Range Anxiety is the Mortal Enemy of Electric Vehicles

Last week the electric car press was abuzz with stories that General Motors (GM) was increasing the electric drive range of the 2013 Chevrolet Volt from 35 miles to 38 miles. The increase is due to better batteries. GM’s battery supplier LG Chem (LGCIF.PK) has apparently improved the volumetric energy density of their cells to a point where GM can fit 16.5 kWh of storage into a space that could only accommodate 16 kWh in January 2011. The GM press release also noted "tests have revealed less battery degradation, the ability to withstand temperatures as low as -30 degrees Celsius and less impact by energy throughput."

According to my calculator the cell improvements represent a volumetric energy density gain of 3.125% in less than two years along with modest gains in cycle-life and cold weather performance. Since I know how hard it is to increase energy density and boost battery performance, I’m impressed. The accomplishment does, however, highlight the unpleasant reality that step-change gains in battery performance and major cost reductions are very unlikely. Battery research, development and commercialization is a long, slow, difficult and expensive process that has nothing in common with the short product development cycles and steep cost reductions we all came to know and love during the IT revolution.

The research, development and manufacturing dynamic is very different this time. It’s so different that Professor Vaclav Smil refers to the new dynamic as Moore’s Curse.

With last week’s announcement from GM and this month’s launch of the Model S from Tesla Motors (TSLA), now seems like a great time to revisit an issue that I discussed in December 2008 and most EVangelicals still don’t grasp –

Range anxiety is always and everywhere the mortal enemy of EV efficiency.

In the world of finance, the value of any asset is based on the number of payments its owner can receive in a given period of time and the amount of each payment. A hotel room that rents for $1,000 a day is more valuable than an executive suite that rents for $1,000 a week, which is more valuable than an apartment that rents for $1,000 a month. While living space and batteries have nothing else in common, their intrinsic value to an owner is based on the same ironclad laws of finance. Full utilization and daily turnover maximize asset values while inefficient utilization and slow turnover savage values.

In the US, an average driver puts about 12,500 miles per year on his car, or about 40 miles a day by the time you account for different weekend driving patterns. Compared to a CAFE compliant new car, each 40-mile daily commuting cycle in electric-only mode represents a potential savings of 1.3 gallons of gasoline for an effective "day rate" of about $5.

Using that day rate as a starting point, I can put on my green eyeshade and drill down into the operating inefficiencies that are directly attributable to range anxiety.

The most efficient battery in the plug-in vehicle world is the 5.5 kWh pack in the new plug-in Prius from Toyota (TM), which has an EPA certified electric-only range of 11 miles. A driver who has access to charging infrastructure on both ends of his daily commute can use 100% of the battery capacity twice a day. So the baseline battery efficiency factor for a plug-in Prius is 200%. Salesmen, soccer moms and others who have several daily trips and good access to charging infrastructure may be able to push their battery efficiency factor to 300% or more.

Second place belongs to the 16.5 kWh pack in the 2013 GM Volt with an electric-only range of 38 miles. Even without access to charging infrastructure, an owner will probably use 100% of his battery capacity every day.

Third place belongs to the 24 kWh pack in the Leaf from Nissan (NSANY.PK), which has an EPA certified electric-only range of 73 miles. Since the Leaf’s electric-only range is nearly twice the average daily commute, the battery efficiency factor falls to 56%.

Fourth place belongs to the 40 kWh pack in the Tesla Model S-40, which should have an EPA certified electric-only range of 140 miles. Since the Model S-40’s electric-only range is more than triple the average daily commute, the battery efficiency factor falls to 29%.

Fifth place belongs to the 60 kWh pack in Tesla Model S-60, which should have an EPA certified electric-only range of 200 miles. Since the Model S-60’s electric-only range is five times the average daily commute, the battery efficiency factor falls to 20%.

Last place belongs to the 85 kWh pack in Tesla Model S-85, which should have an EPA certified electric-only range of 265 miles. Since the Model S-85’s electric-only range is almost seven times the average daily commute, the battery efficiency factor falls to 14%.

Batteries cost money; lots of money. While GM is pretty tight-lipped on the subject of battery costs, most experts believe the battery pack for a Volt costs less than $12,000. In comparison the battery pack for a Tesla Model S-85 costs about $45,000. In most cases, the driver of a Model S-85 won’t save any more gas than the driver of a Volt. Paying a $33,000 premium for electric-only range that most drivers will rarely use is more than a little wasteful.

The first great tragedy is that electric-only range, the most over-hyped feature in EVland, is the mortal enemy of EV efficiency. Electric drive is most economic when you buy no more battery capacity than you plan to use a daily basis. Soothing range anxiety with a huge battery pack might feel better, but it destroys any pretense of efficiency.

The second great tragedy is that EV batteries cost $30 to $50 a pound to manufacture but they’re not worth recycling. The commodity value of recoverable metals in most lithium-ion batteries ranges from $0.50 to $5 a pound, but collection, transportation, primary battery recycling and secondary metal separation and refining cost more than the recovered metals are worth. There are a few companies that have built pilot scale lithium-ion battery recycling facilities, but those facilities are experimental and current recycling technologies are nowhere near cost-effective. That range anxiety soothing battery pack that crushes EV efficiency during the battery’s useful life also gives rise to unconscionable waste of scarce nonferrous metals at the end of life.

Notwithstanding the blistering, scurrilous and occasionally defamatory comments that my articles seem to draw from the ever vigilant and perpetually myopic Knights of St. Elon, efficient cars like Toyota’s plug-in Prius are marginal economic propositions at their best while the least efficient electric vehicles like Tesla’s Model S-85 are obscenely wasteful.

Benjamin Graham once said, "In the short run, the market acts like a voting machine, but in the long run it acts like a weighing machine." While Mr. Graham was talking about the stock market, his wisdom applies to all markets. EVangelical fervor over the Revenge of the Electric Car can only last so long. When consumers and government start weighing the true cost of electric drive against it’s largely illusory benefits the house of cards will collapse and investors will suffer.

Disclosure: I have no direct or indirect interest in Tesla, GM, Nissan or Toyota and I have nothing to gain or lose from any of their stock price movements. While I am a former director and current stockholder of Axion Power International (AXPW.OB), a micro-cap company that has developed a robust, affordable and serially patented third-generation lead-carbon battery for micro-hybrid, railroad and stationary energy storage applications, I can’t see how the success or failure of a niche product like electric drive could impact the value of my investment in a company that’s focused on much larger and more predictable mainstream markets.

John Petersen, www.altenergystocks.com