Critiquing John Petersen´s `The Plug-in Vehicle Scam` 37 comments
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In a recent article, John Petersen argues that “there is no such a thing as a cost-effective electric vehicle that will carry a family of four at highway speeds”. Based on information from the Department of Energy (DOE)´s Annual Energy Outlook 2009 (.pdf), the Obama Audit Task Force (OATF) (.pdf) formed to assess the viability of the General Motors (GM), and a paper on plug-in hybrid vehicles by a three-faculty team of Carnegie Mellon University (.pdf) (CMU) published this year on Energy Policy, he concludes, among other things, that:
- “While your future car is very likely to have modest hybrid capabilities, there is almost no chance it will have a plug or need a charging station”;
- substantially all of the PHEV programs that are being announced today with great fanfare will be quietly axed before too much money is wasted on politically popular ideas that don't make a bit of economic sense;
- “carmaker plans to introduce plug-in hybrids over the next few years... are PR stunts, not business decisions”;
- Li-ion battery developers ... can let somebody else wildly exaggerate the economic potential of PHEVs and then use baseless auto industry PR to justify building government subsidized factories that do not make sense under any reasonably foreseeable future conditions;
- Li-ion is a wonderful technology for portable electronics, E2Ws and personal transportation applications where the vehicle weight to passenger weight ratio is less than about five. It is nonsensical when the goal is to move four passengers and a couple thousand pounds of steel and composites at highway speeds. To date the only rational PHEV proposal I've seen is a gas-guzzler to dual-mode EV conversion initiative that's being developed by Axion Power International (AXPW.OB)”.
Since I have been following Petersen´s publications on Seeking Alpha very closely for the last 9 months or so, these conclusions do not come as a surprise to me. In fact, most of them have already been advanced in his previous papers. However, when confronted with the evidence, they essentially fall apart. For an extensive list of auto industry facts that contradicts Petersen´s contentions, see a recent report by Stockhouse.
What is indeed new to his latest contribution is the author´s reliance on two of the three sources of information (i.e. the DOE´s Annual Energy Outlook 2009 and the CMU paper) I referred to at the outset. Hence, what follows my critique will be to concentrate on a couple of points related to these references.
To begin with, Petersen´s coments on both the graph and the table included in his article reflect a clear bias against PHEVs which is not self-evident in other parts of the Annual Energy Outlook 2009. Indeed on pages 34 and 35 of that document, the DOE does not rule out the possibility that
future advances in Li-ion battery technology could address economic, lifetime, and safety concerns, paving the way for large-scale sales and significant penetration of PHEVs into the US LDV fleet.
[It further refers to] “at least two non-economic arguments in favor of PHEVs. First, PHEVs could significantly reduce GHG emissions in the transportation sector, depending on the fuels used to produce electricity. Second, PHEVs use less gasoline than conventional ICE vehicles. If PHEVs displaced conventional ICE vehicles, US petroleum imports could be reduced”.
But Petersen is not the only one to be blamed here. The DOE´s report suffers at least from two unforgivable errors. For one thing, its projections of 100 electric vehicles from 2006 all the way through 2030 (not mentioned or included in Petersen´s table) are absolutely unacceptable. For another, its forecast of about 150,000 PHEVs for 2015 is not consistent with President Obama´s goal to attain 1 million PHEVs by that year. See the Supplemental Tables to the Annual Energy Outlook 2009 for further details.
Secondly, Petersen´s static assumption that 1KWh costs $ 1,000 in a Li-ion battery for a plug-in such as the GM Volt car constitutes another source of controversy. As it may be recalled, in the second part of its main conclusion regarding the Volt, the OATF argued that
while the Volt holds promise, it is currently projected to be much more expensive than its gasoline-fueled peers and will likely need substantial reductions in manufacturing cost in order to become commercially viable.
Even though almost anyone would agree now that what seems to inflate the cost of the Volt is its battery, this is still pure speculation since GM has not yet revealed the final cost of its emblematic car.
The point has been taken up by John Lauckner, GM´s VP for Global Program Management, in a recent rebuttal of the CMU paper:
The study’s conclusion is based on an incorrect assumption of the cost of battery packs. In the CMU study, the so-called `base case` used a Lithium-Ion battery cost of $1,000 per kWh ($16,000 for a 40 mile Volt pack) that was cited in earlier academic articles. The problem is this cost is many hundreds of dollars per kWh higher than the actual cost of the Volt pack today. Moreover, our battery team is already starting work on new concepts that will further decrease the cost of the Volt battery pack quite substantially in a second-generation Volt pack. Unfortunately, the impact of dramatically lower battery costs (to US$250 per kWh) was treated only as a `sensitivity` in the CMU study when it probably should have been highlighted as THE critical element that would dramatically change the cost-effectiveness of plug-ins with greater electric-only range.
This is consistent with a recent forecast by the New Energy and Industrial Technology Development Organization (NEDO), an independent administrative institution in Japan:
For 2020, the goals are set at 200Wh/kg energy density, 2,500W/kg output density and ¥20,000/kWh for output density-oriented batteries, and 250Wh/kg energy density, 1,500W/kg output density and ¥20,000/kWh for energy density-oriented batteries.
Note that as of March, 2009, when the report was published, ¥20,000 was approximately US$201,6.
Furthermore, Petersen´s point about 23 thrifty Chinese vs. one profligate American is at best odd. It does, though, seem to reflect his excessive US-centric view which simply precludes any foreign attempt to come up with feasible solutions to the battery cost problem. That China´s BYD is already producing cheap PHEVs for the mass market because it has an unquestionable leadership in the production of Li-ion batteries is a fact that cannot be ignored. After all, that is what economics (and competition) is all about, right? If the Chinese manage to produce high quality PHEVs in one or two years, I wonder who will stop them from penetrating the largest market of the world?
If Petersen truly believes that we are in effect at the advent of a new techno-economic paradigm as originally envisaged by Carlota Perez, then he has to be ready to accept radical changes in the world economy; in this context, “business as usual” will simply not do.
Finally, I sincerely hope that John Petersen will continue to contribute with some more thought-provoking articles on this topic and be part of the “real discussion” that is becoming more and more relevant nowadays.
Disclosure: Author is an independent lithium economics analyst based in Bolivia. He holds no positions in any stocks.
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Oh, wait, that's right, it wasn't in the news and isn't in the news. Just because your life allows you to do what you do does not mean it will work for the masses. You shouldn't be so self absorbed as to think that what you've made work for you will work. If it did, it would already be all the rage. But I'm glad to see you can spend as much time with yourself as possible. driving. plugging. diriving. This is great isn't it.
You should really get more in touch with the news. Or maybe you just wanted me to find the item below.
A search of "electric car" and "best thing since sliced bread" came up with thousands of results, the first of which was:
forums.motortrend.com/...
Please note that I am not endorsing the electric drive vehicle referenced above, which Honda recently said, around the same time they gave more details on their pending hybrid electric motorcycle, was on again for future production.
Finding "stuff" on the internet does not make it real.
Of course if that monkey could make me a grilled cheese sandwich while I was preparing to tee off, now that would be worth every penny.
On May 04 03:20 PM realist2 wrote:
> @ Battman
>
> You should really get more in touch with the news. Or maybe you just
> wanted me to find the item below.
>
> A search of "electric car" and "best thing since sliced bread" came
> up with thousands of results, the first of which was:
>
> forums.motortrend.com/...
>
>
> Please note that I am not endorsing the electric drive vehicle referenced
> above, which Honda recently said, around the same time they gave
> more details on their pending hybrid electric motorcycle, was on
> again for future production.
Reading Juan's opposing views helps me sort the wheat from the chaff. In this exchange I find Petersen's argument persuasive and Juan Carlos' criticism interesting, but I wouldn't know where to put my money just yet.
Even Mr. Petersen acknowledges obviously appropriate vehicle applications (less than four wheeled) for lithium based power packs (although what he seems to have in mind is much slower than what I use) and there are already many, many, many non-lithium electric drive vehicle applications in use today.
When I bought my vehicle, I wanted the best performing vehicle that met my criterea of daily driving range, low vehicle life price, low maintenence, low fuel costs and upgradeable. The winning vehicle just happened to be a plug in electric and just happened to have a lithium based power pack. Go figure.
Is everyone at this site really this uninformed about electric vehicles? Do some research on the T282 mining truck, old freight and new passenger trains, fork lifts, etc., etc. if you think electric drive is only for golf carts, not even touching on hybrid cars, easy enough to make plug in for those who want to spend the coin for that. Electric drive has been and continues to get good market penetration in general, and that includes personal vehicles.
Or at least come up with some new arguments that haven't been repeatedly refuted to death.
@ battman
Good point. By your logic, gasoline powered vehicles are not real because you can find them on the internet.
As far as solving our energy crisis, more electric drive vehicles means less gasoline demand, which lowers the price of oil. What part of crisis solved do you not understand? As an added benefit, electric vehicles keep our fuel dollars local, instead of funding volatile parts of the world, which makes for a stronger domestic economy. Any luxury but not needed changes to the grid or infrastructure to make electric vehicles even more convenient (try refueling your non-plug-in vehicle at home at night while you sleep) creates additional jobs. That's a win-win-win so far.
@ notsosmart
Read the EPRI/NRCD study on the actual current grid (as opposed to vaporguess projections, this study did a counterfactual on the actual grid). The existing grid can already handle electric vehicles, plus they help with power smoothing. I use less electricity with my electric vehicle than I did without it, as I'm out romping with it after work instead of staying home watching plamsa TV and running other devices that use more power.
The power packs will be obsolete before they are useless. Some manufactures already have plug and play power pack (and other) upgrades to consumers for higher performing/cheaper ones (try that with a combustion engine) and the old power packs can be used for long term low demand energy storage(consumer/busin... which will also help power smoothing. I already made arrangements to sell my power pack at a profit when I'm ready for a power pack upgrade many years from now. As for disposal, after it's made inert, there's recycling of raw materials for reuse (try that with gasoline), secondary use for art, doorstops, building materials, etc.etc. Mine is non-toxic as well.
Thank you for the rebuttal to John Peterson's opinions on lithium batteries and EV's. In combination with R. Keith Evan's recent article on lithium supplies, it's nice to have other informed opinions:
seekingalpha.com/artic...
I have often questioned the sources of the data cited, particularly when it comes from the DOE-EIA and regards projections of vehicle sales. The current frenzy over hybrid vehicles (plug-in and non) is a sad distraction from the need for a practical electric vehicle. As several commenters have pointed out, a pure EV is a much simpler system than ICE / hybrid vehicles. The final cost should be at or below the lowest cost ICE subcompacts on the market, such as the Nissan Versa or Toyota Yaris. Of course, this depends largely on the cost of the battery pack, which you point out should be declining as production ramps up.
It is unfortunate that companies like GM feel the need to hang on to ICE technology in cars like the Volt, thus driving up the cost and reducing volumes. Especially after their experience with the EV1 and current demonstrated demand for hybrids like the Prius. Gasoline prices will trend up in fits and starts. Just now, we happen to be in a low.
Urban commutes are typically 20-50 miles round trip. By definition, this is regular mileage. Existing battery technologies can handle this without the need for intermediate charging stations or quick charge batteries. All this attention is greatly stimulating battery / capacitor R&D and new developments are announced weekly.
To me, the major car companies are missing the boat (again). This situation boils down to marketing and perception.
Why won't somebody take a light-weight, aerodynamic, nicely styled subcompact vehicle like a Fit or Versa and make it all electric? Battery capacity could be a dealer option. If the price comes in under $10K, they will sell big, especially on the next gas spike. This is a commuter and around town vehicle only; not for road trips or hauling the boat to the lake. The Chinese are preparing one right now.
I just do not understand or agree with the conclusion that commuters will not buy limited range EV's that look and drive like regular cars, especially if the price doesn't involve a "green premium". As a student of economic history, there is a role for government in this. Whether it's subsidizing the batteries to accelerate the cost curve; guaranteeing the battery life; or mandating and subsidizing battery recycling, the government should be promoting this technology.
To get to work, I don't need no stinkin' ICE.
I also agree that US based Li-ion battery developers will need to make their products cheaper to be successful in the market place. If they don´t manage to do so, they will simply not survive, regardless of what happens to GM. In this context, the way will be paved for the penetration of Chinese companies not only into the US market but also into the European market. In this context, I believe that in the apparent competitive advantage of China in lithium batteries there is much more than just cheap labor. But, just how does this work down there? is probably one of the most intriguing technological questions today for which, unfortunately, I still don´t have an answer.
zapman59, My impression is that the EV question is not to talk about driving to the grocery store only but to talk about driving on the highway and from coast to coast. Of course, this will not come about immediately; it will be a gradual process that I have envisaged will take at least another 20 years.
Jimp, I haven´t been following SQM ´s stocks lately. All I can say at the moment is that things may look quite promising for this and other lithium stocks in the next two or three years. But of course investing is a tough decision to make, one which requires much more information and analysis.
battman, As far as I know my only bias is lithium as opposed to other technologies. But I am always open to debate based on the best information and, of course, facts available. Regarding the cost of Li-ion batteries, you´re right, there isn´t much information available at the moment. But there are some interesting facts in relation to cost of PHEVs. For instance, if the BYD car is priced at around US$ 22,000, then that can give you a hint on the cost of its battery at least in China, right? Moreover, if you compare this datum with the information coming from GM for its Volt car, then you realize that there is a lot of space for improvement in the US.
Mister Jimmy, Premiums make sense only when buyers are willing to pay for them. In fact there will always be premiums as long as there enough “niche” markets. But you will not transform the world with “niche” markets; to do so you will need mass-market, cheap and high quality, products.
finmah, I agree that the “real discusion” about all the issues you raise is now more relevant than ever.
The Bike, I don´t think Obama´s dream is wrong. What is surprising is the fact that is not even being followed up by the specific branches of government in charge of this kind of projects.
coreopsis, Thanks for your comment
Fred W, please see my response to chistletoe´s comments.
Realist2 , I really appreciate your comments. They are very insightful and, what is best, come from your real experience. These are the kinds of things we need to talk about to make the necessary steps in the right direction.
Searcher, I commend your optimism and positive message at such an interesting and critical moment of the world.
On May 04 05:09 PM pk de cville wrote:
> I don't begrudge Petersen his strongly held views. They make sense
> to me.
>
> Reading Juan's opposing views helps me sort the wheat from the chaff.
> In this exchange I find Petersen's argument persuasive and Juan Carlos'
> criticism interesting, but I wouldn't know where to put my money
> just yet.
How does Chinese made batteries with Bolivian supplied Lithium make for a stronger domestic economy?
notsosmart, I essentially share your concerns regarding battery recyling / disposal. It took Toyota a while to handle this issue for the NiMH batteries the Prius uses. As for the Volt, if it finally gets to the market with its 10-year warranty, GM will have a few years to plan a solution to this important problem.
On May 04 04:02 PM notsosmart wrote:
> lets see what the upcoming electric brown outs & blackouts this
> summer will do for the projections of plugging in thousands of cars.of
> course we dont have to discuss the useless burnt out batteries that
> have to be disposed of.reminds me of nuclear @ the beginning when
> the waste was hardly mentioned & this was the answer to all our
> energy needs.now that these plants are closing in on their life spans
> what happens to them?we have created a catch-22 world.very hard to
> undo & admit the total screw up.just make sure the ev has warm
> seats & steering wheel so that the aericans are not uncomfortable.LOL
On May 04 06:18 PM battman wrote:
> realist2, you said "As an added benefit, electric vehicles keep our
> fuel dollars local, instead of funding volatile parts of the world,
> which makes for a stronger domestic economy"
>
> How does Chinese made batteries with Bolivian supplied Lithium make
> for a stronger domestic economy?
You said: "How does Chinese made batteries with Bolivian supplied Lithium make for a stronger domestic economy?
1. You are confusing an energy carrier (a lithium based power pack) with an energy source (such as non-rewable oil or renewable wind or solar). My vehicle energy, the fuel for whihc I pay my dollars locally, comes from 100% domestic wind power from a domestic commercial wind farm, as I explained in a previous post - "I use 100% wind power (ok, I used a mix of hydro and solar once so far, the rest wind) for my vehicle, thanks to a subscription plan from my regional power company, at costs less than coal in most states. "
2. If you live in China and Bolivia, the answer is self evident. In my case, my power pack was assembled domestically, but not in China, and does not use Chinese batteries, nor does it contain Bolvia specifc lithium. Those are the kind of differences you find when you compare the reality of my electric vehicle to oversimplications, generalizations, conjecture and other abstract thought.
3. Lithium comes from more places than Bolivia. If Bolivia decided to take their supply off the market, there would still be a substantial world supply of lithium in area neutral commodity markets, which the article author has clearly noted.
4. My electric vehicle is not dependent on lithium. I can pop in any power pack using any type of energy carrier that can generate electricity (think other chemstries such as lead, nickel, or compressed natiral gas or compressed air, or hydrogen, etc. etc.) Electric drive vehicles mean you can easily switch to whatever energy carrier makes the most sense at any point in history. Try that with your gasoline vehicle. My electric vehicle is ready now for whatever the best/cheapest energy carrier is with minimal or no modification from the manufaturer or consumer.
5. You think I haven't already thought of all this and thousands and thousands of other points before during my daily commute on my lihtium power packed plug in electric vehicle? I'm still waiting to hear any meaningful objection against the continued and increased adoption of electric drive in personal vehicle use and use of plug in where/when appropriate.
6. As the author noted, it's likely Chinese lithium in Chinese batteries, not Bolivian, and lithium is only one of many, many energy carriers that can accept energy from many, many renewable (and non-rewable) sources (in contrast to oil as an energy source). An electric drive vehicle can use any energy carrier/energy source combinations that make economic/social/consumer preference sense. For me, today, lithium is what works for me as an active consumer. In a hundred years, who knows?
I don't have good technical expertise, but I can't help but think that a new paradigm shift similar to your own experience could quickly become part of our transportation culture. I look forward to that day. Which I suspect may come sooner than a lot of people might think.
I have a correction on my item 4 above. An electric drive vehicle can use any type of power pack that can carry (store and use, not generate per se) electricity. The generation of electricity can occur off vehicle and in my case is 100% domestic wind power from a nearby (so very minimal transmission losses) commercial wind farm, purchased through a subscription plan with my regional power company, at costs less than coal in most states.
I'll leave the topic of regenerative braking for some other time, but it's a great way to get some of your stopping energy sent to your energy carrier, extend your range, and save your brakes, all at the same time, as you drive.
It does take some practice separating out the concepts of energy carrier versus energy source, renewable energy sources (such as wind and sun power) and reusable and recyclable energy carriers (such as lithium based power packs) verus nonrenewable energy sources (such as oil). Using an electric vehicle daily helps to clarify the differences to me, as I've found that personal experience is my best teacher. Even when I muddle the concepts myself in on-line typing, it all becomes clear again the very next time I take a drive and otherwise use my lithium power pack plug in electric drive vehicle (E2W).