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Green

EV’s, power, and enough money to realize the value

Thursday, May 01, 2014   by: Greener Ideal

A recent press announcement from Cars.com clearly articulated several EV issues at hand. According to the publication’s Chief Analyst Jesse Toprak, “Price points for many pure EVs are getting closer to where it makes sense financially for consumers. The biggest limitations for growth in the EV segment are battery costs and range, and the lack of proper infrastructure. Ultimately, mass adoption will require sufficient infrastructure to be in place.”

Although Toprak’s assertions are clearly applicable from a pure EV product perspective, the quieter elephant in the room may end up being overarching cost limitations driven by expansions of the nation’s electrical infrastructure as whole. In this case, many will fail to accurately calculate the potential of increased operational costs on EV customers, and particularly as one effort begins to run into the other.

To be sure, practical development of a discrete, national electric-charging framework will undoubtedly increase the rate-of-adoption for electric vehicles, but any investment will also end up being accrued, amortized, and priced as a cost component guided by the ‘average’ domestic kilowatt per hour. In this event, the definition could be problematic in terms of increasing operational costs for EV’s downstream, since costs associated with growing the nation’s electrical grid are emerging and significant, just at the moment when EV’s are finally getting their due.

Unfortunately, there are few analysts who will venture a guess as to what the actual cost of a comprehensive national electrical-charging infrastructure will be. But, on the other hand, there are all kinds of financial prognostications available in the case of cost projections associated with the development of an expanded national grid, and nearly all of those calculations suggest significantly higher costs.

In the event, then, and to leverage Robert Heinlein momentarily, “there ain’t no such thing as a free lunch’ on the horizon, whether it be near or far. For example, according to statistics provided by a 2005 Edison Electric Institute (EEI) report, it was suggested that electrical rates would increase by 47% between then and 2030 (avg. 3.13% year-over-year). However, those projections have to be considered low in light of today’s spikes in national power usage and subsequent pricing, since the original report’s calculations did not include re-engineering or resolution costs associated with the EPA’s ‘war on coal’, nor did it count the cost of parallel hikes related to expanded natural gas development

Nevertheless, to establish a simple baseline in order to gain a sense of what might be coming for the EV owner, the currently recognized national average of $0.12 per KWh is expected to slide up to an average of nearly $0.19 per KWh during the next 15 years. Based on the 2005 numbers, then, this means that a current monthly battery re-charge cost of $86 dollars to recharge a Nissan Leaf ($0.12 x 24 KWh x 30), is projected to jump to $88 by the end of the year, then jump again to $90 at the end of 2015.

However, the same report suggested that in order to deal with the development of overall ‘next-fifteen’ national infrastructure expansion, the total was calculated to be on the order of $325 Billion, in 2005 dollars, but today the same value is calculated as being just short of $400 Billion. Therefore, and to the point, baseline electrical costs are going up, while at the same time, more and more EV’s will become padlocked to the socket, the grid, and consequently, ever deeper withdrawals from EV owner checkbook’s due to increased utility costs.

Granted, continual price point reductions for EV’s will draw closer and closer to ‘cost versus value’ propositions similar to those of HEV’s, PHEV’s, and even some ICE’s. But the concern, then, will be that by the time reasonable economies of scale finally settle, back-end daily maintenance costs could overcome any value the technology might offer. Of course, perhaps I am being a bit too sensitive, but on the other hand, maybe not; only time will tell.

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