Perverse Incentives

Did you see the recent EPA news about new vehicle fuel efficiency standards?  Did it strike you as odd that we all would pay auto companies to make more efficient fueled vehicles?  If we want to make it attractive for customers to buy EVs we should eradicate any incentives for fueled vehicles and only offer incentives to EVs.  After all, we are defeating the consumer economics of owning an electric vehicle.

Read the Utility Dive issue and the attitudes so far here.

While we are on this point, how about removing the penalty I pay for an EV of $200 a year because, after all I am not paying the gasoline taxes that pave our roads.  That has already cost me $1,400 so far on my EV.

Elon Musk has been outspoken about this issue as part of the BBB program.  Of course, he can afford to take the high road because he has already produced so many cars.  But then again, why should we incentivize people to do this?  Why not ban the wrong types of vehicles like we did banning incandescent lamps a few years ago?  Just force people to buy the right devices.

Haven’t we learned our lesson from this COVID thing?  Didn’t we offer huge incentives to people to not work?  These are so large and perverse we have trained the US workforce to grab the easy path in life.

Part of our plan also must reflect the real-world realities of how fast we can produce these vehicles.  Placing a higher-than-normal demand on the manufacturing supply chain is pushing up all prices from the precious metals in the batteries and electronics through virtually every piece and part of the car.

Plus, this unreasonable push is also going to raise carbon dioxide levels in the near term anyway since the EV carries about 8 years equivalent of the normal car in its embodiment.

I can hardly wait for the politicians to try to explain that all this money actually increased carbon dioxide levels.  Don’t they realize this will backfire?

Oh, I forgot they don’t really care … that is why they load this kind of legislation with pork.

Inconvenient Carbon Truth

I am really feeling a lot like Sigourney Weaver in the second of the Alien trilogy where she was found drifting in space and after being brought back to earth to account for her actions attempting to save her crew she is being criticized for destroying an alien lifeform.

If you saw the movie you know the question she asks the review panel: “Did IQs drop sharply while I was away?”  Well, I am feeling the same question when I read all the wondrous praise for electric vehicles.

Don’t get me wrong … I have one and love it!  I am looking forward to the next long range versions too.

But, as with any idea, there are the realities of how fast technology adoption is going to take place.  Here is our government’s prediction for the US and around the world a few years ago.  They forecasted that Norway would have 100% electric vehicle sales by 2027 … a good forecast back in 2019.

So, what is the story today?  The good news is that about 90% of new car sales in Norway are electric.  But, and this is the key point in this blog, how many of all cars in Norway are electric? Remember cars last 15 to 20 years, so the existing inventory is staying on the road and will stay on the road until they are no longer economic or convenient to operate.  Pay special attention to convenient … aka long trips for which gasoline vehicles are preferred.

Statistics are hard to find, but given about 65% of all registered vehicles in Norway are electric, that means that about 35% are still fossil fueled.  And, given that most of them are being driven the longer distances, it would be fair to say that Norway is far from carbon neutral on the cars there, and that assumes the electricity being used came from renewables … which it does not.

The good news is that we are moving in the right direction.  The bad news is that we are far from even seeing the finish line … or the Norwegian line if you prefer.  😊

Where are the Adults in the Room?

It seems that holidays can cause tensions within a family that are quite unhealthy.  I was always told that fish and relatives begin to stink after three days.  Well, I certainly hope this is not your experience during the holiday season or for that matter anytime in your life.

However, we all know that disparate points of view, petty jealousies, and an abundance of alcohol can become a toxic brew even at these precious times of the year.  It is against this backdrop that many people will refer to the person who mediates and conciliates these situations as the “adult” in the room.

Well then … where are the adults in the room to mediate the current polarization in the United States?  Don’t you remember what we would call these people at times in the past: statemen … OK … statespersons.  Ombudsmen … negotiators … very clever people who realized that finding middle or even higher ground was more important than the bickering that goes nowhere.

As I think about today’s world, I am struck by the lack of adults in the room.  Today’s politics are just like what we used to call a “food fight” in the cafeteria.  Both sides have resorted to bullying tactics rather than diplomacy.

What makes me crazy are those sitting on the sidelines who are just watching these food fights and waiting for the victor to emerge.  As a result, there are no adults in the room and the factions are just throwing bigger and bigger rocks at each other.

We must learn to listen more and to show mature, sound, economic leadership.  Contrary to some who think we can just print money and get our way out of this; most adults are just like you and I who run a business.  You must plan and manage.  There are always wants and desires that are beyond sound budgets and the ability to manage the details.

Planning is no accident.  Read that again a few times.  Then add the phrase doing the right thing never goes out of style.  Mature adults plan to do the right things while always considering more things than what must be done if and when we have the time and resources to do them as well.

Adults in the room pay attention to the big things like sustainability of our life here and around the world and don’t get distracted by things we can’t change.

Perhaps this was best all summarized by the serenity prayer:

God, grant me the serenity to accept the things I cannot change, the courage to change the things I can, and wisdom to know the difference.


New Year Reckoning

The one thing we in the energy industry know is that senior leadership is dominated by the accounting of their business.  Customer satisfaction is often included in the key performance indicators, and reliability is watched for its implications on that as well as due to its operational costs.  However, the bottom-line results are usually the key metrics.

I am waiting with bated breath for the results to be reported early this next year.  Clearly 2021 was a year of recovery from 2020 but 2020 wasn’t as bad for many as first thought.  Residential loads were and are increasing.  Office space has been decimated with the work at home impacts.  We moved most of our manufacturing offshore so that is not coming back except for the occasional flag waving situation.

This past year will probably evidence the sea change in longer term energy use patterns … or will it?

The politicians are all gleefully patting themselves on the back about the future of EVs but supply chain issues will certainly limit the actual increases and disappoint them.  Americans are still in love with their fossil fueled choices and the freedom to make quick pitstops still dominates the landscape.  Sure, surveys indicate people would like an EV but only for around the town driving … so how is that going to reduce the fuel use in the US.

Nope, even the EIA predicts fuel use will go unchecked in the next five to ten years.

It has been interesting to watch how stock prices for electric utilities that promote solar and wind have been trading at a premium over the typical bricks and mortar energy companies.  The accountants will all attest to the simple fact that rooftop solar is far less economically efficient than solar farms.  How will the net metering battles across the US settle out?  Will the regulators agree with the accountants?

Or is this an ideological battle that goes beyond accounting?  Is this truly an existential situation where the fate of our planet is at stake?  If that is true, shouldn’t the accounting be on carbon dioxide rather than corporate economics?  And if that is true, shouldn’t we be managing our transition toward a renewable energy source with consideration of how much the climate benefits from the near term.

Finally, do we really believe what we do here is going to make a big difference around the world when India and China have kicked the can down the road.  How cost effective will energy policies I hear being promoted actually pen out when the accounting is done.

There is one thing for sure.  This year and next will report energy companies hit or exceeded their targets … I just wish they hadn’t moved those targets to get those results.

Happy New Year