Vinod Khosla: EVs do not make economic sense

...because "most environmentalists" find "economic success" as
completely anathema to their ideology and goals. To too many,
"environmentalism" is just an excuse for anti-capitalism.

Re #1 JohnMcGrew
Actually, he's making some very poor, half-assed assertions, nothing more and nothing new. He's supplied no evidence. He's also resting on the false dichotomy between environmentalism and capitalism - I'm a mainstream economist who believes in market mechanisms, and an environmentalist as well.

For starters, do hummers make "economic" sense? Do luxury cars make "economic" sense? Good mileage is an attractive feature to many people who care about it beyond the economics and are willing to pay for it just as people are willing to pay more for a Mercedes that is in the shop more than a honda (time is money) and more expensive to fix. Corvettes reputedly are a loss for GM yet they have been producing them for decades. Does spending millions if not billions of dollars every year on "concept" models and car shows make economic sense? Does leaving a car idling make economic sense? Does having your foot on the accelerator as you approach a red light with cars stopped in front of it make economic sense? No, but people do it all the time and then complain about gas prices and imports. Does sitting in traffic with 1 person/car make economic sense in terms of gas wasted and time wasted and fumes (health is money)?

He also refers to subsidies and markets, completely ignoring, as is typical, the fact that most industries are riddled with market failures - incomplete and asymmetric information, market power, entry barriers, independence from each other etc. - and that the auto and oil industries have benefited from subsidies in the past. Moreover, oil and auto are mature industries, more about profits and maintaining turf than innovation. Environmentalists are pushing innovation, whereas big auto and oil are all about the status quo.

As for the Leaf, the batteries are owned by Shai Agassi's "A Better Place" who has also built the battery exchange/charge infrastructure in CA, Israel, Denmark, Japan. His setup is innovative so you should be for it.

It's not all monolithic, simple, and black and white the way you and he believes it to be.

I agree that Mr. Khosla is off on this one, but perhaps for different
reasons.

When Motorola released the first tiny flip-phone, the StarTac, it
retailed for $1200. 5-10 years later, such phones were $50-
$120. The point of bringing an innovative product to market early
and at a relatively high price (although the Leaf price is pretty
mainstream for a 5-seater sedan) is to kick start the market.

Somebody has to do it first. Somebody has to learn about what
works and what doesn't so that they can start to drive the cost
out of it. Nobody is expecting battery prices to remain constant
over the coming decade. The amount of R&D going into the field
and government pressure and incentives is ensuring that we'll
see these costs come down. Right now, the DOE is forecasting
that battery costs will drop 70% in the next 5 years and 90% in
the next 20 years
(http://www.reuters.com/article/idUSN1521310320100715).

Climate change scientists have made it clear that we need to
take some major steps to avoid climactic calamity around the
world - getting our transportation network off of CO2-releasing
hydrocarbons (including those grown biologically by the
companies in which Mr. Khosla has heavily invested his venture
fund) would be a great start.

Whether or not EVs make economic sense on their first day of
release is irrelevant. There will be an early-adopter market for
the higher-cost product at the beginning (can you say Tesla
Roadster at $100K) and these early developments will shepherd
in a generation of new, lower-cost EVs that can serve the needs
(and budgets) of the mass market.

So there.

...however, the collusion between much of what purports to be
"environmentalism" and "statism" has been consistent for at least
3 decades now.

One of my favorite examples takes place in 1989, when a couple
of physicists announced that they had created "cold fusion" is a
laboratory setting. The implications of this discovery would have
been profound if found to be true and reproducible; incredibly
inexpensive energy, freeing us from the "addiction to oil",
hazardous conventional nuclear fission, and carbon & soot-
centeric coal. And yet much of the environmental movement of
the time was in horror by the possibility of actually achieving this
generation-long dream.

Why?

Because the possibility of such a cheap and nearly endless
energy source meant something that scared them more than big
oil; economic growth unconstrained by the high cost of energy. It
was the idea of a world opposite of the one many believed in; one
where people lived a more subsistence-level existence than the
consumer comfort based one most people seem to desire.

How many "green" energy proposals supported by "mainstream"
environmentalism are truly economically viable, much less
comparable to the existing infrastructure? There's a political
reason for that.

Fortunately for them, "cold fusion" was at best shoddy science,
and at worst a fraud, and in the eyes of the environmental
extremist, the world was spared the consequences of an actual
cheap and clean energy source.

The wind turbine project for Nantucket Sound has a price tag rising faster than the Big Digs cost and far fewer benefits for society.

Even with advancing wind technology the power output estimates keep dropping as the years go by since it was first proposed. Last year the number of turbines in the project went up, the project cost went up, but the best day power output estimate went down. Interesting.

With an ROI of over 30 years the project will never pay for its self as the turbines have an expected 20 year life span in the harsh salt water environment. This forecast is in spite of massive federal and state subsidies and selling the electricity at more than 4 times the current electric rates.

Even the elevated rates on coal generated electricity expected if Cap and Tax were passed would be lower than the cost of electricity from Cape Wind.

On cold fusion and energy costs:

Drop energy costs and people will have more real income - some would buy more, some would buy better, many would be more comfortable and healthier as cooling and heating in buildings would be cheaper, and "charging" hydrogen fuel-cell and EVs would become incredibly cheap and problem free making these more viable alternatives to even the most skeptical and misinformed. That said, there is a limit to how much more consumption and production there would be.

The ones most against cold fusion would be the coal and oil companies, and to some extent the car companies who would likely suddenly back off hydrogen as it would now be viable (I'm very cynical about why the auto companies backed hydrogen as part of destroying the CA mandate in the 1990s).

As for the greens against cold fusion, I don't happen to know any, which does not mean they don't exist, I just don't know them - I suspect they would be a vocal, and myopic fringe. As for the consumption complaint you mention, it is the same complaint as now regarding what to do about all the waste from consumption, and environmental degradation from extraction, production, and depletion of resources. Concern over waste, of course, has spurred numerous recycling and conservation related industries such as the reusable bag industry, people composting, compostable garbage bags, and less municipal cost for landfill. It also means less plastic in the environment endangering wildlife.

While there are greens who choose a subsistence life, there are many more who do not and who live their lives mostly quietly as greens; what makes them green is that they think about what they are doing and ask themselves "if 1million people did this, would it be good?"; if not, they consider how they can act differently and what the cost/benefits would be.

As for green=statism, the corollary to that is perhaps non-green=capitalism; however, the command control economies are among the worst environmental offenders.

As for environmental initiatives being economical, one first has to account for the externalities of the status quo which have largely been ignored in the past, e.g., the health cost of those living around refineries, the cost of keeping the Persian gulf open, the cost of oil spills including the small amounts spilled every day that accumulate. BTW: I assume you're talking about energy and don't consider keeping poisonous chemicals out of the ground and ground water an issue to discuss, such as Love canal or the PG&E case. Rooftop solar panels over time are economical, in particular in areas with lots of sun even without government subsidies. It also raises the value of the house if you need to move before getting full payback. Many for profit businesses have installed solar, "greened" their lighting, and use other green innovations because they save them money. The more who do this, the less we need to expand the grid and the cheaper will be energy from the current grid - that would be the positive externality, plus cleaner air in L.A. Changing industries in coal country from mining coal to making solar panels etc. would improve their health and save lives from mining disasters. EVs do require mining for the elements in the batteries, but these elements can be reused (lithium) and don't have to be mined again per driver, unlike oil. Also, an EV at $50k is cheaper to run, not just because of the cheaper "fuel" but because of the lack of complexity - no oil to change; no cooling system, exhaust system, fuel system to break down; less heat generated to wear out parts; brakes last longer because of regenerative braking. Batteries are expected to last longer than typical ICEs, and in the Leaf are not owned by the consumer. Other green initiatives that make economic sense are white roofs, solar water heaters, solar attic fans, solar car AC that keeps the car cool even when parked, turning off modern cars at stop lights. Even current hybrid vehicles provide an externality by helping to keep the price of gas down for everybody.

As for the poster "Hates Idiots", you could choose a less aggressive name. I haven't been following the cape project, or the cost overruns of any new coal fired plants either, so I can't speak to the Cape project. However, coal is subsidized in case you haven't noticed, and there are externalities that don't make their way into the price of coal - black lung disease, dirty environment with heavy metals all around, air particulates from burning coal, and effects on climate change. Of course, we could reduce the amount of energy we use, not by suffering, but by being more intelligent in our use of it.

I think the times of unfettered mobility will be over soon. Moving takes energy, no matter how it is generated. Generating energy adds to global warming as efficiency can never reach 1. I don't think though that this means going back to a subsistence society, but certainly to favoring local availability over long-distance transport. Sounds good to me.

He may not be saying anything "new" here, but his message is completely logical.

Someone, above, asked, "What's the economic sense in driving a Hummer?" Well, it's as sensible as that owner FEELS it is. That's the crux of the issue, really. Economic "sensibility" is subjective! Anyone with the financial means to buy a Hummer in the first place obviously considers the fuel costs to be relatively minor. Meanwhile, as they buy more gas than the average driver? They pay a greater share of the taxes on every gallon of gas, which helps repair our roads and bridges. So maybe we should thank all of them for doing us that favor?

What *is* clear is that for those of us with relatively limited incomes, the $25,000+ cost to get into any "electric" or even "hybrid" vehicle is at least $10,000 more than they'd have to spend to get a traditional gasoline-powered economy car! How many of them will really use over $10,000 worth of gas in that vehicle before they're ready to trade it in on something else?

And when you add the super low-cost cars from India to this equation? It's even more imbalanced (which is the speaker's original point, really). When you think globally, you've got MUCH more interest centered around building a very inexpensive vehicle that the masses can afford - NOT people running around fretting about how they can get a "greener" one.

The ugly truth is, the cost of an EV doesn't stop when you drive it out of the showroom. Yes, you'll save on gas, but you'll have to pay for the electricity to charge it. Where do you think that electricity comes from? You're simply displacing where you use the fossil fuel, not replacing it. But even more so, those batteries are not guaranteed forever. Batteries degrade over time. The average battery in a car lasts 5-7 years. Batteries in hybrids (and likely EVs) don't even make it that far. That means you are replacing batteries worth $10,000 plus every few years, thus negating any proposed economic benefit. These cars don't make economic sense, the only alleged benefit is environmental, and that benefit is dubious at best (these batteries are usually made in overseas factories (read limited environmental regulations) with rare-earth minerals that are rather difficult to extract from the ground).

Also worth noting, they've been touting EVs for about a hundred years (New York Times ran an EV article in 1911), but none have survived in the market place, anywhere in the world. But I'm sure that's a worldwide conspiracy, and not simply because they don't make economic sense.

...created by production and consumption.

Lower costs in production means more resources that can be
devoted to remediation. Super cheap energy makes large scale
water purification viable.

As for green=statism, the corollary to that is perhaps non-
green=capitalism; however, the command control economies are
among the worst environmental offenders.5% and the budget near balanced, it
would have been a slam-dunk.

sprevrha@ expresses the totalitarian sentimentality that I
experienced during the "cold fusion" episode; as many
environmentalists see it, the real threat to the world is the
"unfettered mobility" that Americans take for granted. So much
better that we all be crammed into trains, where the government
would decide and control where to and when we travel.

Makes sense. Now or in future.

Stupid video. Khosla's only argument was that the most important thing is making. Which is kind of why we've done more damage to earth in the last 100 years than in the previous millions we've lived here.

Stupid video. Khosla's only argument was that the most important
thing is making. Which is kind of why we've done more damage to
earth in the last 100 years than in the previous millions we've lived
here.

We are the first society to recognize its effect on the environment,
and to take efforts to remediate those effects.

sprevrha@...

The waste heat produced by generating energy and other industrial processes is less than 1% compared to the global warming caused by the CO2 released by burning fossil fuels. It's not worth worrying about.

...you probably have that backwards. The CO2 threat has been
exposed as greatly exaggerated. The point here is how much
environmental damage are we going to cause combating a phantom
crisis.

No Mr. McGrew, CO2 is the thermostat that controls Earth's temperature (along with some other minor non-condensing GHG's such as methane and ozone). If there was no CO2 in the atmosphere the Earth would become pretty much a ball of ice within a thousand years or so. Increasing the level of CO2 increases the Earth's temperature.

A recent paper by Andrew Lacis published in the Journal Science lays it all out. Here is the GISS brief on the paper: http://www.giss.nasa.gov/research/briefs/lacis_01/

This guy clearly comes from a 3rd world, and, in particularly, an Indian centric viewpoint. 200,000 tata nano's may have been ordered the first day, but only because there was no other car NEAR the cost. Such a car would never be able to pass the safety and crash standards implemented in the US! In fact, if you look around a little more, that car, which was supposed to cost $2k was up to 2.8k for the BASIC version at it's launch and almost $4k for the "luxury" version.

A European version will cost more than $6k !!! All of a sudden, this little POS, which would hardly qualify for a car in most of the free world is costing 1/3 to 1/2 of what a more normal sub-compact or compact would cost!

He didn't mention the fact that several of the cars have CAUGHT FIRE!!! That's right, here's a link to one of the web pages.

http://www.insideline.com/tata/nano/another-tata-nano-catches-fire.html

But, similar to Toyota's (there's no problem with the accelerator), Tata has stated that there is no design flaw with the car. Ok, maybe there's not, maybe this is the "preplanned obsolescence" built into the car so it just burns up when it's useful (6 month) life is over!

The other thing not mentioned is how long it is going to take to fill these initial orders, how many subsequent orders have been taken, and just how many of these have to be replaced under warranty because they have already "burned up" ! YIKES!!! Yes, one fire reportedly happened "on the way home from the showroom". I don't know about you, but *I* have never heard of that happening with ANY other car.

Also, have you or anyone else taken a look at the IMPORT DUTY applied to bring a car into India? Try 111.038% of the book value! So, there was a lot of pent up demand for something that simply was unavailable.

The sad thing is that I bet a LOT of the money used to purchase these vehicles was money sent THERE by COMPANIES here in the US that sent OUT JOBS over there!!!

....that is so 2008. I'm not so sure NASA knows what the real
temperatures are:
http://www.foxnews.com/scitech/2010/03/30/nasa-data-worse-
than-climategate-data/

Just as most feared by the AGW enforcers, the ClimateGate
fiasco has started the "preference cascade" within the climate
community, and those wishing to preserve their professional
reputations as anything other than captive are jumping ship, and
many are being explicitly clear as to why:
http://www.thegwpf.org/ipcc-news/1670-hal-lewis-my-resignation-
from-the-american-physical-society.html

@JohnMcgrew

"And yet much of the environmental movement of
the time was in horror by the possibility"

I call "Bogus". You neglect to cite a source to
corroborate this.

If we did have access to clean, portable power the
Coal plants would be shuttered and cold within five
years.

Coal Mining would also fade away, unless we figure
out how to make plastic with it.

Oil imports would vanish.

The US economy would boom without the constant
drain from purchasing energy from abroad.


There isn't an environmentalist in the world that
would cringe in horror at those prospects.

Plus the clean energy would make it possible to start
reversing the damage done.

Your mis-characterization of environmentalists
speaks volumes about your viewpoint.

Vinod has been admired for a lot of things he has done and said but this speech of his was completely out of line and seemed to be so commercially motivated. How can he not bat for development of renewable resources and trash the idea ...... it was not only in poor taste but also makes me feel he now so much of a VC guy that he cannot look at things beyond money (in the garb of economics). Talking about Nano just because it was cheap car concept lacks vision. I guess its time for Vinod to either retire or take a long break and introspect before making future guidances.