Greentech Media, a spin-off of the Prometheus Institute for Sustainable Development, has released a seminal report, co-authored by the Institute’s founder and president, Travis Bradford, and Swiss cleantech analyst  Dominic Hofstetter, Electric Vehicles 2011: Technology, Economics, and Market.  The report takes an analytical and objective look at the current state and future of the electric vehicle market, and asserts in no uncertain terms that the EV Revolution is here: “Light-duty vehicles will never be the same,” the report says.”In some applications and locations, the overwhelming economics of EVs will spur rapid displacement of ICEs [internal combustion engines].”

Travis Bradford refers to himself as a “reformed buyout professional,” who once did public-private equity investing through various partnerships. In 2003 he had a change of course and formed Prometheus Institute,  a nonprofit think tank, which has as its stated goal “connect[ing] the vast reach and power of industrial and capital markets with the technologies necessary to sustain and develop long-term economic well-being for people around the world.” Besides Greentech Media,  Bradford also co-founded, along with Richard Branson and Jigar Shah, the  Carbon War Room, which focuses on creating innovative, industry-based solutions to climate change.

When he’s not running the institute or being an angel investor in the cleantech sector, Bradford teaches at the University of Chicago’s MBA program, Duke University’s MBA program and Columbia University’s School of Public Policy.

 

You have said that this is a transformative time for the automotive market and that it's important to mark this transformation. What do you mean by that?

This year we have witnessed an emergence into transportation energy systems, light duty vehicles that are predominantly electric in nature. This is a trend that will grow for a long time to come. It’s important to mark the beginning of this transformation.

Like EV technology, the internal combustion industry is moving ahead and becoming more fuel efficient all the time, and there are new standards to ensure that this continues. But the reality is that hybrid electric vehicles have now become a permanent part of our architecture, and they're not going away.

Electric vehicles will follow those in a relatively straight-forward way. They will be a permanent part, if not a majority, of total sales for a very long time and they are going to change the perception of how people behave. EVs are going to change the fear premium that we pay on fossil fuels and capital and economic growth. To the extent that carmakers have had the ability to ramp up electric vehicle platforms relatively quickly, now oil shocks are far less of a threat than when you really had no alternative technologies on the horizon.

What we will do over the next five to ten to twenty years is we will learn and change our behaviors subtly to incorporate EVs into our decision making, into our daily behaviors in the places where it's most obvious to do first and then moving down the line to harder and less obvious places later. But this optionality that it gives us will change the whole economic landscape. It will be extremely hard to measure the value of this. It is sort of the difference between the EV1 that was crushed by a single company, and the current EV industry, which is now bigger than any one company. It will continue to provide options and force us into a new way of thinking that will seem very normal five or ten years from now but is very unimaginable even today.

 

California has long been a leader in green technology and sustainability. It also probably has more cars driving more miles than any other state in the US. Do you see California as a primary driver for the EV revolution?

Absolutely, and probably even tighter on that would be PG&E [Pacific Gas & Electric] territory in Northern California. That's why they have partnered with us in the last couple of years to do an EV Conference at their headquarters. When you think about the clear niche market for EVs, the people who are least daunted and most capable of making the adoption decisions are going to be people in the Bay Area. Yes, this is definitely ground zero where it's all getting started. Also, California is where most of the policy [supporting green energy] in the nation comes from, so I tend to spend a fair amount of time and attention on California.

 

Why do you say this action will be specifically the Bay Area?

 It's probably bigger than just the Bay Area; I’m sure there are pockets of excitement elsewhere. But you need a sufficiently sympathetic buyer group. People in tech in California, people who are comfortable with emerging technologies, and in many cases, people who work for companies that are helping develop these vehicles, are already predominantly located in Silicon Valley and around the Bay Area.

Initial adoption of pure electric vehicles depends on a relationship between the people who are manufacturing the cars, the funders who are funding the companies that are manufacturing the cars, the people that work in these companies and their ecosystems. They are the obvious first buyers, just like Henry Ford selling most of his initial production to people working in his factories. He created his own demand in some sense, and I believe that's probably the case here too.

 

How can government either inhibit or enhance the EV revolution?

What you really need to do is focus on customer adoption issues, and there are two ways you can go about it:  The simple but expensive way and the complicated, but perhaps in the long term the less expensive, way. The simple and expensive way is to basically just give some form of rebate, or preferential treatment, or some substantial amount of value to someone who is thinking about adopting one of these vehicles.

The more complicated way is to give people other benefits or other access points that will allow them to make the adoption switch. An example would be preferential treatment when negotiating with the utility about installing a charging station in someone’s home. Another example would be creating work programs that can cluster vehicles around certain office parks or provide preferential parking or preferential driving treatment.

Without changing the economics, you can make it easier or more delightful to choose to go electric. It seems to me that the things that are really driving adoptions are the things people tell me that they appreciate: ‘I get a check back in the mail that covers a big chunk of the upfront cost in the form of a rebate or a tax credit,’ or 'I can use the HOV lanes.’ People love that in California. ‘I'm leasing this product from the manufacturer, and so therefore I don't really have to take too much technology risk, in that if it doesn't work in two or three years I just give it back to the manufacturer, and I don't have to worry about what the batteries are worth or how much life is left on them.’ 

From a policy perspective, you have to think to all those different market obstacles that government can go after. It's different in renewable energy generation. One of the big problems in renewable energy, for instance, is that there's not a good finance mechanism to spread the cost of the generation over the life of the app, but that's not the problem here. The problem here is how to take the perception of risk out of the transaction and inform people about what their options are.

So, really what you've got is, in the language of economics, either risk or informational market obstacles, and you've got to really hit those hard if you want to drive adoptions.

 

That leads into the big topic of EV charging infrastructure. Government is highly involved in regulating and building whatever infrastructure might be the most effective. What do you think the ideal infrastructure would look like for EVs? 

The simple answer is that the charging infrastructure needs to be where cars are parked already, otherwise it requires a behavioral change for people to go and park their cars somewhere that they're not currently being parked and charge them while they're there. It’s very difficult for me to believe that people are going to make that behavioral change, particularly because they don't have to. There are plenty of places cars are already parked where charging stations can be installed - basically at home and at work. You need to stop worrying about putting them in public places or gas stations. We need to get out of the mindset of pulling into a filling station where some attendant fills up our tank and cleans our windows and checks our tires. That's just not the world we're going to.

Anytime a car is parked, it should be charged, just like anytime someone walks into the house he plugs in his cell phone so it’s ready for the next day. This notion of stopping off at the mall and being able to plug in for a little while to get a little more charge, I don't think that's really going to matter all that much. There's a behavioral problem and an economic problem and nobody's ever made a strong economic case that third party charging stations that aren't located at a home or business are going to be economically viable.

 

Is that because of the length of time it takes to charge an EV? If you run a car for 40 or 50 miles, how long would it take to recharge your car?

Depends on the kind of charge you're going to use. If you're going to use a standard plug for a battery electric vehicle, it will probably take most of the night. If you're going to use a Level 2 charger, you can probably do it in four or five hours. If you use a Level  3 charger, you can probably do it in an hour or two. The problem, though, is the bigger the charger, the less likely you're going to get it approved by the utility for this installation. Utilities are very concerned about the power draw off of these chargers, and rightly so.

 A Level  2 charger draws as much power as an entire house, and each house is usually connected to a distribution transformer that has five or six houses on it. If you add two cars on a cul de sac with five or six houses on it, you're increasing the draw on that distribution transformer by the equivalent of two more houses. The transformer is not ready to do that. It also changes the lifetime of the transformer because it isn’t able to cool down at night the way it does with a typical home load. The utilities are rightly very concerned.

So, if you are going to need to upgrade the transformers to handle Level 2 EV chargers, who is going to pay for that upgrade? Is that going to go to the homeowner who will need the extra electricity? How do you determine the value of that? Do you rate-base the whole thing and charge everybody so one or two percent of the people can get transformers? This is a very big distribution of wealth issue.

While utilities care a great deal about level 2 chargers, they do not care at all about level 1 chargers, because it's the same as the draw off your computer or a washing machine. They don't care, they can handle that. In fact, with the current system it would work just fine, because if you're charging in the middle of the night, you're probably paying 12 or 18 cents per kilowatt hour, or maybe more depending on which tier you're in, and it probably costs them marginally 2 cents. They're perfectly fine with you using the Level 1 charger. When it starts causing them to start having to exchange capital assets, they start caring a great deal.

 

What kind of EV technology will take leadership in the short run?

Utilities have a great deal to say about Level 2 chargers, and therefore they have a lot to say about battery electric vehicles. They don't really care about electric cars; they care about not incurring cost over the entire system to benefit a few people. Utilities basically have two objectives: Stability in the system and cost minimization. Interestingly enough, revenue maximization - new revenue that might come from selling more electricity - is not really interesting to them.

Battery electric vehicles require Level 2 chargers to function, because without them, you're not going to be able to park away from home very easily. You're not going to have a lot of flex in the system. Plug in hybrid electric vehicles [PHEVs] are going to be far better from the consumer and the utility and energy providers point of view as this goes into the mass market for reasons having everything to do with infrastructure.

 

Do you think that local distributed power, like local solar power would help in this area?

I don't think it does, actually. I'm a solar guy, but I think that actually adding distributed non-dispatchable generation like [locally generated] solar makes grid management harder. Adding electric vehicles with large charging in off peak hours makes the grid challenges even more difficult. I think it's great that people want to have solar rooftops and parking canopies and they want to charge cars under the canopies and all of that. But it is all perception, not reality.

The reality is that the amount of power you can draw off a rooftop is a fraction of what you would need to do any meaningful amount of charging. The rate of capture is a fraction of what the rate of fueling would be. The likelihood that you would have the sun shining and the cars charging at the same time is low. These things don't really have anything to do with each other. There are other ways to deal with this, but this is really solving two different problems that are not really all that related.

 

You mentioned that EV's might have trouble getting cheaper over time. What do you mean by that?

What I actually said is that they may have trouble getting relatively cheaper. That is an important distinction. They will get cheaper, but so will operating an internal combustion vehicle, all things being equal, because they're going to get more efficient too. They are relatively cheap now, but they may have trouble getting relatively cheaper. So the race is on.

Good news is that they are already relatively cheap. Most people think that because buying an EV requires more capital expenditure up front in paying  for batteries and some other stuff, that EVs are more expensive. But when you think of the total cost of operating the vehicle, including the cost of owning the vehicle and operating it, it's cheaper. EVs are already the cheapest way to do transportation, even at today's prices.

 

People cringe when they hear about the cost of replacing those batteries.

Maybe, and to some extent the auto manufacturers are going to have to figure out how to bridge that. By the way, this is much less of a hurdle for a plug-in hybrid electric vehicle, 6 kilowatt hours will fill the battery, as opposed to a battery electric vehicle that needs 25 kilowatt hours. That's another reason why, if battery anxiety is such a big deal, plug in hybrid electric vehicles will be easier to adopt. They're cheaper up front, less of a risk on the battery on the back side, as well as a number of these other things that make you feel comfortable.

We'll need to work through some of that stuff, and we'll need to get comfortable with the batteries and we'll have to convince ourselves that Volt batteries don't catch on fire!

 

About the study itself - you said it wasn't financed by any of the stakeholders. What makes this study something that someone would depend on for accurate information?

Economics, just like science, should be non-arguable. People use science and economics as tools to make their political or normative points, but that's beyond the scope of what we do. Hopefully you can tell that from the way the material is treated. Greentech Media just reports and analyzes, it doesn't lobby, and neither does the Prometheus Institute. I have personal credibility in this state, I'm a teacher and researcher and I've been working on these issues for a very long time and have a good track record.

The process that we go through is nothing surprising. It's an analytic process where we basically look at all the stakeholders, all the plans, aspirations. We look at the demand side, look at the supporting technology required to bring it to fruition in current status and then forecasting forward for a few years - where they can go in terms of technical and economic characteristics. Then we synthesize that into some kind of understanding of what are the key drivers, what are the limits to growth and basic analytic frameworks.

I'm not starry eyed about EVs; I want to be very clear about the challenges because EVs are an inevitable and meaningful part of our transportation infrastructure, and the faster we can get there, the better off we are. I want to make sure we're not going to fool ourselves, spend money badly, chase avenues that aren't economically or socially viable. That's why I tend to be pointing out limits or difficulties, because I already believe this is an important and inevitable shift.

I have a pretty hard-edged analytic tone to everything that I do, but I didn't call it "The EV Revolution Has Begun" for nothing. This change is permanent and profound, though it will take awhile for full realization.