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The Emerging East: Chinese Electric Car Company Challenges Auto Giants

Posted by elu1299 on August 10, 2009

The Emerging East is Anything Intelligent’s ongoing series on China’s fast-paced technology development.

The Obama Administration announced a record $2.4 billion in grants to electric car and battery companies last week. The funding aims to propel an American hybrid and electric car industry that lags behind foreign competitors. With fuel-efficient cars seen as the new frontier for automakers, the world’s largest auto market needs to move swiftly if it hopes to keep jobs and facilities at home.

The Electric Car Industry

The success of electric cars depends heavily on battery technology. It must be small and light enough to fit in a car, powerful enough to drive a motor, and durable enough to hold charge through many cycles. Several automobile designs implement these lithium-ion batteries:

  • Current hybrid electric vehicles compensate for a weaker battery by coupling gasoline and electric motors. This design allows the battery to recharge with kinetic energy from the gasoline engine. With an electric backup, the gas motor can also shut off when the car is not moving.
  • New plug-in hybrids also have two motors, with the gasoline engine acting as a range extender. With a charged battery, the electric motor can independently drive the car.
  • Electric cars require perfected battery technology, running only on electricity with no gasoline backup.

The eventual transition from electric-gasoline hybrids to completely electric cars opens opportunities for companies to break into the auto industry. Brian Wynne, president of the Electric Drive Transportation Association, told the New York Times that the industry’s “choke point is the availability of automobile-grade batteries.” This choke point is where the up-and-coming Chinese company BYD has entered the field.

BYD: “Build Your Dreams”

BYD, whose letters stand for its Chinese name, got its start in 1995 as a rechargeable battery manufacturer for various electronic devices. In 2003, it broke into the automobile industry with little experience in the complexities of automaking. Last fall, however, its car F3 became the bestselling sedan in China — the world’s second-largest auto market. Now buoyed by Warren Buffet’s 10%, $230 million investment in the company, BYD is making bigger splashes with its “dual-mode” F3DM.

BYDs dual-mode hybrid F3DM

BYD's dual-mode hybrid F3DM

F3DM is a plug-in hybrid, just like the upcoming Toyota Prius and Chevy Volt. But while the plug-in Prius is slated for release in 2012 and Volt in 2010, the F3DM is already for sale in China and may expand to western markets by 2011. The car travels 62 miles on a single charge and costs only $22,000 . By comparison, the Volt travels 40 miles and will cost as much as $40,000. The Prius is expected to travel 16 miles on battery and cost $48,000.

BYD also unveiled the e6 at the 2009 Detroit Auto Show, an all-electric car similar to the Tesla Roadster and Nissan Leaf. The California-based Tesla Motors leads the pack: its high-performance, 220-mile range Roadster is already in production. However, the sports car is priced at a lofty $101,000, although a more affordable, $50,000 Model S sedan is planned for 2012 availability. Nissan plans to release the Leaf in 2010 with a price tag above $40,000 and a range of about 100 miles. Meanwhile, BYD plans to begin production of its e6 late this year for Chinese markets. Its competitors will be watching closely: BYD has not released a price estimate but does claim the e6 can travel a staggering 249 miles on one charge.

BYDs all-electric e6

BYD's all-electric e6

How does a 2003 auto startup balloon into a 130,000 employee, electric car pioneer? BYD founder and CEO Wang Chuangfu has combined his battery expertise with a keen entrepreneurial vision. He has capitalized on China’s improving universities by drawing young, sharp engineers to BYD complexes. He has expanded labor-intensive facilities throughout China to take advantage of the country’s relatively cheap workers. And most importantly, he has developed an iron-phosphate technology which he claims trumps traditional lithium-ion batteries.

Looking Abroad

BYD plans to enter western markets in the next few years with both the F3DM and e6. While its cars may not match the performance, aesthetics, and features of its competitors, its low costs and impressive batteries should threaten its competitors. Given BYD’s startling rise in the auto industry, established Japanese and American carmakers should be prepared for BYD’s global ambitions.

Elu1299 studies environmental science and public policy at Harvard University.

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The Emerging East: A Series on China’s Clean Energy Development

Posted by elu1299 on August 5, 2009

The Emerging East is Anything Intelligent’s new, ongoing series on China’s fast-paced technology development.

Pudong, China

Earth’s most populous country receives no shortage of western attention. Reporters constantly spotlight China’s skyrocketing economic development and large population pool. Business professionals scramble to learn Mandarin in anticipation of new investment opportunities in the region’s emerging markets. Activists keep wary eyes on human rights violations, government crackdowns, and unhealthy pollution.

Much of this attention feeds into China’s image as a ruthless pillager of its human and natural resources. But amidst controversy over sweatshops, lead-contaminated paints and Olympic smog, China has positioned itself as the world’s next economic and technological power. Beneath a dirty economy driven by low-tech, manual labor, China is busily cultivating hi-tech companies and technologies that are ready to compete in the international market. Make no mistake — with its government’s ardent steering, the economy is transitioning fast. Read the rest of this entry »

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Upcoming Years Critical for U.S. Energy Future

Posted by elu1299 on July 28, 2009

The National Research Academy, a branch of the National Academies, released a report today analyzing how the United States will shape its energy future. America’s Energy Future: Technology and Transformation calls for a “sustained national commitment” to both increase energy efficiency and develop new energy options. The report identifies several promising factors that will shape America’s energy outlook: carbon capture and storage, improvements to nuclear technology, alternative liquid fuels, and so forth.

However, the report emphasizes that no single technology will adequately transform the energy sector to meet demands for clean and cheap energy. Rather, the country must develop a “balanced portfolio” driven by “supporting basic research” of new energy technologies. Furthermore, a rapid and sustained national push is needed today if the U.S. hopes to see visible energy transformations decades from now. To speed up development, the report recommends “that sustained policy and regulatory actions, as well as other forms of incentives, be employed to drive adoption.”

The American Clean Energy and Security Act of 2009 (ACESA) currently before the Senate would put in place a cap-and-trade system to annually limit carbon emissions. ACESA is the closest example of “sustained policy and regulatory actions” currently or historically proposed in the United States. The U.S. Environmental Protection Agency released a study that models ACESA’s effect on the economy and energy sector. In the following graph, the EPA compares new energy generation capacity between current conditions and alternate policies under ACESA (H.R. 2454).

Source: U.S. EPA

Source: U.S. EPA

The reference case already considers ARRA, the American Recovery and Reinvestment Act of 2009. Thus, the case includes billions of dollars in federal stimulus funds in the pipeline through 2011. The H.R. 2454 case considers the cap-and-trade and energy efficiency parts of ACESA. Some observations about the effect of ACESA:

  • Carbon capture and storage (Adv. Coal w/ CCS) is specifically incentivized under H.R. 2454, representing a larger portion of new capacity
  • New nuclear is almost nonexistent to 2025: it takes decades to build a nuclear plant
  • Natural Gas generation drastically falls due to carbon cap and CCS incentives
  • Overall new generation capacity greatly decreases by 2025 under H.R. 2454. The EPA estimates carbon allowance prices will be too low to dramatically push for additional renewables.
  • New energy demand will decrease, coupled with higher energy prices, better energy efficiency, and retooling of existing coal plants.

The graph below, also from the EPA study, breaks down generation sources for the same two cases. Again, the H.R. 2454 case produces less capacity in 2020 and 2025 from lower energy demand. As with the previous graph, the proportion of other renewables (nuclear and hydro are shown) in the energy mix changes little from the reference case. Natural gas and coal both decrease compared to the reference case, and generation with carbon capture and storage (red bar) replaces a chunk of traditional coal generation by 2025. However, a glance at both cases’ generation sources shows no sweeping changes to America’s energy future in the next 15 years.

Electrical Energy Mix

Electrical Generation Mix

The take away point from these two graphs: although cap-and-trade legislation will reduce energy demand and incentivize certain renewables, ultimately the policy does little to change the U.S. energy mix. Although cap-and-trade is a start to America’s energy transition, the limited impact of ACESA in the near future reaffirms the message from the National Research Academy. America needs a sustained, long-term commitment towards the research, development, and deployment of new energy technology if it wants a bright energy future. The development of nuclear, battery, solar, geothermal, and other promising technologies requires decades of leadership — a timescale that exceeds all political cycles.

Elu1299 studies environmental science and public policy at Harvard University.

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New Climate Bill Resurrects Old Tariff Debate

Posted by elu1299 on July 9, 2009

On June 26, 2009, The U.S. House of Representatives approved the American Clean Energy and Security Act of 2009, the first bill passed in American history mandating limits on greenhouse gas emissions. The Act, also called the Waxman-Markey Bill, must now pass the U.S. Senate.

Its narrow passage in the House, 219-212, resulted from the lengthy courting of legislators who represented industrial, manufacturing, and agricultural sectors. The bill that finally emerged was loaded with complicated provisions and compromises, leaving both sides of the climate debate unsatisfied. Economist and New York Times columnist Paul Krugman, acknowledging the bill as “a remarkable [political] achievement,” nevertheless blasted those Congressmen who rejected climate change and held up the bill’s progress. However, The Economist harshly criticized many of the bill’s provisions despite supporting its underlying cap-and-trade system:

The House’s climate bill is a masterpiece of obfuscation. Buried somewhere in the 1,200 pages of the American Clean Energy and Security Act … is a sensible cap-and-trade plan to curb emissions of carbon dioxide (CO2). But it is so weighed down with giveaways, loopholes and needless complexity that many environmentalists hesitate to support it.

The bill’s immediate effectiveness in limiting emissions has indeed been watered down: 85% of pollution permits will be free allowances to polluters, and millions of government dollars will help industries like manufacturing and agriculture adjust to the new emissions standards. Yet this extra complexity addresses concerns that the cap-and-trade system will further stunt America’s economy with rising costs. Midwestern lawmakers pushed hard and received compromises for the free permits and extra funding to help retool their already-struggling industrial bases for a clean energy transition. Now as the bill heads to the Senate, lawmakers will continue to push their regional economic interests. Sherrod Brown (D-Ohio), for example, has introduced legislation called IMPACT that would set up a $20 billion loan program to provide additional help to smaller manufacturers and suppliers.

The debate is sure to intensify as midwest senators revive the age-old issue of tariffs and “border adjustments.” Those senators want to avoid harming U.S. companies in the international market and deter domestic firms from bolting to a cheaper, less-regulated country. The House already tacked on a last-minute addition to ACES, imposing border adjustments that “ensure that the U.S. energy-intensive industries are not placed at a competitive disadvantage by nations” without such regulations. However, opponents of trade regulations fear a trade war — especially with less regulated countries like India and China — could cause even greater economic repercussions. The inevitable disagreements in Senate chambers around international trade could become a showstopper for any sort of climate legislation becoming law; already, rifts are forming:

“This bill doesn’t pass unless it takes care of manufacturing,” Sen. Sherrod Brown, D-Ohio, said. “And this bill doesn’t take care of manufacturing without border adjustments.”

President Obama, while overall commending the House bill, told a small gathering of reporters June 28 of granting tariff authority: “At a time when the economy worldwide is still deep in recession, and we’ve seen a significant drop in global trade, I think we have to be very careful about sending any protectionist signals out.”

A major source of disagreement is the accuracy of ACES economic and energy projections. The U.S. Energy Information Administration and Congress use a model called the National Energy Modeling System (NEMS), which projects the supply, demand, and prices of the domestic oil market. NEMS is dependent on many assumptions such as the availability of renewable technologies in the market and projected economic growth. Thus, NEMS projections vary based on how designers believe this bill will increase the development and deployment of renewables. The U.S. Environmental Protection Agency used a different set of models, as did the Congressional Budget Office, but the assumptions of any study are just as critical. The Wall Street Journal, for instance, criticized the CBO’s analysis of household cost from the climate bill by questioning its assumptions. Perhaps the only way to settle these disagreeements is the establishment of changeable regulations that allow the government to respond to unforeseen economic consequences.

Ultimately, political interests and uncertainty threaten to undermine the substantial body of research on climate change, highlighting science’s struggle with varied public interests. The indisputable evidence for climate change has been steadily mounting and the vast majority of scientists recognize its threat, yet the United States has not shown any successful response. In a recent Discover article, four scientists neatly encapsulate the current “state of the climate” and also comment on the political response to climate change. In the article, Stephen Schneider of Stanford University summarizes his outlook on science and policy: “I’m technologically optimistic and politically bleak.” As an escalating tariff battle looms on the horizon, we can only hope that the U.S. will finally adopt a framework both rigid enough to curb emissions and flexible enough to adjust economic regulations if current projections prove incorrect.

Elu1299 studies environmental science and public policy in Cambridge, MA.

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