Plug-in Vehicles and the Excess Grid Capacity Myth

Includes: GM, NSANY, TSLA
by: John Petersen

One of the most persistent myths among EVangelicals is the oh-so-appealing idea the existing generation, transmission and distribution system in the US -- if optimally utilized at all hours of the day -- could provide enough power for plug-in vehicles to replace up to 73% of the nation's cars, vans and SUVs.

The mythology came from a simple arithmetic exercise in toting up the name plate generating capacity of the nation's power plants, deducting actual annual power production and then dividing the difference by an assumed per vehicle demand factor. As an exercise in elementary school mathematics, the myth rings true. As soon as you begin to account for the carrying capacity of primary and secondary distribution circuits, the myth is laid bare as unadulterated balderdash.

America's power generation and distribution grid was built for the sole purpose of servicing the power needs of residential, commercial, industrial and other users. The two characteristics that all traditional power users share are a fixed location and a predictable range of power requirements.

Those two characteristics make it possible for utilities to design their infrastructures in a particular service area to satisfy anticipated peak power requirements without overbuilding. Since utilities are driven by the same revenue and expense factors that control all busineses, they size their distribution facilities to meet existing and expected demand. Since capital spending by utilities is tightly regulated, they rarely overbuild. As a result, there are very few primary and secondary distribution circuits that have any substantial spare capacity.

The basic problem with plug-in vehicles is that all of the dreamers' grand schemes are diametrically opposed to the design principles that governed the development and build-out of the grid in the first place.

While plug-in vehicles will be charged at home most of the time, the nationwide push to build convenient distributed charging infrastructure has one purpose: To make the plug-in experience palatable to consumers by eliminating the fixed location constraints. By their very nature, plug-in vehicles and distributed charging infrastructure are inherently unpredictable. Demand spikes from zero to kilowatts at the whim of each owner and creates intolerable variability for utilities that thrive, and frankly depend, on predictability.

The following graph from the March-April 2009 issue of IEEE Power & Energy Magazine highlights the problem in all its shocking glory.

[Click to enlarge]

If you ever wondered why plug-in buyers in California have to get permission from their utility before taking delivery of a new vehicle, the graph answers your question. Each plug-in vehicle added to a primary or secondary electric circuit is like adding another house to the neighborhood. The first vehicle may not be a huge problem, but it won't take many to completely overwhelm existing infrastructure.

Advanced societies have power when and where they need it because utilities can predict demand and build infrastructure to get the power where and when it's needed. Elementary school mathematics on the back of a napkin won't do the job. It takes power lines and substations and a load of engineering work to keep the existing power grid in balance. Gee-whiz toys that are certain to upset a carefully designed balance that's been installed over the last 100 years are a catastrophe in the making.

I'm a relentless and unrepentent critic of plug-in vehicle schemes from Tesla Motors (NASDAQ:TSLA), Nissan Motors (OTCPK:NSANY) and even General Motors (NYSE:GM) because of fundamental economic flaws in the idea that a battery can ever be a cost-effective substitute for a fuel tank. If the plug-in foolishness proliferates as many believe it will, there will come a time when cities start going dark because of one individual's decision to charge his toy without regard to the ability of his local utility to provide the reqired power.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.