The New York Times reported yesterday that the world’s oil giants are not convinced by President Obama’s plans to reduce oil consumption.
The energy calculus that drives the creation of alternate sources of electricity is very simple: The world runs on the fuel that delivers the lowest cost per watt. The key problem today with the electrification of cars, by which I mean the change of power trains for private passenger carrying vehicles. from hydrocarbon-burning internal combustion engines (ICEs) to electric drive trains powered by batteries, is the initial cost of batteries that can replace the performance of ICEs.
Lithium-ion batteries, though today they must be hand-made and selected, can be used to manufacture high performance private cars with decent ranges, but the battery for the Tesla, which it is claimed will allow an electric vehicle (EV) to go up to 150 mph and have a range of 300 miles, costs nearly $40,000, and the Tesla equipped with this battery will cost around $125,000 at retail. No one today knows how to make EVs with a range of 300 miles and a top speed over 45 competitively with ICEs.
In the next 41 years, up until 2050, it is conservatively estimated that there will be a market for 4 billion personal passenger carrying vehicles. Even if they were priced at an average of (USD)$15,000 each in today’s dollars, this represents a total of $60 trillion of product. When you factor in fuel and maintenance the total probably comes to $100 trillion dollars. Surely this is the largest of the markets of the future, except perhaps for housing.
The auto industry will consume in the next 41 years between 4 billion and 8 billion tons of steel, at least 25 billion tires, as much as 2 trillion pounds of plastics, and typically, and very conservatively, will increase its usage from around 1 billion gallons of gasoline per day that are burned today, to more than 3 billion gallons a day by 2050, if 100% of the vehicles then are still utilizing ICEs.
Even if 25% of the vehicles being built in 2050 are EVs, or 50% of them are, the demand for hydrocarbons then, will dwarf today’s numbers.
This will happen unless the political and social costs of ICEs, calculated along with the price of liquid hydrocarbons as economic costs, exceed the cost of motive force derived by using batteries to power electric motors.
The large oil companies are betting that this will not happen in the time frame that glib politicians spout off about. They are correct. The development of cost effective alternatives to burning hydrocarbons to produce electricity has slowed own and may have reached a plateau.
Clearly the obvious and only replacement for the coal-fired power plants that today produce more than half of the world’s electricity is to substitute for them the rapid and massive construction of nuclear power plants the capacity of which is now 10% of the global demand. But the issue here is political and social, not economic, because, if it weren’t, it would already have happened.
This doesn’t mean that it will never happen, but it does mean that solar, wind, geothermal, and biofuels, which can only ever produce a small contribution to the global demand for electricity, will never happen without political intervention on a massive economic scale that I think can now never happen.
The idea of the Obama administration providing an incentive to develop alternate energy sources with $150 billion over 10 years, is surely hypocritical against the $1 trillion a year now spent by the global petroleum industry, just to look for and develop new fields and new sources of hydrocarbons.
Innovation cannot be bought with money alone. It can only come about after long term investments in the health and welfare and education of the masses of the earth’s people.
The development of alternate energy sources that can replace the huge volumes of energy produced by burning hydrocarbons and splitting atoms of uranium and plutonium, may well occur or indeed have already occurred, but the replacement of our current energy infrastructure and the means by which we utilize it, such as ICEs, will take generations and will be slow and deliberate.
Anyone who tells you differently is simply wasting their breath.