What’s the true cost of an electric car?


An electric car motorcade

Detroit’s the Motor City. California’s car culture is unsurpassed. But when the electric car industry staged an “innovation motorcade” of electric cars and trucks today, it did so in Washington, D.C.–fittingly, because, without the government, there would simply be no electric car industry.

Indeed, the market for electric cars is so distorted by government subsidies that it’s all be impossible to determine the true cost of an electric car.

Notice that I said cost and not price; there’s a difference, and it’s relevant to any conversation about business and the environment. Coal-powered electricity is cheap but the price doesn’t reflect the costs of burning coal, including lung disease, mining accidents and greenhouse gas emissions. (See Fossil Fuels: A Legacy of Disaster from the Center for American Progress.) Hamburgers are cheap but the true cost of beef includes methane emissions, farm subsidies and, arguably, heart disease. Gasoline-powered cars externalize costs that include smog, carbon emissions and, some would say, a foreign policy that favors stability, i.e., autocracy over democracy in the Middle East.

Markets, needless to say, work better when prices reflect true costs.

So what’s the true cost of an electric car? Hard to say. Sticker prices are high–Chevrolet’s Volt has an MSRP of $40,280, while the Nissan Leaf is priced at $32,780–but buyers get a $7,500 tax credit that reduces the cost. The government even gives tax credits to buyers of the $109,000 Tesla Roadster.

The tax credits are merely the most visible form of federal support. [click to continue…]

A window into the future

Here’s a futuristic notion: Windows that darken on hot sunny days to block heat and glare, clear  up on cool or cloudy days to allow in sunlight and warmth, save lots of energy, eliminate the need for blinds or shades and, most important, allow people indoors to be connected all the time to the natural world.

This may sound like magic, but electrochromic windows are here today. You can see them, above, at the student center at Chabot College in Hayward, CA. They’re made by a small Minnesota-based company called SAGE Electrochromics, which is about to get bigger: This week,  SAGE announced that it sold 50% of itself for $80 million to  Saint-Gobain, a global building materials firm based in  France.

The partnership is a marriage of new and old–SAGE is a privately-held high-tech company founded in 1989,  while giant Saint-Gobain (EU37.8 billion in sales last year, 190,00 employees) traces its beginnings to the 17th century when it manufactured mirrors for  the Chateau de Versailles. Until they worked out their deal,  SAGE and Saint-Gobain had been competing to develop windows that would electronically control the sun’s energy that flows through them. [click to continue…]

The nerd in the cabinet

Steven_Chu_official_portraitOnce a professor, always a professor.

Steven Chu, the energy secretary, winner of the Nobel Prize and former physics teacher at Berkeley, spoke tonight at a Washington fundraising dinner for Conservation International, the global NGO.

Actually, he delivered a lecture, deploying a long, detailed PowerPoint presentation, with charts and graphs explaining temperature fluctuations over decades, rising CO2 concentrations in the atmosphere over the last 800,000 years, changes in sea levels, payback for investments in energy efficiency, even a diagram of a new battery technology that included this caption:

Battery about to charged: Positive Mg ions and negative Sb ions are dissolved in electrolyte (green)

Battery fully charged: Mg (blue) and SB (yellow) become the anode and cathode

It was another one of those all-too-frequent moments when I wish I had taken more science classes in college. And remembered why I hadn’t.

By coincidence, Michele Obama visited the energy department earlier in the day and said:

My husband loves his Cabinet.  He was extremely excited that he had a real nerd on his team.  He talked about it for weeks on end.

It’s easy to see why the cerebral president and his brainy energy secretary would bond.

Chu wasn’t spellbinding at the CI dinner but in this city of politicians and special interest groups, with climate change legislation again on the front burner, it was actually refreshing to study a Power Point instead of being bombarded with talking points. Spin doctors marshall facts to support their arguments. Chu starts with the science and works his way from there to solutions.

He argued for three broad approaches to the climate crisis – a major commitment to energy efficiency requiring government regulations and financing, changes in forestry and agricultural practices and still-to-be-discovered breakthroughs in clean energy technology. Some highlights:

Energy efficiency: Chu said market failures – among them lack of knowledge and lack of financing – stand in the way of efficiency to commercial and industrial buildings and to homes which deliver relatively quick paybacks.

“How many University of Chicago economists does it take to change a light bulb?” he asked.

“None,” he replied. “If the light bulb needed changing, the free market would have done it.”

Calling himself “an energy conservation nut,” Chu displayed a chart showing that efficiency standards for refrigerators adopted years ago in California had reduced annual energy costs, on average, from $1272 to $462 a year. “Even though refrigerators have gone up in size, energy usage has gone down by 70%,” he said.

The simple step of painting roofs white could cut air conditioning costs by 15% in warm weather regions, he noted.

Forestry and agriculture: Together, deforestation and agriculture account for about 31% of annual greenhouse gas emissions, Chu (and his pie chart) said. “To achieve our energy and climate goals,” he said. “We’ve got to solve deforestation and change our agricultural practices.”

Some of this can be quite complicated: Rich countries, rather than cutting their own emissions, could finance alternative livelihoods for people in the tropics so they don’t cut down trees. Other ideas are simpler: If you provide poor people in the global south with solar or highly-efficient cook stoves, then they don’t have to burn as much wood to heat their homes or cook food.  An efficient stove avoidsthe equivalent of two tons of carbon emissions, about half the amount emitted by a typical car in a year.

Protecting forests is ”the least expensive way to decrease carbon emissions,” Chu said.

Technology breakthroughs: The energy department recently announced $151 million in grants for transformative technology under a program called ARPA-E, which stands for Advanced Research Projects Agency-Energy, and is modeled after the federal defense spending project that led to the invention of the Internet.  “We don’t have all the technologies we need,” Chu said.

Interestingly, I listened to Chu chat with several venture capitalists  just before the dinner in Union Station and he asked them how they thought his  department was doing at reviewing grant applications from startup fims. He said he had a feeling that the DOE staffers who review the grants might be too conservative and risk-averse, and that he intended to urge them to take more chances on long-shot ideas that could deliver big breakthroughs.

Only near the end of his talk did Chu revealed a bit of the passion that he brings to the topic of climate change.

The costs of enacting climate-change legislation, he said, are about 45 cents a day for a family of four.

And the cost of doing nothing?

One is that the U.S., which recently fell behind China in high-tech manufacturing, will fall even farther behind. “Very recently, China turned a corner,” he said. “China and other countries will pass us by.”

“And the other cost,” he said, “is that we will expose our children and grandchildren to unconscionable risk.”

No PowerPoint slide was required to explain that.

Uh-oh: Obama’s “battery gold rush”

A lot of smart people—Warren Buffett, Andrew Grove, Nissan’s Carlos Ghosn—believe that electric cars will be a big answer to our climate and energy problems. GM and Ford have apparently come around to that view as well, and even Chrysler recently released a cool little neighborhood vehicle called the Peapod. (See below.) I’m impressed by BYD, the Chinese battery and electric car company, and by Better Place, Shai Agassi’s bold electric-car startup aimed at transforming the global automobile industry. Batteries are the key to making electric cars affordable. So why did this Wall Street Journal headline make me cringe?

Obama Administration Sparks Battery Gold Rush

Companies, States Vie for $2.4 Billion in Funding Aimed at Turning U.S. Into Top Maker of Fuel Cells for Electric Cars

The story went on to say that the Department of Energy has received 165 applications from companies seeking some of that $2.4 billion. which is “aimed at turning the U.S. into a battery-manufacturing powerhouse.” The Journal’s William M. Bulkeley reports:

Companies vying for the federal money include General Motors Corp., Dow Chemical Co., Johnson Controls Inc. and A123 Systems, a closely held battery maker backed by General Electric Co. and others. States including Michigan, Kentucky and Massachusetts are also weighing in with applications, usually in alliance with their favored battery makers.

When the winners are decided, as soon as the end of July, the Energy Department may anoint Livonia, Mich., or Indianapolis or Glendale, Ky., as the future U.S. hub of car batteries.

Reading carefully, it’s clear that The Journal (“free people, free markets”) is not happy about this news. Note the use of the word “anoint,” hinting that the government is assuming divine powers. The article characterizes the DOE grants as “one of the government’s biggest efforts at shaping industrial policy”—fighting words in Journal-speak.

They’ve got a point, though, don’t they? One unhappy result of all the bank bailouts of the fall is that $2.4 billion doesn’t seem like much—hey, Citi alone has collected north of $45 billion, last time I checked—but a billion here, a billion there, and you’re starting to talk real money. And if electric cars are going to be as big a business as a lot of people think, then why government investment should be needed at all? Particularly since we have a climate change bill making its way through Congress that will, at long last, if all goes well, put a price on carbon emissions—thereby giving low-carbon energy sources what they desperately need, which is a fighting chance to compete with fossil fuels on something resembling a level playing field. I thought the whole idea behind cap-and-trade (which I strongly favor) is  to capture the externalized cost of global warming pollutants, and then let the market figure out how best to reduce greenhouse gas emissions: regulation that would have a light touch but a profound impact.

But no—with Waxman-Markey, CAFE standards, biofuels mandates, subsidies for “green jobs” and the like—the administration is giving us a belt and a couple of pairs of suspenders, too. Much as I admire Steven Chu, the energy secretary, do we really want to entrust him and his staff to decide which battery technologies are likely to succeed and which companies can most wisely spend that $2.4 billion? What’s more, since the states and their legislatures are competing as well, you can be sure that the likes of John Murtha and Robert Byrd will weigh in on these investment decisions. Indeed, the states themselves are already competing to subsidize battery makers, as The Journal notes:

“If you’re the place where the batteries are made, there’s an opportunity to spin it into other things as well,” said D. Gregory Main, president of the Michigan Economic Development Corp., a state agency that has committed up to $400 million in incentives for battery manufacturers.

Kentucky is promising $110 million in aid and a 1,550-acre site, in Glendale, that it assembled in an unsuccessful effort to land a Hyundai plant several years ago.

Some of these batteries, by the way, could well find their way into cars like the Tesla (sticker price:$109,000) and those made by Fisker Automotive, a California firm that plans to sell $88,000 luxury-hybrids next year. So tax dollars collected from working people and the middle class go to subsidize rich boys and their toys.

Please don’t get me wrong. I think electric cars are a great idea. The faster they arrive, the better. But judgments about which battery-makers to finance should best be left to venture capitalists, investors like Buffett (who bought 10% of BYD), big investment banks and the like. They may be no smarter than the people at the DOE but at least they are putting their own (or their investors’) money on the line. If they’re wrong, they’ll be held accountable, or at least they should be. You can be sure that some of them will be wrong, and that’s fine.

This is why I respectfully take issue with Jesse “Watthead” Jenkins of The Breakthrough Collaborative, who with me is a lead blogger at The Energy Collective, a website that aggregates blogs about energy and the environment. Jesse’s a smart guy and a good guy, but he has more faith in government than I do and so he favors substantially more federal investment in clean energy research and development. If we’re talking basic research, that’s fine, I suppose—the private sector can’t be asked to underwritethat, because the potential payoffs are so uncertain and long-term.

But this battery program is explicitly about picking winners and losers in one industry sector, which may or may not turn out to be a real business. It reflects, I’m sorry to say, the Obama administration’s faith that the best and the brightest Ivy-educated government executives can figure out what needs to be done, and just how to do it. I have no doubt that the people around Obama are smart, well-intentioned and hard-working. I dearly hope that they can, in fact, figure out just what needs to be done. But if we learned anything from Bush II, it is to worry about people in Washington who think they have all the answers.


A day in the life of Steven Chu

Interesting day for Energy Secretary Steven Chu.

Here’s how it begins:

Washington, DC – In recognition of Bike to Work Day, U.S. Energy Secretary Steven Chu will ride his bike from his home to a rally at Freedom Plaza this Friday, May 15. The Secretary is participating in the event to highlight the Administration’s commitment to reducing our dependence on foreign oil by supporting alternative, clean energy modes of transportation.

And then:

US Energy Secretary Steven Chu will address the National Coal Council Spring Meeting on Friday, May 15, 2009. Secretary Chu will highlight the Obama Administration’s commitment to carbon capture and storage as an important part of our nation’s effort to create new jobs and transform the way we use and produce energy.

I wonder if he’ll bike over to see the coal guys. He used to bike all the time as a Stanford prof. That’s him in the middle, below. I assume he took his helmet off for the photo. Hope someone snaps a better one tomorrow.

Chu: Scientist, cyclist, energy czar

The Obama administration has unveiled a $2.4-billion grant program to promote plug-in hybrid cars, which will travel 40 miles on a single electricity charge and 100 miles on a gallon of gas. You’ll rarely have to fill the tank if you don’t drive much.

The only drawback, energy secretary Steven Chu indicated, is that if you don’t run the engine much, the battery gets weak, as he learned first hand some years ago. “When I was at Stanford, I rode my bike everywhere,” Chu recalled. “I went through batteries like crazy because I didn’t drive enough.”

How cool is that? The guy in charge of America’s energy department used to get around mostly on his bike. Chu, who is slight, soft-spoken and 61–you can read a brief autobiography here–spoke this afternoon at an energy forum sponsored by the The Washington Post and Siemens. He made clear that he committed to help move the United States away from fossil fuels and towards a low carbon economy, and he argued that “science will supply us with a lot of the answers” about how to get there.

Wind power, solar power, geothermal power—they will all help slow the growth in carbon emissions, jump-start the economy and reduce our dependence on imported oil. But the future of the U.S. depends, above all, on developing its brainpower.

“We have to invest in our intellectual capability, because it is the intellectual horsepower of the country that will create new wealth,” Chu said.

That’s a welcome, if not surprising, point of view. Chu is a brainy, even geeky, physicist who shared the Nobel Prize in 1997. Hee directed the Department of Energy’s Lawrence Berkeley National Lab before coming to Washington. And he spoke passionately about the nine years he spent during his 30s and early 40s at Bell Labs, the storied industrial laboratory run by AT&T.

“When I got to Bell Labs, it was an incredibly eye-opening experience,” Chu said. “They did not hire proven winners. They hired young kids… We all grew up together.” Five of his colleagues went on to win Nobel Prizes. But the story does not have a happy ending. “Sadly, Bell Labs is no more,” Chu said. Today, only a handful of companies—IBM, Microsoft, Intel, GE, United Technologies—operate industrial labs, and they tend to focus on later stage research.

Chu spoke hopefully about a DOE project known as ARPA-E, which will invest government funds in research that could lead to breakthrough findings — but more often will not.

“The plan is to invest in high risk (projects) with a significant potential for failure,” he said. “It’s like venture capital, squared, if you will.”

The trouble is, the energy department has an unimpressive track record when it comes to spurring new technology. It’s famously bureaucratic.

Indeed, Chu made a bit of news at the event when he announced a $535 million loan guarantee to a company called Solyndra, which makes thin-film solar panels. This is a good thing—the company has an impressive technology, it can’t raise private capital in this economy without the guarantee, and its new factory in Fremont, Ca., will create 3,000 construction jobs and 1,000 permanent jobs. But if I understood Chu correctly, this is the first loan guarantee approved under a program adopted back in 2006. He said the program has been been plagued with excessive paperwork that the department is now trying to streamline. “We’re working as hard and as fast as we can,” he said. The DOE is tracking its progress at this website, www.energy.gov/recovery. It may turn out that the department needs a strong administrator and policy person more than it needs a scientist like Chu.

Still, there’s something refreshing when a cabinet secretary comes across more as a professor than as a politician. In his unassuming way, Chu showed a few slides about global warming—pine forests in British Columbia ravaged by beetles, a melting glacier in Greenland—and warned of the “potential for very serious consequences of climate change.” He said we need a World War II-like effort to conserve energy, showing a poster with the headline, “Should Brave Men Die So You Can Drive?” And he ended his talk with the famous photo of the earth taken from Apollo 7.

“There’s nowhere else to go,” Chu noted. “We really have to focus on that.”