Smart & Clean Energy and Ground Transportation

Why Electric Vehicles?

More often than not, those involved in an undertaking have completely different objectives and this is the cause of most failures. Addressing the core reasons for doing anything is often the most important, the most controversial / complex, and thus the most avoided. But when it comes to something as important as the future of energy and our environment, we collectively cannot afford to avoid looking carefully at our national energy strategy and the motivations of the various players in this market. There are broadly 2 reasons why one would be involved in the electric car industry:

  1. To make money in a hot technology / market
  2. To contribute to the development of effective technologies which are important to the future of our country and our planet (which of course can only be done if the market is economically viable for companies to do so)

The first objective is the most simple. If you are an entrepreneur, you can focus on those segments of the market which have already made a commitment to electric vehicles; for example fleets, various governments organizations, various corporations who want to be good citizens, and various wealthy individuals or enthusiasts. You don’t need to worry so much about their motivations, and the effectiveness of the technology.

However, if you are focused on the effectiveness of deploying this technology on a large enough scale to positively impact our country and the environment, you are dealing with a much more complicated problem. First you have to understand what really motivates the various customer segments. For example complying with government mandates, PR for being a good corporate citizen, the perception of reduced costs, the great acceleration characteristics of the car, the ability to use the carpool lane, etc. Then you need to consider a variety of reasons why one would want to promote electric vehicles at a national level:

  1. Reduce greenhouse gases
  2. Oil independence (national security, global security, economic growth)
  3. Reduce energy costs
  4. Promote new technologies to grow the economy (and jobs) and further develop the country’s global competitiveness

It would be great to be able to achieve all of these objectives, and perhaps one day we can, however today these objectives are in conflict with each other. If you were a policy maker and needed to focus our national efforts on key strategies what might some of those strategies be:

  1. Focus on Oil Independence as a top priority: Promote all electric vehicles (vs. hybrids) and use coal and natural gas plants (which currently provide 70% of the US Power Grid) to keep the costs down. We will burn more greenhouse gases, but it’s the most economical way to work towards oil independence.Note: Electric vehicles are significantly more expensive than traditional cars even after tax benefits. They also produce more greenhouse gas emissions than hybrids in almost every state with a few exceptions like Vermont and Idaho which get most of their electricity from nuclear and hydroelectric.
  2. Focus on reducing greenhouse gases with current technologies: Promote hybrids and plug-in charging infrastructure for metropolitan areas where the power grid is relatively clean (i.e. Uses no coal. Uses nuclear, solar, wind preferably vs. natural gas). Unfortunately, the power grid throughout most of the US is quite dirty, so plug-in charging options are limited. This is in contrast to France for example, where only about 10% of their power comes from fossil fuels (80% is nuclear).
  3. Reducing costs, especially as gas prices go up: There is no simple solution to this other than building smaller economy cars. Both all electric vehicles and hybrids are more expensive than a traditional gas powered car when you take into account the premium cost of the vehicle net tax benefits and reduced operating cost per mile. (Most people purchase hybrids because they want to do their part in reducing greenhouses gases and to take advantage of using the car pool lanes. The perception of reduced costs helps to market these vehicles.)
  4. Long term strategy to have everything (reduce costs, greenhouse gases, and achieve oil independence): Focus on a non fossil fuel power grid – nuclear fission, nuclear fusion, solar (both home and utility generated), wind, bio fuels, etc. Focus on hydrogen cars and fuels which can be cleanly produced with electricity and rapidly delivered to a vehicle as a liquid fuel (i.e. no charge time issue). Continue to invest in improved electric vehicle technologies with the critical focus to drive down charge times to acceptable levels if possible, or focus on segments of the market who do not require long and unpredictable drive distances (e.g. fleets, city vehicles). Improve the electric mass transit infrastructure. Improve the environment (technologies, tax incentives) for telecommuting. Secure funding for these activities at both a Federal and State level. Look for certain states such as California to be more proactive then the US Government, but which will likely require Federal assistance for developing the required technologies and securing investment for long term projects.

There are broadly 2 short term strategies: Focus on Oil Independence vs. Reducing Greenhouse Gases. These are very different strategies and at the moment are in conflict with each other. Which is more important? Less than half of Americans think that global warming is a real problem, but almost every American believes that Oil Independence is critical. So if you believe in the Wisdom of Crowds concept, or in the need to secure votes (or both), perhaps we should focus on the Oil Independence strategy? The strategy could broadly be to first ensure that an electric vehicle and infrastructure business is growing rapidly and profitably by providing the appropriate mandates, subsidies, and tax benefits and doing what we can to ensure that this industry deploys infrastructure intelligently so it is not overbuilt in the wrong places (due to the typical mad rush of uninformed investors) to avoid the industry from crashing. The next logical step is then to focus on the long term strategy over time.

How do we get from here to there? It will obviously involve a combination of Federal and State regulatory and subsidy / tax activities, electric and hybrid vehicle manufacturers, infrastructure vendors, parking lot / garage owners, the end customer vehicle owners (business and consumer) etc, all of whom have different objectives and incentives. The trickiest aspect of this complex problem is that now and into the foreseeable future, the end customer is driven by factors other than cost (i.e. these vehicles will be more expensive than traditional vehicles), such as compliance, tax benefits, side benefits such as carpool lane, etc. A small player can focus on the immediate opportunities (i.e. making money in a hot market), however a large player or one involved in policy must be involved in ensuring that we continue to incent consumers in this market despite the higher cost, while ensuring that we are continuing to work towards long term solutions of all of our critical, and conflicting objectives of oil independence, reducing greenhouse gases, and reducing costs. A formidable challenge, but one worthy of our careful consideration.

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