Saturday, June 18, 2011

"Broadband Electricity and the Free-Market Path to Electric Cars"

Peter W. Huber is a senior fellow at the Manhattan Institute and the author of The Bottomless Well: The Twilight of Fuel, The Virtue of Waste, and Why We Will Never Run Out of Energy which is what you would call a cornucopian energy book. He wrote an interesting article called Broadband Electricity and the Free-Market Path to Electric Cars. He argues that

"more capital investment in the relatively low-voltage lines, transformers, and terminal equipment that distribute power to city blocks, high-rises, and suburban neighborhoods is a direct substitute for much of the additional capital investment that must otherwise be funneled into the electric car."
I am starting to feel optimistic about electric vehicles. Electric motors have already eliminated the mechanical connection between the engine and the wheels in locomotives and mining trucks. They have diesel generators that power electric motors for traction. There is no mechanical connection between the engine and the wheels.
The electric drivetrain is smaller, lighter, and simpler because of the mechanical elements (shafts, belts, etc) that are eliminated.

I think this will happen in automobiles as well, except that cars can carry a battery and charge at charging stations instead of generating power onboard. This will eliminate lots of complicated mechanicals, increase efficiency, and save weight.

Also, neat things can happen when we have a huge number of batteries in electric vehicles connected to the grid. As Huber writes,
Batteries are the customers that are eager to buy the power that nobody else currently wants to buy. They offer the existing owners of an enormously valuable capital asset an opportunity to use it profitably when it would otherwise be standing idle.

Because they already have so much invested in assets that are so often idle, and because batteries offer a perfect demand-size fit to that supply-side opportunity, these companies also have a much bigger incentive than anyone else, car companies included, to get electric miles rolling. They alone are in a position to earn potentially enormous profits by making productive use of otherwise idle assets already paid for in full by others who need always-on power. They also have a strong incentive to deliver this kind of power as fast as they can, whenever it's available, because idle capacity in the grid, like an empty seat on a jumbo jet, is a perishable good—use it or lose it.
The electric vehicle batteries will also be able to sell power back to the grid. I read a paper about the economics of this called Vehicle-to-Grid Power: Battery, Hybrid, and Fuel Cell Vehicles as Resources for Distributed Electric Power in California [pdf].Their conclusion was that
The economic value of some forms of V2G appear high, more than enough to offset the initially higher costs of electric-drive vehicles, thus having the potential to accelerate their introduction.

The cost of electricity from the EDVs noted above is too high to be competitive with baseload power, which typically has a range from $0.03–0.05/kWh. EDV power is competitive in three other markets: "peak power" (during peak demand periods), spinning reserves, and regulation services.

Commercial and industrial customers, unlike residential customers, have rates that typically include a demand charge in $/kW, added to their energy charge in $/kWh. These demand charges are often the largest component of a C&I customer’s monthly electric bills. We find that such customers, if they have infrequent or short demand peaks, could realize economic benefits from V2G power.
This creates many interesting business model possibilities. I can foresee that vehicles will be able to charge opportunistically when power is cheap, and also make money through energy storage. All of this will drive down the cost of electricity, because it allows more efficient use of electrical generation assets, and the cost of transportation.

This makes me think that the peak oil fanatics and collapseitarians like Kunstler are wrong. Their view assumes an end to "easy motoring" brought about by an oil shortage. But it looks like electric cars are workable, and we will have no problem generating cheap electricity, whether nuclear or natural gas fueled.

Here's another possible consequence. Rising diesel fuel prices have tipped the balance in favor of railroads. Railroad engines are electric vehicles, powered by onboard diesel generators. Once semi tractors become electric, the economics could shift back in favor of over the road trucking. Maybe Buffett top ticked the railroad market?


Allan Folz said...

I don't know that electric tractor trailers could ever become cost competitive with electric trains, at least given the current trajectory of things.

Trains are always more fuel efficient than trucks. The only way for trucks to out-compete is when fuel costs become small to negligible, neutralizing train's fuel efficiency. This allows the timeliness of truck's point-to-point distribution can come to the fore.

For trucks to beat out trains, you'd need electricity as cheap as the Thorium Cycle folks dream of and a 10 to 100 fold improvement in battery technology or super-capacitors such that their energy densities can approach diesel fuel.

As for locomotives and mining equipment long ago switching to diesel-electric hybrids, it's because electric motors on a pound-for-pound basis are capable of much higher torque outputs than geared transmissions. The losses converting mechanical energy into electrical are mitigated by the ability of electric motors to generate tremendously high torques. Plus it is easy to have one on each wheel all sharing a power plant. Mechanical transmissions wouldn't be able to do that anywhere near as easily. On-highway applications do not need such high torques so a mechanical transmission is cheaper and more efficient.

Buffet's train purchase was two-fold: a bet on peak-oil and a bet on the Chinese redeeming their trillion in Treasuries for hard commodities.

CP said...

We aren't saying that the per-mile cost of trucks will be lower than trains.

Unlike trains, trucks go door to door which is more efficient aka cheaper.

Trains made a comeback relatively recently. What I was saying was that cheaper truck transport per mile would tilt the total cost advantage back to trucks.