Electric vehicle strategy

Today’s article in the NY Times about electric vehicles (Toyota, Hybrid Innovator, Holds Back in Race to Go Electric) pulled me out of my summer vacation mode and inspired me to share my insights about the electric vehicle race to market.

When in college I was a big fan of “Game Theory” (According to Wikipedia: “Game theory attempts to mathematically capture behavior in strategic situations, in which an individual's success in making choices depends on the choices of others”).

During that time I also became an admirer of Toyota, their “just in time” inventory process and their ability to bring quality to market in a fast and efficient way impressed me as I was becoming an MS in Manufacturing Systems Engineering.

And here we are today, they lead the market of Hybrid vehicles. Their Prius is the flagship of alternative fuel cars (although it’s not much of a change from gas powered cars).

But, wait a minute! Are you telling me that since 1997 when the first Prius was launched to the market Toyota has been unable to improve on their original product by making a plug-in hybrid or a full electric vehicle???? WHY?

Could this be a case of Game Theory being played out?

Mitsubishi is launching an electric vehicle (the i-MiEV). The city of Berlin is setting a goal of a million electric vehicles by the year 2020. Tesla is starting to show signs of success with their all electric vehicle product line. The famous Project Better Place intends to reshape the vehicle market with their battery swapping and city-wide recharging stations.

So why is Toyota letting their leadership slip away?

Scenario A: most of these electric vehicle companies will build their products around the first generation of batteries. A new generation of more efficient batteries will be developed and Toyota will leap over their competitors to take the lead again

Scenario B: Toyota is miscalculating the power of the electric vehicle market and will be left behind with an obsolete plug-in Hybrid Prius

Which scenario do you think will prevail?

Comments from “Things that make sense”:

First of al I want to add another thing that does NOT make sense (and I forgot to mention). Allowing people to drive while talking on the cell phone. It is inconceivable that some states like Florida are still  allowing drivers to talk while they drive, even though it has been proven more dangerous than drinking and driving.

“I'm confused at your stand on plug-in hybrids. Are you for or against? I agree that the standard hybrid gets 100% of its energy from fossil fuel. I consider that, however, its biggest short-coming. Perhaps because I just spent the last 40 years in the electric utility industry, I'm partial to using electricity as a transfer fuel. It can be generated cleanly and renewably (although it often is not). It can be shipped across the country and directly to the consumer without a lot of loss and with no additional fuel. And, can be used cleanly and with no pollution or byproducts at its ending destination.
I'm also confused (although not by you) at the hybrid vehicle concept. Large railroad diesel locomotives get 100% of their motive power from batteries which are constantly recharged by the big diesel engine running a generator. The diesel has no direct connection to the wheels. Is this less efficient than the auto hybrid that connects the small gasoline engine both to the wheels and to the generator and uses the electric motor only to boost acceleration? “

“all good points, of course. (perfectly designed waterless/odorless/attractive toilets have been around for decades). the bottled water thing is criminal and non-sustainable. 99.8% of all "information/news" in print, online, & TV & radio comes from 6 worldwide media companies whose board members interlock with boards of all, or most other corporations. all "news", is corporate news. all "making sense" is corporate centered. “

“You are so right ...it is really frustrating”

“I had the same feeling commissioning one of my project this year, but after 16 years in engineering design, I know that common sense(knowledge) is not common practice”

“Sami,
I posted my idea on your link but for those that may not venture to a great story you have told, here it is:
Dryer Sheets - They are thrown away by the thousands every day and I have found them to be a really good cleaning tool. They have just enough grit to take crud off of mirrors, doors, walls, jewelry, CHROME, and I am sure a myriad of other things”

“Interesting article. For the toilet perspective, dual flush toilets have done their bit towards minimizing the amount of water that is used for flushing purposes. More emphasis should be made on their use (if not to say imposing an eco-tax on those not having a dual flush system) and retrofitting existing cisterns with water bags or something which reduced flushed volumes.
The argument related to bottled water can also be extended to the impact of soft drinks which are canned or bottled in plastic. What is the energy that is recovered from these packaging. Interestingly in Malta we had a law which obliged soft drinks to be bottled in reusable glass bottles. Ironically with Malta's accession to the EU this law had to be removed as it was perceived as a barrier to trade”

Until next time: SHALOM!

Things that make sense

Sometimes I look at certain things that, to me, obviously don’t make sense. The solution is so obvious that I get frustrated just thinking about it!

Case in point when I see a motorcycle rider without a helmet! (although this example is not Greentech related, I wanted to include it to illustrate the point). Why would any government that punishes suicide attempts and that has such a bitter discussion about a 3 week fetus being an individual, allow these people to roam around 70 MPH without any headgear? Same issue with cyclists, who foolishly think they look faster by avoiding the helmet.

Another example is using over ONE FULL GALLON of perfect tap water to wash down a man’s or a woman’s single “serving” of pee (a typical adult initiates bladder reflex contraction with 0.1 Gallon of urine). How hard can it be to mandate a water container that stores rain water and upon availability is used to flush toilets? or simply to create a toilet that does not require water for urine (and does for “other” uses)?

A third case for general non-rationalization is allowing plastic bottles for drinking water, or even worse allowing “imported bottled water”. With the world water situation as it is (very bad, if you have not heard!) why would no one step up and prohibit companies from shipping bottled water from halfway around the globe just to create a “premium” market. Even worse, why don’t we wake up and recognize that plastic bottles are killing our environment and start using another material for our water containers (how hard can that be?).

“In the U.S., more than 30 billion
plastic water bottles end up as garbage or litter
each year”

When the cost of plastic became more attractive than glass all  bottling companies jumped into the new technology! With a little cooperation between government and industry a big difference can be achieved. Here is a NY Times article related to this issue (An Environmental Group’s Campaign of Wry Lies Against Bottled Water)

My forth and final example of “obvious irrationality” is the case for plug-in-hybrids. Here, I admit, there may be other factors unknown to me. But, as far as I can tell, the step from transforming a regular hybrid car into a plug-in hybrid is very straightforward. Granted, the battery pack in a plug-in may be a bit bigger (and heavier). But, the biggest difference is that energy will come from an OUTSIDE SOURCE into the car, as opposed to the minimal optimization achieved by regular hybrids (where energy is recuperated from the gasoline engine in two forms: directly and through the inertia of the car while breaking). Some smaller companies offer kits to transform regular hybrids into plug-ins. Why can’t big car companies do this transformation from the inception of the car???

Makes no sense!!… Do you agree, disagree or do you have any other examples of things that make no sense??

Here are some comments from Do you have the drive to be in Greentech?:

“I watched the Warren Buffet special last night on CNBC and he made it clear, "if you don't invest now, you will not come out on top". Most people don't understand that now is the time to get involved. Products are cheaper, and you can usually work out some great deals for services.”

“While there has been a bit of a shift of mindframe away from Greentech, due to the economy, I believe that there has been enough momentum and drive built up that it will push through the downturn. It also helps that the downturn seems to be hitting bottom instead of getting more severe...”

“I wanted to say I fully agree with you, despite the overall mindset. I myself have been in the industry for quite sometime now both on the investment side and the entrepreneurial”

“You are right, yet I think that comparing Greentech to the Internet Bubble is somewhat of a stretch because this is more tangible, it is more of the "Old Economy". People can calculate real ROIs and this is where I see the main challenge to industries worldwide.
Without Governments' support and incentives, the current ROI on a PV system (as an example) is completely uneconomical. Greentech has to succeed - we have no other choice so industry will come up with viable and affordable solutions that make sense”

“Personally... I think its pretty straight forward: The greentech companies that can actually make money (not just promises) will thrive and get funding. The ones that simply "paint pictures for the future" will likely not make it through the tough economy”

“The U.S. government doesn't have the drive to be in Greentech. It may talk a big game, but there's little investment for new ideas. Venture capital (at least outside of California) doesn't appear to have the drive to be in Greentech. The investors we speak to can't articulate how you generate ROI”

Until next time: SHALOM!

Do you have the drive to be in Greentech?

I say: Greentech will become a major force in world economics; it will be a huge industry.

Right now, though, there is a lot of skepticism. People are focusing on the state of the economy, the safety of their investments, the availability of credit and the state of their mortgages.

So, what will it take to come on top of the Greentech wave?

We will need determined entrepreneurs. People who are determined to succeed, who will be able to balance a vision with a solid day to day operation.

Greentech entrepreneurs have to grow (just like the internet entrepreneurs did) into successful businesses people. First of all they have to overcome the image internet entrepreneurs left on their wave. Investors and fellow industry leaders will look at them with suspicion. They have to prove they are capable of running a serious business; they have to prove that money will be managed and put to good use.

Investors also have a challenge. They have to overcome the fear that the recent downfall of the economy left on their heads (and their balance sheets). Investors will also need to brush up on their science knowledge. It’s not the same to analyze a business opportunity of selling shoes online versus a business opportunity of generating energy from solar rays.

Last, but not least, government and banks will have to shift gears as well. Regulation will be the vehicle to bring this industry to life and banks will have to understand the risks involved, and have capital ready to be put to good use.

So, do YOU have the drive to be in Greentech?

I got a lot of comments from “A couple of VERY interesting videos”:

“Shai Agassi and his scalable model for the car 2.0 make diffusion of his innovation plausible. Yes, a good deal of infrastructure still needs to be put in place to make his idea work, but the story he is telling makes sense.
Saul Griffith's idea seems more of a novelty than a future reality”

"I like Agassi's talk, although I disagree strongly with his premise that one can apply Moore's Law of semiconductor electronics evolution to batteries. The world has needed a better battery since the dawn of the previous century, when Baker and other electric cars lost out to steam and ultimately to internal combustion”

“Agreed, although there is room for significant improvement in batteries, certainly from commercializing a range of nano materials, probably 2x-5x increase in power and energy density in next decade, possibly to 10x. I am aware of several projects in commercial testing that can deliver 20%-40% more than current”

“If you plot the evolution of any figure of merit related to batteries (energy density, recharging cycles, etc.), you will notice only a linear improvement over the years, if any. Certainly not a Moore-like exponential growth”

“For the second idea, I think desertec is more realistic
www.desertec.org”

“If demand for electricity increases due to charging car batteries all this would mean is more coal "base-load" powered stations. There are also many inefficiencies in the transmission of energy, conversion and also in use. Plus you have the issues of short range limits. I believe at this point perhaps the idea of natural gas approach may win over in the short term. For sure in the long term the car engine will transform from combustion engine to electricity driven”

“300M vehicles / 8M vehicles per year = 37.5 years. It doesn’t sound short-term to me, and that’s not counting growth, upon which the entire economy is predicated. Further math, 300M vehicles x $50K per vehicle = $15T, plus whatever new infrastructure will be necessary, and in perspective the US GDP is $13.8T”

“One thought I have is that, even with the investment in a strategically placed network of feasible and convenient battery swapping infrastructure, before investing $20,000 in an all electric vehicle, there would have to be a critical mass of electric vehicles on the road for people to believe that it is a stable technology and here to stay. Sort of a chicken and the egg syndrome”

“1. We need to move away from driving everywhere and build societies where we can walk.
2. Private transport must be replaced by communal public transport, which is far more efficient - less traffic, less congestion, less manufacturing and therefore waste”

“It sounds as if Shai Agassi's idea is already out of the gate. India and China are ahead of the curve on Electric Vehicles. There is incredible new technology with electric motors that is going to continue to progress this model forward where you get tremendous torque with less amp draw. Thanks for the videos”

“As for wind turbines on kites, they can work to produce power. Sadly, every NIMBY group in the nation will find problems with them. They are ugly. They kill birds. The cause epileptic fits in fieldmice. If it is visible, some group will fight it until the bitter end. The legal fees alone will prevent it from ever being financially viable”

Until next time: SHALOM!

A couple of VERY interesting videos

Will this two ideas power the world in the near future?

http://www.ted.com/talks/shai_agassi_on_electric_cars.html

http://www.ted.com/talks/saul_griffith_on_kites_as_the_future_of_renewable_energy.html

What do YOU think?

Until next time: SHALOM!

Mia Green Expo & Conference

This past week in Miami I attended the Mia Green Expo & Conference. It was a two day event held at the Miami Beach Convention Center. The event had an exhibit hall with 118 exhibitors and four different parallel Conference sessions, the choices were: (1) Designing and Building greener Americas; (2) How to be Green & Profitable; (3) Green Policies & Benefits; and (4) LEED 2009 Update & Special programs.

 

Here is my analysis of this event:

Is Miami the new capital of the world for Greentech? Well, the short answer is…no. Furthermore this conference was fairly small and a bit disorganized.

In spite of the above I have to admit that in this growing field of Greentech there are always new things to learn and new people to meet. But, most importantly I enjoy attending these conferences because it reminds me of the HUGE OPPORTUNITY we are facing by being part of this group of early adopters of the green wave.

Some day we will look back at these events and say something like this: “remember those days when we were trying to convince the rest of the world that the green wave was coming and that greentech was going to become a huge industry?”

Most of the people in the event were from state or city government, from the various utilities and from academia. The business people (aside from the utilities) were from the construction arena. This is a good example of how Greentech is still flying under the radar.

Many people don’t realize yet the impact Greentech is going to have in our everyday lives and businesses. Just to give you an example: If the US government sticks to their plan and implement the cap and trade law, every business will have to start thinking in terms of carbon emissions. This means that the corner ice cream shop will have to pay or compensate for the carbon emissions of their ice cream machines (and their blenders, and their delivery truck, and their a/c)! The greentech world will have a demand never seen before, instead of companies pushing for their greentech products, people will demand greentech applications in their businesses, their transport and their homes.

Here are some comments from last week’s IT’S ALL GOOD... GOOD NEWS!:

“We are all happy you said it.
If you remember how it started, we can say now: Bad times R.I.P.”

“I concur. I am beginning to see an improvement in the hiring market. And green jobs are going to lead the way”

“Thanks... Most of us need this kind of news.
Everything but the global Climate Change which goes beyond the Koyoto Protocol is fairly good news.. All that will do is boost my 100% Carbon Tax exempt product automobile mfg company sales”

“Some interesting thoughts here. however the incentives currently on offer for 'green' technologies are skewed towards what the lobbyists want rather than what is practical and effective technology. For my proof I offer wind power which is probably the most unreliable erratic supply available and undeserving (in my opinion) of the massive subsidies it is getting in the UK. I would be more interested if power from waste was getting the same level of subsidy and planning application help. The nimby effect (not in my back yard) prevents good waste to energy gasifiers and combusters from getting off the ground in the UK and this just has to change-recovers energy from waste and reduces landfill - both required for our sustainability. For the UK in situ coal gasification with CO2 capture is a way to supply all of our gas and chemical industry supplies for 200 years plus! By producing synthesis gas we can revert all households to towns gas as we knew it and use syngas to make ammonia and hence fertiliser and plastics - basically replace the petro industry with gasification products as SASOL”

“I certainly hope so. These however are just a few of the green giants out there. If the rest of the economy picks up on their regular way of doing business again, we might be back in the financial slumps before you know it”

“1. the last depression-recovery was based on investment in military and road building. this one is green.
2. it smells like the internet age in c.1994
3. the market is not natural. nice feelings around social conscience did not cut it. economic drivers are being created by government. as such, it is so disruptive! And neat stuff can be done until the old fashioned laws of supply and demand
.
So I do not see there being a return to a premature slump as we have started the next cycle. between now and then I believe we will see another massive transfer of wealth from investors to consultants and marketeers via entrepreneurs as we saw in late 1990's. As the zietgiest is based on long term >25 years for a big return, I hope we are seeing another long growth run; then again energy deficits may derail us”

Until next time: SHALOM!

IT’S ALL GOOD... GOOD NEWS!

It seems the world is getting back in track. After some uncertain months of rollercoaster economic forecasts, bailouts and bankruptcies it seems the future is looking brighter than ever. Here are some news that are sure to lift your spirits (that is, if you are in the green wagon)

- This article talks about the new Prius which has factories working overtime. While the rest of the car manufacturers are shutting down Toyota is selling more Priuses than it can produce.To read full article click here

- A public-private coal plant previously discarded because of high cost will be built in Mattoon, Ill. This plant will store nearly all of its emissions underground. The decision change was based on a cost calculation error that turned the project’s cost from $1.8bn into $1.3bn. To read full article click here

- Taiwan Semiconductor Manufacturing (TSMC) one of the largest semi-conductor producers in the world is jumping into the solar cell and LED light arena. This compatibility between semi-conductors and solar cells first identified in Israel will open new markets for this industry giant. But, more importantly, it will call the attention of other competitors and therefore reduce solar cell and LED costs for the consumers. To read full article click here 

- Bonneville Power Administration, whose power lines carry much of the electricity in the US Pacific Northwest is ramping up their capacity using wind power. The article talks about the demand of some groups to shut down some of the company’s hydropower to protect wild salmon. But, from my perspective, the article brings good news regarding substitution of dirty sources of power generation with clean power. The fact that this creates some conflicts with other groups is just part of the process. To read full article click here

- Climate Change Treaty, to Go Beyond the Kyoto Protocol, Is Expected by the Year’s End. More than 100 nations are negotiating a new treaty that will push the agenda further into cutting emissions of heat-trapping gases and preventing deforestation. To read full article click here

Any thoughts?

Here are some comments from last week’s Why incentives work, and don’t work? (some are VERY INTERESTING. Thanks!)

“In my experience good people tend to attract money rather than money attracting good people”

“Tell me how you reward people and I will tell you how they will act. If you reward people in an illogical inconsistent manner, that's exactly how they will act. Now, if they also get the best administration who understands how to motivate people to giving students a better education with above average teachers in the classrooms I think it will be an amazing system”

“The problem isn't the incentive it is the accountability. The inflated pay is not the reason why good teachers would be found in this new school. It is the accountability that comes with the high pay that weeds out the lesser candidates”

“My thoughts were to have a top school who charges zero tuition but gets paid a percentage of the students earnings for the first 20 years of work. From that, the teachers receive a "dividend" from each child they taught. This way their retirement fund grows from those they taught. It would be a great incentive for the teacher to see that the student is truly able to succeed in life, as their retirement directly depends on the success of the children they taught.
Also, while teaching have bonus pay based on the number of students actually retaining what was taught. This would require the elimination of all multiple-choice tests and every test would have only one question, regardless of subject matter. The question would be "What have you learned this semester from this teacher and show with examples". This would foster critical thinking skills rather than memorization and regurgitation. The percentage of subject matter that the students learned would directly relate to the bonus given.
This would create accountability and a co-dependency relationship between teacher and students”

“All incentives have the challenge of hitting the sweet spot of their intended and invoking the desired response. This one sounds off-target. Did teachers become teachers to make big money? Only if they were misguided and misjudged the teaching space”

“I think in your article you are ignoring that we as society have a very big interest that energy be cheap. Energy is one of the major taxes that everybody has to pay on their lives, so if we are worried over the long-term development of our industries and their competitiveness over time, energy, over time, needs to be low-cost (also, btw, communications and finance).
We should have an interest in developing 50mpg cars and such other technologies. Apart of having lower pollution, such machines are cheaper to operate and provide real advantages. But is making energy expensive the right way? Although it is a good incentive, it goes against other, more important goals”

Until next time: SHALOM!

Why incentives work, and don’t work?

Recently an article in the NY Times was talking about a new school being assembled. The particular thing about this school is the salaries teachers will receive; around $125,000 a year “two and a half times as much as the national average for teacher salaries”.

The idea is to have the best teachers available and the means to do it is by offering a big incentive: 2.5 TIMES THE AVERAGE SALARY OF OTHER TEACHERS!

So, will this guarantee success? Who knows, but certainly they have managed to get VERY good teachers, who knows if this really will translate into top notch education.

That is precisely the point about incentives. Human systems are complex structures and when you create an incentive you disrupt the “natural order” of things and create sometimes unpredictable outcomes. Here is an example:

I believe the US society has a plethora of negative role models from professional sports (as exemplified in the List of professional sportspeople convicted of crimes). Some football, basketball and baseball players earn immense sums of money, they have big houses and luxurious cars, but they also have encounters with the law, they lack education, and some are bound to self destroy. It all traces back to incentives!

A kid from high school gets selected for a top school based on their athletic ability, not their level of education (first incentive). They have lower requirements from the school and eventually get drafted into a professional team. The first round pick in NFL for this year will get “$41.7 million in guarantees” for a six year contract. What is a 21 year old kid supposed to do with over $40 when he turns 27? Furthermore what kind of example is he setting for other kids who look up to him? Is he prepared to be a role model?

All this brings us back to the incentives on Greentech. Are they well designed? will we get the consequences we desire from these “disruptions”?

Greentech needs a hand to compete with existing technologies, energy sources and to change consumer behaviors. But we must be very wary of the potential outcomes of the incentives we propose.

Here are some responses from last week’s Are these environmental goals any good?:

“I am disappointed in the new standards. My VW Jetta 2000, gives about 30.x mpg during summer and 28.5+mpg during Winters in the metro Boston area. My Toyota Corolla 2007 gives about 34mpg.
If the SUVs and Trucks had say, 35mpg in 2016 and sedans to have a minimum of 50mpg, then that would have been a better goal to push for true innovation and energy use reductions by 2025. It would take atleast 8-9yrs. after the 2016 standard to have replaced a majority of vehicles on the road”

“After reading your blog, I have to admit that the "tough rules and regs" doesn't make a lot of sense. If we already have the technology for 50mpg, and Obama's only pushing for 35.5mpg, that takes away from the drive to go for better mpg than 35.5”

“I think like much policy that comes from Washington, it's flawed, but a step in the right direction”

“The best, and in my opinion, only effective way to promote alternate technologies is to ensure gasoline is priced in the range of $5.00 per gallon. That, in my opinion is the way to go. Legislating fuel economy standards may help, but think about it - for every new 35 or even 45 MPG car on the road - how many dozens are out there (think older cars or SUVs)at 20 MPG or less. Then lets think about diesels”

“If oil companies have their way it will become another reason for higher fuel and oil prices. In my view, the Feds have to take seriously the task of forcing automakers to switch over to hydrogen engines and other clean tech, along with forcing the grid energy suppliers to do the same. “

“What 'O' bases his assumptions on are Al Gore's global warming scandal of man-made C02, and other gas emmissions, so we started off wrong to begin with. With the banking crisis killing most other industries, esp the automotive industry, I believe this is a bad time to further destroy the industry”

“Give people something that is better and they will buy it. We can discuss the pros and cons of global warming and political agendas "until the cows come home" yet from where I sit on the other side of the world to you; I see a strategy that should galvanise the community to embrace change”

“I think they should be much tougher.... It is ridiculous that Americans continue to drive gas guzzling cars at 55 mph. The management of American car makers have failed to respond to the energy crisis, produce terrible cars and then want bail outs when they can't sell them”

“Considering the concept of sustainability, I think that 35.5 MPG is definitely high enough. Remember, this is CAFE, the average fuel economy for all of the vehicles a company manufactures, up to 10,000 lbs GVWR. So, while we may have the capability of manufacturing vehicles that will perform at 50+ MPG, there would still be a need for work trucks and vans that simply would not be useful with such a high fuel mileage.”

“I agree with you that the goals are unambitious but if the political pragmatism is that it is a modest goal that passes to law versus no change, then it is better to get the ball rolling.
By the way the US National Academy of Science has just published a free book that illustrates to the US what is happening in its own backyard. Copy available at http://tinyurl.com/qdfwyd”

“I predict that in 2 years we'll all be in agreement that it would have been better to just let Chrysler and GM go out of business”

“Obama so called tough rules are only decades too last due to the Big Three in the past always claiming excuses so that they did not have to upgrade CAFE mileage. They sure used lobbyists' a lot back then.”

“The new standard for cars efficiency by President Obama was long awaited and it is a great news. However, cars in many parts of the world (including China) are more efficient.”

Until next time: SHALOM!