With this new vested interest in the company I began to track Tesla and the EV industry in general. With investment from Daimler and Toyota, a big federal loan guarantee, a successful IPO, and a sweetheart deal to purchase the recently closed GM/Toyota factory in Fremont, California, the prospect of the new Model S actually getting built went from being a possibility to pretty much a sure thing. After a tour of the refurbished factory (at least the 10% of the factory that will initially be used to make the Model S) and a ride in a beta version of the vehicle in October 2011, my enthusiasm has not abated. I may very well buy (or at least lease) one of these things.
Fortunately, there is still time for my normal skepticism and rational pragmatism to decide if there really is a future for the electric car industry and whether this automotive startup will get thrashed by the big boys, leaving me with the latest version of the failed automotive startup. So it’s time to take off the rose-colored glasses and take a hard look at this industry. The primary concerns voiced by EV skeptics are range anxiety, potential electric grid impact and a minimal impact on Greenhouse Gas emissions. Let's look at all three.
Most EV skeptics point to "range anxiety" as trumping potential consumer interest in switching from internal combustion engines (ICEs). They point to consumer surveys listing it as a significant barrier to claim that pure EVs will never catch on and to justify hybrids or "assisted EVs" such as the Chevy Volt or Fisker Karma that have on-board ICEs to recharge batteries. With pure EVs like the Nissan Leaf having maximum range under 100 miles, the skeptics have a point. Will the Telsa’s 300 mile range be enough to overcome the anxiety or will something else be needed?
Companies like A Better Place would deal with range anxiety by building automated battery swapping stations that turn stopping for charge into a five-minute refueling process. Besides overcoming the range anxiety concern, this business model could provide a new paradigm for battery ownership, and even provide an additional opportunity for profit if the charging stations can be configured to provide energy storage capability to support the electric grid. But even though the Model S will have a “quick swap” battery, Tesla is not planning on participating in the Better Place program.
Instead, Tesla is planning to install a series of 90 kW fast charging stations in key locations such as along I-5 between San Francisco and Los Angeles . These would provide a 150 mile charge in 30 minutes or so, a more reasonable turn-around than the six to eight hours typical required to recharge at standard charging stations. More importantly, however, the 160 to 300 mile range of the Tesla Model S means that for a very large percentage of trips there will be no need to stop anywhere to refuel, just plug in when you get home.
Electric Grid Impact
Widespread adoption of EVs would reduce oil consumption and increase electricity consumption, begging the question of whether the impact of the increased electric consumption would create problems for the grid. A little analysis should provide some idea of where the tipping point may be. Consider California:
1. There are roughly 32 million motor vehicles registered in California.
2. On an annual basis Californians use about 242,000 GWh of electricity and about 24.5 billion gallons of gasoline.
3. At 20 mpg, these vehicles travel an average of 15,000 miles per year, let’s say 50 miles per day.
4. EVs have a range of ~3.5 miles/kWh. Thus each one would require about 15 kWh/day or about 4,500 kWh/year.
5. Thus, if 1% of California’s vehicle fleet was replaced with EVs, and traveled the average number of miles, total electric consumption would increase by 1,440 GWh/year, or less than 0.6% and gasoline consumption would decrease by 245 million gallons/year.
6. Most of the EV charging would take place at night when electric rates and demand are lower. In the extremely unlikely event that all of the EVs were recharged using high capacity (20 kW) chargers at the same time during peak usage periods (noon to 6 weekdays), they could increase peak demand by 6,400 MW, about 10% of the current peak.
Based on these numbers, even a 10% adoption rate for EVs (3.2 million) would have a fairly minor impact on overall electric consumption, provided that most recharging is done at night. However, there could be localized problems with neighbors keeping up with the Jones’s. Most residential service transformers have a maximum capacity of about 25 kW and serve several residences. If more than one chose to recharge at high capacity (20 kW each) at the same time, they could overload the transformer, which is not a good thing. Some kind of coordination would probably be needed to make sure this does not happen. Fortunately, through a combination of special rates for EV charging and development of smart grid technology, coordination should be a viable option.
Greenhouse Gas Emissions
Another area of skepticism involves the claim that widespread EV adoption would reduce greenhouse gas (GHG) emissions. The question is whether the tailpipe emissions avoided by EVs are greater than the increase in smokestack emissions from power plants producing that extra electricity. The simple answer is – pretty much. Once again, let’s look at the numbers:
· Combustion of one gallon of gasoline produces about 20 pounds of CO2
· Natural gas combusted to make electricity produces between 0.8 and 1.2 pounds of CO2 per kWh generated (depending on efficiency of power plant)
· Burning coal to make electricity produces about 2.1 pounds of CO2 per kWh.
· Other sources of electricity create virtually no CO2 emissions.
· According to the Energy Information Administration, 45% of electricity in the US is generated from coal, 24% from natural gas and the rest from non-GHG sources. Generation of 1 kWh thus produces 1.185# CO2 (Assuming 1#/kWh for natural gas)
· According to the California Energy Commission, 8% of electricity consumed in California comes from coal, 42% from natural gas, 12% is unspecified and the remainder is from non-GHG sources. Depending on the makeup of the unspecified portion, generation of 1 kWh produces between 0.59 and 0.84 pounds of CO2. Let’s use 0.75.
Putting it al together:
· Driving 100 miles in an ICE vehicle produces 100# of CO2 at 20 mpg or 50# at 40 MPG.
· Driving 100 miles in an EV requires 29 kWh which produces 34# of CO2 based on the national average and 22# in California.
The bottom line is that EVs do produce less CO2 than the gasoline-fueled vehicles they replace. Any action that reduced GHG emissions from power plants (like replacing coal plants with renewable resources or nuclear power) would further reduce GHG from EVs.
Are EVs Ready for Prime Time?
One mistake EV skeptics make is to consider the EV to be conventional vehicle with an electric motor – much like early cars were characterized as horseless carriages. In fact, EVs are not subject to the same limitations as ICEVs and driving one is a much different - and superior - experience. From a design perspective, losing a large, hot, noisy engine and drive train provides huge amounts of flexibility. For example, while retaining the look of a sedan, the Tesla Model S will have 60 cubic feet of storage space, comparable to a mid-sized SUV. Without the constraint of an engine compartment, who knows what basic design changes will be made. Driving will also be a different experience. An EV like the Tesla accelerates faster and more smoothly than an ICEV with a 0-60 mph time of under 6 seconds. And thanks to the electric motor's flat torque curve, the same acceleration rate is available at any speed through the one-speed transmission. Use of regenerative braking will mean a lot less need to switch from the gas pedal to the brake, reducing brake wear and maybe the prospect of accidently driving through shop windows (officer, I swear I was pressing the brake). Electric motors have vastly fewer moving parts (1) than an ICE (~200), which means less that can go wrong. Lack of combustion means fewer maintenance parts (filters, fluids, oil, etc) to replace and a lot less maintenance to perform. No exhaust pipe means no smelly pollution, no catalytic converter, and don't forget - no more gasoline, ever. EVs are so quiet that they may need to be equipped with some kind of sound-making device so blind or distracted pedestrians don't walk in front of them. (Picture being able to download your favorite exhaust sound app for your car.) In addition to the performance advantages there is the fact that a fill up from empty (which you can do in your garage) will add about $10 to your electric bill versus $30-$50 and a trip to the gas station. It will also be possible to pre-warm or pre-cool an EV remotely so it won’t necessary to get into a freezing or sweltering vehicle that has been parked out in the weather. Over time as EV design evolves, they may look and feel less and less like the old fuel burners they replace. It may take a while, but EVs will ultimately replace ICEVs just as cars replaced horse-driven carriages. And when it’s done no one will regret the reduction in tailpipe emissions, just like no one misses streets covered with horse exhaust.
As far as whether Tesla itself will be hugely successful, that’s harder to tell. So far, everything appears to be going according to plan. The Model S was promised in early 2012, and initial deliveries are expected to begin in the summer. While options can easily get the price close to six figures, the base model, with a 160 mile range, is still priced at the $57,400 price originally promised. As critics point out, the automobile manufacturing business is highly competitive and includes a number of well-entrenched vertically integrated international players. Certainly their R&D departments can come up with superior designs, their manufacturing expertise can build more cheaply, and their dealer networks can sell Tesla into the ground. From the perspective of the automobile industry, Tesla doesn’t stand a chance. On the other hand, car companies base their EV designs on their existing ICE models. Being in the position of designing an EV from the bottom up allows Tesla to optimize the design rather than adapting to existing vehicle limitations. This is shown in their use of a flat battery pack for the Model S located under the passenger cabin providing stability, structural integrity and easy access. Their approach to sales and design is more like Apple than GM, and considering that consumers are more comfortable buying i-Pads than Chevys that could be a plus. And then there’s the fact that Tesla stock is being heavily shorted by skeptics, a sure sign of value for us contrarians. Bottom line – I wouldn’t count them out. (I have no holdings in Tesla.)