The Future of Plug-In Hybrids

Sure, in some cases money is no object when it comes to green cred. Take, for instance, venture capital-backed Tesla Motors with its 0-to-60 mph in 3.9 seconds BEV rocketship with an $80,000+ price tag; and then there’s VC-backed Fisker Automotive’s Karma PHEV with a similar luxury market price tag. Henrik Fisker, who helped design the Tesla vehicle and is now being sued by Tesla for trade-secret infringement, leads Fisker.

Both companies are examples of the no-compromise green option for those that can afford it. But, with Volkswagen and other German car companies announcing the coming of diesel vehicles that are compliant with California’s emissions standards, turbo diesel engines offer significant high-torque pick-up in vehicles that are affordable to most mortals, and with fuel-economy benefits versus costs that are by some estimates superior to hybrids.

Given the hurdles and competition, it is hard to say that PHEVs will be materially on the market (say in 25 percent of vehicles) in the next two decades. And this is assuming that petroleum prices stay high. History says that things may not remain this way. A Saudi Arabia-sized ocean of petroleum is presently sequestered in Canadian oil sands and profitably is converted at $50 $70 a barrel.

Replacement cycles also move slowly in the automotive market. It took a decade for the hybrid population to hit one million cars. That’s out of 850 million vehicles on the planet. And the electricity industry is similarly conservative and under various levels of regulatory control depending on the state/province and/or country.

The fundamental hypothesis of the coming Greentech Media PHEV report is that a breakthrough will only happen if the CEOs of the major electric utilities first convince themselves and then can convince Wall Street that the PHEVs lead a paradigm shift in reducing costs; increasing system optimizations; creating quicker and cheaper ways to achieve mandates; decreasing costs; and increasing revenues, profits and (courtesy of Wall Street) the all important stock price.

The Federal Energy Regulatory Commission (FERC) and state regulators, such as the California Public Utilities Commission, would have to be in on this effort, and it would require them to allow the expenditures and investments into the rate base to accelerate research, development and demonstration efforts as well as the early investment in batteries even before batteries are fully ready on a cost basis. But with this early investment aiding in bringing costs/prices down through economies of scale. FERC and other state regulators have to be convinced by these CEOs that they provide the proper forum and that it is in the public’s best interest on both the micro- and macro-level to allow for a direct attempt to displace petroleum. Of course, this would only happen if the stars of national- and state-level politics aligned.

Admittedly it shouldn’t be underestimated how intensely the petroleum industry would react to what is in essence a fight to the death over the most lucrative part of its business.

To succeed, the electricity industry would need to gather its allies either from new markets or from those markets that are negatively affected by petroleum. And with the petroleum market left with only the defense industry on its side, defense would have to fight hard to avoid this recognition of their interest. This could be a winnable war for electricity.

A petroleum-free U.S. could carve a huge peace dividend out of the defense budget, which could then go towards teachers’ salaries, domestic roads-and-bridges projects and more healthcare spending – all of which have very well organized lobbies and potential allies for the electricity industry. A further PHEV primer that will include the above issues and more will be dealt with in the coming Greentech Media report.

Reed M. Benet is leading Greentech Media’s coming plug-in hybrid report and is a former USMC infantry officer, MBA, experienced venture capital-backed entrepreneur and presently a Ph.D. student at the University of California Davis. At U.C. Davis, he is focused on attempting to articulate PHEV business models that are in line with the cost savings, and increased revenues, profits and market capitalization based forces of gravity of a reality-based marketplace. He can be contacted at reedmbenet@att.net.