18 January 2007

If we must keep the personal vehicle, here is some positive news...

The Secret Tesla Motors Master Plan (just between you and me)
by Elon Musk
Chairman of the Board

published Wednesday, August 2nd, 2006

Backgrounder: My day job is running a space transportation company called SpaceX, but on the side I am the chairman of Tesla Motors and help formulate the business and product strategy with Martin and the rest of the team. I have also been Tesla Motor’s primary funding source from when the company was just three people and a business plan.

As you know, the initial product of Tesla Motors is a high performance electric sports car called the Tesla Roadster. However, some readers may not be aware of the fact that our long term plan is to build a wide range of models, including affordably priced family cars. This is because the overarching purpose of Tesla Motors (and the reason I am funding the company) is to help expedite the move from a mine-and-burn hydrocarbon economy towards a solar electric economy, which I believe to be the primary, but not exclusive, sustainable solution.

Critical to making that happen is an electric car without compromises, which is why the Tesla Roadster is designed to beat a gasoline sports car like a Porsche or Ferrari in a head to head showdown. Then, over and above that fact, it has twice the energy efficiency of a Prius. Even so, some may question whether this actually does any good for the world. Are we really in need of another high performance sports car? Will it actually make a difference to global carbon emissions?

Well, the answers are no and not much. However, that misses the point, unless you understand the secret master plan alluded to above. Almost any new technology initially has high unit cost before it can be optimized and this is no less true for electric cars. The strategy of Tesla is to enter at the high end of the market, where customers are prepared to pay a premium, and then drive down market as fast as possible to higher unit volume and lower prices with each successive model.

Without giving away too much, I can say that the second model will be a sporty four door family car at roughly half the $89k price point of the Tesla Roadster and the third model will be even more affordable. In keeping with a fast growing technology company, all free cash flow is plowed back into R&D to drive down the costs and bring the follow on products to market as fast as possible. When someone buys the Tesla Roadster sports car, they are actually helping pay for development of the low cost family car.

Now I’d like to address two repeated arguments against electric vehicles — battery disposal and power plant emissions. The answer to the first is short and simple, the second requires a bit of math:

Batteries that are not toxic to the environment!
I wouldn’t recommend them as a dessert topping, but the Tesla Motors Lithium-Ion cells are not classified as hazardous and are landfill safe. However, dumping them in the trash would be throwing money away, since the battery pack can be sold to recycling companies (unsubsidized) at the end of its greater than 100,000-mile design life. Moreover, the battery isn’t dead at that point, it just has less range.

Power Plant Emissions aka “The Long Tailpipe”
(For a more detailed version of this argument, please see the white paper written by Martin and Marc.)

A common rebuttal to electric vehicles as a solution to carbon emissions is that they simply transfer the CO2 emissions to the power plant. The obvious counter is that one can develop grid electric power from a variety of means, many of which, like hydro, wind, geothermal, nuclear, solar, etc. involve no CO2 emissions. However, let’s assume for the moment that the electricity is generated from a hydrocarbon source like natural gas, the most popular fuel for new US power plants in recent years.

The H-System Combined Cycle Generator from General Electric is 60% efficient in turning natural gas into electricity. “Combined Cycle” is where the natural gas is burned to generate electricity and then the waste heat is used to create steam that powers a second generator. Natural gas recovery is 97.5% efficient, processing is also 97.5% efficient and then transmission efficiency over the electric grid is 92% on average. This gives us a well-to-electric-outlet efficiency of 97.5% x 97.5% x 60% x 92% = 52.5%.

Despite a body shape, tires and gearing aimed at high performance rather than peak efficiency, the Tesla Roadster requires 0.4 MJ per kilometer or, stated another way, will travel 2.53 km per mega-joule of electricity. The full cycle charge and discharge efficiency of the Tesla Roadster is 86%, which means that for every 100 MJ of electricity used to charge the battery, about 86 MJ reaches the motor.

Bringing the math together, we get the final figure of merit of 2.53 km/MJ x 86% x 52.5% = 1.14 km/MJ. Let’s compare that to the Prius and a few other options normally considered energy efficient.

The fully considered well-to-wheel efficiency of a gasoline powered car is equal to the energy content of gasoline (34.3 MJ/liter) minus the refinement & transportation losses (18.3%), multiplied by the miles per gallon or km per liter. The Prius at an EPA rated 55 mpg therefore has an energy efficiency of 0.56 km/MJ. This is actually an excellent number compared with a “normal” car like the Toyota Camry at 0.28 km/MJ.

Note the term hybrid as applied to cars currently on the road is a misnomer. They are really just gasoline powered cars with a little battery assistance and, unless you are one of the handful who have an aftermarket hack, the little battery has to be charged from the gasoline engine. Therefore, they can be considered simply as slightly more efficient gasoline powered cars. If the EPA certified mileage is 55 mpg, then it is indistinguishable from a non-hybrid that achieves 55 mpg. As a friend of mine says, a world 100% full of Prius drivers is still 100% addicted to oil.

The CO2 content of any given source fuel is well understood. Natural gas is 14.4 grams of carbon per mega-joule and oil is 19.9 grams of carbon per mega-joule. Applying those carbon content levels to the vehicle efficiencies, including as a reference the Honda combusted natural gas and Honda fuel cell natural gas vehicles, the hands down winner is pure electric:

Car Energy Source CO2 Content Efficiency CO2 Emissions
Honda CNG Natural Gas 14.4 g/MJ 0.32 km/MJ 45.0 g/km
Honda FCX Nat Gas-Fuel Cell 14.4 g/MJ 0.35 km/MJ 41.1 g/km
Toyota Prius Oil 19.9 g/MJ 0.56 km/MJ 35.8 g/km
Tesla Roadster Nat Gas-Electric 14.4 g/MJ 1.14 km/MJ 12.6 g/km

The Tesla Roadster still wins by a hefty margin if you assume the average CO2 per joule of US power production. The higher CO2 content of coal compared to natural gas is offset by the negligible CO2 content of hydro, nuclear, geothermal, wind, solar, etc. The exact power production mixture varies from one part of the country to another and is changing over time, so natural gas is used here as a fixed yardstick.

Becoming Energy Positive
I should mention that Tesla Motors will be co-marketing sustainable energy products from other companies along with the car. For example, among other choices, we will be offering a modestly sized and priced solar panel from SolarCity, a photovoltaics company (where I am also the principal financier). This system can be installed on your roof in an out of the way location, because of its small size, or set up as a carport and will generate about 50 miles per day of electricity.

If you travel less than 350 miles per week, you will therefore be “energy positive” with respect to your personal transportation. This is a step beyond conserving or even nullifying your use of energy for transport – you will actually be putting more energy back into the system than you consume in transportation!

So, in short, the master plan is:

Build sports car
Use that money to build an affordable car
Use that money to build an even more affordable car
While doing above, also provide zero emission electric power generation options
Don’t tell anyone.

Mileage from Megawatts: Enough Grid Capacity to Charge Plug-In Vehicles
Source: GreenBiz.com

RICHLAND, Wash., Dec. 12, 2006 - If all the cars and light trucks in the nation switched from oil to electrons, idle capacity in the existing electric power system could generate most of the electricity consumed by plug-in hybrid electric vehicles.

A new study for the Department of Energy finds that "off-peak" electricity production and transmission capacity could fuel 84 percent of the country's 220 million vehicles if they were plug-in hybrid electrics.

Researchers at DOE's Pacific Northwest National Laboratory also evaluated the impact of plug-in hybrid electric vehicles, or PHEVs, on foreign oil imports, the environment, electric utilities and the consumer.

"This is the first review of what the impacts would be of very high market penetrations of PHEVs, said Eric Lightner, of DOE's Office of Electric Delivery and Energy Reliability. "It’s important to have this baseline knowledge as consumers are looking for more efficient vehicles, automakers are evaluating the market for PHEVs and battery manufacturers are working to improve battery life and performance."

Current batteries for these cars can easily store the energy for driving the national average commute - about 33 miles round trip a day, so the study presumes that drivers would charge up overnight when demand for electricity is much lower.

Researchers found, in the Midwest and East, there is sufficient off-peak generation, transmission and distribution capacity to provide for all of today’s vehicles if they ran on batteries. However, in the West, and specifically the Pacific Northwest, there is limited extra electricity because of the large amount of hydroelectric generation that is already heavily utilized. Since more rain and snow can’t be ordered, it’s difficult to increase electricity production from the hydroelectric plants.

“We were very conservative in looking at the idle capacity of power generation assets," said PNNL scientist Michael Kintner-Meyer. “The estimates didn’t include hydro, renewables or nuclear plants. It also didn’t include plants designed to meet peak demand because they don’t operate continuously. We still found that across the country 84 percent of the additional electricity demand created by PHEVs could be met by idle generation capacity."

“Since gasoline consumption accounts for 73 percent of imported oil, it is intriguing to think of the trade and national security benefits if our vehicles switched from oil to electrons,” added PNNL energy researcher Rob Pratt. “Plus, since the utilities would be selling more electricity without having to build more plants or power lines, electricity prices could go down for everyone.”

Lightner noted that “the study suggests the idle capacity of the electric power grid is an underutilized national asset that could be tapped to vastly reduce our dependence on foreign oil.”

The study also looked at the impact on the environment of an all-out move to PHEVs. The added electricity would come from a combination of coal-fired and natural gas-fired plants. Even with today’s power plants emitting greenhouse gases, the overall levels would be reduced because the entire process of moving a car one mile is more efficient using electricity than producing gasoline and burning it in a car’s engine.

Total sulfur dioxide emissions would increase in the near term due to sulfur content in coal. However, urban air quality would actually improve since the pollutants are emitted from power plants that are generally located outside cities. In the long run, according to the report, the steady demand for electricity is likely to result in investments in much cleaner power plants, even if coal remains the dominant fuel for our electricity production.

“With cars charging overnight, the utilities would get a new market for their product. PHEVs would increase residential consumption of electricity by about 30 - 40 percent. The increased generation could lead to replacing aging coal-fired plants sooner with newer, more environmentally friendly versions,” said Kintner-Meyer.

“The potential for lowering greenhouse gases further is quite substantial because it is far less expensive to capture emissions at the smokestack than the tailpipe. Vehicles are one of the most intractable problems facing policymakers seeking to reduce greenhouse gas emissions,” said Pratt.

Finally, the study looked at the economic impact on consumers. Since, PHEVs are expected to cost about $6,000 to $10,000 more than existing vehicles - mostly due to the cost of batteries -- researchers evaluated how long it might take owners to break even on fuel costs. Depending on the price of gas and the cost of electricity, estimates range from five to eight years - about the current lifespan of a battery. Pratt notes that utilities could offer a lower price per kilowatt hour on off-peak power, making PHEVs even more attractive to consumers.

Adding “smart grid” communications technology to ensure the vehicles only charge during off-peak periods and to provide immediate, remote disconnect of chargers in event of problems in the power grid would make them attractive to utilities.

Let's say that you do indeed drive 50 miles every day on a solar electric car. How much would it cost vs. a conventional gasoline car?

Assume a $10,000 upfront capital cost for the PV panel with a life of 25 years, plus a 2% annual cost for its maintenance. This means that you produce 50 miles of daily travel for roughly $1.65 in current dollars. That is before you take opportunity cost of funds into account, currently at another $1.40 per day (at 5% interest). Total cost so far, $3.05 per 50 miles. If you have to finance the PV panel with a loan at 10%, the cost jumps to $4.45 per day.

But we are not finished yet. Batteries become exhausted after repeated charge-discharge cycles. Let's say that you need to buy a new battery every 7 years, at $3.000 per set. That adds another $1.17 per day, always in current dollars.

Total goes to $4.22 or $5.62 per day, depending on how you financed your panel purchase. I must immediately tell you that the vast majority of americans cannot pay cash for such a purchase, so the realistic number is indeed the high one - let's say $5.50/day.

Ah, but we are still not finished. The per mile cost increases sharply if there are days you do not drive the full 50 miles per day. In econo-speak, all of that $5.50 cost is sunk-in and fixed. (You have to pay it regardless of use, unlike a tank of gas which you use when you need it.) Let's alter our assumptions a bit and say you use your electro-car at 90% of capacity, or an average of 45 miles per day. The cost now goes to $6.05 per average 45 mile day.

Still not finished...

All of this will buy you just 50 miles per day maximum - no more. What of those days when you want to take a longer trip to the shore, or to visit your mother in law (shudder)? You can't use the electro-car so you take the bus/train/hydrogen rikshaw at $50 roundtrip for the entire family. Assume you do that just 10 times a year. That adds another $1.37 per day. How about that drive-to the Piney Pines Lodge vacation once a year? Bus again, another $200 for the family, or $0.55 per day.

Total $7.42 - let's call it $7.50 bucks even per day. That is just for "fuel" mind you, not including the car purchase, which I assume to cost the same as a regular fossil fuel car.

A new gas car will get 25 mpg. A run of the mill diesel will get to 40-50 mpg, easy. You see the problem? Solar "fuel" costs as much as $7.50/gallon when it replaces an efficient diesel, or a minimum $3/gallon when it replaces a run of the mill gasoline car.

If we want such a system to even START becoming attractive, we need to tax gasoline/diesel prices at least that much more and provide a compensating direct tax credit towards the purchase of the PV system.

Given that people will naturally jump to diesels before going to PV's, a $3/gal price will not do the trick.

A combination $5.25/gal price for gas/diesel (i.e. a $3.25 tax/gal) PLUS all of those proceeds going towards the subsidy of PV installations is the absolute minimum for the process to start, as things stand right now.

How likely is that?...and I haven't even thrown in the higher copper prices ;)...

Posted by: Dumas | January 17, 2007 at 06:03 AM

On top of that Dumas, who's to say that the economy will be strong enough that regular folks will be able to afford any of this?

Still, as PV is still a future promise when it comes to powering the grid, our fleet will still be fossil fuel powered. It will be powered primarily by natural gas and coal.

And soon, mostly coal.

I see it as a solution we'll chase after as we power down. As we run low on oil, our economy will shed jobs as there will be no energy to power their work. The people laid off won't buy electric cars at any price. They'll be more worried about finding shelter from the storm.

As time goes on, it will be ever more likely that those people will be us.

Posted by: Weaseldog | January 17, 2007 at 08:14 AM

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