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Plug-in Hybrid Electric Vehicles: The Only Roadblock to PHEVs
by David Fessler, Advisory Panelist, The Oxford Club
Monday, February 2, 2009: Issue #926
Several weeks ago, I wrote here about how I believe natural gas makes sense as a bridging strategy to get us from oil over to electric as a source of energy to move us around.
Of course, the most vocal proponent of this has been T. Boone Pickens, with his “Pickens Plan.” Many have argued Pickens is only pushing the plan as a means for personal gain. I don’t believe it, for several reasons:
- First, Pickens isn’t hurting financially. Quite the opposite: He has made a fortune in the crude oil business, and his personal net worth is estimated at around $3 billion. He’s donated over $400 million to Oklahoma State University where he is an alumnus.
- Second, I think he’s one of those rare American business owners who truly wants what’s best for America.
- And now, Pickens is likely dancing in the streets: This week President Obama turned the EPA on its ear and told its new head, Lisa Jackson, to review and (likely approve) California’s request for stricter tailpipe emissions than what’s currently mandated under Federal law. This essentially reverses the roadblock/stalling techniques employed by the Bush administration, and opens the door for more strict emissions rules moving forward.
Obama made his position refreshingly clear after issuing the order: “Year after year, decade after decade, we’ve chosen delay over decisive action… rigid ideology has overruled sound science… and special interests have overshadowed common sense… My administration will not deny facts. We will be guided by them.”
Obama also plans to raise miles per gallon targets to 35 MPG by 2020. Not particularly aggressive, but the carmakers will have trouble meeting it without major design changes to many of their models. True to form, U.S. auto companies are screaming like stuck pigs… faced with the grave reality of their situation.
Once the air clears (pun intended) and the whining ends, what you’re likely to hear is how the big three automakers are rapidly ramping up their Plug-in Hybrid Electric Vehicle research and development.
The Rise of Plug-in Hybrid Electric Vehicles (PHEV)
Make no mistake: The biggest roadblock for Plug-in Hybrid Electric Vehicles or PHEVs is battery technology that can provide enough energy for 100 to 200 miles of driving before recharging is necessary. Everything else to make the car currently exists: efficient, high-torque motors; variable ratio transmissions; and strong, lightweight composite materials for the body and frame.
Benefits of PHEVs are blatently obvious:
- Reduce – and in fact nearly eliminate – our dependence on foreign oil.
- Greatly reduce greenhouse gas emissions.
- Revitalize the American automobile industry (and companies that support it) when we need it most.
- Provide thousands of jobs constructing the charging station infrastructure that will be required to support a national PHEV fleet of cars and trucks.
- The creation of even more jobs to upgrade and expand our nation’s power grid to get all the additional power that will be required to where it’s needed.
- Employ still more workers to construct solar and wind farms to generate the additional power required.
Clearly, the American automobile manufacturers have their work cut out for them with regards to PHEVs. Had they taken the long view three or four years ago on PHEVs instead of the short-sighted profit view of selling SUVs, we might already be there.
Now they find themselves in the difficult position of trying to survive the current credit freeze and consumer-spending shutdown that could easily last another 12 months. It’s not clear at this point which – if any of them – will last long enough to be able to bring a viable PHEV design to market, although all three have announced they’ll be introducing electric production vehicles in the next two years.
General Motors, with its Chevy Volt, appears to be the closest with an actual production model. But it is probably in the worst financial condition of the three. So we’ll have to toss GM, Ford and Chrysler on the “don’t” pile for now.
The Real Winners In The PHEV Game – Battery Companies
The real winners in the PHEV game will be the battery companies. They’ll be tasked with supplying the high-power batteries necessary to get a decent size fleet of PHEVs rolling down the nation’s highways.
Right now, the most promising technology that seems like it can provide the power densities required for the 100 to 200 mile target commuting range is Lithium-Ion. Car companies are already running test vehicles using lithium batteries, but cost is still an issue, and they’re coming up a little short on the range.
But they’ll get there: I believe that the power density issue will be solved within the next 12 to 18 months and manufacturing costs will be driven down by advanced yet-to-be-developed mass-production techniques.
So who’s in the battery business?
EnerSys (Nasdaq:ENS) is one of the largest manufacturers, marketers and distributors of industrial batteries. From submarines to spaceships – and everything in between – EnerSys has a battery technology to fit the application. It also makes the charging and power equipment as well.
Last Fall, the company launched its EcoSafe line of batteries designed for renewable energy storage applications. Targeted towards the wind and solar energy generation markets, this product line should see significant growth under President Obama’s energy initiatives.
It’s also working with a number of niche players to develop a Lithium-Ion line of batteries specifically targeted to the PHEV transportation market.
Based on comments he made this past Monday, Obama seems completely tuned in to our energy issues: “At a time of such great challenge for America, no single issue is as fundamental to our future as energy. It falls on us to choose whether to risk the peril that comes with our current course or to seize the promise of energy independence. And for the sake of our security, our economy and our planet, we must have the courage and commitment to change. I cannot promise a quick fix.”
I agree. But if we don’t get started, we’ll never get there. We’ll be watching.
Good investing,
David Fessler
P.S. If you’re looking for more ways to play the green energy boom, I urge you consider signing up for The Oxford Club. You’ll get all of our current recommendations and the Communiqué. You can sign up here. Then check out the recent portfolio updates.
If you’re already a member, you can log in here.
Today’s Investment U Crib Sheet
Any discussion of our nation and its place in the world seems to come back to energy independence and the ways we can pull ourselves away from our oil addiction. It’s why our energy and infrastructure expert David Fessler has been keeping us in the loop on the latest developments.
One of the biggest misconceptions lately has been the perception that our country is cutting back its use of fossil fuels, like coal. It couldn’t be more incorrect. In fact, our country is using more coal than ever. And with the amount of energy that we get from coal, it’ll be a long time before we can replace it. But that doesn’t mean that investors don’t stand to profit from our biggest energy source. “Renewable Energy Reality: Coal.”
David also showed us how energy and gas prices are inexorably linked last week. Read more on “The Gas Prices Rollercoaster.”
But just because we haven’t moved away from fossil fuels, doesn’t mean that we can’t profit from their movements. In fact, there’s been a unique situation called contango that’s been affecting the oil futures market. We’ve been covering contango since it began in earnest almost two weeks ago, but there are good and bad ways to play it. For clarification, we’ve included “How to Profit from Rising Oil Prices.”
- Plug-In Electric Vehicles: In Search of the Mass-Produced Hybrid
- Automakers & PHEVs: Between “Barack” and a Hard Place
- Is General Motors the Buy of the Decade? PHEVs Part Two…
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10 Responses to “Plug-in Hybrid Electric Vehicles: The Only Roadblock to PHEVs”
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David Fessler is an Advisory Panelist for Investment U and The Oxford Club, one of the world’s most exclusive and prestigious networks of private investors.
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February 7th, 2009 at 9:07 pm
I wouldn’t throw Ford on the don’t pile – We recently announced our electrification strategy to bring 4 new electrified vehicles to market by 2012, a small pure battery electric van for commerical use in 2010, a passenger car BEV in 2011, and next generation hybrid and a PHEV in 2012. We believe electrification will play an increasingly important role in transportation, although there are still questions to be answered, including how the market may develop. For more information on our plans, please take a look at http://ford.digitalsnippets.com/environment – it has the latest on our plug in efforts.
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February 8th, 2009 at 9:59 am
It all sounds so good and easy if you just suspend reality . . . If those stupid car companies hadn’t sold profitable SUVs for the last few years they would no longer have companies . . . Mr. Fessler (and Obama) seem to think that simply passing a law will make PHEVs appear. You may want to consider the scarcity of some of the minor and strategic metals required to produce those batteries, where most of those resources are produced, and who controls the future production . . . You’ll find that only Ford (if we’re talking the big 3) 3ven has a shot at fulfilling their requirements . . . then consider a little more closely the additional electricity needed. Sorry. Solar and wind do not produce baseline power. Coal, nuclear, and geothermal do. Solar and wind plants will require even more massive batteries to store the generated power for periods they cannot produce . . . assuming they can produce excess power . . . I am all for states rights and thinj that Califonrnia should be able to set its own emissions laws, but the reality is that this bill at this time amounts to assisted state-suicide, and CA may well take the big 3 down with them . . . all in the name of common sense.
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Olaf Olafsson Reply:
February 23rd, 2009 at 1:43 pm
Solar is going to be huge, not really surprising as the Sun is really the basis for life here on erth, Suntech hopes to reach “grid parity” in 3 years and then there will be no looking back.
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February 9th, 2009 at 5:19 am
Why should U.S.automakers be screaming when thier subsideries in the EU are making vehicles which can gve over 50 mpg and emissions have much better figures than US made vehicles.
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February 23rd, 2009 at 11:42 am
As the owner of two highway-capable (70 mph) EV’s, my take on the future is that the emphasis needs to be on lithium production. It is expensive stuff, and until the process and its by-products can be made more technically simple and environmentally acceptable, the lithium-ion battery powered car has a serious enconomic hurdle.
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February 23rd, 2009 at 4:08 pm
Anybody figured how GM is going to stay in business for the next decade ( The time required for PHEV Tech to become commercially significant ) ?…………JohnB.
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February 23rd, 2009 at 9:40 pm
First of all, where in the world is electricity so cheap and plentiful that it’s production has to be restrained? Get the infrastructure up and running, providing cheap and plentiful power, then talk about unleashing PHEVs onto consumers. There will always plenty of uses for electricity and alternative and renewable methods should eventually lower costs. The current idea of plugging in at night or off-peak hours will just mean a system under strain 24hrs a day.
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March 1st, 2009 at 9:54 pm
You made some good points there. I did a search on the topic and found most people will agree with your blog.
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March 20th, 2009 at 12:28 pm
Electric vehicles sound good in California; not so good in North Dakota (and I live nearby in Canada). What will cold weather do to the ability to hold a charge? 100 to 200 mile range is insuffucient for the distances around here.
Power to Grid – okay, so the system is sucking my car’s battery in the garage; then my son has to go to the hospital, and I go out to a nearly dead battery; Thanks but no thanks.
Another “solution” that only looks good on the surface.
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April 10th, 2009 at 12:29 am
An interesting view of the automotive industry. Where do you see the future of the industry, will it ever recover or will there be major casulties?
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