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By Robert Rapier on Jul 2, 2010 with 55 responses

The Tesla Motors Electric Vehicle Strategy for South Korea

I am working on two essays, but it is going to be a couple more days before I have either one of them finished. One is about the recent USDA report on the energy return of corn ethanol. This essay will include a look back at how the USDA’s methodology of allocating energy inputs has changed over the years, and how that impacted upon the calculated energy return for ethanol.

In the second essay, I will discuss in some detail my graduate school work (which I have never done on this blog), and report on where the process stands today. The process in question is the MixAlco Process and was developed in the lab of my former research advisor, Professor Mark Holtzapple at Texas A&M.

In the meantime, it is time to put up some new material. Kevin Kane, author of the Energy Fanatic Blog, has provided guest essays here before:

Energy Security Populism: Oil Prices, American Leaders, and Media

Iraq Oil & Gas Production: Geopolitical Compromises and Kurdish Autonomy

American Freedom from Oil: A Bipartisan Pipedream

His most recent piece touches on a topic that is frequently discussed here: The potential of electric cars. It was written for a South Korean audience, but some of the issues Kevin mentions are topics frequently debated here, and should provide some basis for discussion while I finish up these next two essays.

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The Tesla Motors Electric Vehicle Strategy for South Korea:

Luxurious, Sexy, and Fast Electric Vehicles

By Kevin Kane

Energy Market Analyst

On occasion, electric vehicle critics suggest that they are too expensive to compete with combustion engine vehicles, but this is not true. In fact, high-end, 500-kilometer range, luxury electric vehicles such as the Tesla Motors Model S, priced at $57,000 ($49,000 after tax incentives), set for production in early 2012, are very competitive, if not superior, to gasoline and diesel engine vehicles in the same performance class. With a 0-96 kilometer hour time of 5.6 seconds, the Tesla Model S performs like a Mercedes E550, offers a base price in the same range, and looks as beautiful as a Hyundai Genesis.

If successful as a start-up company backed with hundreds of millions of dollars in private capital and a $465 million dollar low-interest loan from the U.S. Department of Energy, Tesla will prove that the future of electricity-fueled vehicles will not be in slow moving city-cars, but instead it will be in sexy and luxurious electric sports cars and sedans that fully substitute gasoline and diesel-powered vehicles in each class.

The image of electric vehicles being small and slow should be removed from all policy directions and discussions for the following reasons:

(1) Battery costs are presently too high to profit from a low cost compact electric vehicle;

(2) Sedan-size electric vehicles offer companies more profit than small vehicles due to battery costs that can range from $12,000 to $36,000 depending on size and financial scheme;

(3) Smaller electric cars have smaller batteries that increase the frequency of charging, which increases the chance for exceeding peak load capacity if they eventually number in the millions; Thus, short range, small electric vehicles can result in electricity black outs while long-range sedan-size highway-capable vehicles may not; and

(4) Korean people like large size cars, not small ones. Smart companies only give people what they want, not what out-of-touch elites think would be good for them.

Electric vehicles that are profitable should be very fast, sexy, and luxurious. Goldman Sachs, JPMorgan, Deutsche Bank and Morgan Stanley all agree, evidenced by the fact they all are serving as underwriters for Tesla Motors.

In 2012, Tesla will start producing approximately 20,000 Model S sedans per year that cost $57,000 each ($49,000 after a $7,500 U.S. government tax credit). By 2013, Tesla may produce a long-range electric sedan that costs $30,000. Rather than wait for costs to come down to produce compact electric vehicles, Korean car companies may want to begin producing high-end luxury electrical sedans today while the rest of us will just have to wait until prices fall; otherwise, Korean car companies could fall behind their emerging competition, Tesla Motors, a company often called the Apple iPhone of cars.

  1. By paul-n on July 2, 2010 at 11:29 am

    There are some valid points here, but there are also some I disagree with.

    There is no question that car companies make more profits on high end luxury sedans than on small economy cars, and if they think this is where they should concentrate their oefforts on  electric cars, then that is their business decision.

     

    BUT, there is now way that (in the US, at least) they should be getting a $7500 tax credit for producing $50k electric cars to be driven by the elite.  This credit then becomes a transfer of wealth from everyone to the privileged few that can afford $50k for an electric car.  Compete with other luxury cars by all means, but not at taxpayers expense.  What is the good of oil-reducing technologies if they are packaged to be so expensive that only the elite few can afford them?

     

    Smaller electric cars have smaller batteries that increase the frequency of charging, which increases the chance for exceeding peak load capacity if they eventually number in the millions; Thus, short range, small electric vehicles can result in electricity black outs while long-range sedan-size highway-capable vehicles may not

    While the first part of this, about increased charging frequency, is true, the second part does not necessarily follow.   As long as the vehicles are charged off peak, it does not really matter.  For city driving, it is likely that all ev drivers will connect them each night anyway, to keep them topped up, so the the amount of charging depends on miles driven.  Daytime charging will be quite minimial, unless some places (e.g. shopping centres) offer free recharging stations, but I doubt they would be willing to risk blacking the mall out foir the sake of ev drivers.  Also, the consumer desire is for the shortest charging time regardless of battery size, so you have higher current charging setups for these bigger cars.  

    Tesla has stated that they will produce the model S in two years for price of $57k, but how many ev projects to date, around the world, have come in on time or budget predicted several years earlier?   Look at the delays with the Volt, or the Leaf, and both GM and NIssan are very experienced in producing cars.  The Tesla was based on the Lotus Elise, so the chassis work had already been done.  The S is a whole new model, and to be produced in larger volume, and Tesla has not done this before.  They have made the smart move of buying Toyota’s old factory, but there are a lot of things that can go wrong with scaling up to produce a new model car.  The target dates and prices should be regarded as best guesses, until a car is actually in production and orders (not just a $99 refundable deposits) are being taken.

    And, I don;t think the iphone comparison is really valid.  Yes, they were both groundbreaking products, but the iphone became a market leader, the single biggest selling model of cellphones, and made the “non smartphones” obsolete.  The Tesla has only sold around 1000 vehicles in three years, and has certainly not rendered ice vehicles obsolete.

    Tesla can claim status as the leading innovator in EV’s, or even the market leader, but until it takes over market share from everyone else, or creates a similar sized market of its own, it is not the iphone of cars.

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  2. By savro on July 2, 2010 at 11:59 am

    Paul N said:

    There are some valid points here, but there are also some I disagree with.

    There is no question that car companies make more profits on high end luxury sedans than on small economy cars, and if they think this is where they should concentrate their oefforts on  electric cars, then that is their business decision.

    BUT, there is now way that (in the US, at least) they should be getting a $7500 tax credit for producing $50k electric cars to be driven by the elite.  This credit then becomes a transfer of wealth from everyone to the privileged few that can afford $50k for an electric car.  Compete with other luxury cars by all means, but not at taxpayers expense.  What is the good of oil-reducing technologies if they are packaged to be so expensive that only the elite few can afford them?

    I fully agree with Paul on this point. Couldn’t have said it better myself.

     

    While the first part of this, about increased charging frequency, is true, the second part does not necessarily follow.   As long as the vehicles are charged off peak, it does not really matter.  For city driving, it is likely that all ev drivers will connect them each night anyway, to keep them topped up, so the the amount of charging depends on miles driven.  Daytime charging will be quite minimial, unless some places (e.g. shopping centres) offer free recharging stations, but I doubt they would be willing to risk blacking the mall out foir the sake of ev drivers.  Also, the consumer desire is for the shortest charging time regardless of battery size, so you have higher current charging setups for these bigger cars.  

    I think Kevin’s point here is that smaller batteries will require more frequent charging, thereby increasing peak load on the grid. Larger batteries would theoretically hold enough power from an overnight charge to last it through the entire day. I’m sure you’ve had this experience with cellphone batteries. The good batteries just need that overnight charge and you never have to worry about it during the day. The bad ones often need a refill sometime during the day.

    So if there were millions of EV’s on the road, the grid would see a larger spike if the bulk of those EV’s had small batteries.

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  3. By rrapier on July 2, 2010 at 1:27 pm

    And, I don;t think the iphone comparison is really valid.  Yes, they
    were both groundbreaking products, but the iphone became a market
    leader, the single biggest selling model of cellphones, and made the
    “non smartphones” obsolete.

    I remember when my company a few years ago got me a Blackberry. I thought “This is one of the coolest toys I have ever seen. I should buy stock in the company because they are destined for greatness.” I didn’t buy the stock, and then my next company bought me an iPhone and put thoughts of Blackberries completely out of my head. But it was a reminder to me that one shouldn’t make investment decisions without having a thorough understanding of the landscape. Just because my Blackberry was new and novel to me did not mean it was the best thing going.

    RR

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  4. By doggydogworld on July 2, 2010 at 2:27 pm

    PaulN I am not aware of any Volt delays. The original announcement said it would ship in 2010 and that is still the plan.

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  5. By Thomas on July 2, 2010 at 2:29 pm

    Agreed that Electrics will epitomize “green luxury” for at least the next decade.

    An interesting thing to watch will be the demographics of this new EV market. Will Prius owners upgrade to mass production Evs or will a new group of buyers emerge? I think the new electrics will canabalize sales of gas-hybrids. Lots of surveys show that Hybrid buyers are older, upper-middle class, low-mileage drivers. These are ideal EV early adopters. The EV vs. gas hybrid choice will be like 720p LCD vs 1080p Plasma for these guys.

    One thing pushing Nissan and GM towards plug-ins is the fact that Toyota and Ford are running circles around them in the hybrid segment.

    May 2010 Sales:

    Prius 14 428,Fusion 2 486, Altima 1 167, Silverado 299

    All hybrid best-sellers for their respective brands. If I were Toyota I’d have a sticky brake pedal on EV production.

    Nissan and GM may manage to steal hybrid drivers from other brands. However, this will subdue the Ev’s effect on energy usage and pollution. Regardless,it will be five years before there are enough Evs available to affect any existing sales. By then all the major brands will have an EV and buyers will be deciding how “green” they want to be.

     

    Paul-

    $7 500 tax credit on luxury cars is out of hand. Let’s get rid of the far larger subsidies on $250 000 homes too.

    Conventional cars aren’t “dumb phones” in the EV-iPhone analogy–they are land lines.  They’ve been around for 100 years and are relatively cheap to operate. Everyone agrees that landlines are destined for the tech graveyard, but most households and businesses still have them. The “tipping point” was probably around 2002 or so, but it will take until 2025 for it to all play out. Hybrid cars are cellphones that can “just make phone calls” and are the tech bridge to smart  phones (EVs).  We’re probably twenty years away from a EV tipping point.

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  6. By Thomas on July 2, 2010 at 2:42 pm

    Notice how most people don’t  jump from land line only straight to an iPhone. The progression is :

    landline => cell phone => smart phone

    The same will be true for Evs over the next 35 years:

    conventional cars => gas-hybrids => EVs

    This is like 1988 in the cell phone business.  The tipping point will be when the first car (new or used) of teenagers  is a plug-in.  The way twelve year olds get iPhones and have never used a pay phone.

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  7. By takchess on July 2, 2010 at 3:15 pm

    getting a $7500 tax credit for producing $50k electric cars to be driven by the elite.

    I’m not against this. a tax credit is encouraging new technologies advancement. I believe it will “trickle down” in future releases . …

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  8. By Wendell Mercantile on July 2, 2010 at 3:31 pm

    The original announcement said it would ship in 2010 and that is still the plan.

    Doggy Dog~

    Sort of. The first consumer Volt will be built late this year, so technically they will make their target of 2010. GM CEO Ed Whitacre announced yesterday that GM planned to build only 10,000 Volts in CY 2011, and those would be sold in only a selected few areas: MI, CA, and Washington, DC; then expanding to the rest of NY, NJ, and CT. Planned production for 2012 is 30,000 units.

    So much for Rufus and the rest of us in flyover country.

    Personally, I am not a fan of the $7500 tax credit. As with ethanol subsidies, the government cannot give something to someone without first taking it from someone else. One person’s subsidy or tax credit, is another person’s tax.

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  9. By paul-n on July 2, 2010 at 4:35 pm

    Sam, 

    I suspect it is only the Volt sized batteries that need recharging within a day, and even then you don;t need to recharge it.  The Leaf with 80-100 mile range will be enough for daily driving for most of it’s owners, and there is no point making a pure EV that can;t do a day’s driving on one charge.

    For intensive uses (e.g. a taxi) the EV’s are not effective as you lose too much productive time recharging, and shorten the battery life from too many fast charging cycles.

    Managing peak power is an issue, but I thiunk peak power pricing for charging Ev’s will moderate that demand long before blackouts are a real risk.

    @ Doggy, in addition to what Wendell said, there is this from  a GM spokesman;

    “We’ve got a lot of work to do to get where we need to be,” stresses Peterson, who says “it might not be possible” to complete the Volt’s nationwide rollout until sometime in 2012.

    Sure sounds like delays to me.  I have no problem with GM taking their time to get it right, in the introduction of anything new, unextected delays are to do be expected (just look at the cellulosic ethanol folks!)

    @ Takchess, I don’t think the  ”trickle down” theory is any justification for any subsidy.  The purpose of the tax credit was to make these cars more affordable to everyday drivers.  If the car makers choose to make them luxury cars, which by definition, are not affordable to everyday drivers, then the tax credit is redundant, IMO.  Whether the luxury EV is $58k or $50k will not make that much difference to the buyer, they are either in the market for a car in that price range, or not.  

    if they must have a tax credit, it should be on a sliding scale for both efficiency (kWh/mile travelled) and vehicle price.  Thus, a large or expensive electric loses the credit, but a small cheap one (think of an electric Nano) does not, and an over-optioned small electric loses part of the credit.  That way, we end up with more ev’s on the road for the same $ in tax credits, but then, getting the most value, (as opposed to the most votes), out of subsidies/tax credits has never been the objective.

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  10. By Benny BND Cole on July 2, 2010 at 9:33 pm

    Kevin Kane needs a Wall Street 101 course. Wall Street underwriters will “take public” any company that can sell shares to the public. Many IPOs blow up–the underwriters, however, have already earned their fees. It is a transaction business–underwriters are not invested in these companies.

    I do agree that the first BEVs and PHEVs should target the upper-class, who will pay for the luxury of snubbing gasoline stations. Also, there are people out there who blithely plunk down $5k for leather seats. Okay, so what is $5k for a battery then?

    The Volt should have been a Cadillac. You pay for the luxury of not wasting time at smelly gasoline stations. It is a high-end option. Later, when unit costs come down, you go to the Chevy.

    I hold out high hopes for the PHEV, and think they become commercially successful at $6 a gallon. If we taxed gasoline more heavily, then more people would buy PHEVs, and we would use far less imported oil.

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  11. By Kevin Kane on July 2, 2010 at 10:49 pm

    @Paul N

    Thank you for your comments, but I strongly disagree with you about giving tax incentives for expensive electric vehicles. All new technology that enters the market is expensive, and the purpose of a tax incentive is to promote sales of this new technology until these leading companies can generate enough sales to invest in technology to lower the cost for ordinary people. In some areas of technology, without government support, the market will never manage the entry of the product on its own. The purpose of taxes and subsidies in the sector of gasoline or vehicles has nothing to do with intending to transfer wealth–although that is an outcome–and everything to do with changing consumer behavior when the market is incapable of handling it on its own. This outcome is more important than anger over assisting people who can afford expensive vehicles. Focus on the utilitarian outcome, not the emotional frustration. I cannot afford one of these vehicles, but it does not bother me one bit to give someone a little bit of money to encourage them to buy them so the cost can fall in a shorter time than the market would on its own. Less ideology and social perspectives, and more raw economics are in order!

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  12. By Kevin Kane on July 2, 2010 at 10:56 pm

    @Paul N

    In regards to off peak daily charging, it is even possible for small vehicles that charge every night if numbered in the millions to exceed reserve capacity should they all be using chargers with a capacity of say +18kW. It also depends on the quantity of watts being demanded, not just the number of vehicles or the time. It also depends on the reserve capacity, which various from city to country.

    @Benny,

    You are absolutely right, I can only cover so much material at once, and I would be happy to read some books on investment and the financial sector if you could recommend them. However, I could just as easily have substitute those banks with the +40 million Toyota put in Tesla Motors.

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  13. By Wendell Mercantile on July 2, 2010 at 11:40 pm

    All new technology that enters the market is expensive, and the purpose of a tax incentive is to promote sales of this new technology until these leading companies can generate enough sales to invest in technology to lower the cost for ordinary people.

    All? I’m pretty sure Thomas Edison, Henry Ford, Edward Land (Polaroid camera), Chester Carlson (Xerox machine), and Ruth Wakefield (chocolate chip cookies) brought their inventions to market w/o subsidies. In Ford’s case, it wasn’t the car he invented, but the use of an assembly process that lowered the price for ordinary people.

    If a product or process is truly good and fills a market need as did the light bulb, an affordable car, an instant camera, a photocopier, or chocolate chip cookie it will break through w/o subsidies and tax credits.

    We’d be in a fine pickle if Edison, Ford, or the Wright Brothers had sat in their workshops and writing letters to Congress saying they needed subsidies, or hired lobbyists to say it for them, instead of just buckling down and doing it.

    Tax credits do nothing more than keep prop up and keep alive weak companies or industries* that are without a truly superior product. There is a place for government to invest in research and development, but not to prop up industries with subsidies and tax credits.
    ________
    * Such as we’ve done with the corn ethanol industry for the last 30 years.

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  14. By Benny BND Cole on July 3, 2010 at 12:00 am

    Kevin Kane-

    There was a great book a while back, “The Pied Pipers of Wall Street.” Nice and short and readable.

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  15. By russ on July 3, 2010 at 2:05 am

    Quote from Kevin,’I cannot afford one of these vehicles, but it does not bother me one bit
    to give someone a little bit of money to encourage them to buy them so
    the cost can fall in a shorter time than the market would on its own
    ‘.

    Look at subsidies anywhere in the world – rarely do they fit into that mould – just cash for buddies and eye candy for the voters. It is easier to ask for more bucks than do the work every time.

    If I gave you a bank account number would you mind depositing a few bucks every month? Would do just as much good and at least I would send a monthly email of appreciation.

     

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  16. By paul-n on July 3, 2010 at 2:51 am

    Kevin,

    Thanks for you comments.  I have to say I’m with Wendell about using subsidies for R&D but not for production.  To sell 10,000 EV’s with $7.5k subsidy each is a $75m subsidy, but what does it achieve? What will they learn that they can;t learn from internal testing on a limited prototype run?  Car companies already know how to do mass production, thanks to Henry Ford, and won;t learn much more from producing lots of an inferior car.  Better to spend the $75m on more R&D to get the car right first, or else admit that it won’t be, and shelve the project.  When it is easier to use subsidies than innovate, they will do enough to get the subsidies, and stop short of doing enough to not need them.

    Subsidies for production, especially when the price is irrelevant (luxury cars) seems to be paying them to do something they will probably do anyway.

    As for the off peak charging, i do agree that if the EV’s proliferate, and this is not managed, then there will be problems.  We clearly want EV’s to proliferate, so we have to manage the problem.

    An 18kW (off peak)charger is far too powerful.  The Leaf has a 25kWh battery pack, so why do a night time charge in 1 1/2 hrs?  The night chargers should be set up to do a six hour charge, which would be 5kW, from empty, and 2kW from a half discharged battery – a negligible addition..  Many houses would need a service upgrade to handle an 18kW charger, and the utilities will start  charging big upgrade $ for this.  They are already doing so in Vancouver for houses wanting service upgrades to build laneway houses, as many distribution lines and transformers are at peak capacity.  They will have no problem doing the same for (high rate) EV chargers.

    You are correct about the other variables, but utilities manage this every day.  When they start to see these loads being added, they will take action.  Neither utilities or politicians are going to let (subsidised) EV owners cause blackouts- that is what cost the previous gov of Calif his job!

     

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  17. By Rufus on July 3, 2010 at 3:49 am

    So, out of the 11 Million autos sold in the U.S. this year, how many will be Hybrids?

    Is there a large “unmet” demand? Are they “flying off the shelves?”

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  18. By Kevin Kane on July 3, 2010 at 5:58 am

    @Wendell,

    Your examples of subsidies are selective. Correct me if I am wrong, but Wind Power is rather economical at this point, but the speed that brought it to its present competitiveness in many ways reflects subsidies. It could be argued that without subsidies, we would never have benefited from the introduction to Wind Power in the market place. What is more, the Internet might not exist if it were left to the market place in its early stages. I don’t know about you, but I am not wiling to wait for the market to make the Internet economical simply because I have some silly faith in a principle or theory in a textbook. Insofar, its is an undergraduate level of understanding in economics–not sufficient to understand the real world economy– that would leave one to think that the market can manage everything–a pipe dream that people like Ron Paul faithfully believe in without evidence.

    However, please let me state that I am oppose to any subsidy or tariff in general if its purpose is not short term and if it exists to protect an industry. I believe in pursuing one single global market place, and so I do not support protectionism even in the smallest quantities. However, I do support subsidies for new technology and for a targeted duration in order to help it enter it into the “global” market place so long as these methods are universally adopted.

    I’d like to point out that although I feel a blessed to be from the U.S., a country that seems to dominate the discussion on the direction of every new technology or policy, this is also a problem since our debates on the deployment of these ideas are always based on the assumption that we are always being American-centric, forgetting that what does not work in the U.S. might work in another country. I will write about this in more detail in the coming weeks with economic analysis and include share of peak load calculations in the case of EVs in South Korea, a country too small to run out of a long range EV batter driving in any one direction across the country.

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  19. By Kevin Kane on July 3, 2010 at 6:02 am

    There has been much discussion about the need to raise gasoline prices to make economical PHEVs and EVs, and I fully agree that U.S. gasoline prices are irrationally low due to politicians that pander to populism.

    However, aren’t there many other counties with a range between gasoline and electricity prices that make the penetration of EVs and PHEVs very economical at this very moment? How about not assuming we are only talking about the U.S.

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  20. By Kevin Kane on July 3, 2010 at 6:02 am

    There has been much discussion about the need to raise gasoline prices to make economical PHEVs and EVs, and I fully agree that U.S. gasoline prices are irrationally low due to politicians that pander to populism.

    However, aren’t there many other counties with a range between gasoline and electricity prices that make the penetration of EVs and PHEVs very economical at this very moment? How about not assuming we are only talking about the U.S.

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  21. By Rufus on July 3, 2010 at 6:31 am

    If I’m figuring this right, a cellulosic refinery is going to throw off about 80,000 btus worth of lignin for every gallon of ethanol produced. A ten million gpy refinery will sell approx 800,000,000,000 btus of lignin pellets for use, generally, in electricity production. How many megawatt/hours is that?

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  22. By paul-n on July 3, 2010 at 1:35 pm

    About 80,000 MWh, and at a price of $0.10/kWh (average), worth about $8m/yr (it would be a 10MW power plant).  Compared to $15m from 10mgpy at $1.50/gal.  Better business may well be to just burn all the corn for electricity!

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  23. By paul-n on July 3, 2010 at 1:51 pm

    Correct me if I am wrong, but Wind Power is rather economical at this point, but the speed that brought it to its present competitiveness in many ways reflects subsidies. It could be argued that without subsidies, we would never have benefited from the introduction to Wind Power in the market place.

    Kevin, I fell compelled to correct you here.

    Wind power is far from economical at this point. The only reason it is growing is because almost everywhere gives it very generous subsidies, usually in the form of fixed rate feed in tariffs. This results in wind operators getting paid 10c for midnight electricity when the spot price for such electricity is near zero.  Wind produces unpredictable energy and mostly when it is least needed – it is the lowest value electricity you can produce, but it commands the highest subsidies, and has been mandated to be the first in the loading order – i.e. when it is available it must be used, and other (non subsidised) generators must be idled

    It is only economical when, without need of subsidies, it becomes a preferred investment choice for electricity developers, and it is a long way from that.  How much benefit we have really had from wind is an open question, for something that has accounts for less than 1% of electricity generation, we have had not had much benefit at all, but there has been an enormous cost paid, in the form of subsidies.  These subsidies have not directly improved the technology, they have resulted in many turbines being built that are now obsolete – I am not sure what real benefit has been achieved.  

    Because wind is subsidised, it keeps getting built, and the task of dealing with the biggest problem – unpredictability, is left to someone else.  

    bringing it back to the car subject, it is analogous to having developed a fleet of clean running taxis, but you never know when one will be available to you, how big it will be, and you can;t reserve one either.  If you need to get to places at specific times, how helpful is this system?  Are you willing to rely on it to get you to the airport, or the business meeting?  Is something that delivers that level of service, even if clean and renewable, really worth subsidising? 

     

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  24. By Wendell Mercantile on July 3, 2010 at 3:09 pm

    Your examples of subsidies are selective

    Kevin Kane,

    Yes, certainly selective, but examples of things (light bulb, mass-produced car, copy machine, Polaroid camera) that went to market w/o subsidies and had a significant impact on American life.

    I also could have picked Bill Gates (MS-DOS and Windows), Steve Jobs (Apple and Mac computers), Christopher Sholes (typewriter), Eli Whitney (cotton gin), or Martin Cooper (cellphone) as other examples (and the list could go on) of those who have brought life-changing, profitable inventions to market w/o needing subsidies.

    How did we ever get in the position where we’ve accepted that subsidies are a necessary part of bringing a new product to market? I think electric cars are an important step forward, but if they are as good as people think they will be, they should be able to penetrate the market based on their merit.

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  25. By Rufus on July 3, 2010 at 7:16 pm

    Energy is a “long-term” strategy. The “Free Market” doesn’t do Long-term strategies.

    We can replace All of our imported oil through a strategy of Biofuels, wind, solar, and biomass to electricity. Poet probably has the best idea running the lignin through an anaerobic digester, and producing Biogas.

    The Biogas-fired Turbines are the most efficient, and quickest “loading” system out there. 3,000 “20 Million gpy” Cellulosic ethanol refineries, with the attendent 240 Trillion btus of biogas would drive a lot of cars, and produce a lot of electricity for when it’s needed. Think about it.

    Add that to Solar kicking in during “Peak,” and Wind producing in the evening, and night, and you’ve got something to give the big oil/gas/coal companies heartburn.

    And, “Us,” Independence.

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  26. By Wendell Mercantile on July 3, 2010 at 8:54 pm

    Poet probably has the best idea running the lignin through an anaerobic digester, and producing Biogas.

    And then they need to go one step further: Turn that bio-gas (did you mean syn-gas?) into methanol for flex-fuel internal combustion cars and di-methyl ether (DME) for compression ignition engines.

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  27. By Rufus on July 3, 2010 at 9:38 pm

    No, I meant “bio-gas.”

    Why would you do that? You’ve already got ethanol for “liquid” fuel; you use the biogas for electricity for the “hybrid” part of the equation.

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  28. By Duracomm on July 3, 2010 at 11:11 pm

    Rufus said,

    Energy is a “long-term” strategy. The “Free Market” doesn’t do Long-term strategies.

    Rufus you need to spend less time reading ethanol scammers hype and more time paying attention to what is happening out here in the real world.

    The current disastrous fiscal situation at both the federal and state level shows that when bench marked against government the free market is genius at long term strategies and the government is a complete and utter failure.

    If the free market companies used the same “long term strategies” the government does the companies would be bankrupt and a good chunk of their management would be in prison for violating fraud statutes.

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  29. By Kevin Kane on July 3, 2010 at 11:15 pm

    @Paul N

    I do think that part of the equation of making wind economical resides in raising electricity prices , which at $.10 a kwh average in the U.S. is too low in general, but gasoline prices are even lower, unfortunately.

    So what do you suggest is the alternative to replacing coal? I would like to see consumers wanting to pay more for electricity in the same way that some women want to pay more to buy a nicer purse that offers no less utility than a less expensive one, or in the same way men want to buy a Ferrari that offers no less utility than a just-as-fast and more-reliable sports car. I’d like to see renewable energy become competitive because consumers “prefer” to pay for it, in the same way they prefer to buy a brand name over a generic one with the same utility. Its not our job to push something because of its absolute economical competitiveness; rather, something becomes economical when consumers demand.

    @ the Corn Ethanol maniacs,

    Nothing could be a more backward idea… using food for fuel… There are many studies that show that ethanol partly explains the spikes in food prices in 2008, not to mention the pollution from fertilizer that follows.

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  30. By Duracomm on July 3, 2010 at 11:46 pm

    Kevin Kane said,

    I do think that part of the equation of making wind economical resides in raising electricity prices , which at $.10 a kwh average in the U.S. is too low in general, but gasoline prices are even lower, unfortunately.

    Just curious, who appointed you emperor to determine if energy prices are to high?

    Furthermore, why do you hate poor people?

    You do realize that the economy is in tough shape right now and increasing energy prices is going to have a negative impact on both
    1. The economy and
    2. People who are struggling to make ends meet in a bad economy

    I am being a little smart a** with those comments but not too much.

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  31. By Duracomm on July 3, 2010 at 11:54 pm

    Kevin Kane,

    One of the main problems with subsidies is they effectively kill technological innovation.

    There is no need to improve a technology to compete in the market if subsidies are used to make failed products competitive.

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  32. By Rufus on July 4, 2010 at 12:01 am

    We produce a lot more ethanol, now, than we did in 2008; so why have food prices fallen?

    Could it be that oil prices have fallen by almost half?

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  33. By Wendell Mercantile on July 4, 2010 at 12:19 am

    Why would you do that? You’ve already got ethanol for “liquid” fuel…

    Because making ethanol requires an energy-intensive process to separate water from ethyl alcohol. You don’t have to worry about that thermodynamic loss going the syn-gas —-> methanol —-> DEM route.

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  34. By Kevin Kane on July 4, 2010 at 2:27 am

    @Duracomm,

    You are being to general. It depends on the duration, for what purpose, what externalities exist, et al. Without subsidies, or government support, there would be no such thing as a nuclear reactor.

    @Rufus,

    Prices are derived from supply, demand, and externalities not captured.

    “From April 2007 to April 2008, in the absence of any growth in biofuel production in the United States, we estimate that the International Monetary Fund (IMF) global food commodity price index would have risen by 40.6 to 42 percent as opposed to 45 percent.” World Bank Report.

    Kevin

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  35. By Rufus on July 4, 2010 at 7:41 am

    All I know is, “field corn is cattle feed.”

    A pound of beef at the supermarket is embedded with 2.6 lbs of corn.

    Field corn Was $0.04/lb. Now it’s $0.06/lb.

    A “Quarter-Pounder” costs about a “Penny” more than it did as a result of higher priced corn.

    Then there are “Transportation” Costs, a major component of Food Costs. Transportation Costs, as a result of Ethanol, are lower than they would be. As much as $0.05 lb? Did it cost another nickle to ship a pound of Nebraska beef to China? My guess, “probably.”

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  36. By klr on July 4, 2010 at 7:32 pm

    I provided this link at TOD yesterday, it may be of interest here as well:  Autos – MSRP and Sales.ods.  This is a spreadsheet I built up compiling March 2010 sales and MSRP of various models.  The Tesla’s base price is around that of the Infiniti M45′s, with 1440 sales for March, which would suggest a possible cap for the future.  I believe Tesla is still only moving ca. 200 cars per year anyway so this is all very drawing board at the moment. 

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  37. By Kevin Kane on July 4, 2010 at 9:20 pm

    KLR,

    Nice spread sheet. Would you mind contacting me by email at KevinPKane@Gmail.com

    I might consider using this spread sheet with some academic research I am working on if you do not mind. However, if these sales estimates are just for the U.S., than they are not applicable since Tesla is launching its models all over the world. I suspect that Asia will be one of Tesla’s strongest markets.

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  38. By Wendell Mercantile on July 5, 2010 at 12:31 am

    All I know is, “field corn is cattle feed.”

    A very simplistic statement Rufus. Field corn is also high fructose corn syrup* (HFCS), corn starch, and assuming you’ve ever eaten a Fritos corn chip, a Dorito, a corn tortilla made from masa harina, or southern corn bread (also called hoecake, spoon bread, corn pone, and jonnycake), or even Italian polenta, you’ve eaten something made from field corn.

    In Mexico, the roasting ears that street vendors sell are also field corn, and not what we call sweet corn in the United States.

    _________
    * Which in case you haven’t noticed, is in virtually every processed food sold now at supermarkets — from Twinkies, to soda pop, to salad dressing, to Pepperidge Farm whole wheat bread, to frozen lasagna. Just did a short bit of looking and found a stat saying the average American now consumes more than 41.5 lbs of HFCS a year — all of that made from field corn. Field corn is a lot more than cattle field.

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  39. By Rufus on July 5, 2010 at 1:17 am

    41.5 lbs X $0.06/lb = $2.49

    Pretty cheap eating; wouldn’t you say? :)

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  40. By russ on July 5, 2010 at 2:02 am

    @ Kevin – Wind power is used where there are substantial mandates/incentives/subsidies etc. If the utilities were not forced to have a RE component to their production why would they ever go for an unreliable and intermittent source. That is almost like buying a gas turbine that breaks down whenever you need it.

    Wind comes when you don’t need need it as well as when you do – since utilities are generally forced to take it they must back down on baseline power to accept the ‘wild’ generation.

    No problem though – the wind turbine supporters rarely or never point out what is effectivley a low capacity factor of maybe 10% at best. The 10 to 35% normally pushed by turbine manufacturers only comes about as the utilities have to take the wind power – or pay for it anyway I suppose and since this cost would normally be a ‘pass through’ the retail customer gets screwed again.

    Actually Paul N covered this quite nicely earlier. Wind power is a lousy example to show subsidies are a good idea. Now the greens love wind – but they generally have no idea of what happens behind the curtain. They just clap and applaud on cue when the sierra club, greenpeace, nrdc, union of concerned scientists, ewg or others tell them to.

    @ Rufus quote – Add that to Solar kicking in during “Peak,” and Wind producing in the
    evening, and night, and you’ve got something to give the big
    oil/gas/coal companies heartburn.

    Until the RE sources become baseline power somehow – meaning economic storage is developed – this is a green pipe dream. Unless you can convince the customer that brown outs when the sun don’t shine or the wind don’t blow are perfectly acceptable.


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  41. By Rufus on July 5, 2010 at 3:06 am

    Include the WHOLE quote, Russ.

    The Biogas-fired Turbines are the most efficient, and quickest “loading” system out there. 3,000 “20 Million gpy” Cellulosic ethanol refineries, with the attendent 240 Trillion btus of biogas would drive a lot of cars, and produce a lot of electricity for when it’s needed. Think about it.

    Add that to Solar kicking in during “Peak,” and Wind producing in the evening, and night, and you’ve got something to give the big oil/gas/coal companies heartburn.

    And, “Us,” Independence.

    The bio-gas fired turbines would be the “base load.”

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  42. By Kevin Kane on July 5, 2010 at 4:04 am

    Russ,

    I am familiar with Wind Power’s low capacity factor coupled with intermittency, and I don’t disagree about its limited applications, but I do also consider that a Smart Grid capable of storing power at houses and with v2G will mitigate some of these problems. Although this doesn’t add to the strength of my example or my previous argument.

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  43. By russ on July 5, 2010 at 10:08 am

    Kevin,

    I think we have to forget the EV in your garage storing power for the grid – if the grid comes to that point everyone will need their own off grid power supply. There would not be the stability that the grid requires at a minimum. Storage has to be under the utilities control or else it doesn’t exist when they need it. 

    Battery life is calculated in cycles – whether you use them or the utility – so how many will offer the utility a high percentage of their battery life for free? If the utility has to pay for it they are better off just buying batteries. 

     

    @Rufus – The additional words you added mean nothing – bio gas fired turbine or NG fired turbine makes zero difference in the real world.

    You are describing todays ‘on line reserve’ but simply changing the fuel source – gas turbines in a low efficiency configuration.

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  44. By Rufus on July 5, 2010 at 10:41 am

    No, I’m describing how 3 “sustainable” technologies can be pieced together to provide timely, and “Renewable” energy. The biogas turbines can “follow” quickly, and make up for the intermittency of the wind, and solar. Add in some solid Nuclear “baseload,” and we can cut back on our “fossil” fuel energy, dramatically.

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  45. By Wendell Mercantile on July 5, 2010 at 11:55 am

    Rufus~

    You need to rethink your equation. Industrial chemists can make ~ 33 lbs of HFCS from a bushel of corn. But that wasn’t even the point, the point was to debunk your simplistic statement of “Field corn is cattle feed.”

    Field corn is much more than cattle feed. Perhaps in the flex-fuel car of your dreams you could fill the tank with HFCS.

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  46. By Rufus on July 5, 2010 at 12:52 pm

    Yes, Wendell; but there are “other” co-products left over. And, yes, corn is, primarily, cattle feed.

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  47. By Kit P on July 5, 2010 at 11:49 pm

    Better how?

     

    If a technology is going to going to be accepted as something more than an interesting novelty it has to be better in some way. 

     

    About 20 years ago BEV were mandated for Southern California because they had lower emissions (else where emissions).  While BEV did not come to fruition, air quality got better in Southern California.  The reason was improved ICE emissions.  Sometimes the best way to fix a problem is improve existing technology.

     

    BEV could be better if it reduces imported oil but it must be widely accepted in the US.

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  48. By Kevin Kane on July 6, 2010 at 8:43 pm

    @Russ,

    I have calculated down to the last kW the impact of V2G on the grid. So long as the Smart Grid is controlling what vehicle does what when it is plugged in, and not the consumer, it will work. Its not a technological hurdle, just a policy and software headache. Korea will bring its GE-partnered Smart Grid regionally online by 2020 and fully online by 2030.

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  49. By Kevin Kane on July 6, 2010 at 8:43 pm

    @Russ,

    I have calculated down to the last kW the impact of V2G on the grid. So long as the Smart Grid is controlling what vehicle does what when it is plugged in, and not the consumer, it will work. Its not a technological hurdle, just a policy and software headache. Korea will bring its GE-partnered Smart Grid regionally online by 2020 and fully online by 2030.

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  50. By Kevin Kane on July 6, 2010 at 8:44 pm

    @Russ,

    In regards to battery life cycles, I can see that point, but I am also confident with our seemingly annual-breakthroughs in battery technology, that we are not far away from mitigating those concerns.

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  51. By Kevin Kane on July 6, 2010 at 9:56 pm

    @Kip

    You like to throw the word elitist around in an inappropriate fashion. Someone who drives a Tesla Model S is probably not elite. Elite is a fictional person you have created in your head, and if real, doesn’t likely describe anyone on this forum, or on any other forum you visit.

    To share a little bit about myself to make this point, after 6.5 years in the Army from Private (age 18) to Sergeant (age 25), from sleeping on a floor to sleeping in the dirt in the field hugging a rifle, to a BA to an MA, I am not so-called elitist. Nothing in this world has been handed to me.

    Because I save my money instead of spending it on unnecessary and useless things like Cable TV or daily doses of Mountain Dew, I might be able to afford a Tesla Model S by filtering several hundred dollars a month for many years into savings and market investments. Does this make me an elitist because I know how to save money while someone of the same income level as me may not? I think not.

    If you assume that if one can afford a Tesla Model S by making monthly payments, and so they must be wealthy or an elitist to afford those high payments, this is very sad, and a deeply seeded cultural problem at the route of economic crisis. It never occurred to you that perhaps a person who makes $40,000 a year would save money for 10 years to buy something nice in cash; this highlights your own inability to recognize saving money as a means to buy an expensive car in cash.

    Stop misusing the word elite.

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  52. By Kit P on July 8, 2010 at 6:05 pm

    “You like to throw the
    word elitist around in an inappropriate fashion.”

     

    I am not sure what your
    point is Kevin. If you do a word search in this thread for ‘elitist’
    you will find that Kevin was the first person to use it and I have
    not used it or inferred it in this thread.

     

    I was part of an elite group
    in the Navy, so I know the difference between ‘elite’ and ‘elitist’.
    For example, despite your protests you might be ‘elitist’ if you say
    things like “useless things like Cable TV or daily doses of
    Mountain Dew”.

     

    I drive a 23 year old ford
    Ranger to work. I paid $1200 for it more than 10 years ago. I
    bought it because it is a chick magnet. My wife is attracted to me
    because we share common values.

     

    “this highlights your own
    inability to recognize saving money as a means to buy an expensive
    car in cash.”

     

    What I recognize is that the
    way to save money is to not buy something more expensive than what
    meets your needs.

     

    Since BEV are more
    expensive, I am interested in what might motivate ownership. If
    something that is more expensive provides benefit to me fine but if
    it is marketing it provides benefit to the car salesmen.

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  53. By Kevin Kane on July 11, 2010 at 8:19 pm

    Kit P,

    Pardon me. It was Paul N who threw the term around.

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  54. By Kevin Kane on July 11, 2010 at 8:20 pm

    Kit P,

    Pardon me. It was Paul N who threw the term around.

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  55. By paul-n on July 11, 2010 at 10:38 pm

    I am not sure I “threw the term around” but I did use it, and use it intentionally.  The thrust of the article was that the car manufacturers should concentrate on only doing electric vehicles for their expensive luxury vehicles.  By definition, these are not bought by the majority of people, but those with more money, so I think elite is not out of place, though there are other words that may be better.

    In any case, for the person like Kit, who chooses to drive an older vehicle, or the many who no choice because that is all they can afford, or for the people in places like NYC who have no car at all, the BEV’s are of no help whatsoever, though they are still subsidising them.  If you can afford to buy a luxury car, i think you can afford to buy a BEV luxury car.  When ordinary people are struggling to pay for their housing and health care, they do not need to be subsidising luxury vehicles, regardless of how they are powered.  

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