progress. It’s why companies like Kodak faltered when they resisted digital photography, while others, like Apple, thrived by embracing the smartphone revolution.

Embracing change doesn’t mean reckless abandon. It’s about calculated openness: testing, learning, and iterating. Ford didn’t build the Model T overnight. He refined it through trial and error. Similarly, adopting new technologies requires discernment. Not every innovation is a game-changer, but dismissing them outright ensures obsolescence. An open mindset means staying curious, asking how a tool might enhance your work or life, and being willing to fail in pursuit of something better.

Ford’s legacy teaches us that history is not a museum piece. It’s what we make today. The marvels on the horizon, from AI and androids to sustainable energy and space exploration, are opportunities to shape a future that reflects our highest aspirations. If we stagnate, clinging to tradition for comfort, we stop growing. But if we embrace change, approach new technologies with curiosity, and dare to innovate, we create a history worth a tinker’s damn, one that drives humanity forward, just as Ford did a century ago.

The Debate Over Tesla's xAI Investment

A Sustainable Analysis of Tesla's Proposed Investment in xAI

The upcoming November 6, 2025, shareholder vote has an option to authorize Tesla to make an investment in xAI (Elon Musk's artificial intelligence startup that now owns X (previously Twitter)). This presents a complex dilemma. This shareholder decision has massive technological potential upside of a vertically integrated AI autonomous future; it also has substantial risks related to corporate governance, capital allocation, and environmental footprint. As an investor dedicated to both long-term financial growth and responsible corporate citizenship, it's important to carefully examine how this investment aligns with Tesla's stated mission to accelerate the world's transition to abundance.

Evaluating the Strategic Synergy and Capital Risk

The core argument for the investment is the strategic synergy between Tesla, an AI and robotics company masquerading as an automotive firm, and xAI, a general-purpose AI development company. Proponents argue that an equity stake ensures Tesla has unfettered access to xAI’s cutting-edge large language and reasoning models, such as Grok. This access is crucial for advancing Tesla's most capital-intensive and visionary projects: Full Self-Driving (FSD) and the Optimus humanoid robot.

Without a deep, collaborative relationship, Tesla risks falling behind competitors who partner with or develop their own state-of-the-art foundation models. A strong partnership could translate to a competitive advantage in the burgeoning robotaxi and general-purpose robotics markets, potentially unlocking trillions of dollars in future value.

However, with Musk at the helm of each company there's no doubt that they will be working together, as we've seen with the recent integration of Grok into Tesla's vehicles, and this investment is shadowed by significant financial risks. xAI has already commanded a high valuation in the private market, meaning Tesla would be entering the investment at a premium. Committing a large chunk of corporate cash to a minority stake in a separate, volatile startup is a major concern for financial stability. Tesla's primary capital requirements should, arguably, remain focused on scaling up battery production, expanding its global Supercharger network, building production lines for Optimus, Cybercab, and Semi and refining its core vehicle manufacturing process (e.g., unboxed method).

Environmental and Governance Concerns

For the environmentally conscious investor, the potential of this deal raises specific questions, primarily centered on the massive computational requirements of advanced AI.

Training large language models demands enormous amounts of energy for cooling and powering massive GPU clusters. While Tesla is developing its own high-efficiency hardware (AI5) and has expertise in energy storage (Megapack), directing capital toward a new, distinct entity with significant compute needs must be scrutinized for its overall net impact. There are over 30 gas turbines at the xAI datacenter in Memphis. Fifteen of these turbines are running at any time, spewing emissions into the local air 24/7. This is not a solar-powered utopia.

Not how datacenters are powered

However, if xAI's development accelerates AI that leads to massive leaps in energy grid optimization or material science, the environmental payoff could be huge. Conversely, if it results only in another high-energy-demand chatbot, the investment fails the sustainability test and does not align with Tesla's environmental goals.

There are corporate governance issues that are equally vital to consider. Musk and the Tesla board are official neutral on this issue. An investment in xAI could be seen as using Tesla's cash to fund the CEO's private ambition, creating a potential diversion of assets. Shareholders must be convinced that the terms of the deal are demonstrably fair and optimized for Tesla, not just for xAI. 

Consideration	Pro-Investment Perspective	Anti-Investment Perspective
Technological Access	Guarantees critical IP for Optimus and FSD development.	Tesla should develop AI in-house, retaining 100% of the IP.
Financial Return	Massive upside if xAI achieves AGI, generating returns.	High risk, late entry at inflated valuation, and uncertain monetization.
Capital Allocation	Necessary strategic spend to secure future technology.	Diverts capital from core environmental mission: batteries, manufacturing, and charging infrastructure.
Governance	Secures Musk’s focus and vertically integrates the ecosystem.	Unmitigated conflict of interest that favors the CEO's private firm.
Environmental	Accelerates AI needed for long-term grid optimization.	Increases overall computational energy demand without guaranteed environmental benefit.

The Fiduciary Duty Test

The final judgment rests on the fiduciary duty of the board and the shareholders: does this investment serve the best long-term financial interests of Tesla and its public shareholders?

Tesla is unique for many reasons, cheif amound them is the mission of accelerating the energy transition, this is a core part of my investment thesis. A robust and sustainable future hinges on both better battery technology and advanced AI to manage complex systems. If the xAI investment is structured with concrete, verifiable access guarantees, a clear path for technological transfer, and an attractive valuation (relative to its potential), it becomes a high-stakes, high-reward proposition.

The vote is not merely about an AI company; it’s about control and commitment. A strong "yes" vote signals shareholder endorsement of a consolidated, Musk-led technological conglomerate. A "no" vote pushes Tesla to redouble efforts on its internal AI programs and focus on its immediate, profitable, and tangibly impactful clean energy products. Given the substantial conflict of interest, the burden of proof for this investment rests squarely on demonstrating that it is an extraordinarily beneficial deal for Tesla, exceeding what any other partnership could offer, not just a convenient funding mechanism for xAI.

Conclusion

The shareholder proposal to invest in xAI demands a considered, forward-thinking response. While the integration of xAI could provide an unparalleled technological lift for FSD and Optimus, the potential misuse of shareholder capital and the unresolved corporate governance issues surrounding a related-party transaction are problematic. Shareholders must weigh the potential trillion-dollar technological leap against the fiduciary duty to preserve capital and mitigate conflict. A decisive vote either way will fundamentally redefine Tesla's identity, determining whether it is an integrated AI-first company or a focused, capital-efficient sustainable energy leader. In the end, it all comes down to trusting (or not trusting) Musk and if you don't trust him, maybe holding share in any Musk-led ventures is a bad idea.

Nature's Trillion-Dollar Gifts: Top 7 Ways Ecosystems Keep Us Alive

Introduction

If you've ever plugged in your electric car to your solar-powered home and thought about how awesome it is to drive on sunshine, this might have made you wonder what other great things nature does for us. There are even bigger ways nature powers our entire planet. Nature isn't just pretty scenery; it's the ultimate infrastructure keeping life ticking along. From the air we breathe to the food on our tables, ecosystems provide services that make Earth habitable. These systems are irreplaceable and beyond economic value. But, if we did have to pay for them, what would they be worth? Maybe, just maybe, some people who don't appreciate nature purely for its own sake can come to appreciate it for all the things it does to make all of us happier and healthier. So let's crunch a few numbers and we'll see they're worth trillions of dollars annually.

I'm not the first person to ask this question, and there've been detailed studies dating back 30 years. The global value of these services hits around $125 trillion per year, dwarfing the world's GDP. In this post, we'll dive into the top seven ways nature makes life livable, complete with economic estimates based on updated research. Think of it as appreciating the "free" services that sustain us all.

The Top 7 Ways Nature Sustains Us

These aren't just feel-good facts; they're critical functions that, if lost, would cost us dearly to replace artificially.

1. Sunshine Growing Our Food (Food Production): Through photosynthesis, plants harness sunlight to produce the biomass that forms the base of our food chain. Forests, grasslands, and oceans all contribute, enabling agriculture and fisheries. Without this, we'd be starving. Economic value: $5.25 trillion per year.
2. Oxygen Generation (Gas Regulation): Plants and phytoplankton pump out the oxygen we need to breathe. This atmospheric balance is vital for all aerobic life. Imagine bottling O2 for everyone - impossible! Economic value: $4.88 trillion per year.
3. CO2 Removal (Climate Regulation): Ecosystems like forests and wetlands absorb carbon dioxide, mitigating climate change and stabilizing temperatures. This natural carbon sink prevents worse global warming. Economic value: $2.59 trillion per year.
4. Water Purification (Waste Treatment): Wetlands, rivers, and soils filter pollutants from water, making it safe for drinking and farming. This service saves billions in treatment plants. Economic value: $8.63 trillion per year.
5. Pollination: Bees, birds, and insects pollinate crops, boosting yields for fruits, veggies, and nuts. Over 75% of food crops rely on this. Economic value: $0.44 trillion per year.
6. Flood Control (Disturbance Regulation): Mangroves, wetlands, and forests absorb storm surges and heavy rains, preventing floods and erosion. This protects communities and infrastructure. Economic value: $6.75 trillion per year.
7. Biodiversity for Medicine (Genetic Resources): Diverse species provide compounds for pharmaceuticals, from aspirin to cancer drugs. This biodiversity is a treasure trove for health innovations. Economic value: $300 billion per year.

A Closer Look at the Numbers

To put these in perspective, here's a table summarizing the top seven services, their roles, and estimated annual economic values in USD trillions. These figures are derived from scaling the 1997 Costanza et al. breakdowns to the 2014 updated global total of $125 trillion, reflecting inflation, better data, and land use changes.

Service	Description	Economic Value ($ trillion/year)
Sunshine Growing Our Food	Photosynthesis enables food chains	5.25
Oxygen Generation	Atmospheric gas balance	4.88
CO2 Removal	Carbon sequestration and climate stability	2.59
Water Purification	Filtering pollutants from water	8.63
Pollination	Crop fertilization by animals	0.44
Flood Control	Storm and flood mitigation	6.75
Biodiversity for Medicine	Genetic resources for drugs	0.30

These values highlight how interconnected everything is. For instance, losing forests impacts CO2 removal, oxygen, and flood control all at once.

Why This Matters in Our Daily Lives

In the world of electric vehicles and renewable energy, we often focus on tech solutions, but nature's services are the foundation. Deforestation, pollution, and climate change threaten these freebies, potentially adding massive costs to society. For example, poorer water quality means higher bills for filtration, and reduced pollination hits food prices.

Conclusion

Nature's contributions, from sunshine fueling our meals to biodiversity inspiring life-saving medicines, are priceless; yet we've put a price tag on them to underscore their importance. At a combined $28.84 trillion just for these seven (part of the $125 trillion total), it's clear we can't afford to ignore ecosystem health. Just like charging your EV with solar panels, let's commit to sustainable practices, conservation, and policies that protect our planet's natural capital. After all, a livable Earth is the best investment we can make for future generations.

From Fossil Fuels to Green Energy: The Path to a Renewable World by 2070

Transitioning to a 100% Renewable Energy Society with Rooftops and Parking Lots

A 100% renewable energy society, where all energy needs are met by renewable sources, is technically feasible with existing technologies, particularly by leveraging rooftops and covered parking areas to address land use concerns. This approach, combined with a strategic phase-out of fossil fuels, can power the United States and the world sustainably. This post will show the feasibility, technologies involved, challenges, outline a plan to eliminate fossil fuels, the easiest and hardest sectors to transition, and a timeline for achieving a fully renewable, electrically powered world by 2070.

Is a 100% Renewable Energy Society Possible?

Yes, a 100% renewable energy society is achievable, especially for electricity, using current technologies. Studies from the International Energy Agency (IEA) and the researcher Mark Jacobson suggest global electricity demand (approximately 18 terawatts in 2023) can be met by scaling up renewables like solar, wind, hydroelectric, and geothermal, paired with energy storage and grid enhancements. Extending this to transportation, heating, and industry is more complex but feasible by 2070 with aggressive investment and policy. Using rooftops and parking lots for solar panels significantly reduces land use concerns, making the transition more practical.

Technologies Utilized

The transition relies on these technologies:

• Solar Power: Photovoltaic panels on rooftops and parking lot canopies, plus concentrated solar power for heat.
• Wind Power: Onshore and offshore turbines for large-scale electricity.
• Hydroelectric Power: Dams and run-of-river systems for baseload power.
• Geothermal Energy: Harnessing Earth’s heat for electricity and heating.
• Energy Storage: Lithium-ion batteries, flow batteries, pumped hydro, and thermal storage to balance intermittent renewables.
• Grid Infrastructure: Smart grids, high-voltage direct current (HVDC) lines, and demand-response systems for efficient distribution.
• Electrification Technologies: Heat pumps for heating, electric vehicles (EVs) for transport, and electric furnaces for industry.
• Emerging Solutions: Green hydrogen for select hard-to-electrify sectors.

Addressing Land Use with Rooftops and Parking Lots

A major concern for solar is land use, as powering the US with solar farms requires approximately 3,600 square miles for electricity (approximately 4,000 TWh) or approximately 4,500-10,000 square miles for total electrified energy (approximately 5,000-6,000 TWh). The National Renewable Energy Laboratory (NREL) estimates approximately 8,000-10,000 square miles of suitable rooftop space (residential, commercial, industrial) and approximately 2,500-4,000 square miles of parking lots for solar canopies. Combined, these provide approximately 10,500-14,000 square miles, exceeding the needed area. Rooftops alone could meet electricity demand, while parking lots cover additional needs, eliminating the need for dedicated solar farms and minimizing ecosystem or farmland disruption.

Challenges

Despite this solution, challenges remain:

• Cost of Deployment: Retrofitting rooftops and building parking lot canopies is costly, with canopies approximately 20-30% more expensive than ground-mounted systems.
• Grid Reliability: Intermittent rooftop and parking lot solar requires storage and grid upgrades for stability.
• Adoption Barriers: Not all owners will install solar due to upfront costs or leasing issues; NREL estimates 50-60% rooftop adoption by 2050 without incentives.
• High-Cost Sectors: Heavy industry (e.g., steel, cement) and long-haul transport (e.g., aviation, shipping) lack mature renewable alternatives.
• Policy and Social Resistance: Fossil fuel subsidies, and regulatory inertia in traditional energy sectors slow progress.

Plan to Phase Out Fossil Fuels

A phased approach to eliminate fossil fuels, leveraging rooftops and parking lots, could work as follows:

1. 2025-2035: Scale Electricity and Light Transport
   Expand solar on rooftops and parking lots by 10-15% annually, targeting 50% renewable electricity globally by 2035. Subsidize EV adoption and ban internal combustion vehicle sales by 2035 in major markets. Retire coal plants, replacing their generation with solar, wind, and storage.
2. 2035-2050: Decarbonize Heating and Medium Industry
   Deploy heat pumps for residential/commercial heating, replacing gas systems. Scale green hydrogen for industries like ammonia and refining. Use carbon pricing to incentivize renewables.
3. 2050-2070: Address Hard-to-Abate Sectors
   Develop green hydrogen and synthetic fuels for aviation and shipping. Retrofit heavy industries with electric or hydrogen processes. Achieve 100% renewable electricity, phasing out natural gas.

Easiest Sectors to Transition

• Electricity Generation: Renewables, especially rooftop and parking lot solar, are cost-competitive. Solar and wind can replace coal/gas with existing technology. Timeline: 100% renewable electricity by 2050 in most regions.
• Light Transport: EVs are mature, with expanding charging infrastructure. Timeline: Full transition by 2040 for passenger vehicles in developed nations.
• Residential Heating: Heat pumps are efficient and widely available and work even in sub-freezing regions. Timeline: 80% electrified by 2045.

Hardest Sectors to Transition

• Heavy Industry: Steel, cement, and chemicals need high-temperature heat, where electric furnaces and hydrogen are not yet scaled. Timeline: Significant decarbonization by 2055, full transition by 2070.
• Aviation and Shipping: Currently, battery-powered planes are limited to short flights; green hydrogen/synthetic fuels are early stage. Timeline: Partial transition by 2055, full by 2070.
• Remote Regions: Areas with low solar/wind potential require costly transmission infrastructure. Timeline: 2060-2070.

Proposed Timeline

• 2035: 50% global electricity from renewables (rooftops, parking lots, wind); 80% new vehicle sales are EVs; coal phased out in developed nations.
• 2050: 100% renewable electricity in advanced economies, 80% globally; heavy industry adopts hydrogen; aviation begins synthetic fuel use.
• 2070: Full renewable energy across all sectors, with fossil fuels limited to niche applications.

Conclusion

A 100% renewable energy society is achievable by 2070 using rooftops and parking lots for solar to eliminate land use concerns. With approximately 10,500-14,000 square miles of available space, these areas can meet US electricity and total energy needs. Electricity and light transport can transition quickly, while heavy industry and aviation require longer timelines. Aggressive policy, investment, and public support are essential to overcome cost, adoption, and grid challenges, ensuring a renewable-powered future by 2070.

Robotaxi Rollout Slowed - Musk Informs Wall St.

On July 23rd of this year, Tesla held their Q2'26 financial call. In that discussion, Elon Musk reported that Tesla Robotaxi services would be available to half of the US population by the end of 2025. Based on this, we calculated that Tesla would need to have Robotaxis operational in 37 Metropolitan Statistical Areas (MSAs) including the Austin and Bay Area regions where they already Robotaxis rolling around.

Yesterday, Musk announced that those plans have changed. On October 22nd, Musk scaled back from half of the US population to "8 to 10" MSAs by the end of 2025. Here's Musk's complete quote: 

"We do expect to be operating robotaxi in, I think, about eight to ten metro areas by the end of the year. It depends on various regulatory approvals. You can actually think most of our regulatory applications are online. You can kind of see them because they're public information. We expect to be operating in Nevada, Florida, and Arizona by the end of the year."

Given this scaled back ambition, we did exactly as Musk suggested and took a look at Tesla's permit requests to try to determine which regions Tesla is likely to cover with robotaxis by yearend?

Tesla Robotaxi Permit Applications by Region (as of October 22, 2025)

Tesla has applied for (or obtained) permits in the following states:

State	Status	Details
TX	Obtained (August 2025)	Secured statewide rideshare license for unsupervised operations; launched pilot in Austin with fleet expansion.
NV	Obtained testing permit (September 2025)	Approved for public road testing; targeting Las Vegas launch by year-end.
AZ	Applied (July 2025)	Submitted for robotaxi certification; expected operations by end of year.
CA	Applied for partial permits (September 2025)	Seeking ride-hail approvals at San Francisco, San Jose, and Oakland airports; Bay Area expansion in 1-2 months pending full driverless permit.
FL	In application process (ongoing)	Regulatory approvals sought for Miami/Tampa; operations expected by end of 2025.

At the time of writing, I could not find confirmed applications for New York, Illinois, or Colorado.

So, let's look at these confirmed states and see which locations are candidate for these new service areas.

MSAs with Population Over 1,000,000 in States with Confirmed Tesla Robotaxi Permit Applications

Below is the further filtered (list from our July post) of MSAs from Texas, Nevada, Arizona, California, and Florida. This results in 12 MSAs expansion candidates.

Texas (Top 3 MSAs)

MSA Name	Population (2023 est.)
Dallas–Fort Worth–Arlington, TX	8,100,037
Houston–The Woodlands–Sugar Land, TX	7,510,253
San Antonio–New Braunfels, TX	2,703,999

Nevada (Primary MSA)

MSA Name	Population (2023 est.)
Las Vegas–Henderson–North Las Vegas, NV	2,336,573

Arizona (2 Largest MSAs)

MSA Name	Population (2023 est.)
Phoenix–Mesa–Chandler, AZ	5,070,110
Tucson, AZ	1,063,162

California (Top 3 MSAs)

MSA Name	Population (2023 est.)
Los Angeles–Long Beach–Anaheim, CA	12,799,100
Riverside–San Bernardino–Ontario, CA	4,688,053
San Francisco–Oakland–Fremont, CA (Bay Area)	4,566,961

Florida (Top 3 MSAs)

MSA Name	Population (2023 est.)
Miami–Fort Lauderdale–West Palm Beach, FL	6,183,199
Tampa–St. Petersburg–Clearwater, FL	3,342,963
Orlando–Kissimmee–Sanford, FL	2,817,933

From 50% to Less Than 18% for 2025

In conclusion, Tesla's Robotaxi rollout has shifted from an ambitious nationwide push covering 50% of the US population to a more measured expansion into 6 to 8 new regions for a total of 8 to 10 service areas by year's end. These 12 candidate MSAs encompass roughly 61 million people, or about 18% of the US population. While challenges like regulatory hurdles and safety validations persist, this targeted approach allows Tesla to refine its Full Self-Driving tech at scale with safety monitors as needed. 

Ultimately, Robotaxi promises personal mobility at affordable prices. This will empowering the elderly, disabled, or low-income individuals while reducing vehicle crashes and emissions. But you might have to wait until 2026 to try it out for yourself.

Batteries Slay the Duck Curve: A 37% Gas Reduction Thanks to Massive Storage

Introduction

The energy landscape is shifting, one quirky phenomenon called the duck curve is stirring up some challenges for our power grids, especially in sunny spots like California. This curve, named for its distinctive shape, highlights a mismatch between solar power generation and demand, is creating headaches for grid operators. As we push toward cleaner energy solutions, understanding this issue and how batteries are stepping up to address it is key. Let’s explore what the duck curve is, why it’s a problem, how it’s nudging energy costs upward, and the role batteries are playing in smoothing things out, all while tracking the impressive battery capacity installed in California since 2010.

The Duck Curve Increasing Energy Costs

The duck curve is a graphical representation of net electricity demand over a day, where solar power generation dips in the evening as the sun sets, causing a sharp rise in demand that resembles a duck’s belly and neck. In California, where solar dominates renewable energy, this curve emerges because midday solar output often exceeds demand, only for that surplus to vanish by late afternoon when people crank up air conditioners and appliances. This creates a steep ramping need, forcing grid operators to rely on backup sources.

The problem lies in the grid’s struggle to balance this variability. Operators must ramp up fossil fuel plants, like natural gas, quickly to meet evening peaks, which is inefficient and costly. The trending summary notes a 37% reduction in natural gas use in 2025 thanks to batteries, hinting at the previous reliance. This inefficiency drives up energy costs because gas plants, often idle during the day, burn fuel at premium rates during spikes, sometimes exceeding $1,000/MWh compared to $50/MWh for solar. Additionally, the need for rapid adjustments wears down equipment, adding maintenance expenses. The NPR article from October 6, 2025, points out rising electricity bills due to grid strain, with distribution costs climbing as old infrastructure struggles with these swings. So, the duck curve not only challenges reliability but also inflates costs for consumers and utilities alike.

How Are Batteries Mitigating the Duck Curve

Batteries are becoming the unsung heroes in tackling the duck curve, storing excess solar energy during the day and releasing it when demand spikes. In California, the trending data shows batteries supplied over 25% of peak demand in spring and summer 2025, a game-changer for evening ramps. They charge when solar production peaks, soaking up that midday surplus, and discharge in the late afternoon to early evening, flattening the curve’s steep rise. The Financial Times chart from Jigar Shah’s post, covering June 2025, illustrates this perfectly, with batteries kicking in around 6 PM as solar fades.

This mitigation reduces reliance on gas plants, cutting fuel costs and emissions. The 37% drop in natural gas generation since 2023, per the trend summary, underscores this shift. Batteries also enhance grid stability, avoiding the wear-and-tear costs of frequent plant startups. The Economist article suggests pairing this with demand response, but batteries alone are proving effective, with California avoiding Flex Alerts since 2022, as noted in the LA Times. Globally, with capacity up 67% to 617 GWh this year, this approach is scaling, driven by cost drops over 90% since 2010. It’s a smart, sustainable move to keep our grids humming while leaning on renewables.

Battery Capacity Installed in California

Since 2010, California has built an impressive battery infrastructure to support its clean energy goals. Based on the LA Times figure of 15,700 MW by October 2025, plus an estimated 1,500 MW from 2010 to 2019, the total power capacity reaches 17,200 MW, or 17.2 GW. To convert this to energy capacity in watt-hours, we need the discharge duration. Most grid-scale lithium-ion batteries offer 4 to 6 hours, with a 4.5-hour average being reasonable based on CAISO data and project specs like Moss Landing. Thus, energy capacity is calculated as 17.2 GW x 4.5 hours = 77.4 GWh.

Breaking it down, 1.5 GW from 2010-2019 yields 6.75 GWh, while 15.7 GW from 2020-2025 contributes 70.65 GWh. This 77.4 GWh reflects a robust build-out, aligning with California’s 55% share of US storage capacity per Reuters. Variations in duration (e.g., 4 vs. 6 hours) or ongoing projects might adjust this slightly, but it’s a solid estimate for 2025.

Table: Battery Capacity in California Since 2010

Period	Power Capacity (GW)	Duration (Hours)	Energy Capacity (GWh)
2010-2019	1.5	4.5	6.75
2020-2025	15.7	4.5	70.65
Total	17.2	4.5	77.4

As you can see in this table, in just the first 5 years of the 2020's, California has installed more than 10 times the battery energy capacity than they had in all of the previous decade.

Fossil Fuel Reduction

In California, methane use for electricity generation has dropped significantly due to renewable energy and batteries. There's been a 37% reduction in natural gas electricity generation during peak periods in 2025 compared to 2023, driven primarily by grid-scale batteries. These batteries store excess solar energy during the day and release it at night, mitigating the duck curve. This reduces reliance on gas-fired peaker plants, which burn methane, the primary component of natural gas (about 80%), ethane, propane, and butane. Solar power, dominating renewables, provides the surplus energy batteries utilize, cutting the need for fossil fuels. The LA Times notes a 3,000% battery capacity growth since 2020. This is a significant cut in fossil fuel use in the electricity sector. This shift lowers costs and emissions.

Conclusion

The duck curve is a fascinating challenge that highlights the growing pains of our shift to renewable energy, pushing up costs with its demand spikes and reliance on gas. Batteries are stepping up, storing solar power and easing evening peaks, as seen in California’s 37% gas reduction. With 77.4 GWh of capacity installed since 2010, we’re on a promising path. With continued innovation, we can keep costs down while powering our future sustainably.

How Even Small Batteries Make a Big Difference for Solar Homes

If you have solar on your home, you may be considering the addition of a residential energy storage system (or more simply, batteries). But how much battery capacity do you need? A few hours worth, a few days, or something in between. Certainly, more capacity will last longer, but the cost adds up quickly. If money is no object for you, go nuts and include a Megapack if you'd like. For the rest of us, finding the right balance of cost and effectiveness is important. 

While the idea of storing multiple days' worth of energy might seem appealing, a few hours of storage delivers surprising value at a fraction of the cost. Systems like the Tesla Powerwall, with a capacity of 13.5 kWh, demonstrate how compact storage solutions can optimize energy use, reduce costs, and enhance reliability. The key takeaway? Bigger is not always better when it comes to energy storage.

Conventional Wisdom

An industry rule-of-thumb is that for each 1 kW of solar PV you have, you should have 5 kWh of battery capacity. This guideline provides a useful starting point. It seeks to balance capturing excess daytime solar production with meeting evening demands or managing short outages. It often aligns well with the household's daily energy use. However, it is not a one-size-fits-all solution. Factors such as local electricity rates, net metering rules, solar output, AC/heat pumps, EV charging, and individual consumption patterns may necessitate adjustments. It's essential to choose a size that's tailored to your home's specific needs.

Time-Shifting Energy for Cost Savings

One of the primary benefits of limited storage is the ability to time-shift solar energy. Solar panels generate the most electricity during midday when sunlight is abundant, but household energy demand often peaks in the late afternoon or early evening. Utility companies frequently implement time-of-use (TOU) or time-of-day (TOD) pricing, where electricity rates during peak hours can be two to three times higher than off-peak periods. With just 4 to 8 hours of storage, homeowners can store excess solar energy produced during the day and use it to shave off these costly peak periods. For a typical household consuming 30 kWh daily, a battery storing just 10 kWh can generally cover evening demand, slashing expensive peak rates. This approach maximizes savings without the need for an oversized, costly battery system.

Enhanced Reliability During Outages

Short-term energy storage shines during power outages, which are often brief. According to US utility data, approximately 70 to 80% of outages last less than two hours, and many are resolved within minutes. A battery with a few hours of capacity ensures critical appliances like lights, refrigerators, and communications remain operational. This uninterrupted power prevents inconvenience, such as stumbling in the dark to find flashlights or candles. It also provides a buffer to safely power down sensitive electronics, protecting them from potential damage when grid power returns. For households in areas prone to short outages, this level of backup is often sufficient, making larger systems unnecessary.

Safety and Convenience in Emergencies

Even a brief loss of power can disrupt daily life. A few hours of battery storage keeps the lights on, reducing the risk of accidents like tripping over furniture or banging a shin while navigating a dark home. In the event of an evacuation, such as a wildfire, having power ensures you can pack up and load the car quickly, even if the grid has failed. This reliability transforms a potentially chaotic situation into a manageable one, highlighting the practical benefits of modest storage capacity.

Cost-Effectiveness of Compact Systems

While multi-day storage might seem ideal, the costs escalate quickly. A single battery unit providing 4 to 8 hours of storage for critical loads typically costs between $7,000 and $15,000 installed. Scaling up to multiple days of storage could double or triple this expense, with diminishing returns for most households. Short outages and peak pricing periods are the primary concerns for most, and a smaller battery addresses these effectively. Investing in excessive capacity often yields minimal additional benefits, reinforcing that bigger is not always better; sometimes it just costs more.

Conclusion

A few hours of energy storage paired with solar offers a compelling balance of cost, convenience, and reliability. By enabling time-shifting, ensuring power during brief outages, and enhancing safety, compact systems deliver outsized value. Homeowners can achieve significant savings and peace of mind without the expense of oversized batteries, proving that modest, strategic storage is often the smartest choice. 10 - 15 kWh adds a lot of value, without a huge price tag. However, if you're looking to time-shift or need longer blackout protection, you may need 30kWh+.

Soon after our Powerwalls were installed, our power went out in the dead of winter.

If you'd like a Powerwall or two, you can use my referral code: ts.la/patrick7819