One of the potential game changers, electric vehicles, has been getting some negative press recently. It’s too expensive, the range is too short, there aren’t any recharging stations are some of the obstacles frequently cited.
In my view, it really comes down to the economics individual decisionmakers face. Economics matter, really a lot. Remember $4 gas wiped out investors in Chrysler and GM. So I posed myself the question…is there anyway to make EVs the right economic choice? True, even after the federal tax credit they cost more, but can this extra cost can be overcome by lower fuel expenses?
Having been around the utility industry for a while, and also helping develop a price forecasting service for wholesale electricity, I’m aware that there are some big changes in the wholesale electric markets. These changes are the result of the rise of numerous super-efficient combined cycle power plants and the price dampening effect of lots of shale gas. This is translating into off-peak electric prices in the western US in the 4 cent/kWh range. So what would happen if a progressive utility that was getting tons of federal money to install smart meters decided to put the smart meters to work by flowing off-peak electricity to electric cars at wholesale prices?
But even before looking at the economics of cheap electricity, is it practical to provide cheap off-peak power? I think the answer is yes. The smart meters are supposed to provide utilities with two way communication and multiple meter channels. So it should be possible to set up an outlet that only functions during off-peak hours and is separately metered. Also, adding some load during the nighttime shouldn’t be too big an issue…this is when load is already the lowest and the transmission and distribution system should work fine, at least for a while. Finding wholesale power shouldn’t be much of an issue either, the utility can either generate it or buy it on the market from a variety of suppliers. Operationally the utility may need to manage the morning and evening ramp ups and downs differently but after looking at wind integration I think this can be made to work.
For an economic comparison I chose a Nissan Leaf which is now appearing at auto shows, and a Toyota Camry. I looked up mileage rates, ranges, charge sizes, tax credits, and basic manufacturers suggested prices. I expect the average driver, who puts on 41 miles a day, should be able to handle the 100 range of the Nissan Leaf. Putting this all together I developed the following chart showing the time to payback the higher initial cost of the Leaf, after tax credits, as a function of miles driven and electric pricing.
The bottom line is with cheap off-peak energy the Leaf can payoff in as little as 3 years. Not bad. This is less than the term of some auto loans so a buyer would acutally see, after loan and fuel costs, a lower cost for the Leaf than a Camry. And after the loan is paid off the owner would continue to enjoy the fuel savings for the life of the vehicle. The progressive utility, it seems, can make a difference and use its new smart grid technology in the bargain.
Switching to the investment side of clean energy, 2010 has been disappointing. While all broad market indices that I track are positive for the year, only one of the fifteen clean energy ETFs and mutual funds I track are positive YTD and many of these investments are very negative. To review these investment results go to our Returns page.
The best, and only positive return in clean energy is the PowerShares Global Progressive Transportation (PTRP) ETF, up 7.15% YTD. Unfortunately for investors, this fund has only been able to attract $5.8 million USD in investments in its two years, due in part to the lousy timing of opening in September 2008. The upshot is PowerShares is closing PTRP as of December 14, 2010 and investors will have no easy instrument to invest in clean tech transportation.