Battery Cars Attract Investors Who Ignore Range Anxiety

It’s a bit like those old Looney Tunes cartoons, when Road Runner races off a cliff and it takes a little while for gravity to establish its case against the horizontal and the inevitable precipitate, vertical descent begins. How else can you explain the fact that investors still take battery cars seriously, after the invention of the plug-in hybrid, not to mention the extended range electric vehicle (EREV)?

Battery-only cars lose out on every front. The batteries are hugely expensive – up to $15,000 a throw for the Nissan Leaf being launched later this year – much bigger and pricier than the batteries required for hybrids, and EREVs like the Chevrolet Volt, or plug-in hybrids like the next generation Toyota Prius.

Batteries instil range anxiety in the occupants and lack flexibility. Plans to cure range anxiety with stocks of new, charged up batteries and quick replenishing points look economically and technically dubious. Environmental claims for battery power crash and burn at the first hurdle, which shows coal power will be the main provider, while the electric grid is hopelessly inefficient, wasting huge amounts of power between furnace and battery. The fact that huge government subsidies, notably in France and the U.S., based on an increasingly flimsy argument that excessive CO2 is endangering the planet, also suggests that politics, not economics, is driving the battery agenda on.

Range cut
The electric Mini, when it was first unveiled at the Detroit Car Show in 2009, was said to be able to make it around Lake St Clair, about 150 miles. Now the claim for most battery cars seems to have been cut to about 100 miles, but that will only be on a good day when the car is ambling along with one light-weight, calorie watcher on board, with no hills, lovely spring weather not requiring air conditioning, and a relaxed driver ahead of schedule able to eschew overtaking.

In June of this year, a race for electric cars has been arranged in Paris, with the idea of showing how exciting battery cars can be. There will be a number of Tesla sports cars, by all accounts. Please note that the race through the streets of Paris is only over 25 miles, and even that is likely to mean that the “winner” will probably be reduced to the speed of a golf cart as it approaches the tape. Or maybe, like Olympic indoor sprint cyclists, the contestants will prowl slowly until the chequered flag is in sight, before unleashing a final surge.

Extended range Volts or plug-in Priuses can be used with their internal combustion engine allowing a range of up to 400 miles, while still giving up to 40 miles of battery-only use if required in the Volt. You simply top them up at the gas station, or plug them into your house when you get home. They provide huge flexibility and range, albeit at a high cost. The Volt is likely to be priced at about $40,000 before government subsidies, but at least it is a big, roomy car, not a weeny, city runabout. (Plug-in hybrids use a gasoline engine to power the vehicle, with the battery augmenting the engine, and allowing some electric-only travel. Volt-type vehicles use the electric motor to power the car all the time, initially just with the battery, but with a small gas, diesel, gas turbine engine or fuel cell one day, to replenish the electricity when it runs out)

Better Place
But projects like Better Place, a Palo Alto, California-based company run by Shai Agassi, formerly the president of SAP’s Product and Technology Group, still impress investors enough to persuade them to part with huge sums of money. Last month British Bank HSBC said it was pumping $350 million into Better Place, which is developing charging facilities for electric vehicles, battery swap stations and general services to spur the use of battery cars. Better Place, at the Frankfurt Car Show last September, agreed to buy around 100,000 electric cars from Renault of France for delivery up to 2016 for use in Israel and Denmark. Renault, and its Japanese affiliate Nissan, reckon that by 2020, 10 per cent of global car sales will be of battery powered vehicles. Manufacturers like VW disagree, expecting sales of only 1.5 to two per cent. Whoever is wrong is going to face down some angry shareholders. Last month when HSBC announced its investment, Better Place was said to be worth $1.25 billion.

Better Place founder Agassi said the deal with Renault marked the end of the oil age for cars, but he might just as well have said this was the start of coal power, because much of the electricity generated to power the batteries will come from the burning of fossil fuels.

Big flaws
And critics say the plan has big flaws. The economics of Better Place’s idea of having huge stocks of spare engines hanging around waiting to be swapped, look poor. The technology of quick recharging is questionable. Some experts say if you overdo quick recharging, you quickly render the battery useless. Other experts question the environmental benefits assumed from battery power, pointing out that although electric motors are super efficient at using power, up to two thirds of electricity is lost between the generation of the electricity and getting it to the battery.

Oliver Hazimeh, head of management consultant PRTM’s global e-Mobility Practice, thinks Renault-Nissan has overestimated the likely global demand for battery cars, although he’s more optimistic than the likes of VW. Hazimeh, on the telephone from his Detroit office, said by 2020, battery cars will account for four per cent of global demand and variations on the plug-in will add six per cent.

Plug-ins and EREVs will take an early lead in the electrification race, but batteries will start to rally by 2016 as costs come under control, and range issues become less of a negative.

“We see an early advantage for plug-in vehicles, but as battery costs come down demand will pick up steam. The value proposition now until 2018 is more in favor of plug-ins, by then battery costs will come down and will be economically more viable,” Hazimeh said.

$15,000 battery
Hazimeh said battery costs by 2010-2011 will be between $600 and $700 per kilowatt hour, but will be cut to between $300 and $325 by 2020. Currently batteries cost about $1,000 for a kilowatt hour.

“We expect initial versions of the Nissan Leaf battery car to cost around $15,000,” said Hazimeh.

He reckoned that vehicle manufacturers will concentrate on cutting the costs of batteries, before turning to the range issue towards 2020, which could be extended to perhaps 140 or 160 miles.

British Petroleum might not know much about cars, but it is an expert in the energy field, and obviously takes a big interest in how automobiles will consume energy. It has taken a look at the automotive industry’s power choices, and although it has an obvious axe to grind, decided that hybrids plus gasoline beat batteries hands down.

In a speech in Brussels last month entitled “Energy and Climate Policy after Copenhagen – a pragmatic response”, BP Refining and Marketing Chief Executive Iain Conn said hybrid/gasoline is a much better way than the battery to improve fuel efficiency and cut CO2 emissions.

“The most effective pathway to lower carbon transport is through making existing vehicle engines more efficient. In particular, there are major gains to be obtained from advanced gasoline engine technology. Combined with step-by-step hybridization – starting with recovery of braking energy – we can see the potential for nearly halving CO2 emissions per kilometer. And importantly this can be delivered at a much lower incremental cost than a full battery electric vehicle,” Conn said.

(BP didn’t reply to questions seeking more details about its battery conclusions).

Cellulosic ethanol
If you add in cellulosic ethanol that doesn’t jeopardize food production or endanger biodiversity, you will really be motoring towards significant improvements in CO2 performance, Conn said.

In fact, the underlying driver of battery power is the promise of huge subsidies from governments seeking to stop cars emitting excess carbon dioxide which was thought to be warming the planet and endangering the human race.

Recent controversies, which show that data used by governments to justify action to curb CO2 might not have much basis in fact, threaten to undermine the conventional wisdom that humans are damaging the climate. News that basic data used by the U.N.’s Intergovernmental Panel on Climate Change had been distorted to exaggerate the case for global warming, was followed by the Himalayan glacier story. This purported to show that all the glaciers in the area would melt by 2035, but was based on hearsay, not science. The same was true for reports on Amazon jungle retreat and accelerating hurricane activity; all shown not to be linked to human CO2 activity. This was in addition to the “hockey stick” controversy”, which was said to show a recent surge in warming after about 1,000 years of steadiness. In fact, researchers used an algorithm designed to ignore evidence of previous warming and exaggerate recent data.

Inferior in every way
Paying more for a battery car which is almost guaranteed to leave you stranded someday and which is inferior in every way to conventional automobiles, might have been acceptable if it saved future generations from global warming. If that conclusion is in doubt, battery cars will go the way of the dodo. At least plug-in Priuses and extended range Volts can claim to improve economy without dying beside the road.