Electric Cars vs. Oil in Hawaii

Ever since last week's announcement of a deal to roll out Project Better Place's model for recharging electric cars in Hawaii, I've been curious about how it would work out, if the supplies of new renewable electricity needed to wean the Islands' million or so cars and light trucks off of oil were not forthcoming, or at least didn't materialize as quickly as the company and state hope. If I've done my sums right this morning, it appears that electrifying Hawaii's passenger cars would still save large quantities of oil and reduce greenhouse gas emissions significantly, even if every kilowatt-hour (kWh) to run them was generated from the state's oil-fired power plants.

Since the late 1990s, I've been convinced that in the long run, the majority of cars would be some form of electric vehicle (EV), whether in the form of hybrids, with power generated onboard from engines or fuel cells, or battery EVs tapping external sources of power. The rate at which this transformation takes place, however, remains highly uncertain, with conventional, Prius-type hybrids still accounting for less than 3% of the US car market, and battery EVs other than golf carts as rare as hen's teeth. I've followed the plans of Better Place with great interest, since their mobility-based business model could provide a key ingredient for accelerating the electrification of personal transportation, even while the high cost of batteries makes EVs more expensive to purchase than their gasoline-based competitors.

As Better Place founder Shai Agassi noted in an interview published in Sunday's Washington Post, Hawaii looks ideally suited to be an early adopter of this technology. With no indigenous production, all of Hawaii's oil, including that from which its gasoline needs are refined, must be imported. In that context, the benefits of the Better Place plan look obvious, until you realize that powering a million cars on renewable electricity would require on the order of 3 billion kWh of electricity per year, the equivalent output of more than 400 wind turbines of 2.5 MW each. Ignoring issues of transmission and intermittency, that's about 16 times the state's currently-installed wind power base. Year-to-date through August, 75% of the state's electric power was generated from oil, and less than 7% from various renewables. So at least for now, if this model is going to work in Hawaii, it has to make sense assuming that most of the incremental power for electric cars would be generated from oil.

That sounds counter-intuitive, until you consider the relative efficiencies of centralized power generation versus the gasoline engine under the hood of your car, combined with the inherent efficiencies of electric drive. Comparing the fuel consumed by Hawaii's oil-fired power plants to the power they generated, I found that each gallon of fuel oil yielded roughly 15 kWh of electricity. If the typical electric cars that will be sold in Hawaii travel 3-4 miles per kWh, that equates to an average effective fuel consumption of around 47 miles per gallon, after allowing for 10% transmission losses. That's 43% lower than the 26.8 mpg of the 2008 model year average for the US new-car fleet, and it would reduce greenhouse gas emissions by roughly the same proportion. Although that's no better than the fuel economy of a Toyota Prius, that comparison would improve, as renewable power gradually displaced oil-fired power.

So at least from an oil-consumption and importation perspective, this idea appears to make sense in Hawaii. I can't speak to its economics, or to how practical it is today for regions such as California's Bay Area, where in recent years increasing numbers of workers have been driving in from communities such as Modesto, Tracy and Stockton--commutes that would have seemed unthinkable 25 years ago--in order to beat the high cost of housing near the coast. I wish Better Place well, and I would certainly appreciate having the choice of an attractive, economical electric car, when it comes time to replace my current sedan in a few years.

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Toyota FT-HS coming in 2009

The June '07 print edition of Automobile is full of juicy information, and one of the more significant bits of news appears in a sidebar on page 30. According to the magazine, Toyota has given the FT-HS hybrid sports car the green light, and the Calty-designed production version will make its debut in 2009. It's being billed by Automobile as the spiritual successor to the late, lamented Supra -- a position that's hard to argue assuming you can look past the probable lack of an inline 6. Like the concept, the two-seat FT-HS will pair the company's Hybrid Synergy Drive with an as-yet-undetermined gasoline engine (the concept utilized a 3.5-liter V6). Power and pricing aren't discussed, but if the numbers thrown around when the concept was introduced -- 400 horses and mid-level dollar amounts -- are feasible, the thing should have plenty of takers.



Pairing a potent hybrid powertrain with essential sports-car fundamentals, theFT-HS is a mid-priced sports car that integrates ecology and emotion in a concept that addresses the question, “What is a suitable sports car for the 21st century?”Boasting a powerful V6 3.5L engine, the FT-HS is coupled with Toyota's Hybrid Synergy Drive® to produce a target power output of approximately 400 horsepower and a projected zero-to-60 acceleration in the four-second range. At a mid-priced market position, the FT-HS would be a true “attainable exotic” with 21st-century performance.A sculpted front and rear remove mass around key functional components, while the roof has a distinctive scooped-out section designed to


reduce aerodynamic drag and provide head room at the key areas.The FT-HS's interior features create a dedicated driver's cockpit that includes a cross-car instrument panel structure and delta-wing driver pod. An integrated instrument panel surrounds the driver, creating an enclosed pod effect. Armrests flow seamlessly into the door and surrounding interior. Seating is optimized for a lightweight appearance and function: The seating accommodates four and then converts to a two-seater when the roof retracts.

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2009 Hyundai Genesis Coupe Concept

Hyundai unveiled its highly anticipated Concept Genesis Coupe during a press conference at the Los Angeles International Auto Show. The concept car heralds the introduction of an all-new, rear-wheel drive 2 + 2 sports coupe scheduled to join the Hyundai lineup in the spring of 2009. Following the introduction earlier this year of the Concept Genesis sedan, Concept Genesis Coupe signals Hyundai’s second step in broadening its appeal to driving enthusiasts.

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Sports car today: Lotus Eagle 2009

After many and many rumors and spy shots, Lotus Eagle finally on show. Lotus Eagle 2009 will make its world debut in July at the London Motor Show. The new 2+2 sports car will go on sale towards the end of the year at a price of $90.000. Lotus announced a convertible version is also in the works and will be launched few months after the coupe.
The 2009 Lotus Eagle will be placed between the Elise and next-generation Esprit, and is designed for those who love the Elise, but also want a little more room and comfort.

The 2009 Eagle will be powered by a tuned version of Toyota’s V6 engine used in the Camry. It will be offered with two different displacements: 2.5 liters and 3.0 liters with power between 200 and 300 hp. The Lotus Eagle 2009 was announced to be a real sports car with 0 to 60 mp sprint to be made in less than 5 seconds. More info will gather on this Lotus Eagle later on…

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Cheap Gas

As rapidly as it has fallen, the average pump price of unleaded regular gasoline in the US still has a ways to go, to end up lower on Barack Obama's Inaugural Day next January 20 than its inflation-adjusted level of $1.60 per gallon when Bill Clinton took office in 1993. However, it does seem likely to beat the adjusted $1.82 per gallon in effect when George W. Bush took the oath of office. The fall from its $4.11 peak in July is a classic good news/bad news story, with evidence of the latter showing up in several forms this week.

I can't recall when I've spent more time examining the data for US car sales, or for that matter when they have received more media attention. The November figures were simply awful, and not just for the Detroit Three that are pleading for life-support in Washington, DC. The sales of Toyota and Honda fell by slightly more than Ford's, compared to November 2007, with Nissan off by as much as GM. But contrary to the view that the summer's high gas prices were burned indelibly into the minds of consumers, "light trucks", the category that includes SUVs, recovered some of their lost market share for the month, accounting for 51.9% of all light vehicles sold, in contrast to their year-to-date market share of 48.5%. That might not be entirely attributable to low gas prices, though it struck me as significant that Honda's only model to post a sales gain for the month was their Pilot mid-sized SUV (EPA 18 mpg), while Toyota's popular Prius hybrid (EPA 46 mpg) fell by 48%, year-on-year. One month does not a trend make, but it's clear that sub-$2 gasoline negates essentially any financial benefit from expensive fuel-saving technology.

An interesting analysis of gasoline prices from the American Petroleum Institute puts today's prices in perspective. Despite the precipitous drop of the last several months, the average price for 2008 should still tie the previous annual, inflation-adjusted high of $3.277/gal. for 1981. That makes today's $1.81/gal. even more remarkable. While it looks typical or even high compared to most of the years from 1982-2002, it appears quite low in the longer historical context. The question facing consumers and policy-makers alike is whether future gas prices are more likely to resemble the first two-thirds of 2008 or the last third, once the economy recovers. Setting aside concerns about Peak Oil, which has receded from attention, lately, the period coinciding with the lower gas prices on API's chart featured a weak OPEC and steady non-OPEC oil production growth of around 1% per year. That looks unsustainable, even without the likely impact of $40 per barrel oil on new deepwater drilling and oil sands projects.

Nor is it clear how much more biofuels can contribute, at least in the next several years. US ethanol output already stands at roughly 10 billion gallons per year, the energy equivalent of about 400,000 barrels per day of crude oil. That's priced into today's oil balance. Getting beyond 15 billion gallons will require a large contribution from cellulosic ethanol technologies that are still at the demonstration scale, with the largest currently-operating facility producing only 1.4 million gallons per year--less than 100 barrels per day.

So if $1.80/gal. gasoline looks unsustainably cheap, what should we be planning for? Eyeballing the API's 1918-2007 gasoline price chart suggests the long-term average is pretty close to 1949's inflation-adjusted $2.43/gal. Coincidentally, that's consistent with the level implied by OPEC's notional "fair price" for oil of $75 per barrel. That's a problem, because $2.50 gas won't do much for the sales of the hybrid, plug-in hybrid, and all-electric cars that Congress and others are insisting the Detroit Three agree to build more of, in order to qualify for a federal bailout. Even a $50/ton carbon tax or cap & trade permit price for CO2 only gets us to $3.00. Without a lot more help than that, gas prices alone are not likely to deliver the anticipated contribution of fuel economy towards improved US energy security and reduced greenhouse gas emissions. That might just require convincing Americans that more efficient cars are justified by values, rather than mere value.

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The Road to Copenhagen

The road to Copenhagen goes through Poland. If you know what that geographically-dubious statement refers to, then you must follow the news relating to climate change pretty closely. This week and next, the UN Framework Convention on Climate Change (UNFCCC) is holding its fourteenth Conference of the Parties (COP-14) in Poznan, Poland. Along with conducting the ongoing business of the UNFCCC, the main goal of the meeting is to table a first draft of the replacement for the Kyoto Protocol, which expires in 2012. A new agreement is meant to be finalized in a year's time, at COP-15 in Copenhagen, Denmark. While this is all consistent with the "road map" agreed at last year's conference in Bali, the current conference is taking place in a remarkably different context, with financial uncertainties that were never contemplated in Bali.

Two changes, in particular, will affect the effort to develop a new set of international commitments on the emissions contributing to climate change, and for addressing the consequences of further warming. The election of a US President with a very different approach to climate change alters the negotiating dynamic, even though he has not yet taken office. The official US delegation is accompanied by a Congressional delegation headed by Senator John Kerry (D-MA.) Although Sen. Kerry does not officially represent the President-Elect, he certainly brings a point of view much closer to that of the incoming US administration than to the outgoing one, reflecting a shift back toward greater harmony with the positions of the EU members, Japan and other countries that adopted the Kyoto targets. Considering the views on climate change of Senator McCain, however, this change since Bali is not nearly as surprising as the one that ultimately may overwhelm it: the evolution of a US housing slump and already-nascent recession into a global financial and economic crisis.

We don't know what lies ahead, but we can make some reasonable guesses. Unemployment will continue to increase in the US and EU, and even if the recession in Asia proves less severe than the one in the late 1990s, as a recent article in the Economist suggested, China and India will face the prospect of millions of people falling back into poverty, after having risen close to middle class status. That will make it harder for their governments to devote resources to reducing CO2 or to be seen to sacrifice future economic growth to slow emissions. Nor will it be easy for Western governments to agree to terms on delayed targets and generous technology transfers benefiting countries that many of their citizens worry are competing for their jobs.

It was always going to be tricky for the delegates following the Bali road map to design an agreement that would reconcile the divergent emissions histories and economic growth rates of the developed and developing countries in a way that left all parties feeling fairly-treated, while still making meaningful progress on stabilizing and ultimately reducing global greenhouse gas emissions. Attempting this against the backdrop of a major global recession complicates matters greatly, going beyond the question of whether economic priorities will trump environmental challenges for the next few years. Depending on the ultimate duration of the current crisis and the manner in which it is resolved, the future mechanisms of our international system might look quite different, and the scope for a global response to climate change could alter significantly. Simply put, the delegates to Poznan cannot assume that the world in which a Copenhagen Protocol would be implemented will resemble the one in which the process for negotiating its terms was outlined a year ago.

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The Right Price

So OPEC has kicked the can down the road another two weeks, deferring further production cuts until at least their December 17th meeting in Algeria, when they can better assess the impact of the cuts they've already made--code for observing how badly its members have cheated on their earlier quota reductions. As usual, the cartel's control over prices is much stronger when demand is surging and production capacity strained, than when markets develop considerable slack. This is a much-rehearsed dance, and the market has apparently already discounted it, with the price of light, sweet crude poised to test the $50 mark again this week. The more interesting commentary out of Cairo concerned OPEC's desired price, which is apparently $75 per barrel: well above today's level but far below summer's peak. Wishing won't make it so, but there has been much discussion lately about the "right" price for the most liquid of energy commodities.

I can't help observing the irony that $50 oil, the prospect of which seemed nearly inconceivable to seasoned industry experts only a few years ago, now looks too cheap, not just to OPEC, but also to producers of unconventional oil, developers and supporters of alternative energy, and those concerned about climate change. When you dig a little deeper, however, the insight here seems to be that the absolute price matters less than its volatility, at least from a planning perspective. It's hard for producers of all kinds of energy to plan their business, if the monthly average price of their output--or the key commodity affecting it--can spike up by 150% and then drop by 60%, all within the course of two years. Oil remains a cyclical business, as anyone who's been around it for a while understands, but this is ridiculous.

That $75 per barrel figure from OPEC is interesting for many reasons. It probably represents the minimum level needed to balance the considerable budgetary expansions taken on by its most aggressive spenders, such as Venezuela and Iran, along with pseudo-member Russia. But it also looks like the level that is required to keep additions of new unconventional oil capacity, such as Canadian oil sands, on track. With typical refining margins, instead of the bizarrely-inverted pricing we've seen recently, it would translate into an average gasoline pump price in the US of around $2.50/gal. And because US ethanol distillers are producing well beyond the volumes required to satisfy the federal Renewable Fuel Standard, that would yield an ethanol price after subsidies in the neighborhood of $2/gal., enough to give ethanol producers a 75 cent per gallon "crush spread" over corn at $3.50 per bushel. That's a lot better than the 40 cents or so implied by the current ethanol and corn futures prices.

If the drop to $50 were short-lived, most of those energy producers would experience little lasting impact, other than ethanol firms that have been pushed to the brink by the combination of overly-rapid expansion, tightening credit, and slumping prices. But looking ahead, no one can say with any certainty whether oil will remain here, test $40/bbl, or zoom past $100 again next summer. In this regard the futures market, which last week reflected prices above $70/bbl. beyond 2010, has been a very poor barometer. Nor have the forecasts of government departments or international agencies fared any better at anticipating the volatility that is so disruptive to economies and to the plans of energy companies and oil-exporting countries.

Consumers are in the best position of anyone affected by these developments. If you drive an average car an average amount, your fuel bills ought to be about $90 per month lower than they were in July, which is the equivalent of a $120 per month raise for anyone in the 33% combined federal income and social security tax bracket. Save it or spend it, but don't count on it lasting longer than a year. That means buying your next car with the prudent assumption that at some point in its life, you will be paying $4 or more per gallon, once again.

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