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I recently test drove a Tesla. It was faster and handled better than my fine German car and it drives a mile for less than a fourth of the cost! My MIT colleagues assure me that battery technology continues to rapidly improve, so greater range on electric vehicles (EVs) is ahead. Although they are currently more expensive than conventional cars, EVs have many fewer moving parts and should be cheaper to produce and maintain in the long run. All this promises the first major change in urban transportation in more than a century.

With no direct CO₂ emissions, many ask whether EVs should be subsidized. In the short run, that should actually depend on where you live. In states with inefficient and polluting power generation—absolutely not. In states with a natural gas and renewable energy base, the current federal subsidy is economically justified. In the long run, though, if we tax carbon production from fossil fuels correctly, direct EV subsidies will be unnecessary.

Equal transforming potential exists in the prospect of using Musk Solar roof tiles on much of our residential housing—at least the housing that has a sufficiently low floor area ratio. Two- or three-story houses could generate almost all the power they need—from a smooth, fully integrated roof. Throw in a few Musk Battery packs, and many homes could operate off the grid. Tall buildings, however, cannot achieve even a small fraction of this self-sufficiency—which leads to the implications for real estate of this solar-EV revolution.

To my thinking, the prospect for suburban living has just gotten a lot brighter (pardon the pun). Suburban houses will not only be able to generate the energy they need internally, but also fuel their cars—and all with absolutely no CO₂ emissions. Lastly, all of this comes at a significantly lower cost than today’s energy system.

Meanwhile life in denser cities will change far less. It will still have to depend on an expensive, long-distance power transmission grid—with mixed energy generation sources. Remember that transmission represents almost half of the delivered cost of electricity. Buses and subways will operate and cost about the same as they do today—just with less pollution.

Energy outlays represent a far larger share of suburban household budgets than of urban ones, so the potential effects of the Solar-EV revolution are clearly greater for the suburban lifestyle. Since 1870, improvements in transportation and energy have been largely responsible for the development of suburbs, both before and after the two World Wars. Looking forward, it seems quite likely that a second wave of suburbanization will result from the Solar-EV revolution.