Guest Aeuhhh???? by David Middleton
Economics
Oil Needs to Fall Below $20 to Compete With Green AlternativesBy Mathew Carr
August 5, 2019, 4:40 AM CDT Updated on August 5, 2019, 9:18 AM CDTWind and solar power can produce seven times more useful energy for cars, dollar for dollar, than gasoline with oil prices near current levels, according to BNP Paribas SA.
Oil will have fall to $9-$10 a barrel in the long-term in order for gasoline cars to remain competitive with clean-powered electric vehicles, and to $17-$19 a barrel for diesel, Mark Lewis, global head of sustainability research at BNP’s asset management unit, said in a research report. U.S. benchmark crude was trading at about $55 in New York on Monday.
“Our analysis leads to a very stark conclusion for the oil industry: for the same capital outlay today, wind and solar energy will already produce much more useful energy for EVs than will oil purchased on the spot market,” Lewis said. “These are stunning numbers, and they suggest that the economics of renewables in tandem with EVs are set to become irresistible over the next decade.”Lewis coined the term “energy return on capital invested” to explain the economics of road transport. It’s a measure of the money spent on oil and renewables and the differential in their net energy produced when used to provide mobility, he said.
[…]
Bloomberg
Oil Needs to Fall Below $20 to Compete With Green Alternatives…
Renewables must be so feeble, they now need two fake energy acronyms to make them viable.
First we had Energy Returned on Energy Invested (EROEI) and now we have Energy Returned on Capital Invested (EROCI)…
Stark raving mad numbers
The EROCI chart is comparing the capital costs of building offshore wind and solar PV power plants to the sales price of crude oil. It doesn’t get much more apples and oranges than this. Based on this bass-ackwards math, $9/bbl oil is worth more than $60/bbl oil. I only minored in math and spent most of the last 40 years involved in economic geology… But that is just fracking mental.
“Our analysis leads to a very stark conclusion for the oil industry: for the same capital outlay today, wind and solar energy will already produce much more useful energy for EVs than will oil purchased on the spot market.”
Mark Lewis, BNP Paribas, global head of sustainability research, BA in Spanish & German, MPhil in Latin American Studies, MA in German – LinkedIn
No business makes an investment decision based on “energy return.” Returns are denominated in $$$ or some other form of currency.
If his point is that oil would have to drop to $9/bbl for gasoline prices to be low enough to make ICE vehicles less expensive to drive than EV’s… We already have a metric for this concept: Miles per gallon equivalent (MPGe). EV’s are less expensive to drive, at least on paper… Yet the Ford F-Series pickup truck outsells all makes and models of EV’s combined in these occasionally United States… by a wide margin.
To be fair, the article does go on to acknowledge that oil has a YUGE scale factor advantage over unicorn dust… But the unicorn dust is actually a lot more expensive than indicated in Señor (or is it Herr?) Lewis’ EROCI graph.
Why is there such an incessant need for these people to make up fake metrics, fake numbers and declare an end to reality? I think this explains the problem: BNP Paribas, “The bank for a changing world.”
In the meantime, reality marches on…
Hat tip to “Carl” for the WUWT tip submission.
LSD, or wot?
BNP Paribas must still be butt-hurt about a non-Frenchman winning le Tour de France again.
There’s no other logical explanation, Captain.
One little mistake, we all occasionally make mathematical errors. How many math tests did any of us get 100% correct? (for myself maybe 1 out of 100). The author must have meant, “oil must fall below $200/bbl to compete with wind/solar”. That works out about right.
The ‘savings ‘ in running costs for EV come from the fact that there power source currently does not get hit for a massive tax take like ICA ones do. That will have to end once EV hit significant numbers because this tax take is used in many areas to found them .
Its an irony that EV’s ‘success ‘ would spell an end to the very thing that makes them cheaper to run , not to buy where they cost more.
Wind and solar have ZERO ability to recharge electric cars on demand when needed. There utility is only a maybe. If you happen to need it at the right time.
Renewables only as a source effecively makes electric cars useless.
Dispatchable backup is essential.
Oh and I would love for them to elaborate more on how crude would need to drop to $19/bbl for diesel to be more useful than the alternative…you know…that Tesla Semi that no independent source has been allowed to test yet.
And in other news…
“Tesla reports larger-than-expected losses of $408 million in second quarter. Tesla reported Wednesday a wider-than-expected loss of $408 million, or $2.31 per share, and generated $6.3 billion in revenue in the second quarter despite record deliveries of its electric vehicles.”
A loss of 0.4 billion on a revenue of 6.3 Billion does not seem disastrous to me. It is the sort of discrepancy that could be closed by better management methods, improvement in productivity, reduction in stock inventory, a more aggressive buying policy as examples of the actions that I have seen turn failing companies around in fairly short time scale. But the keys are: a product that is in demand , and, crucially, good managers.
Most gasoline engines are about 35% efficient, meaning that 35% of the heat of combustion of gasoline is converted to work to move the car. The heat of combustion of gasoline works out to about 35 kWh per gallon, so that a gallon of gasoline delivers about 12.3 kWh of power to the car. At about $2.80 per gallon of gasoline, the cost per kWh of power is about 23 cents.
Electric motors are normally about 80% efficient, so that supplying 12.3 kWh to drive an electric car requires about 15.3 kWh of charging power. Of course, due to the higher weight of storage batteries compared to a gasoline engine, an electric car might require more power to move the same distance at the same speed as a gasoline-powered car. Whether this results in any savings over gasoline engines depends on how the electricity is obtained.
A combined-cycle natural gas generation plant (where natural gas is burned in turbines, and the hot low-pressure gases are heat-exchanged to generate high-pressure steam and provide further power) can have an overall efficiency of about 60%, so that charging an electric vehicle with 15.3 kWh costs 25.5 kWh in heat of combustion of natural gas, which is less than the energy stored in a gallon of gasoline.
Coal-fired plants are only about 35% efficient, so that charging an electric vehicle would cost 43.7 kWh of heat of combustion of coal, or more than the energy stored in a gallon of gasoline.
Using an electric vehicle which is charged by a fossil-fuel power plant essentially transfers the location of the emission of pollutants from the car to the power plant, without eliminating them. Natural gas burns cleaner than gasoline, but coal is much dirtier (in terms of real pollutants such as CO, NOx, and SO2).
Nuclear power plants do not produce pollutant emissions (other than spent radioactive fuel) but their capital cost is much higher than that of gas-fired or coal-fired power plants.
The problem with “renewable”-fuel charging stations is that most people with electric cars want to drive them during daytime or early evening, and recharge them overnight. Solar power is obviously not available at night, and average wind speeds are much lower at night than during daylight hours.
You also need to factor in about 80% efficiency in the charging process, so 80% of 80% knocks it down to about 64% efficiency from the point the electricity is at the charger. Factoring in energy delivery efficiency gets far more complicated for both electricity and petrol.
You’ve also forgotten about TRANSMISSION LOSSES. Windmills are seldom located where the demand for power is, and transmission (and conversion) losses all have an impact as well. Intermittency also guarantees that much of the ACTUAL recharging power WILL necessarily be from fossil fuel powered generating plants and NOT from windmills and solar panels.
Plus you probably LOSE some storage capacity in EV batteries as they go through charge-discharge cycles, while ICE vehicles continue to get the same energy out of the fuel they burn.
Oh, and we’re still ignoring the fact that may people don’t have off-street parking or garages, and therefore have no access to “overnight” charging for the EVs AT ALL.
http://www.caiso.com/Pages/default.aspx
That is the California Independent Systems Operator. As of today at 12:30 it shows renewables supplying 44% of current demand. In June, renewables provided 35% of electrity demand.
Electricity is expensive: my cost at 12:30 is $0.46/kwh (rate depends on time of day). My less thrifty neighbors are “above baseline”, so they pay more, unless they have put up solar panels, which indeed some have.
I voted against the Renewable Portfolio Standard, but I was in the minority. I mention these figures as examples of more and more fairly reliable statistics about costs and availabilities that I see being publicly available as time goes by.
EROEI is a perfectly sane metric
That’s why nothing here is denominated in Btu, kWh or joules…
https://www.marketwatch.com/investing/stock/xom/financials
David Middleton: That’s why nothing here is denominated in Btu, kWh or joules…
That’s a non sequitur. No one metric is completely adequate by itself, but EROEI and EROCI are reasonable metrics to add to the list.
Not for investing money.
Leo Smith, maybe you should have added /sarc. Not everyone understands the EROEI gives the same value to a kw.hr of electricity on a sunny windy cool day as it does after a week of cloudy calm scorching hot days. Doesn’t work that way with all the grid poison renewable junk power on the grid. Nobody cares about the energy in energy out the only metric that matters is that the k.wh price is 10 fold more during the hot spell.
And who would have thought that such honest finance advice would come from a company with such a great reputation?
https://dealbook.nytimes.com/2014/06/30/bnp-paribas-pleads-guilty-in-sanctions-case/
https://news.efinancialcareers.com/uk-en/326970/bnp-paribas-investment-bank-redundancies
let me know when solar/wind materials built w/o using oil based materials.
dmacleo: let me know when solar/wind materials built w/o using oil based materials.
I am looking forward to that as well.
I look forward to peace on earth.
AND without using fossil fuel constructed and powered machines to mine materials, transport materials, assemble, transport assemblies, erect assemblies, demolish them at end-of-life, and transport/dispose of the “dead” solar panels and windmills.
funny I never see an electric truck out plowing snow in extreme cold weather here.
would like to see one running all night lifting a plow (electric, BOSS 9.2) and running front and rear window defrosters full blast all night.
that “wasted” heat from ICE not really wasted up here 6 months a year.
dmacleo
Yes, and you don’t see the calculations for the efficiency or cost of battery systems calculated for Winter when the batteries have reduced capacity and some of the energy has to be used to keep the driver/passengers warm.
Clyde Spencer; Yes, and you don’t see the calculations for the efficiency or cost of battery systems calculated for Winter when the batteries have reduced capacity and some of the energy has to be used to keep the driver/passengers warm.
An associate of mine, who wishes to remain anonymous, lives in Denver and drives his Tesla year-round. In winter when there is enough snow, he drives it with his whole family in it to ski up in the mountains.
In my VW Jetta I can drive from here (San Diego suburb) to his house in 17 hr, including stops. With charging stations as they are now, his Tesla could make the trip in 19 hr. However, I seldom make the drive non-stop, but overnight somewhere in between. With an overnight charge, the shorter range of the Tesla only adds 1 hr to total lapsed time.
At about the time that I bought a new VWJetta he bought his Tesla. We are keeping track to see who has the lowest lifetime cost. He has roof-mounted solar panels for electricity, which he essentially leases fro a flat monthly rate. He saves a lot on electricity. He does not pay anything for recharging his Tesla at night.
Teslas are definitely niche cars, as he freely admits. His other car is an above-average-sized SUV.
dmacleo: funny I never see an electric truck out plowing snow in extreme cold weather here.
99% of the vehicles on the road can’t do that job.
Contrariwise, you don’t see people driving snowplows to shop for groceries, drive on their vacations, or deliver mail.
That’s because an ICE-powered snow plow already moved the snow out of the way.
David Middleton: That’s because an ICE-powered snow plow already moved the snow out of the way.
Not here, not most places in the US, and not most of the year anywhere. Even Upstate New York (e.g. Rochester which averages 100 in of snow per year) does not use its snowplows every day in winter, and does not use them to carry the mail or FedEx and UPS packages.
Let me know when snow plows are delivering the mail in CA and TX.
This sentence was written in English…
Snow plows and other snow removal vehicles only clear the snow when it’s blocking the streets. It doesn’t snow most of the year. When there’s no snow, they generally take the plows off of the trucks and use them as trucks.
when we had local fedex contract in 2017 we could carry packages for them after plowing lots. we chose not to as we had too many other commitments but a driver was allowed to take packages and deliver if desired and get paid extra.
so yeah, snow plows can deliver fedex.
I get groceries often when out plowing. safer than having wife drive 30 miles into town to do it.
my postal carrier has plow mount on his truck.
my bosses plow truck also tows a camper so the vacation meme covered too.
rural area.
lot of trucks. most economical (thats not just fuel economy) tool for the job.
Someone is going to have to scoop my brains out so I can understand drivel like this…BIZARRE!
EV’s are less expensive to drive, at least on paper… Yet the Ford F-Series pickup truck outsells all makes and models of EV’s combined in these occasionally United States… by a wide margin.
For some reason, Ford is developing an EV-150. We’ll see how well they do.
Hell, Tesla’s EV pickup truck is more popular than the F-150… and it doesn’t even exist… Nor does the electric F-150… Ford’s train-towing stunt notwithstanding.
David Middleton: Nor does the electric F-150.
My mistake. Ford is developing (and advertising) a hybrid F-150. Chevrolet had a hybrid Silverado (iirc) that did not do well in the market.
Oh Ford is teasing an electric F-150… Musk doesn’t have a monopoly on hype.
David Middleton: it doesn’t even exist… Nor does the electric F-150
By coincidence I came across a plug-in hybrid F-150 a couple hours ago. It’s owned by SDG&E.
Prototypes don’t “exist” economically.
another opinion: https://www.insidehook.com/daily_brief/vehicles/gm-volkswagen-hybrids-or-electric-vehicles
“But with plug-in electric vehicles currently making up only 1 percent of the U.S. market, it remains to be seen if demand will keep up with investment.”
Matthew, it appears you believe in marketing hype over markets. What is your educational background and work experience? You seem big on the future, but what is your past?
Dave Fair: PhD in statistics. Research in health, mostly brain and behavioral health.
At one time, air travel made up only 1% of trans-Atlantic travel. At one time, turbine engines powered only 1% of commercial flight. At one time, powered vehicles did only 1% of American plowing.
My colleague in Denver owned a Leaf before owning his Tesla, and I owned a Corolla before owning my VW Jetta. His detailed 5-year cost comparison, Leaf vs Corolla, actually favored the Leaf — but the comparison was unfair because, among other details, he paid no tax toward maintaining the roads. But major factors included oil, brakes, and transmission; he did include depreciation of the battery. That was a couple years ago. I expect to read many more comparisons.
Even though I am getting old, the future is where I expect to do my living. A lot of the pros and cons of electric vehicles and wind and solar power depends on how fast the costs of production can be reduced. And back to the main theme, the future is where the investors expect to reap their returns.
For more detail about me, look me up at ResearchGate. A few of my papers are there.
“Based on this bass-ackwards math, $9/bbl oil is worth more than $60/bbl oil. I only minored in math and spent most of the last 40 years involved in economic geology… But that is just fracking mental.”
Renewables are worthless because they’re more expensive. Cheap energy is worth more. $9/bbl was worth more. We built our country with oil like that. If it was worth more because we had to pay $100/bbl, we’d be like North Korea. That poor.
Price is related to worth. It’s not always the same thing. Build a country. What has more worth to you? $9/bbl oil or $100/bbl oil? $100/bbl oil is worthless to you.
$100/bbl oil is worth more than 10× $9/bbl oil to someone deciding whether or not to invest in oil production.
And if I get a windturbine subsidy of $.05 per kilowatt generated, a wind turbine to worth more me but not to society. The wind turbine is worth less to society because I just farm the government for money.
I don’t know of anyone who is in business for “society”… Except maybe social justice warriors… But that’s not a real job.
Capitalism is good for society. It’s an argument to win with. We say, Look at Venezuela. They aren’t capitalists. I appreciate your articles. I use this site to keep up with the climate news.
I agree capitalism is good for society… Unfortunately most people who claim to be doing things on behalf of society aren’t fond of capitalism.
Just another bogus religious argument fabricating nonsense into faux facts to peddle the faith.
No business makes an investment decision based on “energy return.” Returns are denominated in $$$ or some other form of currency.
Are you saying that the price of TWHs will not be determined by the purchasing power and preferences of the customers? Absent even more onerous govt intervention than we have now, wherever there is demand for TWHs, the cheaper suppliers will have the advantage.
As you wrote, the performance of the wind and solar farms is not likely estimated accurately. But some day they will be. If it should turn out that they produce TWHs more cheaply than fossil fuels at the equivalent of $20/barrel of oil, then the solar and wind farms will be competitive in the market or force down the price of fossil fuel.
Say for the sake of argument that you want to sell electricity in the Imperial Value where most of it will be used in the daytime for pumping irrigation water. It’s only one niche, but there are lots of small niches in the US where electricity from the renewable energy sources can start competing with electricity from fossil fuels. It’s all a matter of continuously reducing the costs of manufacturing the devices.
Do you not know how to read? This sentence was also written in English…
David Middleton: Do you not know how to read? This sentence was also written in English…
Do not be simple minded. Even with batteries the more watt-hours you can make per $billion the better will be your financial return.
Perhaps we could rescale the graph to $$$/kwh, to get over your perplexity about cutting the costs of production.
Keep your mind on the future. Turbine engines didn’t drive reciprocating engines out of airline travel the first day they were flying.
Perhaps we should review why Anthony Watt installed PV panels instead of a gas-powered generator. In my neighborhood the roof-mounted PV systems outnumber gas-powered generators for powering the A/C. Granted, that’s in CA where regulations have driven up the cost of electricity off the grid.
Try to follow along.
The EROCI Bozo is comparing the capital costs of building power plants to the sales price of crude oil and claiming that crude oil has to be less than $20/bbl to compete with offshore wind, solar PV and electric vehicles. The EROCI graph treats TWh as a value.
My first comment in this tedious exchange:
The part of your reply that I read…
I wasn’t saying anything other than what I wrote, hence my reply…
No one invests capital in oil & gas development to get TWh in return.
The graph is mind-numbingly idiotic.
$100 billion invested in crude oil development at $9/bbl is worth a lot less than crude at $60/bbl or $100/bbl. By EROCI Bozo math, natural gas would be worth more than all other energy sources because it has the lowest levelized cost of electricity.
Let’s say you have a prospect to drill. It has a great direct hydrocarbon indicator, but it’s in a play where it could be either oil or gas. The cost to drill and develop the prospect is that same whether it’s oil or gas… let’s say $20 million. If the reservoir is filled with oil, the volumetrics indicate it’s 1 million barrels (bbl), if gas, the volumetrics indicated 6 billion cubic feet (Bcf) of natural gas. The lease has a 1/6 royalty. Oil is at $55/bbl and gas is at $2.50/mcf.
An oil discovery would return a net profit of $25.8 million.
A gas discovery would return a net loss of $7.5 million.
Well, the product is what the customers buy. There are advantages to producing it cheaper, and investment advantages in knowing who can produce it cheaper. Henry Ford got rich by reducing the cost to produce autos; investors responded favorably. Michael Dell got rich by reducing the cost to manufacture PCs. There are lots more examples.
We agree that the pricing of the renewable production is suspect. But the idea of backing the producer with the lowest cost of production has a lot of support — that’s whom the customers will buy from.
Whoever produces oil & gas cheaper makes more money than those with higher F&D costs.
However, all producers make more money at $60/bbl than they would have made at $9/bbl, irrespective of their F&D costs.
David Middleton: However, all producers make more money at $60/bbl than they would have made at $9/bbl, irrespective of their F&D costs.
You seem to be assuming that the producers can always command the price that they want.
In what other realms of production do you think the producers with the higher raw materials costs have the larger market share of comparable products?
Nearly 40 years in this business tells me that we cannot even predict the price of oil, much less control it… That’s why we hedge the living schist ot of our production.
David Middleton: No one invests capital in oil & gas development to get TWh in return.
The return easily translates into $$$ once you know the market price of the TWh. Meanwhile, somebody is investing in TWh; here in San Diego Co, SDG&E and the producers it buys the electricity from are investor-owned. There are a lot more investor-owned utilities, and investor-owned manufacturers of PV panesl and windmills. If the reality ever approaches the analysis closely enough, some of the investment money will flow out of oil and into the alternatives.
I think we have beaten this topic to death for now. That essay you critique is surely not the last word, so we’ll keep following this story in the future, as we have in the recent past.
“… but there are lots of small niches in the US where electricity from the renewable energy sources can start competing with electricity from fossil fuels. It’s all a matter of continuously reducing the costs of manufacturing the devices.”
Matthew, your apparent ignorance of basic electric utility facts is breathtaking. Again, what are your educational qualifications and work background?
Dave Fair: Matthew, your apparent ignorance of basic electric utility facts is breathtaking.
Of what basic electric utility facts am I ignorant? One of my consulting jobs entailed working with a bunch of electrical engineers who were designing (and patenting) better temperature control systems for hotels, and modeling/estimating how much savings could be obtained given the somewhat bizarre and nonlinear electricity rates that SDG&E (that is, nonlinear in kwh consumed) charges its industry customers.
Now we’re getting closer to the nut, Matthew. Some sort of consulting work in conjunction with electrical (electronic?) engineers designing temperature control systems for hotels. Of what did your consulting work consist?
How does this consulting work relate to planning, financing, designing, constructing, and operating and maintaining electric power systems? How does it relate to analyzing, developing and establishing wholesale power sales contracts? How does it relate to analyzing, developing and establishing industrial, commercial and residential electric service rates and conditions of service?
I’ve done all the above and more. Additionally, I actually ran an electric power company. Tell me more of your expertise in these areas.
Dave Fair: . Tell me more of your expertise in these areas.
So you are an expert in the past. Tell me how my hypotheses about the future are wrong. Did you make a killing investing in battery-powered power tools, battery powered electric razors, batteries, battery-powered golf carts? PV cells for rooftop power supplies (like my colleague in Denver, an engineer fwiw, has)? Battery-powered model airplanes and drones? How about battery-powered delivery trucks?
This isn’t about how power companies have been run heretofore, it is about the possibility of market penetration by a new technology that so far has required government assistance, like passenger aircraft, turbine engines for them, and the rest of the airline transportation system.
Did you read the part about how our system was patented? That was possible because none of the experts had heard about it yet.
Dave Fair: Tell me more of your expertise in these areas.
This may be repetitious — it looks like one of my posts got deleted.
Did you read the part about our patent? We got the patent for the system because nobody yet knows about how to do what we were doing; the measuring devices and their communication network are battery powered.
The topic is the possible penetration into the market of devices that now need govt assistance, like aircraft and turbine engines of yore. Battery powered devices following, possibly, the trajectory of battery powered tools (including drills and chain saws), model aircraft and drones, golf carts and delivery vans, picnic coolers, computers, telephones, speakers, earphones, cameras, video recorders, and televisions.
Dave Fair: I’ve done all the above and more. Additionally, I actually ran an electric power company. Tell me more of your expertise in these areas.
I think we have covered our disagreements and partial agreements on the facts and conjectures. I have one more question: I allowed as how the costs of the electricity from wind and solar might be underestimated by a factor of 3 (that is, actual costs might be 3 times the estimates.) How bad do you think the estimates might be? Do you agree that the actual costs matter?
Dave Fair: Matthew, your apparent ignorance of basic electric utility facts is breathtaking.
At the risk of repeating myself, of what facts about basic electric utilities am I ignorant?
If their thesis is true, then what are they worried about? All they need to do is wait and “renewable” energy sources will put fossil fuels out of business.
Pro-tip: Don’t hold your breath.
Sailorcurt: All they need to do is wait and “renewable” energy sources will put fossil fuels out of business.
More likely they’ll reduce the (growth rate of demand for) fossil fuels.
oops!
More likely they’ll reduce the (growth rate of) demand for fossil fuels.
Sorry.
Señor (or is it Herr?) Lewis’ EROCI graph…”
There’s a political motivation at work likely, so I think it is “Comrade”.
Assuming that a cost effective backup power generation system is not going to be discovered, I can see only one way that the numbers in this article can be effectively applied to real word usage. That is, if smart metering is implemented on an outlet basis and it includes an individually addressable EV charging mode the power system operators could enable EV charging when any excess energy is available to them from wind and/or solar. This would require that, since there can be multi-day periods where excess wind and/or solar are not available, EV customers would have to have an alternate mean of transportation to use in case their EVs were insufficiently charge. But, for someone that only commutes a few tens of miles a day, and has an office job where his/her EV would be available for charging during daytime hours (available solar +/ wind) and late night sleep time hours (available wind), and could take a bus or some other means of transportation when the vehicle hadn’t received a charge lately, this might be cost effective. :<)
One reason electric vehicles are so cheap to operate is they are not taxed to pay for the roads the. way gasoline and diesel are. They are exempted.
When the cost electricity is padded with the same amount gasoline is, the operating cost will be much higher. There no way around it. Governments are devoted to tax income. If all the vehicles are electric the same road building and maintenance will be needed. A fuel tax will become an energy tax. That’s all.
In Ontario the tax on fuel is about 50% of the price. Let’s round it to $0.072 per km. Half is taxes so 3.6 cents per km for road use. Electricity is about 1.2 cents per km. Adding the necessary taxes quadruples the consumable cost to 4.8 /km.
That is less than 7.2 but we didn’t factor in the battery replacement. If it costs $8000 after a working life in 150,000 km it is another 5.3 cents per km. Plus the merchant’s time. So apples-to-apples, it will cost 12.5 cents per km to operate. That is 74% more, with a saving on engine maintenance still to be considered.
Not so cheap, really
‘Oil will have fall to $9-$10 a barrel in the long-term in order for gasoline cars to remain competitive with clean-powered electric vehicles’
A new LEAF is $32,000.
A new Civic is $20,000.
Operating cost with electric power is cheaper than with gasoline. But even at a hundred bucks a barrel, the high cost of ownership grossly overrides any savings. Get a LEAF down to $20,000 and then we can talk.
When my son had a Civic, he spent a thousand dollars a year for gasoline. It is obvious on its face that the LEAF can’t compete. But there is more: depreciation on a LEAF is catastrophic! I haven’t checked it in a year or two, but the LEAF lost 71% of its value in TWO YEARS.
Financially, EVs are a Titanic disaster.
‘in order for gasoline cars to remain competitive with clean-powered electric vehicles’
An assertion not in evidence.
Gamecock: A new LEAF is $32,000.
A new Civic is $20,000.
Compare for a while a Tesla and an equally-priced Mercedes-Benz, around $65,000 (no tax credit or other subsidy.) The Tesla probably has a lower lifetime cost, though this remains to be seen. The Tesla has an awesome acceleration, which some people find attractive (I do.) At that price, some buyers prefer the Tesla, and some the M-B. True, there are not many in either camp — I got a VWJetta for a little less than $16,000 in a closeout sale — taxes, title and registration included, but it’s also a 5-speed manual, which puts me and my wife in a very tiny and non-representative niche. It’s a special consideration obviously, but if VW can manufacture their all-electric car of the same size as a Jetta for around $20,000, it might do well in the market.
Future costs of mass production are, in my opinion, the most important known unknowns in this discussion.
Last few thoughts:
1. If the costs of renewables are too low by a factor of 3, then the “breakeven” price of oil is $30/bbl.
2. If there really are no customers to buy the electricity, then this analysis is empty. I think there will be customers, and that the cheapest electricity will increase its market share. Hence provide a return on investment.
3. If demand for oil for other purposes than transportation fuel keeps the price of oil high, then there are opportunities for investing in oil and investing in renewables.
4. Right now renewables and EV cars are supported by subsidies and tax credits. Those confound the calculations. I do expect that the large majority of ICE drivers will demand taxes from EV drivers to contribute to road maintenance. I do hope that subsidies are also ended due to voter demand.
5. EV-powered snow plows will not be cost-competitive in my lifetime, but that represents a small fraction of the energy used for transportation.
The “breakeven” price of oil has no relationship to renewables. It entirely based on the cost of finding and developing the oil. It varies by play, basin and operator.
The analysis is empty because it’s empty.
The demand for oil for transportation and other purposes will not shrink any time soon…
https://www.eia.gov/outlooks/aeo/pdf/aeo2019.pdf
The IEA’s recent reduction in its growth rate forecast is not a forecast of shrinking demand.
At the Federal level the subsidies are ending. The PTC and ITC for wind and solar are scheduled to phase out over the next couple of years. And the Federal tax credit for EV’s phases out after an automaker sells 200,000 EV’s
EV-powered snow plows won’t exist anywhere outside of Elon Musk’s imagination.
David Middleton: The “breakeven” price of oil has no relationship to renewables. It entirely based on the cost of finding and developing the oil.
that was meant to be the breakeven price of oil as a raw material in the production of electricity. Sorry if that was not the topic of this thread. If alternatives are cheap enough, they will reduce the demand for oil for electricity.
It’s odd you would think that the market price of a commodity is independent of the market price of its competitors in the market.
Oil is rarely used “as a raw material in the production of electricity.”
Wind and solar aren’t competitors with oil. Natural gas isn’t even a competitor with oil.
David Middleton: Oil is rarely used “as a raw material in the production of electricity.”
Yeh. I was thinking of the cost of energy-equivalent amounts of natural gas. Sorry.
In which case, wind and solar still aren’t competitors with oil.
Like you, I have had these discussions with lots of other people. Some are what you might call true believers in the future of electric vehicles, others more like the majority of writers here who believe, more or less, if EVs were a good idea they’d already command at least 5% of the market. I am closer to you than to the EV boosters like my friend in Denver, but I was surprised to learn that you can already drive long distances most places in the US and still find places to recharge pretty conveniently, as I wrote about driving from San Diego to Denver (indeed, most people driving from San Diego/Los Angeles to Las Vegas wouldn’t be inconvenienced much at all. I was surprised by the fact that people use EVs to drive to the skiing lodges in the Rockies. So I am thinking that maybe EVs have a brighter future than I thought a year ago.
Maybe. The future technologies are always unpredictable, and the technological ecology, so to speak, is created by different people than those who have created and managed the recent past. Experts in the present are not as reliable as we would like in predicting the future.
You might be right. OTOH, if the EV boosters are right, the energy supply for transportation, whether measured in TWh, joules, or gallons of fuel, will gradually shift from gasoline filling stations to charge points. Investors who have choices of where to invest their $$$ for returns measured in $$$ will be paying attention to studies such as the one that you critique here.
Electric vehicles will make gradual inroads.
Electric tractor trailers, probably not.
Electric airliners… not a chance.
Electric LNG tankers… No.
Electric container ships… No.
Electric ore carrier ships… No.
Regarding predictions…