by Tyler Durden
Sat, 11/09/2019 - 18:30
Looking beyond the dramatic headlines - the cliff-hanger nature of
Tesla’s financial statements and the Trump administration’s efforts to
re-engineer the auto industry - we need to focus on one number that determines when electric
vehicles (EVs) will make economic sense. So says a report
out of Argonne Laboratories sponsored by the Department of Energy.
That number, according to
researcher George Crabtree, is the price of the battery (as measured in $ per
kwh), which he says has to halve in order to make EVs competitive with
conventional cars. Not promising one might think. Well, researchers
now believe that battery prices could reach the magic level somewhere between
2022 and 2026.
But,
there is more to come. Researchers are working on lithium ion-solid state batteries.
These would not only eliminate the unfortunate flammability issue that
dogs lithium batteries but also possibly double the mileage per charge. Toyota
hopes to have such a battery ready in the early 2020s.
Still, what about the potential shortage of minerals required to
build the batteries? Crabtree points out that the key to making
sure we do not have a lithium shortage is
to recycle the batteries. At present we recycle almost 100% of lead acid
automotive batteries and less than 5% of lithium batteries. However, figuring
out how to recycle the latter economically will require research.
What all this says is that the electric vehicle could emerge from its present position
in the United States as a well subsidized status symbol to
a commercially competitive vehicle within five years. It looks as if the
automobile manufacturers will be ready.
But how about the electricity producers? This requires
new modes of power distribution for charging stations as well as an ongoing
commitment to fossil-free energy sources. This is not a trifling issue for
electricity producers. Electric vehicles could eventually account for 30-40% of
US electricity sales. This is huge. But these sales will not be made unless the
industry has in place an infrastructure to deliver the power to the right
places at the right time.
That brings up the perennial chicken-or-the-egg question.
·
Should we incur the expense and build EV infrastructure hoping
demand will eventually follow?
·
Or should we first allow car manufacturers to first build and
sell their cars while hoping electric utilities move fast enough to satisfy the
demand for EV charging infrastructure?
In real estate for example, developers build roads and lay water
pipes rather than tell prospective home buyers to do the job after they have
taken possession. Electric utilities have in the
past put in necessary infrastructure or made commitments to customers ahead of
demand. But this has typically occurred only after receiving the blessing of
state utility commission regulators who would permit these
new assets to be added to rate base and earn incremental monies for the
utility. In that way, the utility recovers its initial, considerable
investment. Without the regulator’s blessing, we believe risk adverse utilities
will be loath to invest in a seemingly speculative venture, especially when the
Federal administration seems so averse to the new technology.
But aside from limitations of batteries, energy density and
mineral shortages, the electrification of transportation has the potential to
eliminate roughly one quarter of US carbon emissions. This also
assumes electric utilities install EV charging infrastructure while continuing
to decarbonize base load power generations (which would knock another quarter
off carbon emissions). And it now looks as if electricity producers and
distributors have little more than five years to get their acts in order. This
means that near term utility capital allocation decisions should be reflecting
these changes. If not then perhaps another entity will assume responsibility
for this aspect of the energy transition.
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