Nick,
I always look forward to your articles, observations, and recommendations. But I couldn't disagree more with -- indeed I was shocked and even offended by -- the celebratory tone of this article on Toyota's announcement of an all-electric, plug-in Prius. I've come to expect a high degree of critical thinking at Green Chip Stocks especially when it comes to complex and critical areas like the transport sector, but that was missing here. Embracing PHEVs and EVs is a popular fad now, but it cannot possibly have the positive impact on the planetary environment everyone is attributing to it. These cars will not be "affordable" to large numbers of car buyers, although they're better than eco-bling like the Teslas or Fiskers. Even the gas/electric Prius is too expensive for most car buyers.

Rather than arguing the case, let me just refer you to a report from a multi-year study that happened to be released by the National Research Council at the National Academies of Science on the same day (last Monday) that Toyota made their announcment: "Transitions to Alternative Transportation Technologies--Plug-in Hybrid Electric Vehicles" (http://www.nap.edu/catalog.php?record_id=12826). The full report costs $30, but the Executive Summary can be downloaded for free.

A main finding is that even with the most aggressive R&D imaginable (and these scientists and engineers know R&D!), grid-enabled vehicles (GEVs -- this is the term the Electrification Coalition, the number one PHEV/EV lobbying organization, recently introduced in its "Roadmap"), like plug-in hybrids, battery-powered all-electic vehicles, etc., will remain so expensive that at most only hundreds of thousands will likely be on the road until around 2030 -- two decades from now -- even under the best of circumstances in terms of cost, consumer acceptance, infrastructure development, and government subsidization!! That's enough time for many light-transport energy technologies to be developed!! And the idea that by buying a GEV today you are supporting the development of cheaper GEVs in the future is not supported by this Report.

We've got to outgrow this preoccupation with plug-ins and EVs, and the sooner the better. As long as fossil fuels are the cheapest source of energy available for motor vehicles, fossil fuel vehicles will be used the most. Between now and 2030 millions and millions of inexpensive conventional ICEVs will continue to be driven a thousand times more miles every day than GEVs. What difference does it make that my neighbor's expensive GEV emits less GHG and consumes less imported fuel than my inexpensive ICEV. Being greener than thou doesn't help. The entire national fleet of inexpensive ICEVs, true mass market vehicles, have to be made as fuel-efficient and non-GHG-emitting as possible. That will help the planet and let investors make money. Partial electrification of the many is far more efficacious than full electrification of the few.

The main conclusions in the NRC report are:

1. Lithium-ion battery technology has been developing rapidly, especially at the cell level, but costs are still high, and the potential for dramatic reductions appears limited. Assembled battery packs currently cost about 1,700/kWh of usable energy. A PHEV-10 will require about 2.0 kWh and a PHEV-40 about 8 kWh even after the batteries have undergone expected degradation over time. Costs are expected to decline by about 35 percent by 2020 but more slowly thereafter. Projections of future battery pack costs are uncertain, as they depend on the rate of improvements in battery
technology and manufacturing techniques, potential breakthroughs in new technology,
possible relaxation of battery protection parameters as experience is gained, and the level
of production, among other factors. Further research is needed to reduce costs and achieve breakthroughs in battery technology.
2. Costs to a vehicle manufacturer for a PHEV-40 built in 2010 are likely to be about $18,000 more than an equivalent conventional vehicle, including a $14,000 battery pack. The incremental cost of a PHEV-10 would be about $6,300, including a $3,300 battery pack. In addition, some homes will require electrical system upgrades,
which might cost more than $1,000. In comparison, the incremental cost of an HEV might be $3,000.
3. PHEV-40s are unlikely to achieve cost-effectiveness before 2040 at gasoline prices below $4.00 per gallon, but PHEV-10s may get there before 2030. PHEVs will
recoup some of their incremental cost, because a mile driven on electricity will be cheaper than a mile on gasoline, but it is likely to be several decades before lifetime fuel savings start to balance the higher first cost of the vehicles. Subsidies of tens to hundreds of billions of dollars will be needed for the transition to cost effectiveness. Higher oil
prices or rapid reductions in battery costs could reduce the time and subsidies required to
attain cost-effectiveness.
4. At the maximum practical rate, as many as 40 million PHEVs could be on the road by 2030, but various factors (e.g., high costs of batteries, modest gasoline
savings, limited availability of places to plug in, competition from other vehicles, and consumer resistance to plugging in virtually every day) are likely to keep the number lower. The Maximum Practical rate depends on rapid technological progress, increased government support, and consumer acceptance. A more realistic penetration rate would result in 13 million PHEVs by 2030 out of about 300 million vehicles on the
roads, which still assumes that current levels of government support will continue for several decades.
5. PHEVs will have little impact on oil consumption before 2030 because there will not be enough of them in the fleet. More substantial reductions could be
achieved by 2050. PHEV-10s will reduce oil consumption only slightly more than can be achieved by HEVs. A PHEV-10 is expected to use about 20 percent less gasoline than an equivalent HEV, saving about 70 gallons in 15,000 miles. Forty million PHEV-10s would save a total of about 0.2 million barrels of oil per day. The current
light-duty vehicle fleet uses about 9 million barrels per day. PHEV-40s will consume about 55 percent less gasoline than equivalent HEVs, saving more than 200 gallons of gasoline per year per vehicle.
6. PHEV-10s will emit less carbon dioxide than nonhybrid vehicles, but more than HEVs after accounting for emissions at the generating stations that supply the
electric power. PHEV-40s are more effective than PHEV-10s, but the GHG benefits are small unless the grid is decarbonized with renewable energy, nuclear plants, or fossil fuel fired plants equipped with carbon capture and storage systems.
7. No major problems are likely to be encountered for several decades in supplying the power to charge PHEVs, as long as most vehicles are charged at night. Generation and transmission of electricity during off-peak hours should be adequate for many millions of PHEVs, although some distribution circuits may need upgrading if they
are to serve clusters of PHEVs. Encouraging PHEV owners to charge their vehicles during off-peak hours will require both rate schedules that reward time-appropriate charging and equipment that can monitor or even control time of use.
8. A portfolio approach to research, development, demonstration, and, perhaps, market transition support is essential. It is not clear what technology or combination of technologies, batteries, hydrogen, or biofuels—will be most effective in reducing the nation's oil dependency to levels that may be necessary in the long run. It is
clear, however, that a portfolio approach will enable the greatest reduction in oil use. Increasing the efficiency of conventional vehicles (including HEVs) beyond the current regulatory framework could reduce gasoline consumption by about 40 percent in 2050, compared to the Reference Case. Adding biofuels would reduce it another 20 percent. If PHEV-10s are also included at the Maximum Practical rate, gasoline consumption would be reduced an additional 7 percent, while PHEV-40s could reduce consumption by 23 percent. Employing HFCVs instead of PHEVs could eliminate gasoline use by the fleet.

The report also says: "It is the committee’s opinion that [the DOE's battery price goals] beyond 2012 are extremely aggressive and are unlikely to be reached by the target date or even for a significant time beyond." (Page 22)

Nick, I believe you need to completely rethink your investment strategy and recommendations for the light-transport sector. "Wide-scale hybrid adoption" is a dangerous myth for investing, if you're meaning plug-in and electric drive-trains, and I'm really surprised that you've bought into it. Prius class gas/electric hybrids yes somewhat, and and micro-and mild-hybrids yes for sure because of the availability of new but lower power battery technologies today. It will be possible to make money from vehicle over- electrification in the near term only because other investors are speculating on the basis of gross misunderstanding and GEV tulipomania.


==John L. Burch, a loyal subscriber
jlburch@mindspring.com

Watched Wof Blitzer(CNN) interview Sec. Chu and he asked "how can we reduce imported oil?".

Chu answered that we are working on electric cars and also how to make fuel from grasses using Cellulosic Technology.