Emissions, Electric Cars, and the Grid – 3/2/16

Like it or not, we live in interesting times. The effects of climate change are becoming noticeable enough that even countries like China are taking emissions and general pollution seriously. In response, calls for “cleaner” vehicles like electric cars viable for the common consumer are growing and major car and tech companies are looking to comply, putting oil’s position as the “best” source of motive power for transportation in doubt. And aging infrastructure, under-invested in for years, has raised questions about utility regulation and how electrical grids should be upgraded for security and to handle intermittent electricity generation.

While many will still deny climate change outright, companies and countries are already running cost-benefit analysis models that take its effects into account. The Paris talks of 2015 show that governments are ready to begin planning damage mitigation efforts, and the Clean Power Plan, meant to set the US towards the 26% emissions reduction goal, shows the at least some US effort. Some of this effort is partly the result greater weight placed on the externalities caused by air pollution. Attempts to institute national carbon taxes to price those externalities into the market have not done well in the Republican-controlled Congress but state-level taxes and cap-and-trade policies are gaining popular support.

Legislative support for emissions cuts may not even be necessary depending on the actions of the Judicial and Executive branches. The possible shift to a liberal majority on the Supreme Court before or after Obama’s last term would make it much more likely that the EPA will be allowed more power in regulating emissions. The momentum behind the Clean Power Plan could even keep it running if a less environmentally friendly future president decided to dismantle it. Years of challenges and publicity to get the rule to this point have made it so rolling the rule back would take a similar level of effort by opponents.

Power plant emissions are doubly important now that electric cars are benefiting from lower prices and improved functionality. Recent battles between Tesla and GM, both preparing their own electric cars, over direct-to-consumer sales shows that electric vehicles are nearly ready for mainstream consumption as the battle over unfair cost advantages begins. A more direct warning came from Bloomberg’s recently published article advising oil investors to begin taking electric cars seriously. It cites the billions invested by nearly every major carmaker – as well as Apple and Google – into the next generation of electric cars as a reason to believe that, by 2023, the next oil price crash will be likely be caused by electric vehicle use. The current crash caused by lack of Chinese demand and oversupply due to primarily to unexpectedly high US shale-oil output will end as soon as high cost producers bow out and stockpiles decline but substituting electricity for oil would be permanent. Oil is largely used for gasoline so reduced demand from transportation would be devastating for oil prices.

Electricity that could be powering cars will still have to come from somewhere, so a big unknown is where exactly that electricity will come from. Since 2013, the world has been adding more electricity-generating capacity from wind and solar than from coal, natural gas, and oil combined so clean power could make significant gains by the time of mass adoption. Reductions in the cost of batteries used in the cars thanks to economies of scale will also help make intermittent sun and wind power more cost-effective while reducing dependency on back-up power provided by fossil fuels. Renewables and electric vehicles just happen to benefit each other in their mutual dependence on better battery technology.

The rise of renewable energy puts stress on the poorly maintained U.S. power grid. Problems with the grid are especially apparent in the West where California has set some of the most demanding standards for clean power adoption in the nation. Sadly, the West also has one of the country’s patchiest grid networks lacking the ability to trade excess supplies quickly across borders. As a result, a disturbing amount of capacity can end up shutting down during peak generation hours when demand in California can’t match supply. For utilities to successfully incorporate intermittent power sources, power grid managers need to step up coordination and consolidation.

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