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Is There a Future for Battery Powered Vehicles?

April 28, 2015

Many people expect the Internal Combustion Engine (ICE) to disappear over the next decade, and be replaced with battery powered vehicles (BEVs).

But could the opposite be true?

Perhaps BEVs will disappear.

Table 1 shows the basic estimated cost information at the heart of BEVs.

Table 1

Cost per battery based on kWh capacity

Battery cost

Size in kWh >>

85

70

60

$260

/kWh

$22,100

$18,200

$15,600

$200

/kWh

$17,000

$14,000

$12,000

$125

/kWh

$10,625

$8,750

$7,500

The current Tesla battery cost is estimated at $260/kWh.

The probable cost after completion of the Gigafactory in 2018 is around $200/kWh.

The battery cost the Department of Energy (DOE) has established for BEVs to be competitive with ICE vehicles is $125/kWh.

The cost of an ICE engine is around $5,000, and this would be avoided in a BEV. When the savings in fuel costs are added, the DOE estimate seems reasonable for small BEVs.

However, the only technology on the horizon that might be able to achieve the DOE requirement is the solid state Lithium battery, which is not likely to be available before the mid 2020s. It’s currently in the laboratory stage and may never achieve the $125/kWh goal.

This means a competitive BEV won’t be available for at least a decade, if then.

Tesla Being Charged. Photo by D. Dears

Tesla Being Charged. Photo by D. Dears

The Tesla model 70D is priced at around $83,000, using the 85 kWh battery.

With completion of the Gigafactory in 2018, the cost of the battery should be reduced to $200/kWh, and the price of the 70D lowered to the mid $70,000.

This is still a car for the rich and famous.

Tesla proposes to produce a Model 3 for $35,000, with a range of 200+ miles. This will likely require a 70 kWh battery, with a cost of around $14,000, based on future Gigafactory costs. See Table 1.

This will still result in a price premium, over an ICE vehicle, of around $7,000.
For the next decade, buyers will have to be willing to pay a $7,000 premium to buy a Model 3 type BEV.

BEV offerings from other manufacturers are likely to be similar.

Of course, this higher cost can be offset by government subsidies. But why continue to use taxpayer money to subsidize BEVs?

In the meantime, the ICE engine will be improved, which will improve gasoline mileage, lower the weight of the engine, and result in a smaller price tag for the engine. Improvements can be achieved by using plastic materials, special steels for pistons and liners, and new ceramic materials, similar to those being used in jet engines.

As a result, the ICE engine is likely to get better and be less costly, which could increase the BEV price premium.

While these are merely estimates, they reflect an objective look at the likely cost of batteries during the next decade.

BEVs are going to cost several thousand dollars more than comparable family sized vehicles. The rich and famous will continue to buy the luxury versions and take advantage of taxpayers who will subsidize their cars.

But initial cost is only part of the equation.

Buyers of BEVs will also have to contend with having to replace batteries, at a cost of around $14,000. If initial owners sell their BEV, there will be additional depreciation due to the high cost of replacement batteries.

An ICE vehicle will continue to be able to go 400 miles between fuelings, while owners of BEVs will still need to contend with range anxiety.

And why are we spending multiple billions of dollars in subsidies, all of which comes from the income of ordinary Americans, to pursue the adoption of an expensive product that most people may not be willing to buy?

It’s not to have the United States become energy independent, because, with fracking, the United States is already becoming energy independent.

It’s to cut CO2 emissions.

But this is a bogus objective, because 66% of the electricity used to charge batteries comes form power plants that emit CO2. There is little likelihood that the percentage of electricity coming from power plants using fossil fuels will be significantly reduced, especially as nuclear power plants begin to be shut down in the mid 2030s. See, U.S. Nuclear Demise Amid Increases Elsewhere

Using BEVs will not lower CO2 emissions.

Led by California, several states are perpetuating this bogus objective by mandating that 15% of vehicles sold in their states be zero-emission vehicles by 2025. In 2014 BEVs represented 0.7 percent of cars sold in the United States, which is less than one percent.

It’s unlikely that solid state Lithium batteries will change the financial equation before the mid 2020s, if ever. If they do, the Gigafactory will be a white elephant unless its output can be sold elsewhere. See, Is Tesla Gigafactory a Bad Investment? 

In a twist of fate, the ICE could be powering vehicles for many decades, while the BEV faces near extinction and becomes a mere toy for the rich and famous.

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Arctic Oil Potential

April 24, 2015

A recent report prepared for the Department of Energy, established that large reserves of oil were in the Arctic, and that the United States should begin to develop those reserves as it could easily require 20 years before oil could be produced from the region.

Map of Arctic

It’s estimated that 75% of the potential oil and natural gas reserves are offshore and 25% are onshore.

It should be noted that these reserves include known reserves, discovered potential reserves and undiscovered potential reserves. While undiscovered reserves sound rather iffy, the industry has an excellent track record of making reliable estimates.

Most of the offshore reserves in U.S. waters are in waters less than 100 meters deep, or roughly 330 feet. The same is true for Russia. Reserves in Canada and Greenland, however, fall of rapidly from shallow, to deeper waters.

The fact that U.S. reserves are mostly in shallow waters is important, because rigs can be grounded on the ocean floor. They are easier and safer to use, and can utilize well established drilling and production technologies.

Using floating rigs year-round will require additional research and development.

Therefore, most of the U.S and Russian reserves can be easily and safely accessed, while recognizing the difficulties of operating in Arctic waters with a much shorter year in which to conduct operations. Open waters can last for only 3 or 4 months.

Development however, will require at least a few decades, based on the following timetable.

  • Evaluating and establishing leases, 2 to 10 years
  • Exploration and appraisal, 5 to 20 years
  • Development 3 to 10 years

In total, more than 20 years will probably be required to develop these reserves.

Arctic Reserves by Country

Arctic reserves are spread unevenly, with the U.S. and Russia having the greatest share of oil reserves, while Russia has the overwhelming share of natural gas reserves.

Another important item in the report is information on U.S. shale oil development, and whether it will last beyond the current decade.

The news media reported that shale oil production will begin to decline within ten years.

However, the media may have jumped to a conclusion about the durability of shale oil development.

The report used the EIA’s Reference Case projections showing shale oil and total U.S. oil production beginning to decline around 2020, five years from now.

The problem with using the EIA 2014 Reference Case is that the EIA has been behind the curve in estimating shale oil’s potential.

While it made sense for the report to use an accepted reference to maintain credibility, the EIA Reference Case is probably wrong with respect to how many years shale oil can be produced in quantity.

At least two factors mitigate against the demise of shale oil in the near future.

  • As the price of oil increases above current $50 levels, more areas become economically viable for shale oil development.
  • New techniques are being introduced that will increase the amount of oil that can be recovered from wells.

The report also recognized the complexity of the regulatory structure covering activities in the Arctic, and why some existing regulations need adjustment, such as those for leasing due to the long periods required before production can actually begin.

There are 39 federal agencies participating in the Arctic Policy Group, 27 agencies and working groups identified in the IPNSAR (Implementation Plan for the National Strategy for the Arctic Region), and seven interagency policy coordination bodies.

In addition, the Arctic Council consists of eight Arctic states (the United States, Canada, the Russian Federation, Norway, Kingdom of Denmark, Sweden, Finland, and Iceland), six permanent participant groups, twelve observer states, and a multitude of other governmental and nongovernmental organizations.

The report also reviewed the importance of preparing for an oil spill. It provided information on the ecological reports that have been prepared over the past decades.

A section of the report reviewed the extensive procedures taken to prevent an oil spill, and those to be taken in the event of an oil spill.

Drilling has been done in the Arctic so companies are familiar with the obstacles and how to drill safely. Norway and Russia have taken the lead in Arctic oil development, with Norway having recently offered leases in the Arctic.

The executive summary of the full report is available at http://bit.ly/1BYSVA9 and all other sections are also available by following the link.

Extremists will likely object to the report being prepared by the National Petroleum Council which is largely comprised of oil industry experts in combination with DOE.

While many people, especially extreme environmentalists who believe in global warming, will object to drilling in the Arctic, it’s clear that drilling in the arctic will become necessary as the demand for oil increases.

It’s clear that, due to the long winters and short drilling seasons, it will take twenty years or more to develop the oil and natural gas resources in the arctic.

It’s also clear that it’s important to develop these resources to ensure the continued future economic growth of the United States.

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Battery Powered Vehicles Lagging

April 21, 2015

First quarter sales of EVs and PHEVs were a mixed bag, and nothing to brag about.

US Sales of Electric Vehicles, Including HEVs 2015

Month

Hybrid (HEVs)

PHEVs 

Battery (BEVs)

Totals

PHEV & BEV

January

25,312

2,113

3,977

31,402

6,090

February

27,038

2,589

4,435

34,062

7,024

March

33,655

3,020

5,715

42,390

8,735

Total 1Q 2015

86,005

7,722

14,127

107,854

21,849

Total 1Q 2014

101,436

11,249

10,873

123,558

22,122

% change

(15.21%)

(31.35%)

29.93%

(12.71%)

(1.23%)

The only bright spot was the sale of EVs, but they lagged fourth quarter sales of 19,413 EVs by about 27%.

One has to wonder when the sale of EVs and PHEVs will take off.

Total light vehicle sales in the first quarter were 3,726,963.

Total EV and PHEV sales were 0.6%: That’s less than 1% of all vehicle sales during the first quarter of 2015.

When these vehicles were introduced, it was expected that there would be 1,000,000 sold by the end of 2015. This was the forecast made by President Obama.

Total cumulative sales since these vehicles were introduced in 2011 were 307,894.

By this measure, EVs and PHEVs have been a dismal failure, in spite of billions of dollars of taxpayer funded subsidies.

Volt and Leaf pictures from DOE

Volt and Leaf pictures from DOE

Because of this failure, some commentators attempt to disguise the failure by combining HEVs, EVs and PHEVs when describing electric vehicles. (HEVs are hybrids, similar to the Prius, that can’t use battery power for more than a short distance, and do not recharge their batteries from the grid.)

This distorts the actual market penetration of cars that rely on battery power, either exclusively, such as the Tesla, an EV, or PHEVs for commuting distances, such as the GM Volt.

My earlier article, Is Tesla Gigafactory a Bad Investment? described the current status of battery development and the new solid state battery that’s now in the very early stages of development.

It’s clear, at this point, that EVs are for the rich and famous, and not for ordinary drivers.

It’s still very much a question whether Tesla, or any other manufacturer, can produce a car for under $35,000 that will appeal to the average driver.

How much more taxpayer money will have to be spent on subsidies before EVs and PHEVs achieve any modicum of success?

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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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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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