Two events in Washington, DC are ushering in the New Year with starkly contrasting visions of the future. In Congress, Republican leaders have prioritized passing legislation supporting the Keystone XL pipeline, which will transport oil from Canada to the Gulf of Mexico. Meanwhile, just a mile north of Congress, the 2015 Washington Auto Show is previewing the industry's latest green automobiles, including a large number of alternative powertrain cars. Nearly every major car company--from BMW to Ford to Kia--has staked out its territory. But perhaps the most transformative project is auto industry upstart Tesla's Nevada-based giga-factory electric battery plant. Like Keystone, both are job-creating multi-billion dollar projects, but the similarities end there.
The Keystone pipeline is much more high-profile. Environmental groups have repeatedly attacked it, claiming that it could pollute lakes, rivers and other water supplies along its route while accelerating climate change faster than even traditional oil production. Supporters of the project claim that the environmental dangers are overstated and that the project will produce tens of thousands of needed jobs. Congress is almost certain to pass legislation supporting the project. President Obama has said he'll veto it. New Year, same old Washington gridlock. But Tesla's project offers a different angle on this stale debate between economics and environment.
The company's new facility in Nevada is dedicated to creating breakthroughs in the development of cheaper and higher-storage capacity batteries. By traditional economic standards, this will be a huge boon to Nevada's economy. The enormous factory is expected to create over 20,000 jobs and help stabilize the state's flailing housing market. But the facility's potential impact is truly tremendous: By 2020, Tesla founder Elon Musk guaranteed the facility will reduce the cost of its lithium ion cell batteries by 30 percent. This would be an enormous accomplishment. About half of the cost of Tesla's luxury vehicles comes from the battery. A 30 percent reduction in battery cost would be roughly equivalent to shaving $10,000 off the price of one of its $70,000 luxury cars. But the development of much cheaper and higher density batteries will have repercussions far beyond just one car company, or even the auto industry.
The current limitations in battery technology is probably the biggest barrier to more widespread adoption of all renewable energy sources across every industry. With advanced storage capacity, not only would electric cars be cheaper, more fuel-efficient and have longer range, but homeowners and businesses would be able to rely on competitively priced solar and wind-produced electricity for other purposes. Tesla's facility will sit out in the Nevada desert, getting all of its power on site from wind, solar and geothermal systems. With breakthrough battery technology, this kind of electrical generation will become the norm. In fact, the project's possible uses are so broad that it is being co-financed by Panasonic, a traditional battery manufacturer.
In contrast to Tesla's vision of the future, Keystone's nearly 2,000 miles of pipe looks incredibly dull and unimaginative. However many jobs Keystone actually creates during construction, we can be certain of one thing: most will be temporary and, worse, tied to an old, dirty industry -- petroleum extraction. Investing in breakthrough battery technology is seizing the future and possibly dominating a new, nearly limitless market for electricity storage options.
This transformation in the energy sector will take much longer than five years, no matter what the successes of Tesla's new project. And, even as alternative energy sources continue to come online, fossil fuel will be widely used and very profitable. But gasoline's monopoly position in fueling transportation is already eroding in the face of cars powered by natural gas, electricity, bio-fuels and hydrogen cells. The United States has also begun to use less gasoline, partly because of new fuel-efficiency standards for passenger vehicles.
Later this year, countries will gather in Paris for climate talks. President Obama has signaled that the United States will be taking a leading role in international efforts to reign in runaway climate change. Investments in sustainable sources of power are essential to that goal. As important as they are, the debate over Keystone shouldn't end in a standoff between the environment and jobs. It is about the kind of future we want to embrace.