Do We Have the Energy to Innovate?

In my previous post I wrote about electric vehicles (EVs). As I mentioned in that post, EVs will put a demand on our domestic electricity production and distribution systems due to the higher demand for electricity. As I recall the past problems our nation had with the power grid, I started to look into the “smart grid” that is being hyped. What I found was somewhat encouraging.

Many areas of the country are already involved in “smart grid” projects. From California, which I expected, to Texas, which is probably the last place I expected, “smart grid” initiatives have already taken place. It seems that it does not matter whether you are from a liberal state that needs a great deal of energy or you are from a conservative state that has a great deal of energy, there is probably “smart grid” project going on in your area.

I just so happened that an associate of mine was scheduled to conduct an interview with Steven W. Pullins, President of the Horizon Energy Group. Mr. Pullins currently leads the nation’s Modern Grid Strategy for the National Energy Technology Laboratory. My associate agreed to use several of my questions during the interview even though she was questioning Mr. Pullins concerning security aspects of the “smart grid”.

There are several issues about the “smart grid” that I wanted to know about: Is the support for EV’s being included in the overall design and implementation of the “smart grid, how long would it take for the “smart grid” to be able to support any significant number of EVs, and would the a large adoption of EVs adversely affect energy costs. This last point is the most important since it affect the manufacturing.

Mr. Pullins seemed very passionate when it came to discussing EVs. Mr. Pullins noted that EVs are being accounted for in the development of the “smart grid”. In fact, EVs have a role in the “smart grid” as they are seen as both an energy consumer and a potential energy supplier to the “smart grid”.

As for being able to support EVs, Mr. Pullins feels that it will be 5 – 10 years before the grid is able to handle the demand from a society that has switched to EVs. This timeframe is fine since it will also take about 5 – 10 years before our society switches to EVs in any significant amount. This gives the utilities and the transmission “smart grid” time to ramp up to meet the demand. Mr. Pullins did point out that the energy industry needs, and intends to use, a coordinated strategy between the growth and development of the grid and the growth and development of EVs.

We all know that EVs are more efficient then gasoline automobiles. The amount of power generated by one gallon of gas, at about $2.25 per gallon, is equal to the power generated by $0.75 – $1.00 worth of electricity. The problem is that most of the electricity in the US is produced by methods other then petroleum. In 2006, only about 3.0% of our nation’s electricity was produced by petroleum. Petroleum is one of the more expensive sources of electrical power and is not a practical source for supplying the additional electricity needed.

My concern is that this added demand from EVs will cause the overall cost of electricity to spike. Since energy costs are a significant cost for manufacturing, any spike in prices due to supply and demand issues could cripple domestic manufacturing. Mr. Pullins indicated that no matter what we do, the cost of electricity will go up. I salient point is that if we make the switch to a “smart grid” the overall cost of electricity will increase by a smaller percentage.

Mr. Pullins used the example of Denmark. In 1985 electricity cost in Denmark was $0.15/kWh. That year, Denmark switched their grid to a cellular architecture (Denmark’s equivalent of the “smart grid”). At the rate they had been going, electricity was expected to cost $1/kw hr within 20 years. Because they switched to cellular architecture, their electricity now costs $0.20 /kWh. He compared it with America where energy costs grow 3% – 8% annually.

From some additional research and the answers from Mr. Pullins, I now have a slightly different opinion of EVs. I still feel the same as I did after the previous post, I now more fully appreciate that they are more of a driver of innovation then I initially thought. If just the thought of supporting EVs helps get the “smart grid” in place sooner and, as Mr. Pullins predicts, the “smart grid” reduces the cost of energy then we all win. Most importantly, our manufacturers win with reliable and more economical energy for decades to come.

Electric Vehicles Can Power Manufacturing

The other day I read an article on electric vehicles (EVs) concerning investments. (http://seekingalpha.com/article/130742-electric-car-initiatives-heat-up-implications-for-investors?source=yahoo). The thing that struck me most about the article was that it indirectly indicated that EVs are good for America and American manufacturing.

EVs are good for America on several counts; they are more energy efficient, they produce much less pollution, and they are good for domestic manufacturing. Better energy efficiency reduces the amount of energy we have to consume, which translates into less oil we have to import. The higher energy efficiency can potentially save the consumer money.

Even if you do not believe in global warming, switching to green technologies to produce energy is good for both the economy and the environment. Less pollution means less pollution related health issues and less pollution related corrosion of our infrastructure.

EVs also add to our manufacturing economy by having domestic production of the EVs. A further benefit is that the EV can be powered by electricity from wind, solar, natural gas, nuclear, coal, etc. That energy will need to be generated domestically. There might be less gasoline stations, but is that a bad thing?

We are already seeing investments in battery makers, both domestic and abroad, in a ramp up to EV, and increased hybrid, production. There are already projects, both public and private, to add to our domestic wind and solar energy production levels. Wind energy manufacturing companies are needed to provide wind turbines, turbine towers, control systems and much more. Solar power has similar needs.

When looking at the benefits of EVs, one needs to look at the overall impact on the economy and not just the EV in isolation. Only time will tell if an EV directly saves the owner money. Even if it does not, it helps domestic manufacturing, reduce indirect social costs, and help our overall economy. All of these things help everyone.