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Hucksters Using Tax Payer Funded Subsidies

April 17, 2015

It’s been demonstrated that PV rooftop solar systems are a bad deal for America, because they have abysmal returns and can destroy the grid.

But homeowners are being enticed into leasing arrangements because, with leasing, the homeowner can save money. In some states, it’s logical for homeowners to lease PV roof top solar systems.

What’s good for the individual homeowner, may be bad for his neighbors and the rest of the country.

In fact, leasing probably wouldn’t be available without subsidies.

Here is how a typical lease would work.

Based on one of the online calculators, the cost of a PV rooftop solar system in Shreveport, Louisiana, where the homeowner uses 2,000 kWh each month, with a cost of $245 per month for electricity, would save $2,511 per year.

The installation, without labor, would cost $30,731. The payback for the installation would be 12 years.

This is a terrible payback for any investment. Moreover, the homeowner doesn’t want to invest this much money because he has other needs, and is concerned about losing part of the investment if he moves and sells his home.

PV Rooftop Solar Installation Photo by D. Dears

PV Rooftop Solar Installation Photo by D. Dears

So he opts to lease the system. A good decision for the homeowner, as he is guaranteed to pay substantially less for the electricity he uses.

The leasing company has a bonanza, and reaps a profit at taxpayer’s expense.

  • First, the leasing company receives a federal taxpayer funded subsidy of $9,219, as estimated by the online calculator.
  • Some states have special tax incentives and sales tax relief that the leasing company can take advantage of.
  • Next, the leasing company receives the agreed upon monthly payment for electricity from the homeowner.
  • Next, the leasing company can depreciate the cost of the installation when filing its tax returns.
  • Next, the leasing company can sell electricity that’s generated in excess of what the homeowner uses, to the utility. With net-metering, the electricity is sold to the utility at the same price the utility charges, which is approximately 10 cents per kWh in Louisiana. (Probably higher in most other States.)

While the installation would have been a bad investment for the homeowner, the subsidy creates a good investment for the leasing company. Largely at taxpayers expense. Ordinary people are footing the bill for PV rooftop solar.

For all the reasons cited here and in earlier articles, PV rooftop solar is bad for America. See, Rooftop Solar is Harmful, Part 1 and Part 2.  Also, Hucksters Pitching a Bad Solar Investment.

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© Power For USA, 2010 – 2015. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author, Donn Dears LLC, is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Power For USA with appropriate and specific direction to the original content.

Hucksters Pitching Bad Solar Investments

April 14, 2015

Most people wouldn’t buy a magic elixir from a traveling pitchman, but they may be an easy mark for a PV rooftop solar installation, pitched over the Internet or by the media.

There’s an abundance of misinformation circulating on the net and in the media about PV rooftop solar. So much so, that everyone should be careful.

Many Internet sites have information on PV rooftop solar installations. Some offer to provide a free estimate of the savings people can achieve with a PV rooftop solar system, and some have an online calculator allowing the viewer to determine possible savings.

Just be careful, the calculator can distort the payback in at least two ways.

One calculator uses the amount of money required from an investment, such as a CD, as being comparable to the amount that will be saved from a PV rooftop solar system. (Note that the return from the investment may be taxable.)

The return from the investment is larger than the actual savings from the PV rooftop solar installation, and the calculator determines your payback based on this higher, misleading value.

In another ploy to inflate the value of the investment, the calculator adds the cost of the PV rooftop solar system to the value of your home when calculating the payback in years.

But a PV rooftop solar system is probably like a swimming pool. You rarely recover the cost when selling the home.

In addition, the calculator deducts the federal 30% tax credit from the investment, so the payback is determined using the net cost after the tax credit.

If PV rooftop systems are so good, why do the sellers of these systems have to distort their true value?

The answer is simple.

  • In most locations, PV rooftop solar systems aren’t a good investment.
  • They require a subsidy to make a bad investment appear good.

The online calculator also uses a variable to reflect your location. The variable is likely the insolation value for where you live.

Insolation values are determined for locations around the world, and show how much sunlight falls on the Earth at that location. It’s frequently expressed as kWh/square meter/day.

Solar Radiation Map for US. From NREL

Solar Radiation Map for US. From NREL

These values vary widely. For example:

  • Central Australia = 5.89 kWh/m2/day
  • Helsinki, Finland = 2.41 kWh/m2/day

And in the United States:

  • Phoenix, Arizona = 5.38 kWh/m2/day
  • Minneapolis, Minnesota = 3.68 kWh/m2/day

For insolation levels at other locations, go to http://sunintersolar.com/wp-content/uploads/2012/04/Insolation.pdf

But the calculators on the Internet may not take into consideration the number of cloudy days that occur at any location.

This can turn a payback of 12 years in Albany, New York, into a much longer payback.

The 12-year payback is abysmal, even if cloud cover is included in the calculation.

The payback assumes the PV rooftop solar panes face due south. If they face to the east or west, it requires an additional 2 or more years to recover the investment.

Paybacks at other locations could also be much longer than shown by a calculator on the Internet if cloud cover isn’t taken into consideration by the calculator.

Here are a sampling of paybacks periods as determined by the calculator:

  • Atlanta, GA, 15 years
  • Lincoln, NE, 17 years
  • Pittsburgh, PA, 21 years
  • Spokane, WA, 22 years
  • Tampa, FL, 11 years
  • Tucson, AZ, 10 years

It’s obvious there are few places in the United States where paybacks without subsidies are reasonable, say less than 5 years.

And PV rooftop solar panels are only expected to last 20 years, so in many locations the panels would be scrapped before they had paid for themselves.

Because of the question about cloud cover, anyone enticed into buying a PV rooftop solar system should insist on a warranty, where, if the savings over a year aren’t achieved, the company making the installation would rebate a proportionate portion of the installation cost.

For example, if the saving were 10% less than guaranteed, there would be a rebate equal to 10% of the installed cost.

This only makes good business sense.

The cost of PV rooftop solar will probably come down a little over the next decade. But even if they were 50% less, so the panels cost half of what they do today, PV rooftop solar would still be a bad investment throughout nearly all the United States.

PV rooftop solar is a bad investment for two reasons:

  1. The paybacks are abysmal.
  2. PV rooftop solar can destroy the grid. See, Rooftop Solar is Harmful, Part 1 and Part 2.

Beware of hucksters promoting PV rooftop solar.

 
PS: You can verify the paybacks by using the calculator at http://bit.ly/1IZyozw

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War on Fossil Fuels Tragedy

April 10, 2015

The February 17 article described a few reasons why fossil fuels benefit humanity.

Of course, several people on Facebook blasted the article, when they said, “Fossil fuels are bad because they emit CO2.”

There is an unfolding tragedy around the world as fossil fuels are banned or economically black balled.

We need only turn to Africa to see how the war on fossil fuels fosters conditions that leave people living in poverty.

The war on fossil fuels is literally killing people.

While natural gas is cleaner than coal, many parts of the world lack natural gas, but have large supplies of coal.

Sub-Saharan Africa is an area that is beset with poverty and short life expectancy.

Here is how McKinsey & Company describes the current situation.

“There is a direct correlation between economic growth and electricity supply. If sub-Saharan Africa is to fulfill its promise, it needs power—and lots of it. Sub-Saharan Africa is starved for electricity.”

“It has 13 percent of the world’s population, but 48 percent of the share of the global population without access to electricity.”

While the average American consumes over 14,000 kWh/year, in the Central African Republic, it is 29 kWh/year, and in Chad, it’s only 8 kWh/year.

Energy access is defined by the International Energy Agency (IEA) as 250 kWh/year and 500 kWh/year, for rural and urban areas respectively.

Three resources are available in Sub-Saharan Africa that could be used to generate electricity — coal, natural gas and oil. All are fossil fuels.

Distribution of these resources is spotty. Natural gas is primarily in Nigeria, with some scattered in a few other countries, mainly the Congo, Namibia and Rwanda.

There are large reserves of coal in South Africa, with small reserves sprinkled throughout many other areas.

This coal could be used to generate electricity, but environmentalists are depriving African countries the money they need to build coal-fired power plants.

The Obama administration has announced it’s cutting off funding for coal-fired plants overseas.

And, in a major shift, the World Bank will also cut off funding for coal-plants around the world.

This is a tragedy, because it will condemn millions to live in poverty and die at an early age. In Sub-Saharan Africa alone, there are 600 million people without access to electricity.

NASA Satellite Image of Nighttime Africa

NASA Satellite Image of Nighttime Africa

While there are other problems in Africa, such as graft and religious warfare, the cheapest and most easily used resource is now being made unavailable for building power plants in Sub-Saharan Africa.

Renewables, except for hydro in the Congo, are unrealistic. Money is in short supply, and largely unavailable for expensive renewable alternatives. Without gas turbines for back-up, wind is even more unreliable. Solar only generates electricity during the day so African countries would go dark at night.

Other countries are also targeted by the war on fossil fuels.

India and Indonesia, two very important and populous countries, need electricity.

In India, the average person consumes only 600 kWh/year, while in Indonesia, it’s only 629 kWh/year.

Indonesia has large coal reserves for coal-fired power plants, and for export to sustain its economy.

India has large coal reserves which it is trying to develop, primarily so it can generate more electricity.

Indonesia 2014, Photo by D. Dears

Indonesia 2014, Photo by D. Dears

Do we expect these countries, with large populations, to relegate their citizens to continued poverty because of the war on fossil fuels?

Similarly, China is developing its coal reserves and building new ultra-supercritical, highly efficient, coal-fired power plants.

Without the participation of India, Indonesia and China, it’s impossible to cut CO2 emissions worldwide and prevent atmospheric CO2 emissions from increasing.

The lack of electricity affects people in other ways.

Millions don’t have access to drinking water.

While Africa, Asia and South America have many rivers that can provide cooling water for power plants, many locations lack the ability to distribute the water to communities located some distance from rivers.

Distributing water requires the use of pumps, driven either with electricity or fossil fuels.

Irrigation of rice paddies and farms require water distributed to them by electricity or fossil fuel driven pumps. There are foot driven pumps, using a man walking on them, but that in itself is a tragic waste.

Consumers in countries lacking adequate supplies of electricity are rioting, upsetting the social order.

The war on fossil fuels is a tragedy, because it’s condemning people to poverty and an early death.

The use of fossil fuels is beneficial to mankind, and the war on fossil fuels is immoral.

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Shale Oil Revolution Continues

April 7, 2015

Companies in the United States who are drilling for shale oil have had to respond to the sudden low price of oil.

Saudi Arabia decided to maintain production rather than cut production to maintain the price of oil, and this has sent the price of oil plummeting.

The reasons for this change in tactics are unclear. Some have said it was to force the curtailment of shale oil development.

Another reason could be their desire to minimize the amount of money Iran can receive from its oil if the nuclear negotiations result in the lifting of sanctions.

Whatever the reason, companies involved in shale oil development have had to scramble to stay alive.

Initially, these companies took four actions:

  • Reduced new drilling investments to save cash
  • Shifted drilling activities to each area’s sweet spot
  • Delayed finishing wells to save cash and store oil in the ground
  • Reduced service and supplier costs

Now they are pursuing new techniques that will improve the amount of oil they can obtain from their wells.

Chart from EIA

Chart from EIA

Their entrepreneurial spirit, an American trait, has turned the tide from possible disaster to an improving future.

The sudden drop in oil prices can be seen as a blessing in disguise.

As usual, the peak oil theorists have been proven wrong again.

As recently as late last year, they were bemoaning the supposed shrinking of sweet spots, the rapid decline in production rates, and predicting the demise of shale oil development.

Radical environmentalists who have railed against fracking may achieve some short term prohibitions, such as the fracking regulations issued by the Interior Department for Federal Lands, but fracking is here to stay because it’s important to America.

The continued march towards energy independence is strategically important, even vital to the United States, when the dangers in the Middle East are fully understood. Saudi Arabia, the other Gulf oil producers, such as Qatar and the UAE, and Egypt, are being surrounded by ISIS and Iranian surrogates.

Here are two new developments that will, over the long term, improve shale oil production.

Until now, parallel horizontal wells have been kept a thousand feet or more from existing wells.

Now, horizontal wells are being drilled only 500 feet from existing parallel wells. This alone will increase the output from shale formations.

Wells are also being stimulated by refracking, which opens new fractures and extends existing fractures in the shale, thereby restoring production levels.

It’s been estimated that only 8% of the available oil within two or three hundred feet of a horizontal well, is being extracted.

Both these new techniques will increase the amount of recoverable oil.

Other experiments are taking place.

One of these is the use of coated propants rather than sand alone. Resin-coated sand that expands after lodging in fractures helps to keep fractures open, and by expanding after reaching the farthest point in the fracture helps to maximize the fractures size.

The entrepreneurial spirit of America’s shale oil drilling companies will keep the shale oil revolution alive. Ultimately shale oil and natural gas development using fracking will proceed worldwide.

Everyone around the world will benefit from developing these fossil fuel resources.

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Rooftop Solar is Harmful, Part 2

April 3, 2015

The previous article showed how people are sponging off the grid with PV rooftop solar systems.

The claim is frequently made that fossil fuels get more subsidies than do renewables.

Like so many claims made by advocates for wind and solar, it’s also bogus.

Actually, the subsidies received by renewables have been far greater in recent years than those received by fossil fuels. See, The Big Untruth,

Perhaps the biggest untruth with respect to energy is that fossil fuels receive huge subsidies, while wind and solar receive few if any subsidies.

A report providing data on subsidies was produced by the Congressional Budget Office on March 13, 2013.

Testimony given to the House of Representatives included the following chart that provides a clearer picture of where tax preferences, i.e., subsidies, have been applied.

Chart from Congressional Budget Office Testimony to Congress

Chart from Congressional Budget Office Testimony to Congress

From 1977 until 1987, fossil fuels received large subsidies because of the oil embargo and efforts by the United States to achieve energy independence. For the next 18 years there were far fewer subsidies for either fossil fuels or renewables.

Beginning in 2006, subsidies increased substantially, and from 2008 to the present, renewables have received far larger subsidies than fossil fuels.

This puts to rest the idea that wind and solar should get subsidies, because they already do, and the subsidies renewables get are very large … much, much larger than are received by fossil fuels.

This doesn’t address whether wind and solar should get subsidies. The levelized cost of electricity (LCOE) for wind and solar is between two to four times higher than for natural gas combined cycle (NGCC) power plants. Subsidies for wind and solar require tax payers to pay twice: First by using taxpayer money for subsidies, second by forcing tax payers to pay higher prices for electricity.

Then there is the argument that everyone benefits from PV rooftop solar.

This is the most specious argument of all.

There are two ideas supporting this argument.

First, wind and solar eliminate CO2 emissions. This is only beneficial if CO2 emissions are the cause of global warming, which they probably aren’t.

Second, it’s been claimed, inaccurately, that PV rooftop solar means lower energy prices for all.

This was put forth in a Renewable Energy World.com article, Rooftop Solar Capacity Benefits all Ratepayers.

The source of this claim appears to have been an interview given by Sanford Bernstein & Co.

But the interview pertained to wind and utility scale solar installations … NOT PV rooftop solar.

The crux of the Sanford Bernstein comments was that utility scale wind and solar lowered the price of electricity in wholesale markets.

The comments didn’t pertain to PV rooftop solar, yet the article claiming everyone benefitted form PV rooftop solar assumed they did.

Whether this was deliberate, or an honest error isn’t clear.

In Germany, wind and solar must be dispatched ahead of electricity from any other source. As long as the wind is blowing and the sun is shining fossil fuels are shut out of the market.

Grid operators in the United States in wholesale markets, such as PJM and ERCOT, require utilities to offer their electricity into the day-ahead market at their variable cost of production.

For renewable generators, the variable cost of production is zero.

Utilities who generate electricity using fossil fuels are therefore shut out of the wholesale market as long as wind and solar generated electricity is available.

PV rooftop solar isn’t involved in theses auctions.

PV rooftop solar has nothing to do with these wholesale auctions. Inferring they do is wrong and misleading.

Since some electricity from utilities using wind or solar is bid into the system at lower variable cost, total costs for consumers are theoretically lower. But the LCOEs of wind and solar, as they relate to the total market, are still higher.

Technically speaking, the Sanford Bernstein statement is correct, but it only applies to a small part of the total electricity market, which for PJM includes, wholesale, regulated, capacity, financial transmission and ancillary services.

Claims that PV rooftop solar lowers the price of electricity for everyone are bogus.

Another misleading claim is that PV rooftop solar reduces peak demand on the grid.

While it’s a possibility at a few locations, it’s been shown that peak demand generally occurs later in the day than when PV rooftop solar power is at its peak output. In other words, maximum PV rooftop solar output is typically out of phase with peak demand. It should be noted conditions favorable to PV rooftop solar affecting peak demand would realistically only occur in the summer when the air-conditioning load is great.

Could there be other creative uses for PV solar?

Some enterprising individuals may be able to install low-cost solar panels on a solar-tree or clothesline like structure in their back yard to offset some of the higher cost electricity during peak periods, if prices vary by the hour of the day. But this entrepreneurial activity, providing there are no subsidies or net metering involved, won’t seriously affect the grid. It’s akin to homeowners reducing their use of electricity during peak periods by washing the dishes at night.

For an interesting look at Going (Solar) Rogue see, http://bit.ly/1BGFkMz. However, Going Rogue focuses on small, low cost, backyard kits, and not $20,000 PV solar installations. It also ignores areas where insolation and cloud cover are unfavorable, which includes most areas north of the Mason-Dixon line.

If people want to install PV rooftop solar with the necessary batteries, and disconnect from the grid, they should be allowed to do so.

But saving the grid is important.

People living in cities such as New York, Chicago, Philadelphia, San Francisco, etc., can’t use PV rooftop solar. Most roofs in big cities aren’t large enough to provide electricity for everyone in an apartment building, and many rooftops are shaded by adjacent buildings.

People living in cities must, for the most part, rely on the grid to bring electricity to them, whether the electricity is from wind turbines located in Montana, or from concentrating or PV solar generating facilities owned by the local utility.

Advocates of wind and utility based solar should oppose PV rooftop solar and net metering paying residential rates.

The phony claims concerning PV rooftop solar are mostly made by extreme environmentalists because of their demand that CO2 emissions be cut.

Extreme environmentalists attack the Koch brothers, and others who can factually refute their claims.

These two articles have addressed the importance of the grid and why PV rooftop solar could destroy the grid or force the government to take it over. In another two weeks Hucksters Pitching PV rooftop solar, and leasing of PV rooftop solar systems will be addressed.

Extreme environmentalists are in favor of big government controlling all aspects of energy production and usage, in part, to cut CO2 emissions.

For the rest of us? Be careful what you wish for.

 

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© Power For USA, 2010 – 2015. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author, Donn Dears LLC, is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Power For USA with appropriate and specific direction to the original content.

Rooftop Solar is Harmful, Part 1

March 31, 2015

Recent activity on the Internet has tried to turn this fact on its head.

While it’s not unexpected that supporters of PV rooftop solar would attempt to turn the facts upside down, the addition of a Tea Party activist to the group supporting PV rooftop solar makes news.

Debbie Dooley, reportedly a founding member of the national Tea Party, and a member of Conservatives for Energy, supports the Florida ballot initiative called Floridians for Solar Choice.

The Floridians for Solar Choice web site says, “Giving Floridians a Voice and a Choice on Energy.”

As expected, the left has grabbed this misguided revolt by a tea party member to exploit her in its campaign for more PV rooftop solar at taxpayer expense.

An article in Grist capitalized on the situation by calling for a “Green Tea Coalition.”

Rather than seeking an impossible dream, these Don Quixotes are proposing a nightmare.

Don Quixote and his sidekick Sancho Panza after Titling at Windmill. By Gustave Dore.

Don Quixote and his sidekick Sancho Panza after Titling at Windmill. By Gustave Dore.

Here is some of the misleading information about PV rooftop solar found on the Internet:

  • People should be free to add PV rooftop solar
  • Utilities are against competition, because it hurts their profits
  • It means lower peak-hour energy prices
  • It’s the Koch brothers who are against PV rooftop solar
  • Fossil fuels get subsidies, why shouldn’t wind and solar?
  • Everyone benefits from PV rooftop solar

These are misleading, inaccurate or just plain wrong.

For example, no owner of a single family home is prevented from installing a PV rooftop solar system.

Any such homeowner can install a PV rooftop solar system and then disconnect their home from the grid.

What the Don Quixotes are actually objecting to is having to buy batteries to provide storage for electricity needed at night or when the sun doesn’t shine. They probably will have to buy enough batteries to last for a week or more for when the weather is bad.

Everyone has the freedom to install PV rooftop solar, it’s just they don’t want to buy batteries. They want to keep sponging off the grid instead.

So the freedom argument is bogus, as is the argument that utilities don’t want competition.

The grid has value, and it’s the cost of buying batteries to store electricity for an extended period of time that, in part at least, establishes the economic value of the grid to homeowners.

It’s true, painfully true, the profitability of utilities will be hurt with PV rooftop solar.

And this is a problem that should concern everyone, because utilities are needed to maintain the grid, and provide electricity to all who want it, at the lowest possible cost.

Germany is living proof that wind and solar can destroy the system that’s based on utilities providing electricity to everyone. Consumers in Germany pay five times as much for electricity as we do in the United States.

Because of energiewende, German utilities are trying to dispose of their fossil fuel assets, which is likely to result in the government having to take over the grid. See, The Bell Tolls and Watching Germany’s Endangered Utilities.

At the core of the problem in the United Sates is that the vast majority of owners of PV rooftop solar installations don’t pay for their use of the grid.

This is especially true with net metering, where utilities must pay to participate in their own destruction.

PV rooftop solar installations can allow homeowners to sell surplus electricity to the grid, in many cases taking advantage of net metering.

Net metering requires the utility to pay the same price for electricity sold to the grid by homeowners, as homeowners pay when they buy electricity from the utility.

If the homeowner pays 12 cents per kWh for the electricity he uses from the grid, he will, with most net metering laws, be paid 12 cents per kWh for the electricity he sells to the grid.

This forces the utility to pay twice as much for electricity as it would cost the utility to generate the electricity itself. For example, the utility would pay the homeowner 12 cents per kWh for electricity it could generate for 5 cents per kWh.

If a restaurant (utility) could grow vegetables in its back yard at a very low cost, should it be forced to buy vegetables from someone else at a high price?

This is what net metering forces utilities to do.

In addition, homeowners with PV rooftop solar installations aren’t paying their fair share of the maintenance and capital costs of the transmission and distribution lines, including all the transformers, cut-outs, regulators, capacitors and switchgear contained in substations and along the power lines.

If the homeowner generates all the electricity he uses, and doesn’t buy electricity from the grid, and then sells electricity to the grid over the utility’s distribution and transmission lines, he isn’t paying anything for the maintenance or other costs of those lines and the infrastructure associated with them.

If the homeowner didn’t have batteries for storage, he might buy some electricity at night and during bad weather, but the amount he pays would be a pittance compared with the actual infrastructure costs incurred by the utility for the power lines used by the homeowner.

The result? Homeowners don’t pay for using the grid while getting paid an excessive amount for the electricity they sell to the grid.

PV rooftop solar is like a cancer eating away at the heart of the utility system.

So long as there are only a very small number of PV rooftop solar installations, the cancer can be tolerated.

But if most people had PV rooftop solar, the utilities wouldn’t be able to survive, which is the situation evolving in Germany.

And what about subsidies, and the claim that everyone benefits from PV rooftop solar?

See Part 2.

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© Power For USA, 2010 – 2015. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author, Donn Dears LLC, is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Power For USA with appropriate and specific direction to the original content.

Is Tesla Gigafactory a Bad Investment?

March 27, 2015

Let the battle begin.

It pits liquid filled Lithium-ion batteries against solid state Lithium batteries.

The Department of Energy has established a goal of $125/kWh for EV batteries.

Currently, many cite the rating of current EV batteries as being around $400/kWh.

However, reports place Tesla’s current battery at $260/kWh, with the proposed giga factory bringing the cost down to $185/kWh by 2018.

These costs are very difficult to nail down, because there’s both the cost of the internal battery components, but also the cost of the packaging required for encasing Lithium-ion batteries using liquids or gels.

There’s also the question of whether the cost is a commercial cost, i.e., with overhead and profit included, or a transfer cost that excludes portions of overhead and any profit.

It’s conceivable that Tesla will use a transfer cost when costing the battery for inclusion in the finished cost of the automobile.

But, it’s reasonable to assume that the gigafactory will bring the commercial cost down, perhaps to around $200/kWh by 2018, assuming the current cost is $260/kWh.

At $200 per kWh the cost of the battery for the existing and proposed Tesla vehicles would be:

  • Model S = $17,000
  • Model 3 = $11,000 (Assumes 55 kWh battery)

These both assume a range of over 200 miles.

Looming on the horizon, however, is the solid-state Lithium battery.

There are a number of startups that are pursuing solid-state technology that eliminate the liquid or gel that’s part of existing Lithium-ion batteries.

A few of these include:

  • Solid Power in Colorado
  • University of Maryland
  • Sakti3

Applied Materials manufactures the equipment that these startups will use for the manufacture of solid-state Lithium batteries, and they have additional information on the process.

Sakti3 has received considerable publicity, but all of them are still working at the laboratory level.

Even so, Sakti3 claims it can reach a cost of $125/kWh using its approach.

Evolution of Battery Technology from Materials 360 Online

Evolution of Battery Technology from Materials 360 Online

A battery costing $125/kWh could make EVs more affordable, though there are still major hurdles before EVs are likely to replace the internal combustion engine.

Not the least of which is the cost of replacing batteries. The battery of an EV using a 55 kWh battery would cost around $7,000. This battery would have to be replaced at some point, perhaps at 100,000 miles, and possibly sooner.

This would be similar to taking your car to the dealer to have the engine replaced. The process may be simpler, but the financial obligation remains.

This is a cost that will be factored into the resale price and depreciation of EVs that will be a hurdle for some consumers.

But, why did Elon Musk decide to use the existing Lithium-ion battery technology for his gigafactory and not the solid state technology?

Many say that Musk is a better promoter than was P. T. Barnum, but it’s doubtful Musk is a fool.

Musk undoubtedly explored the new solid state technology before deciding to use existing battery technology.

The current status of the solid state technology must have been such that it wouldn’t be ready by 2018.

Beyond that, Musk should have wanted to get at least a minimum return on his investment in the giga battery factory.

Optimistically, he might have expected a five year payback, but more likely he would have expected a ten-year payback.

Using these assumptions, it would appear that the earliest a solid state battery would be commercially available would be 2023, or more likely 2028.

Musk must have concluded that he would be first to market with a less costly, but not least costly, Lithium-ion battery, and that by using existing Lithium-ion technology he would establish Tesla as the premier EV car manufacturer.

And, there’s no assurance that sold state Lithium batteries will be successful in bringing their cost below what Musk envisions.

But that doesn’t mean that Musk hasn’t been overly optimistic.

He expects the giga battery factory will supply 500,000 EV cars beginning around 2020.

That could be a huge mistake.

At the current rate, it’s very doubtful that EV sales will reach 500,000 by 2020.

He is also counting on his arrangement with SolarCity to absorb some of the gigafactories output.

It’s possible, however, that California’s mandate for energy storage could save Musk from bankruptcy.

The irony is, that even if 500,000 EVs are sold every year, they will not cut CO2 emissions since the electricity for recharging batteries will have mostly been generated using fossil fuels.

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