Why Melting Glaciers Mean Cleaner, Cheaper Cars

When we focus on news that reinforces our environmental challenges, of which there’s no shortage, we forget just how exciting the opportunities in fixing them are and how fast these solutions are now accelerating. Every story about melting icecaps or raging floods brings a smarter, cleaner world closer. My favourite example at the moment is electric cars. While they had a bad start, we are now on the verge of the breakthrough we’ve been waiting for, with around 30 models coming into the market from the major car companies and new start-ups over the next 3 years.

If we get this right, it’s hard to overstate the significance of the upside. This is a real game changer for our transport and energy systems. Forget any old ideas you have about niche markets, limited range and slow cars. There are some very exciting cars on the way and some business concepts that could change not just personal transport but the whole electricity sector. How will this unfold?

Imagine for example not charging your car overnight, but pulling into a “battery change station” where a machine simply takes out your battery pack and replaces it with a fully charged one, all in a few minutes, while you go and pick up a coffee. The batteries will have been charged by 100% renewable energy and you will have a contract that guarantees the price you pay, eliminating fears of petrol price rises. That’s the vision now being implemented across a number of countries by the very well funded Better Place and its founder Shai Aggasi as you can read here.

But it gets even better. You could also have a car that plugs into the grid when you’re not driving it. This means when the power is cheap because demand is low you will be able to charge your car and when there is high demand and power is expensive you can sell it back to the grid and make a profit. So your car effectively becomes a power station and you become a mini power company! An additional benefit of this is that the car fleet acts as a giant battery, enabling storage of intermittent renewables like solar PV and wind power.

By the way, they are also dramatically cheaper to run because electricity is so efficient at energy conversion. If you want some more details on the numbers take a look at this excellent summary by Andrew Simpson from Curtin University.

If you’re worried these electric cars will be boring to drive then take a look at Tesla Motors who are producing the Tesla Roadster that will go from 0 – 100kh/h in 4 seconds. Who said greenies don’t know how to have fun!

This is all in addition to the clean cites, no air pollution and countless new jobs created as we build the infrastructure for this transport and energy revolution.

Heard all this before and wondering if its real? Warren Buffet certainly thinks its is. He invested US$230 million in Chinese electric car company BYD in 2008 and his 10% stake is now worth close to $2 billion. China plans to put a million electric cars on the road by 2012 so BYD is looking like delivering on its name for its owners (BYD stands for Build Your Dream!).

As a transition this dramatic takes off in a market, it’s hard to tell where it will head but in any outcome the implications for consumers, business and markets are certainly profound.  Alan Kohler makes an interesting argument in his investment newsletter The Eureka Report as to why all cars will be electric within 20 years. He points out that when people come to believe that the electric car is going to be the clear winner, they will suddenly realise their old petrol car will have close to zero resale value within a few years. At that point there will be a rush to go electric, to avoid the inevitable price collapse in second hand petrol cars. This will of course be self-reinforcing when it takes off.

Of course we can’t be sure which technologies, business models and companies will succeed. What we can now safely accept however is that with so many people and so much money focused on making this work, the time has clearly arrived when the internal combustion engine is heading for a rapid sunset.

Let you mind run over the implications of that for the oil industry and peak oil….

So next time you read about a melting glacier, remember how much fun driving into the future is going to be.