Who You Gonna Bet On?

By Bill Moore

Posted: 11 Oct 2010

Germans and Brazilians share a common concern. Both are overly dependent on the supply of natural gas from fickle suppliers. In Germany's case it's Gazprom, the Russian natural gas giant, whose pipeline to Europe runs through Ukraine. For Brazil, its the Bolivians. Both have experienced the economic impact of uncertain supplies and/or prices. In Bolivia's case, it was the ascendancy of Evo Morales, the nation's first Indian president, and his plan to put an end of the vestiges of colonialism that he saw shackling the country.

One of the first targets of his anti-colonialism initiative was the pipeline and twin refineries that sent natural gas from the fields in the region around Santa Cruz, in Bolivia southeast region across the border into Brazil where it supplies Sao Paulo and Porto Alegre. Shortly after taking office in 2006, Morales order Bolivian troops to occupy the facilities that sent the processed gas to Brazil and forced the Petrobras, which bought the gas to renegotiate its contracts after six months of protracted negotiations.

Now this may seem to have little bearing on electric cars, unless you happen to be an unnamed GLG Expert Contributor. In an analysis dated 1O October 2010, the Gerson Lehrman Group published "Evo Morales: the greatest ally an electric company could ever have."

The official summary of the article reads:

When Evo Morales nationalized Bolivia's gas system, it sent waves of mistrust to the entire LATAM region, and especially to Brazil's promising ethanol program, thereby forcing investors to look for alternative ways for transportation. The only one they found was the electric car: something that really puts all the energy chips into one single basket, and something the electric companies can only be thankful.
The gist of the author's argument is electric cars make us dependent on a single energy supplier: the electric power company. Just as the Germans and the Brazilians have discovered how vulnerable they are to the political and economic whims of foreign suppliers, so will future electric car owners make the same painful discovery.

Here's how the article ends:

So it is easy to understand when an investor decided to get his hard-earned money into unproven technologies such as electric car, even knowing that technology is still miles away to become a reality (if it ever will). But the sad part of the electric car is that means really putting all the chips onto one single energy source. Because if it happens that the electric company decides to charge twice for its product, or if its wind, solar, hydro, thermal, whatever source fails, not only our house will be cold and in the dark, but we will also be stuck in it, as our car will not be able to take us anywhere else.

In other words, we tried desperately to avoid having to depend for our transportation needs on an energy source we thought was unreliable, and we got finally stuck into a model that really puts all chips (not only the transportation ones) into a grid that may perfectly fail, leaving us literally and figuratively stranded in a cold, dark, place.

I don't think Morales realized how much happiness he brought to the electric companies: I'm sure they did.
"Miles away to become reality…if it ever will"? I certainly would take exception to that statement, but that's not what troubles me most about this piece. It's the assumption that like Russia or Bolivia, power company can't be trusted. Now, I agree that the grid needs serious upgrades both in terms of its robustness and security; and billions are being spent to do just that. But which is more vulnerable, I wonder? Oil sourced from Iraq or Nigeria, natural gas from Russia or Bolivia, or electric power from my local utility? Apparently, whoever wrote this piece, forgot that unlike oil or natural gas on the international market, electric power rates are set and regulated by Public Utility Commissions, made up of elected officials, who are accountable to the voter, or are in theory, though I won't dispute the fact that money talks and funds political campaigns. However, if you look at electrical power rates historically in the United States, PUC's have done a pretty good job managing what utilities can charge consumers. Compare that to the crazy, unpredictable volatility of oil and gas prices. Contrary to the author's assertion, an electric company can't "decide to charge twice for its product," not without PUC approval and the wrath of voters such a move would incur.

As for the notion that by adopting electric cars, we're putting "all the chips… into a single basket," isn't that what we already have with our current system? Can you run your car on nuclear power, sunlight, geothermal, tidal and wave power, wind? Probably not. If there's no gasoline, there's no go. Plain and simple. The beauty of an electric car is that it can use electric power generated for any of the above sources. Sure it may come through a vulnerable grid, but your utility, be it public or investor-owned, has a vested interest in keeping the lights own, one that usually has more to do with local economics than with international politics.

So, since I am betting in which basket to throw my "chips," I'll toss them in the one marked "electric cars."

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