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Electric Vehicles and the Natural Resource Cliff

John Petersen

We all love to whine and complain about oil prices because we buy gasoline regularly and that makes the price changes obvious. To solve this overwhelming problem, myopic visionaries with rose colored glasses propose a simple solution – convert personal transportation from vehicles powered by oil to vehicles powered by clean, free and renewable electricity from the wind and sun. Like most fairy tales, it can't happen in real life which means it won't. This is not a technology issue. It's a raw materials issue and electric vehicles cannot solve the problem.

In the first three quarters of 2010, the world produced an average of 86 million barrels of crude oil per day. That works out to 0.65 metric tons, or 200 gallons per year, for each of the planet's 6.6 billion inhabitants. There's no doubt about it, oil is a scarce resource – at least until you compare it with metals that are two to five orders of magnitude scarcer. To put oil in its proper perspective, the following table summarizes global production data for several critical natural resources.

Natural
Global Production
Per Capita
Resource
(Metric Tons)
Production
Crude Oil
4,282,736,000
648.9 kg
Iron & Steel
2,400,000,000
363.6 kg
Aluminum
41,400,000
6.3 kg
Copper
16,200,000
2.4 kg
Lead
4,100,000
0.7 kg
Nickel
1,550,000
0.2 kg
Rare Earths
130,000
20 g
Lithium
25,300
4 g

For every thousand pounds of global oil production, we produce ten pounds of aluminum, four pounds of copper, one pound of lead, six ounces of nickel, a half-ounce of rare earth metals and a tenth of an ounce of lithium. No thoughtful investor can compare per capita production of oil and essential metals and rationally conclude that we can increase metal consumption in the name of conserving oil. The resource sophistry can't work in anything beyond technical puppet shows for lazy, impressionable or childish minds.

To make matters worse, metal prices are anything but stable. We ignore changes in metal prices because they're usually buried in the cost of other products. That doesn't mean that metals are a bargain compared to oil or that their prices are any more stable. The following graph tracks market prices for oil and three of our most important metals over the last 20 years. The trend lines are remarkably similar.

2.6.11 Commodity Prices.png

If we even try to significantly increase metal consumption in an effort to conserve oil, the inevitable supply and demand imbalances will quickly eliminate any advantage and simply make the situation worse. In the final analysis, any energy policy or business model that increases metal consumption in an effort to conserve oil must fail. We've already seen the disastrous results of using food to make ethanol for fuel. There will be blood if we follow the same foolish path with metals.

I am a relentless and unrepentant critic of plug-in vehicle hype and propaganda because any plan to use hundreds of pounds of metal to replace a fuel tank must fail. There aren't enough metals in the world to make a dent in global oil consumption and using scarce metal resources to make non-recyclable components like batteries and motors for plug-in vehicles can only make the problem worse. It's sabotage masquerading as a solution.

The only transportation technologies that stand a chance of survival in a resource-constrained world are those that use tiny amounts of metals to conserve large amounts of oil. Electric two-wheeled vehicles work as long as the empty vehicle weight is less than twice the passenger weight. For automobiles, resource effective technologies range from simple stop-start idle elimination at the low end to Prius class HEVs at the high end, although even these technologies can be marginal if the primary components are not easily recycled. The instant you add a plug the resource balance goes to hell in a handbag along with the investment potential.

All the political will, good intentions and happy-talk forecasts in the world cannot change the ugly facts. We’re driving toward a natural resource cliff at 120 mph and fiddling with the dials on the navigation system.

With the exception of Advanced Battery Technologies (ABAT) and Kandi Technologies (KNDI), which have the common sense to focus on entry-level two- and four-wheeled electric vehicles with minimal natural resource inputs, the entire electric vehicle sector is a bug in search of a windshield. It doesn't matter how cool the products are if there will never be enough affordable raw materials to make them in meaningful volume.

Several companies that I follow have no chance of survival when their business models are analyzed from a resource sustainability perspective. The list includes Tesla Motors (TSLA), Ener1 (HEV), A123 Systems (AONE), Valence Technologies (VLNC) and Altair Nanotechnologies (ALTI). In each case their products have extreme natural resource requirements and little or no end-of-life recycling value. They will compound our problems, not solve them.

Several other companies that I follow have good resource sustainability profiles because their products can make major contributions to oil conservation without putting undue strain on global metal production. My list of sustainable companies includes Johnson Controls (JCI). Enersys (ENS), Exide Technologies (XIDE), Beacon Power (BCON), ZBB Energy (ZBB) and Maxwell Technologies (MXWL). In each case their products have moderate resource requirements and high end-of-life recycling value.

There is only one energy storage company that can offer better performance and lower resource requirements in the same product – Axion Power International (AXPW.OB). Its serially patented PbC battery technology uses 30% less lead than a conventional lead-acid battery, boosts cycle life and dynamic charge acceptance by an order of magnitude, and retains the recycling advantages of lead-acid batteries, the most recycled product in the world. The unique performance characteristics of the PbC technology are proven and the principal remaining risk is further refining fabrication equipment and processes for Axion's carbon electrode assemblies. When Axion's equipment, processes and products complete the final stages of validation testing by its principal potential customers, the technology can be easily ramped to a global footprint within a few years for a fraction of the cost of other emerging energy storage technologies.

Axion has never been a stock market darling because its management speaks in the past tense and focuses on challenges overcome, milestones passed and goals accomplished. As a result of its low key approach to the financial markets, Axion carries a $54 million market capitalization despite the fact that its disclosed industry and customer relationships include East Penn Manufacturing and Exide Technologies, the second and third largest lead-acid battery manufacturers in North America, Norfolk Southern (NSC), the fourth largest railroad in North America and BMW, one of the most highly regarded automakers in the world. Any time a tiny company with a transition stage technology can quietly build relationships with several world-class companies, astute investors should pay attention.

Seven years ago I believed Axion had an honest shot at the big leagues. Today I think I may have set my sights too low. The progress I expect won't happen overnight, but it will happen long before we see a million plug-in vehicles on the road in the United States.

Disclosure: Author is a former director of Axion Power International (AXPW.OB) and has a substantial long position in its common stock.



was posted on AltEnergyStocks.com.


       

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Comments

John,
While your phrase "adding a plug" (meaning moving up the electrification scale from HEV to PHEV/EV)is pithy, I think it's also a bit misleading.

It's the extra batteries that are added to take advantage of the plug, not the plug itself, that are the problem. I've long thought that it may make sense to add a plug to HEVs and stop/start vehicles in order to top off their batteries at night, so long as the batteries in question do not degrade faster at full charge (as is true for Liion and NiMH), but not for PbA or PbC (I think.)

After all, a plug, especially if used with an existing extension cord, may only use a pound or so of relatively common metals (copper, aluminum)which can be recycled, but might save tens or hundreds of pounds of oil over its useful life, while extending the life of lead-based batteries by keeping them closer to their optimal state of charge.

Your comment is well taken Tom. It's not the plug. It's the batteries. I wish I had enough of a background to know whether topping off HEV batteries at night would make a meaningful difference.

I think we have enough information to figure out the difference topping off HEV batteries would make.

The Nissan Leaf gets about 4 mi/kwh. If we assume that that is the equivalent of about 30mpg, each kwh displaces 0.13 gallons or about 50 cents worth of gas at $3.75/gallon. Since 1 kwh costs about $0.10 at retail rates, we have an approximate $0.40 per kwh savings by topping off the battery.

A typical hybrid (Prius) has a battery capacity of about 1.3 kwh, normally maintained at a 60-80% SOC. If we were to add a plug to an HEV, we'd probably also add a charge depleting mode so that the driver could use a little more electricity than gas in the last few miles before getting home, so we can assume the vehicle is at a 50% SOC when first parked. So, each time we plug it in, we'd charge 650 wh = 0.65 kWh, save about 1/11th of a gallon of gas, and $0.26. So 200 charges/year would certainly pay for the plug is about $50/year, more than enough to pay for the plug and extension cord many times over.

For people with short commutes this would be particularly significant, sine an HEV that normally got 50 MPG on a 10 mile commute would use .07 gallons instead of .20 gallons, and hence get an effective 150MPG.

The only question in my mind is, how many people would be willing to plug in each time they park for only $0.26? I would, but I'm rather energy-obsessed.

I think the closest we'll see to a top-up-charge like the one you favor will be the plug-in Prius that's scheduled for 2012 and will supposedly have about 13 miles of electric drive range. If anybody can pull off a good balance between internal combustion and hybrid drive, Toyota would be my top candidate. As you might expect I'll be more than a little interested in knowing what the additional cost of the plug-in will be.

Great discussion and I've been on the AXPW bandwagon for awhile now. Good to see it start to creep up. Volume has been heavy the past few days. Has either of you read about Planar Energy?

http://www.planarenergy.com/

I was recently exposed to them thru a quick Economist article. Basically, they claim to have created a solid state Li-Ion battery. Their "big claim" was that in 5-6 years they could triple the trip length of the volt (EV) by using this new technology.

I've been reading about Planar for a while now and find their work fascinating. I also know that the gulf between a great idea and an affordable product is wide and deep. Ninety percent of innovations that look good in the lab don't make it to a factory floor and those that do usually take seven to ten years. Since the planar devices use carbon nanotubes which are terribly expensive to begin with, I suspect that we won't see them cheap any time soon.

John you are quite right to point to the economically volatile mix of resources that go into car production, not just oil.

I think you miss a couple of points:

EVs and PHEVs as we know them now are transitional vehicles. The OEMs need to build them as a bridge between the standard car market and whatever we are going to drive (if anything) in future. I completely agree that non-commercial drivers won't have 3000lb cars forever.

The resources that go into EVs are just replacing what would have gone into a gas car, so introducing EVs doesn't mean more resources used, just slightly different ones.

After oil, there's just no foreseeable transportation energy source besides electricity. Sure there might be a viable bio-fuel someday, but the chemistry isn't friendly to current tech.

Here's a really tough question:

Will we be able to use the oil/coal left to power a transition to a future of far less energy use, and a different mix of energy sources? Or will there be a hard landing?

John Fisher

The really tough answer is that if a significant part of the 6 billion poor on our planet achieve their goal of becoming resource consumers instead of being largely resource neutral, then a great many things will have to change dramatically including transportation. Family cars and thirty mile commutes will become a thing of the past and as transportation costs rise the demand for transportation will have to fall. The current paradigm is not sustainable. EVs are more like a long pier than a bridge because there's nothing on the other side and we are most certainly in for a wet landing.

"EVs are more like a long pier than a bridge"

See this is exactly where we differ. IMO there are certain to be some sort of high-efficiency vehicles, and the rich will always have something cost-no-object, just as they do even in Haiti today.

"if a significant part of the 6 billion poor on our planet achieve their goal of becoming..."

I don't think there is any chance at all of this happening, not in China, not in India. The math just doesn't work.

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