The Electric Car Market: These Companies Could Put a “Charge” in Your Portfolio
by David Fessler, Energy and Infrastructure Specialist
Friday, June 4, 2010: Issue #1274
I recently plunked down a deposit for a Nissan LEAF – the world’s first all-electric car, which is destined to hit the United States in big numbers.
I figure since I work from my home office and don’t drive much, I’ll use the Nissan as my everyday car and leave the gas-guzzler for longer trips.
A Nissan engineer will shortly be visiting my home to make sure I have enough power to handle the LEAF’s charging requirements. But as a degreed electrical engineer, that won’t be a problem. When I restored my 200-year-old house, the electrical infrastructure became my pet project! I should have plenty of power.
Jet across to California, however, and anyone willing to drive an electric car will be in for a rude awakening when it comes to charging them…
The California Electric Car Market: Land of the Free, Home of the Green
Think of electric vehicles and one of the first places that springs to mind is California. You don’t have to go far before you come across a Toyota Prius or Honda Insight.
In fact, a U.S. Department of Energy survey from 2007 (the latest data available) revealed that there are more than five times as many hybrids registered annually in California than the next six states combined. And 25% of all hybrids sold are purchased in California.
That shouldn’t be surprising. Despite its fiscal problems, California is often the vanguard state for anything new. It’s no accident that Silicon Valley is located there.
It’s also at the forefront of the green movement. For example, it was the first state to adopt a renewable energy mandate. As part of that, its goal is to return the state’s carbon dioxide emissions to pre-1990 levels by 2020.
With regard to the auto market, Nissan, General Motors and a number of other manufacturers are gearing up to unleash plug-in hybrids and full electric vehicles – many of which will be plugged into the California market.
And therein lies the source of the problem…
California’s Shaky Electric Infrastructure
You see, California’s shaky electric infrastructure is far from able to handle the onslaught of thousands of electric vehicle owners all “plugging in” when they get home at 5:00 PM.
That’s precisely the time that electricity demand peaks for other reasons. Televisions, computers, video games, air conditioners, stereo systems and lights all get fired up when people return home from work.
It’s the time of the day when there’s little power capacity to spare… if any. Just ask any California resident about brownouts and blackouts. Many are familiar with them.
Now add the power drain to charge an electric car. Depending on the vehicle’s battery pack size, the power draw could approach that of an average sized home. And that’s a problem because utility companies generally size their electric grids based on the number of homes in a development, plus a safety factor of some magnitude. But it’s not 100%. And they weren’t banking on electric cars sucking up power, too.
In fact, a study from the National Renewable Energy Laboratory estimated that Plug-in Hybrid Electric Vehicles (PHEVs) would increase annual energy demands by anywhere from 6% to 12%, depending on the region of the country. California was one of the highest regions cited in the study.
Until recently, no thought was ever given to the significant draw that charging electric vehicles would add to the grid load. The problem – and the scale of the fix – is unprecedented…
Operating Under Electric Gridlock
Put yourself in the position of utility companies that operate the electric grids…
- How the heck do you know who is going to buy electric vehicles and where they live?
- Do they live in areas with excess grid capacity?
- What if everyone in the same neighborhood buys one?
The problem isn’t additional generating capacity. It’s making sure the distribution part of the power grid can handle the increased loads, wherever they are.
The utilities are meeting with electric vehicle manufacturers and studying demographics in an attempt to get a handle on the problem. They’re pouring millions into upgrading neighborhood distribution grids, targeting areas most likely to harbor large numbers of electric vehicles. And it’s a race against time, as vehicles will begin arriving later this year.
So how are the wheels of government in California going to handle the problem?
Why… just like many governments do, of course: Through additional regulations…
The Dreaded “R” Word
The California Public Utilities Commission (CPUC) is in the midst of formulating its first key regulatory ruling regarding electric vehicles.
The problem lies in the current CPUC regulation that allows only electric utilities to sell electric power. So it’s contemplating whether electric vehicle-charging companies are “utilities” and are therefore subject to CPUC rules.
Huh? There’s no question that they’re not utilities and it leaves the CPUC little choice as to its decision.
With the onslaught of electric vehicles, “Pay for Power” stations are likely to spring up at gasoline stations, shopping malls, parking garages, workplaces and along busy metropolitan streets.
And the most sensible way to handle these companies would be to let the market dictate prices. Competition is a wonderful thing, after all. Other state PUCs are closely watching what’s happening in California.
And for investors?
Playing the Electric Vehicle Power Game
Some of the biggest beneficiaries will be the companies who ultimately provide the power for electric vehicles.
But it will be the metering/recharging station equipment makers that will see their businesses take off, as the electric vehicle infrastructure build-out gets underway in earnest.
In fact, an estimated five million charging stations will be deployed worldwide between now and 2015. (The variability of the number depends in large part on how quickly national, state and local governments adopt incentives to promote electric vehicles.)
Right now, the electric vehicle-charging market is led by via niche players like…
- AeroVironment, Inc. (Nasdaq: AVAV).
- Coulomb Technologies and Better Place (both privately held).
But make no mistake… the heavy-hitters are coming, too:
Others are readying charging stations of their own, which could lead to a crowded market and competitive pricing for recharging.
That would be a good thing for early electric vehicle-adopters like me – and for investors, too.
Good investing,
David Fessler
Any investment contains risk. Please see our disclaimer.
7 Responses to “The Electric Car Market: The Companies That Could Put a “Charge” in Your Portfolio”
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David Fessler is the energy and infrastructure expert for Investment U.
A very intriguing concept – how long have you been tracking it? What is the win/loss ratio? Please explain your Lifetime Membership and why the subscription price is lower than the Regular Membership.
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Any idiot who buys a Japanese car should not be allowed to write investment advice. You and the other traitors who persist in buying Nipponzin junk should be put on one of their old Marus and sent on a “Hell-ship” cruise. If you survive, which is not likely, you could then compare notes with me.
JD Merritt AKA Yung Hyaku Roku Ju Ni. (former Jap POW for three and a half years.
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Electric Cars won’t make it they are technically outdated forever.
A better alternative for investment money is the funding 100 plus companies with $50M each to be used to make breakthrough innovations in green fuels as for example synthetic fuel made from coal, which is plentiful available all over in the world while those fuels are greener than green when generated form nuclear energy.
Other innovations to be pursued could be smaller batteries with larger storage capacity, solar applications, and wind-turbines. If such companies created viable innovations further funding would automatically follow from the industry. Unfortunately Governments have zero accountability and taxpayers are like sheep.
read my full article in detail on:
http://www.nowpublic.com/world/billions-stimuli-electric-cars-fallacy
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I have been watching the developments at
Blacklight Power Inc. for about a year now.
Their website is at http://www.blacklightpower.com/
Of particular interest is their way of electric
power generation, as well as their having already licensed 7 electric power generation companies to use their system of creating electric power much cheaper than nuclear or carbon fueled systems, with zero emmissions. (See “Business and Licensing” on their website.
They are however pretty mum about it all, apparently they do not want to go public for fear that some company will buy them out in order to maintain their status quo of old fashioned generation methods.
I hope somebody can convince them to make more noise with generation possibilities and get some business partners to get this off the ground in a major way.
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Excellent article. I am a Californian and paid extra for mounting enough future solar electric panels (when we replaced our solar pool heater panels) to power our home and future electric car.
It seems to me that a straight electric car presently does
not have enough range to handle the needs of most Californians. Most of the cars you mentioned are hybrids.
drb
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Where are our politicians putting their money?
That’s where I want to put my money.
When is the next “Cattle Futures” for Hilary?
Why did Goldman Sachs sell so many shares of BP stock just before the oil spill?
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Important, helpful information on electric cars.
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