Wednesday, June 6, 2012

Tesla's Gift Box: Inefficiency Wrapped In Hype - Seeking Alpha

Tesla's Gift Box: Inefficiency Wrapped In Hype - Seeking Alpha

Where lies the truth, i have read it takes as much electricity to refine gasoline to run a dynosaur car as it takes to run an EV over the same distance, but here the story plays out differently!

The depressing financial stats on alternative enrgy hogh flyers is familiar, i think back to Ballard Energy, Solyndra, here is a long history of tech hype and disillusion, but is the underlying math deceptive?

You have two competing proposals on your desk. The first is from Self Sufficient Motors, which wants to build a fleet of thirty HEVs using high-power batteries from the factory. The second is from Tesla Motors (TSLA), which wants to build one Model S using high-energy batteries from the factory. There is only enough capacity for one of the alternatives.

It you accept the proposal from Self Sufficient Motors, each of the HEVs will save 160 gallons of gasoline a year. So the combined fleet will reduce imports by 4,800 gallons a year and reduce CO2 emissions by 55 metric tons a year.

If you accept the proposal from Tesla Motors, the Model S will save one owner 400 gallons of gasoline a year and reduce CO2 emissions by 5 metric tons, but it will increase CO2 emissions from power generation by 2 metric tons, resulting in a net emissions reduction of 3 metric tons a year.

At first you're confused by the numbers because everyone knows that grid-powered electric vehicles are way cleaner than normal cars. Then your research assistant finds the following graph from the Union of Concerned Scientists that explains it all by showing that less costly HEVs fall nicely into the middle of the emissions range for grid-powered electric vehicles.

A grid-powered electric vehicle might make one driver feel warm and fuzzy about himself, but from a public policy and resource conservation perspective it's the most wasteful plan in history.

There is no room for rational intellectual debate.

At March 31st, Tesla had $123 million of working capital and $154 million of equity. It lost $89 million during the first quarter and burned $50 million of cash in operations. Its remaining DOE loan facility can only be used to buy equipment. Those funds cannot be used to buy parts, materials or labor to build cars, or to pay the overhead associated with running a company. At Friday's close, the market value of Tesla's outstanding shares was $2.96 billion, or 19.2 times book value.

I've heard the breathless claims that Tesla is the next Apple (AAPL) and Mr. Musk is a younger and far smarter version of Steve Jobs. That may be the case, but it can't change the reality that Apple trades at 5.2 times book value after a decade of extraordinary growth and profitability that consistently outperforms market expectations while Tesla is a rank startup with a long history of losses.

Many individual investors don't understand the Hype Cycle, the most dangerous dynamic in the stock market, until after they've been victimized at least once. Some investors never learn and they keep doing the same thing expecting different results. This graph from the Gartner Group conveys enough information to help sensible investors avoid Wall Street's version of a buffalo jump were the herd is sent stampeding over a cliff and the hunters feast on broken carcasses.

Then i turn to the Union of Concerned Scientists page on EV's and i get a much different story:

State of Charge: Electric Vehicles’ Global Warming Emissions and Fuel-Cost Savings Across the United States

Electric cars produce lower global warming emissions and cost significantly less to fuel than the average compact gasoline-powered vehicle.
Download: State of Charge--Executive Summary | State of Charge--Full Report | State of Charge--Technical Appendix
Electric Vehicles and Global Warming Emissions

Electric vehicles (EVs) burn no gasoline and have no tailpipe emissions, but producing the electricity used to charge them does generate global warming emissions. The amount of these emissions, however, varies significantly based on the mix of energy sources used to power a region's electricity grid.

For example, coal-fired power plants produce nearly twice the global warming emissions of natural gas-fired power plants, while renewable sources like wind and solar power produce virtually no emissions at all.

The UCS report, State of Charge: Electric Vehicles' Global Warming Emissions and Fuel-Cost Savings Across the United States, compares the global warming emissions from EVs with those from gasoline-powered vehicles and finds that:
Nationwide, EVs charged from the electricity grid produce lower global warming emissions than the average compact gasoline-powered vehicle (with a fuel economy of 27 miles per gallon)—even when the electricity is produced primarily from coal in regions with the “dirtiest” electricity grids.
In regions with the “cleanest” electricity grids, EVs produce lower global warming emissions than even the most fuel-efficient hybrids.
EVs charged entirely from renewable sources like wind and solar power produce virtually no global warming emissions.

Infographic: Learn more about the range of global warming emissions from electric vehicles.

Charging Up: How Clean is Your Electricity Grid?

The report evaluates regional electricity grids across the United States based on the global warming emissions produced from electricity generation, and then compares the emissions generated by charging an EV with those produced by gasoline-powered vehicles.

The report finds that:
Nearly half of Americans (45%) live in the “best” regions where EVs produce lower global warming emissions than even the most fuel-efficient gasoline hybrids on the market today (greater than 50 mpg).
Another third (37%) live in “better” areas where EVs produce emissions comparable to the best gasoline hybrid vehicles (41 – 50 mpg).
A minority (18%) reside in “good” regions where emissions from EVs are comparable to the most fuel-efficient non-hybrid gasoline vehicles (31 – 40 mpg).

How clean is an electric vehicle powered by your regional electricity grid?

Who do you believe, i ask?

I will go with a science based attitude!

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