Apollo and the Electric Car

By Bill Moore

Posted: 21 Sep 2011

Jim Bitter, a resident of Mill Valley, California stood up during a recent city council meeting to express his view that the city's plan to install two public chargers was foolish. He's quoted as saying, "“These cars only exist because of federal subsidies, and you’re enabling the federal government to get involved in something that just plain doesn’t work,” Bitter said. “It’s another Solyndra happening and when you raise your hand, you’re sending a signal to Washington that this is a good idea. I fully expect that you will.”

Solyndra is the failed thin film solar PV manufacturer that received a $535 million federal loan guarantee, on top of the billion dollars invested by private investors. Earlier this month, the US Federal Bureau of Investigation executed multiple search warrants of the company's headquarters in Fremont, California, after the company declared bankruptcy and fired nearly all its employees.

Clearly stung by Bitter's anti-government polemic, unsurprisingly, the city council changed its mind and cancelled its plan, leaving Leaf drivers in Marin County looking elsewhere for a recharge.

Bitter's doubts about the viability of electric cars is only one voice in a growing chorus of critics and skeptics, each approaching the topic from a slightly different perspective that I have classified into the Three R's: range, reliability and resale. The first two have been extensively covered here before, so permit me to briefly address the last one, especially since it reflects directly on the issue of EV cost, which is one of the most off-heard complaints: electric cars are too expensive.

What none of the critics seem to want to acknowledge is that "cost" and "expensive" are relative terms. A $300 electric moped in China is "expensive" to an factory worker in Changchun, especially since it might be ten times the price of his or her old "Flying Pigeon" pedal bike. Here in America, people pay that for a mobile phone or game machine.

The real concern here isn't how much it costs up front, but what will it be worth in the future? What happens to the market value of a Volt or Leaf or Prius PHV when each hits its 8 year, 100,000 mile warranty limit? What happens when the battery range of the Volt drops to 20 miles instead of 40, or the Leaf 50 instead of 90? It's going to happen, certainly, but how bad a hit will that be on its resale value in 2020?

Honestly, no one really knows, and that frightens people. What we can say is that none of the cars will be inoperable. They will still drive and in the case of the Volt or Prius PHV plug-in hybrid, they will still get relatively good fuel economy. The LEAF also will still be drivable, probably just not as far; and at some point its battery will need replacing, at what cost we can only guess because there's a lot that can happen between now and 2020 in terms of battery technology improvements and cost reductions. Maybe by 2020, a new replacement battery for the LEAF will cost less and/or offer longer driving range and greater durability. A lot depends on the role of technology R&D, which brings me to the title of this commentary: Apollo and the Electric Car.

It struck me this morning as I posted several stories critical of electric cars, such as the one that observes how EVs don't seem to be catching on with consumers -- that one based on a couple interviews with people at the Frankfurt Auto Show -- that none of these critics have stepped forward to offer any alternative solutions. The only one to do so of late was Louis Woodhill writing in Forbes, who argued that we should be focusing our efforts on converting cars to run on natural gas, which isn't a bad idea, though as I point out, a new NCAR study casts a very dark shadow over that scenario if you're looking to slow atmospheric heating from greenhouse gases. All these naysayers seem stuck in our current fossil fuel-shackled status quo of internal combustion engines burning some form of petroleum by-product.

For all their complaints about the shortcomings of electric cars, as well as the federal largess being showered on companies working on solving these issues, they clearly can't see the forest for the trees. I agree, electric cars aren't perfect, but then neither are the pollution-spewing contraptions we drive now, though they have gotten much better over the last several decades.

While I can't definitively prove this, it is my contention that the money being invested by the federal government, and the investment community -- remember, most of the money used to fund these firms is private venture capital, not just federal dollars -- will have the same 'spin-off' effect that we witnessed during the heyday of the Apollo space program. In 1969 dollars the federal government spent an estimated $20-25.4 billion to get six Americans safely to the surface of the moon and back, or the equivalent today of about $136 billion in 2007 dollars.

What did America get in return for this investment? A Chapman Research report in 1989 identified 259 non-space applications of NASA technology worth at that time more the $21 billion in sales and benefits, creating (or saving) 352,000 mostly high-skilled jobs and returning some $355 million in federal corporate taxes. The article on NASA's budget in Wikipedia includes reference to a 1992 article in Nature that claims those 259 applications represent only 1% of the estimated 25,000-300,00 space program spin-offs, adding...

"The economic benefits of NASA's programs are greater than generally realized. The main beneficiaries (the American public) may not even realize the source of their good fortune. . ."

The Wikipedia entry adds that a 1971 study of NASA released by the Midwest Research Institute concluded that “the $25 billion in 1958 dollars spent on civilian space R & D during the 1958-1969 period has returned $52 billion through 1971 -- and will continue to produce pay offs through 1987, at which time the total pay off will have been $181 billion. The discounted rate of return for this investment will have been 33 percent.”

I would argue that the money the government -- and investors -- are putting into a wide range of electric vehicle technologies will have a similar spin-off effect with far wider economic and societal impact than just what finds its way into the cars and trucks we drive. Where those applications will appear, I can only hazard a guess: advanced telematics being one that immediately springs to mind. The quest for rare earth-free motors or better hydrogen storage will have technological spin-offs that we can only imagine. Today we take for granted cell phones and GPS, but would we have had them without Apollo?

Where would America be today, had we not invested in the future in the 1960s? Where will we be in 2020 if we don't make similar kinds of farsighted investments? Yes, not all of them will have similar pay-offs. When I interviewed Ray Lane recently, he explained that Kleiner Perkins maintains a portfolio of 40 or so promising, paradigm-busting companies in which they invest, realizing that only 10 of them will be breakouts.

For all their talk about fiscal conservatism, critics of electric cars just don't seem to get it. Maybe EVs will be a flash in the pan when all is said in done, as these critics contend, but spins off from these investments will keep America competitive, as well as less dependent on oil, and with air that's easier to breath.

I think that's worth the risk, don't you?

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