Road Runner

PHEVs and EVs: Plugging into a Lump of Coal

John, Please address the issues I brought up instead of diverting the conversation.

On Sep 01 01:20 AM John Petersen wrote:
> RoadRunner, I write about facts as they are in 2009 and you want
> to talk about conditions as they might be in 2030. Current facts
> are fairly easy to ascertain and future conditions are not. As of
> today. speaking solely in terms of CO2 abatement, HEVs enjoy a price
> advantage of roughly $60 per ton over PHEVs and EVs. While PHEVs
> may get to a point where they are sitting on the zero line, that
> will not change the comparison with HEVs which will simply offer
> a larger advantage arising from a higher oil price. As PHEVs and
> EVs become cheaper, energy efficient solutions like HEVs become more
> profitable. The relationships are locked in place.
>
> For the last couple weeks I've been pretty technology agnostic. For
> purposes of this particular analysis the type of battery doesn't
> matter and the primary issue is "if we have a given quantity of batteries,
> what type of electric drive gives us the best bang for the buck in
> terms of (a) cost savings to owners, (b) contribution to fuel efficiency,
> and (c) CO2 abatement." The answers are the same if the batteries
> are NiMH, lithium-ion or my favored lead-carbon. PHEVs and EVs sound
> good in the telling but are an immense waste of resources.
>
> I look at the energy storage sector from the perspective of an investor
> who is trying to pick stocks that will outperform both the market
> and others in their sector. It takes very little experience with
> market dynamics to know that stocks swing from being "in favor" to
> being "out of favor" fairly rapidly. When that happens the out of
> favor stocks rise while the in favor stocks fall. Currently companies
> like Ener1 and Valence are maintaining market values that are several
> years ahead of their business fundamentals while the lead-acid sector
> has fallen to very low levels. As a result, Ener1 which has annualized
> sales of $30 million trades at roughly 1.5x the market value of Exide
> which has annualized sales of $2 billion. As the market comes to
> the realization that both companies have a bright future, Ener1 is
> likely to fall and Exide is likely to rise. That's simple value investing
> as practiced by Warren Buffett.
>
> While we're on the topic of Buffett, he bought his interest in BYD
> at a price of roughly 1.3 times sales and paid $1.12 per share. Since
> BYD has been profitable for years, it was probably a smart buy. Today
> BYD is trading at close to $6 because many investors think "following
> Buffet" is a good strategy. What they ignore is that paying 5x Buffet's
> price is a very high risk strategy. For their investment to double,
> Buffet's has to increase by 1000%. Given the events that have transpired
> over the last year, I wouldn't encourage anybody to buy BYD because
> it's already had a monster run-up in price and is likely to either
> remain flat if the business continues smoothly or fall off if it
> gets rocky. Warren will come out a winner in any event because he
> almost always does. The followers who pay a much higher price per
> share may not be as fortunate.

PHEVs and EVs: Plugging into a Lump of Coal

John, you said, "For those of us who like propeller-head technical issues, five to seven years is just around the corner. For investors who focus on the time value of money, five to seven years is a very long time to wait for first returns." But, then you turn around and write an article called "How PHEVs and EVs Will Sabotage America's Drive For Energy Independence". Becoming energy independent is a multi-decade long-term goal.

You are being hypocritical. You are trying to scare people away from plug-in vehicles by saying that they will sabotage the long term goal of energy independence, but when someone, like me, challenges your reasoning on this, you blow off my argument because it supposedly is too long term to be investment oriented.

Second, my argument was not technically oriented, nor was it too long term. It was a direct challenge to the way you interpreted a McKinsey chart. You used that chart to argue that plug-in vehicles are bad for US energy independence. I argued that you misinterpreted that chart because you did not do your due diligence in understanding that chart.

John, your religious fervor for promoting the stock of Axion has led you to spread incorrect ideas about Lithium ion batteries and plug-in vehicles. You are cherry picking your information sources, misinterpreting data, and blowing off your critics through hypocritical arguments.

Luckily, car companies are ignoring your false warnings and charging ahead with plug-in vehicles using Lithium ion batteries. In the short term, plug-in vehicles don’t save money nor reduce carbon, but they are the basic technology, when perfected, that will do both.

And, about your comment, “For investors who focus on the time value of money, five to seven years is a very long time to wait for first returns.”. Tell that to Warren Buffett.


On Aug 31 12:20 AM John Petersen wrote:
> Road Runner, we need to remember that Seeking Alpha is an investment
> site and the entire purpose is to get people in the ballpark and
> provide enough information to help them make good investment decisions.
> I agree that progress is being made on a number of fronts in terms
> of driving down technology costs. The rate of progress, however,
> is much slower than we've lived with during the IT revolution, so
> it's an entirely different metric.
>
> For those of us who like propeller-head technical issues, five to
> seven years is just around the corner. For investors who focus on
> the time value of money, five to seven years is a very long time
> to wait for first returns. It's all a question of the shoes you're
> standing in, which is why I try to focus on things that will be important
> over the shorter term and tend to put less value on long-term promise.

PHEVs and EVs: Plugging into a Lump of Coal

John, you said, "For those of us who like propeller-head technical issues, five to seven years is just around the corner. For investors who focus on the time value of money, five to seven years is a very long time to wait for first returns." But, then you turn around and write an article called "How PHEVs and EVs Will Sabotage America's Drive For Energy Independence". Becoming energy independent is a multi-decade long-term goal.

You are being hypocritical. You are trying to scare people away from plug-in vehicles by saying that they will sabotage the long term goal of energy independence, but when someone, like me, challenges your reasoning on this, you blow off my argument because it supposedly is too long term to be investment oriented.

Second, my argument was not technically oriented, nor was it too long term. It was a direct challenge to the way you interpreted a McKinsey chart. You used that chart to argue that plug-in vehicles are bad for US energy independence. I argued that you misinterpreted that chart because you did not do your due diligence in understanding that chart.

John, your religious fervor for promoting the stock of Axion has led you to spread incorrect ideas about Lithium ion batteries and plug-in vehicles. You are cherry picking your information sources, misinterpreting data, and blowing off your critics through hypocritical arguments.

Luckily, car companies are ignoring your false warnings and charging ahead with plug-in vehicles using Lithium ion batteries. In the short term, plug-in vehicles don’t save money nor reduce carbon, but they are the basic technology, when perfected, that will do both.

And, about your comment, “For investors who focus on the time value of money, five to seven years is a very long time to wait for first returns.”. Tell that to Warren Buffett.


On Aug 31 12:20 AM John Petersen wrote:
> Road Runner, we need to remember that Seeking Alpha is an investment
> site and the entire purpose is to get people in the ballpark and
> provide enough information to help them make good investment decisions.
> I agree that progress is being made on a number of fronts in terms
> of driving down technology costs. The rate of progress, however,
> is much slower than we've lived with during the IT revolution, so
> it's an entirely different metric.
>
> For those of us who like propeller-head technical issues, five to
> seven years is just around the corner. For investors who focus on
> the time value of money, five to seven years is a very long time
> to wait for first returns. It's all a question of the shoes you're
> standing in, which is why I try to focus on things that will be important
> over the shorter term and tend to put less value on long-term promise.

PHEVs and EVs: Plugging into a Lump of Coal

John, I believe you incorrectly used the information in the “Global carbon abatement cost curve” chart, and consequently came to incorrect conclusions.

The McKinsey report you referenced, “Profiting from the low-carbon economy”, at www.mckinsey.com/clien... does not fully explain this graph so I had to find a better explanation. I found a better, though not complete, explanation at www.iiasa.ac.at/rains/... called “Pathways to a Low Carbon Economy”.

The flaw in your reasoning is that you did not notice that technology in the “Global carbon abatement cost curve” is “frozen” at 2005. Note the phrase “frozen technology
scenario (2005-2030)” on graph “Basic cost curve logic”. In other words, there is no accounting for major technological advances nor big drops in price. That, in my opinion, is why solar and plug-in vehicles have a positive abatement cost. Because solar and batteries are both experiencing huge technological and manufacturing innovations, I believe that when this graph is rewritten in the future, it will show a much lower cost for solar and plug-in vehicles, and it will eventually show a negative cost.

Another thing is the “Global carbon abatement cost curve” was calculated at $60 a barrel oil. In the “Pathways to a Low Carbon Economy” report, there is an updated Global carbon abatement cost curve” at $120 a barrel oil called “Effect of high energy prices”. It shows that the cost is almost $0 for plug-in vehicles, solar, nuclear, etc.. I believe that $120 is a good estimate for oil prices starting in 2011. Through, this could be a low price for oil if the dollar heads lower. Watch how much China lets their currency rise against the dollar.

One more thing. Your idea that a plug-in vehicle is just plugging into “a limp of coal” is only 50% accurate. Today, only 50% of electricity is generated from coal. But, in the “Pathways to a Low Carbon Economy” report, it states that “In 2030, 70% of electricity would be generated from low-carbon sources”. See “Key findings global GHG abatement cost curve v2.0” page.

I think McKensey put out this chart as more of a sales tool than a teaching tool. It is geared toward bankers telling them that there are big opportunities to make money if they get in early to the new CO2 abatement movement. McKinsey’s ultimate goal is to get banks to pay McKinsey more money to do deeper research. The information on this graph was left intentionally vague on purpose. I had to “read between the lines” to approach an understanding of what this chart means.

John, you should not have drawn hard conclusions from this graph. It’s not comprehensive enough of a chart and report for drawing such conclusions as stated in the “Pathways to a Low Carbon Economy” report, “The GHG abatement cost analysis ... cannot be used for ... Forecasting individual technologies ...”. This only makes sense since no one can accurately predict where fast moving technologies are going to take the world in 10 years or more. This chart is intended to create a baseline of understanding, and get people “in the ballpark” with their knowledge.

8 Energy Storage Stocks that Can Expect Explosive Growth

John, A question for you that has been eluded to in previous comments. Was the ability of solar thermal to store energy in molten salt or steam taken into account in the NanoMarkets report?

8 Energy Storage Stocks that Can Expect Explosive Growth

Thanks John for the very informative report and all the leg-work that went into it.

Energy Storage on the Smart Grid: 99.45% Cheap and 0.55% Cool

John Peterson, You comment above that starts with "Dirk, the costs of wind and solar keep falling ..." is right on the mark. Good job of spelling it out so concisely.

How Growing HEV Markets Will Impact Battery Manufacturing Revenues

Good reasoning John. I can't argue with that. But, I think that only time will tell if you are right. We seem to be nearing the end of research, reasoning, and debate on this subject. Now it is up to the ever changing marketplace for how this scenario plays out.

The price of oil in 2 to 5 years, which has a huge effect on this scenario, has a wide range of possibilities. It can find a stable point around or below $100, which is my guess based on fundamental cost of extracting it, or it my shoot about $200 because of speculation and/or emerging market demand and/or a falling dollar. All 3 are unpredictable.

When the price of gas rises again to early 2008 levels, will the Chinese and Indian governments cap the price like they did in 2008, or will they let it rise? Capping the price will lead to much higher demand leading to much higher oil prices.

Will the US Government finally do the smartest thing, as per almost all economists, to curb oil use which is raise the gasoline tax? I can’t even guess on something like this.

Li-ion Battery Technologies: Understanding Their Development Path

John you made some important points that I want to re-emphasize.

You said, "Unless the market forecasts I've seen are seriously misguided, manufacturers of all classes of energy storage devices will have a hard time keeping up with expected demand.". I whole-heartedly agree. We are entering a new revolutionary era – the alternate energy revolution. This revolution depends heavily on energy storage for smoothing out production fluctuations from wind and solar, and for electric and hybrid-electric vehicles.

You said, “I’m convinced that near-term revenue growth in the Li-ion group will be slower than most people expect, while near-term revenue growth in the lead-acid group will be faster than most people expect.”. This may be true. As revolutionary as the LiFePO4 battery is, it will still take years to get it into mass use. I believe that GM did not go with A123 batteries because they didn’t believe A123 could produce the batteries in scale. It takes a lot of time and capital to build out the manufacturing infrastructure for any new technology. John made an interesting point several posts back in saying that the lead-acid companies have an advantage in that they already have the manufacturing infrastructure in place to ramp up quickly if the lead-carbon battery proves itself.

One caveat on the above point. Keep an eye on the Chinese Lithium Iron Phosphate battery manufacture BYD (1211.HK and BYDDF.PK). They are an extremely aggressive company. They take a low-tech, high-labor approach to making batteries that may be able to ramp up scale quickly without expensive capital expenditures. This approach may lead to quality issues, like with Thundersky batteries, so keep an eye on that. Because BYD is more interested in market share than in profits, it may keep a downward pressure on LiFePO4 battery prices hurting domestic LiFePO4 battery manufacturers like Valence. So watch out there. But, as John alluded to in this article, BYD may be too busy keeping up with the Asia market to hurt the US manufactures (my first point above).

Why Advanced Lead-Acid Batteries Will Dominate HEV Markets

John, I realize there is a big difference in the timeframes between mine and your analysis. I am looking farther into the future than you are. I'm looking 10 years plus, and you seem to be looking at about 5 years. That's where we differ.

I do see LiFePO4 battery prices eventually collapsing to around $100/kWh, but it will be 10 to 15 years from now. You said in a post many months ago that the majority of the cost of a battery is the raw materials. The only potentially expensive material in a Lithium Iron Phosphate battery is the Lithium, and it is only about 1% of battery price at current prices around $1000/kWh. There will probably be short term bottlenecks in world wide mining production, but the long run looks good because the ocean is full of the stuff and it can be extracted today, though at about 3x the current price.

And, I do see gasoline at around $5 a gallon in 10 to 15 years. There is plenty of oil in the world, but it is no longer cheap. And, the emerging markets of India, China, Indonesia, etc. are increasing their use of oil at a fast pace. Also, in 10 to 15 it will be obvious that the planet is warming giving the Liberals more power to raise taxes on gasoline, like in Europe. Many of the old conservative cult zombies will be dead diminishing their power to resist.

I posted before that I see an opportunity for Lead-Carbon technology in the energy storage thirsty world of alternate energy. But, in passenger vehicles where safety, reliability, operating temperature extremes, long-life, space, and weight are very significant, I just can’t see Lead-Carbon beating out Lithium Iron Phosphate. The proof is the current stampede of auto manufacturers going to Lithium. Volkswagen is now linking up with BYD. I’m waiting for a mid-sized, luxury, performance, plug-in hybrid-electric Audi to hit the market.

Why Advanced Lead-Acid Batteries Will Dominate HEV Markets

From tireman63, "Another concern is the ICE hybrid. What about the catalytic converter on these engines? Cat converters have a warmup period which is designed to eliminate excess unburned hydrocarbons from the exhaust when the engine is cold. If these ICE engines have to stop and start many times in the course of a day, especially in cold weather, how effective and long lived will these very expensive units be.".

I don't see the engine of a full hybrid constantly being started the stopped. It's not needed with a large battery (like 20kWh and up which will be the future). The engine will be started when the battery drops to a certain level, and shut off when it rises to another level. There could be multiple selections for these 2 levels. Let’s imagine 3 selections and assume some turn-on and shut-off points: economy, normal, and power. In economy mode, the engine starts charging at 20% battery capacity and turns off at 40% battery capacity. This way you get the most out of overnight home charges and charging stations. In normal mode, the engine starts at 40% and turns off at 60%. In power mode, the engine starts at 65% and turns off at 80%.

You would use power mode in situations where high power for longer periods is needed, like pulling a boat in an SUV with the whole family through the mountains. Anyone that’s driven out West knows that there are long stretches (30 miles plus) with a constant 6% upgrade. You don’t want to be limited to driving 30 mph in the right lane for many miles because the battery is dead and engine only produces that much power. It’s a good thing that the engine in hybrids will be much smaller, and run at the optimum speed, than in a regular engine/transmission vehicle in order to be more economical. But you don’t want it to become a limitation, and it doesn’t need to be. Us Americans demand a lot from our vehicles and being underpowered can easily be a purchase killer. Sorry, I’m not a flaming liberal that wants to shove small or underpowered vehicles down peoples throats. I want economical vehicles to rise to our standards, and they can.

Why Advanced Lead-Acid Batteries Will Dominate HEV Markets

John, You stated in one of your charts that for “PHEV-40”, a 16kWh Li-ion battery would weight 821 pounds. This is way too high. The new A123 batteries are around 165 Wh/kg. Thus a 16kWh battery would weigh about 100kg (100*.165=16.5), or 220 lbs (1kg = 2.2 lbs). Even if another 55 pounds was added for packaging and heat management, you are off by a factor of 3. www.greencarcongress.c... . Note that A123 makes Lithium Iron Phosphate batteries.

You calculations on size are off too, as I showed in a previous post that a 19 kWh Lithium Iron Phosphate could fit under the back sear of most passenger cars.

Are Energy Storage Investors Chasing Their Own Tails?

Thanks much John. You are a great source of information.

Are Energy Storage Investors Chasing Their Own Tails?

GE seems to make smart decisions as to what markets and products to pursue. This battery is just one example. They are heavy into new economy energy products like wind turbines, high-efficiency jet engines, etc. When the storm is over with the big finance side of their house, I believe their stock will do well with their vast portfolio of solid, new economy products. Looks like Jack Welch left the company with good decision makers. That is why I am an investor with them.

Are Energy Storage Investors Chasing Their Own Tails?

So GE is making sodium nickel-chloride batteries and not sodium sulfer batteries as reported earlier?