Electric Cars Do Not Sell – Just Like Renewable Energy, A Good Idea Whose Time Has Yet To Come – Innovation Will Replace Carbon Based Energy, But Not Today

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By Paolo von Schirach

February 4, 2013

WASHINGTON – The New Green Economy that would have created tens of thousands of new and highly paid jobs was one of Obama’s first term promises. It sounded good, and it seemed to be in step with the unfolding new era of expensive (and scarce) oil and global warming. Going green appeared both smart and virtuous.

Steven Chu to the rescue

America would finally shake off its dependence on oil, while creating new, sustainable and at the same time highly profitable sectors. To make all this happen, Obama called upon Steven Chu, eminent scientist and Nobel Prize recipient, to run the Department of Energy. The mandate was clear: Washington would deliberately push forward the development and the adoption of the best renewable energy solutions.

Bad timing

Great plan, at least in principle. But horrible timing. As Chu was providing credits and grants to renewables, the US shale oil and gas revolution was unfolding, with zero Washington backing and zero US Government appreciation of its enormous consequences. Shale oil and gas represent a real game changer. At least for a few decades, America will have much more carbon based energy reserves than any estimates had previously envisaged. The US has now the cheapest gas in the developed world. These reserves will last for about a century. So much for shortages and sky high prices for imported natural gas.

This shale revolution undercut at least part of the rationale for the quick adoption of renewable energy sources. Especially when it comes to power generation, hard to beat current prices for US natural gas.

Electric cars doing poorly

And what about the revamped and re-engineered electric cars, (EVs)? Well, the millions of anti-carbon US environmentalists looking for truly green alternatives apparently do not like them enough. Nobody is buying them. Worldwide sales are pitiful. In the US only 14,687 EVs sold in 2012. This is 0.1% of total US auto sales of 14.5 million, well below all auto makers projections.

At some point some kind of vehicle not relying on internal combustion will be developed. But we are not there yet. The unresolved issues plaguing EVs are the cost of batteries, the still limited distance you can travel with one charge, the long time required to recharge, and the lack of a national infrastructure of recharging stations.

There will be new technologies

All these problems may be resolved at some point. Or we may be surprised by some totally unexpected and different breakthrough that will transform the auto industry. Still, for the moment, auto companies do well with more fuel efficient gasoline engines, while hybrids also do well.

Lesson: Government should not try to time innovation

The lesson of all this is that it is unwise for public policy to try and time the level and pace of innovation deployments. Common sense tells us that “at some point” we shall have to move away from limited and environmentally unfriendly carbon energy sources. (In this respect please note that abundant US natural gas is also the cleanest hydrocarbon). But only when we have something better that really works.

Departing Secretary Chu should reflect on this

Forced adoption of renewables via subsidies and mandates to utilities often resulted in sub optimal choices and waste of money. As Secretary Chu is getting ready to leave office, he may want to reflect on this. Broadly speaking, the Green Tech plan was good; its timing unfortunately was not.

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