Elon Musk, one of his generation’s greatest entrepreneurial minds, had a fundamental choice last week when deciding where to locate a huge new $5-billion battery factory for his Tesla Motors car company.
Mr. Musk could have chosen a state such as Arizona, where Arizona State University has both a national reputation for innovation and entrepreneurship as well as top scientists and graduates working on battery technology.
He also could have stayed at his home base in the San Francisco area, with world-class battery scientists at Stanford University and the University of California at Berkeley.
Or he could have chosen Nevada, which has no research university ranked among the nation’s top 100 or having any particular interest in battery development, but was willing to offer him more than $1-billion in tax breaks.
Mr. Musk chose Nevada, and in doing so the businessman—named this year by CNBC as the nation’s No. 1 economic disruptor for another of his companies—may have poked a hole in what has become an almost unassailable article of faith among research universities and their backers: Investing in education, especially science, is the surest ticket to economic success in the modern, high-tech world.
“What makes that odd,” James K. Woodell, director of innovation and technology policy at the Association of Public and Land-Grant Universities, said of Tesla’s belief that tax breaks are more important than nearby scientific talent, “is that’s so untrue generally these days.”
Others, however, are less sure that the country’s increasingly technology-centric economy will routinely favor the communities that place their bets on education and science.
Arizona tried hard to sell Mr. Musk on the overriding value of its two big research universities, and failed, said Barry G. Broome, president and chief executive officer of the Greater Phoenix Economic Council.
“A company is always going to manage cost and return on capital first, talent second—and that’s never going to change,” Mr. Broome said. “When you’re investing $5-billion, you’re going to make a cost decision first.”
Tesla, the world’s leading maker of electric vehicles, ended several months of negotiations involving at least five states by announcing on Thursday its choice of a site near Reno, Nev., for a battery-production facility that’s expected to cost the company $4-billion to $5-billion, cover 500 to 1,000 acres, and employ some 6,500 people.
Tax Breaks
As part of the package, the governor of Nevada agreed to ask state lawmakers to grant Tesla tax breaks and other incentives worth up to $1.3-billion over 20 years.
Much of Mr. Musk’s decision to focus on the tax breaks and other advantages in Nevada—such as more favorable labor and environmental laws—can be explained by the fact that the facility is intended to be far more about churning out huge numbers of batteries than about reinventing them, several technological experts said.
The factory will be largely a site for packaging together battery cells made by Tesla’s Japanese partner Panasonic, said Jay F. Whitacre, an associate professor of materials science and engineering at Carnegie Mellon University who founded Aquion Energy, a maker of advanced battery technologies.
There appears to be “very little interest in innovation at that factory,” Mr. Whitacre said. “That innovation will happen elsewhere or in Japan.”
Nevertheless, battery technology is still rapidly evolving, with energy densities doubling in the last 15 years, said Venkat Viswanathan, an assistant professor of mechanical engineering at Carnegie Mellon. The types of batteries needed to give electric cars a major share of the American vehicle market “probably haven’t been commercialized yet,” Mr. Viswanathan said.
But rather than wait while it tried to push forward the technology, Tesla—with demand so high its cars are back-ordered for months—made a strategic decision to move ahead with its car production by packing some 8,000 lithium-ion battery cells into each vehicle, Mr. Whitacre said. The Reno factory now represents a huge gamble on perpetuating that approach by continuing to use the decades-old lithium technology, he said.
“It’s a crazy idea,” Mr. Whitacre said. “But when you look a little more closely, it’s pretty clever.” The new factory still will require experts in fields such as advanced manufacturing, but perhaps at numbers small enough that the company can recruit them from outside Nevada, he said.
Needed: Engineers
And so, with Tesla apparently content to build a state-of-the-art factory to manufacture batteries that will rely on old technology, communities around the country that are desperate for economic growth might have new reason to doubt whether making major new investments in education is really their surest means of creating lots of new jobs.
“That’s an excellent question,” said Daniel Sperling, a professor of civil engineering and environmental science and policy at the University of California at Davis, and founding director of its Institute of Transportation Studies, who admitted he was surprised to see Tesla had so little interest in a partnership with a research university.
Even automated factories need lots of engineers, Mr. Sperling said, citing examples such as the German automaker BMW’s reliance on Clemson University for engineering support at its nearby factory. “Where are they going to get all these people to design and run this thing?” he said.
Arizona State University’s trailblazing president, Michael M. Crow, apparently had the same thought. He and Mr. Broome, along with U.S. Sen. John McCain, met personally with Mr. Musk earlier this year as part of Arizona’s bid to win the giant battery factory.
A central theme in Mr. Crow’s presentation, Mr. Broome said, was the idea that Arizona State could become a major supplier of the 1,500 engineers that Tesla would need for that project. “Elon Musk was really impressed with Arizona State University’s research capabilities,” he said, “and Dr. Crow presented a case on how the university could actually be embedded with Tesla.”
Boosters of New Mexico’s bid made similar suggestions. A group of state and local lawmakers, in an April editorial in The Albuquerque Journal, sketched out a long-term plan for supplying talent to the Tesla factory, beginning with engineering students who could be made available “at little or no cost to the company.”
By contrast, the president of the University of Nevada at Reno, Marc A. Johnson, said he was not involved in efforts to attract Tesla. Having a nearby research university seemed to be “a checkbox” for Tesla, Mr. Johnson said, “but the company did not come here solely because of the research capacity here.”
Mr. Johnson conceded that battery-related work is not a particular strength of the University of Nevada at Reno, which with $85.7-million in total research and development spending in 2012 ranked 161st in the country, according to National Science Foundation data.
The University of Arizona at Tucson, Arizona State University in Phoenix, and the University of New Mexico at Albuquerque all rank higher, according to the NSF data. And Texas and California, two other states that vied for the Tesla plant, each have several institutions that perform more research than Nevada.
A Tesla spokesman, Simon Sproule, said the company did commit $1-million to the University of Nevada at Las Vegas—which ranks 228th on the NSF list—to support research projects as part of its investment in the battery factory. But, he acknowledged, “the proximity of universities and research centers was not a principal factor in deciding the final location when looking at the relative weight of all factors.”
An Unusual Example
Mr. Woodell, whose association is among many university groups that have preached the primacy of research in building local economies, said the Tesla decision appeared to be an unusual example. Even most routine manufacturing these days is advanced manufacturing that requires specialized skills, and companies are increasingly turning to outsiders to perform necessary research and development work, he said.
“I would hate to kind of use this as some sort of bellwether or harbinger that universities are irrelevant,” Mr. Woodell said.
Mr. Broome said he agrees, to a point. Nevada is an unusual state, he said, with a “very shallow economy” built around gambling and housing. “I’m the governor of Nevada, I do the deal with Tesla,” he said. Some other states with struggling economies might reasonably make the same choice, he said.
But a state like Arizona, which already has two top research universities, could make itself much healthier in the long run by investing $1.3-billion in those universities rather than giving it away as tax breaks, Mr. Broome said. Using that kind of money to help put ASU’s engineering program on a par with that of a national leader like the Georgia Institute of Technology would lead to 10,000 more jobs in 15 years, “and it will be sustainable,” he said.
Tesla’s decision is nevertheless a reminder that even a strong research base doesn’t guarantee that jobs will stick around, said the University of New Mexico’s provost, Chaouki T. Abdallah.
As Tesla and Panasonic are demonstrating, research can be done all around the world, not necessarily at the places where products are made, Mr. Abdallah said. “I don’t think the co-location of the researcher with the manufacturing is critical,” he said.
