I’ve been following the EEStory for a long time now and have remained skeptical yet optimistic for the duration. However, a recent interview with Dick Weir that was leaked to the web gives far more concrete information. It seems as though the first units will become available within the next year.

Just to recap, EEStor builds an energy storage unit that promises nearly instant charge time and 1/4 of the weight and 1/5 of the price of a similarly-sized lithium ion battery. Energy storage is currently the biggest hurdle to be overcome in the electrification of transportation.

Talk about game changing. Who else feels a sudden urge to buy Zenn stock?

Environmental sustainability is primarily an accounting challenge. If our economy fully accounted for all of the harm done by a good or service in its price, consumer incentives would drive environmental policy. This process is known as internalizing externalities.

The process of internalizing externalities is a difficult one, as it must be driven by government policy. Market-based mechanisms, such as a carbon cap-and-trade regime, can set prices or limits on certain types of emissions. Companies can be forced to pay for disposal of the hazardous materials in their products at end-of-life.

Such policies are extremely important for long-term progress on environmental issues but are also slow to be implemented, as they must wend their way through the political process. It’s satisfying, therefore, to find that there are other incremental improvements possible in alignment of consumer incentives with environmental sustainability.

One example is pay-as-you-drive insurance. The concept is simple—as drivers rack up more miles, their claim risk increases. Therefore, charge higher premiums to drivers who drive more miles.

This simple change in the car insurance business model has dramatic implications on consumer incentives. From an accounting standpoint, traditional insurance is a fixed cost and does not factor into any decision-making. As soon as this cost becomes variable, however, every incremental mile driven costs the driver more money. This incents drivers to drive less, reducing congestion, fuel consumption, and carbon emissions.

PAYD adoption is driven by simple self-reinforcing economics. Low volume drivers would be immediately incented to switch to PAYD—they would be the primary beneficiaries of the lower premiums. In response, traditional insurance providers would need to raise their rates because their average customer would now drive more miles. The cycle would repeat until all customers had shifted over to PAYD.

This phenomenon is a classic case of adverse selection. While the effects are muted because of the legal requirement to purchase insurance, the point still stands. If some insurance companies collect information relevant to pricing risk and others do not, these companies will always win.  This portion of the Wikipedia article linked above is a particularly instructive analogy to life insurance:

Non-smokers, on average, are more likely to live longer, while smokers, on average, are more likely to die younger. If insurers do not vary prices for life insurance according to smoking status, life insurance will be a better buy for smokers than for non-smokers. So smokers may be more likely to buy insurance, or may tend to buy larger amounts, than non-smokers. The average mortality of the combined policyholder group will be higher than the average mortality of the general population. From the insurer’s viewpoint, the higher mortality of the group which ‘selects’ to buy insurance is ‘adverse’. The insurer raises the price of insurance accordingly. As a consequence, non-smokers may be less likely to buy insurance (or may buy smaller amounts) than if they could buy at a lower price to reflect their lower risk. The reduction in insurance purchase by non-smokers is also ‘adverse’ from the insurer’s viewpoint, and perhaps also from a public policy viewpoint.

Furthermore, if there is a range of increasing risk categories in the population, the increase in the insurance price due to adverse selection may lead the lowest remaining risks to cancel or not renew their insurance. This leads to a further increase in price, and hence the lowest remaining risks cancel their insurance, leading to a further increase in price, and so on. Eventually this ‘adverse selection spiral’ might in theory lead to the collapse of the insurance market.

To counter the effects of adverse selection, insurers (to the extent that laws permit) ask a range of questions and may request medical or other reports on individuals who apply to buy insurance, so that the price quoted can be varied accordingly, and any unreasonably high or unpredictable risks rejected.

I thoroughly expect PAYD to become the norm once the tracking technology and privacy concerns are worked out.  It’s very satisfying when simple, profit-maximizing changes in business models have positive environmental consequences.

Almost a year ago I set out to create a document tracking all of the EVs on the market.  I meant to make it an ongoing project and to keep it updated, but unfortunately there has been just too much going on over the past year, both in my life and in the EV market, to keep up with this.  So I was understandably excited to discover this PHEV vehicle tracker.  Finally, someone else has realized the need for this type of information.  Up to this point there was literally no other way to find an inventory of all PHEVs on the market.

I love it when the blogosphere manages to produce something more than a transactional piece of news, and after reading this post on Autoblog Green I’m nearly giddy.  Autoblog Green has decided to run an extended series of articles introducing sustainable transportation to the uninitiated.  Topics include “Can a car run on natural gas?”, “What is regenerative braking?”, “Battery basics for beginners” and many more.  If you’re interested in the topic and not yet an expert, check it out.

I love it when online journalism proves that it deserves that title.

Government participation in business has become a huge topic over the past year and it’s something that I’m very interested in.  I really think we’re writing the next chapter in the history of controlling the means of production.  In the past we had extremists such as Hayek and Trotsky; now we have centrists like Obama. 

While I personally tend towards extremism, I’m becoming more comfortable with some of the market interventions that we’re beginning to see in renewables.  I’m all for renewable portfolio standards—the government should regulate emissions—but the stimulus package went far beyond simple regulation.  The stimulus package asks all levels of government to deploy capital and to play an increasing role in business (never one of government’s strengths).

It’s hard to skim through renewable energy news without running into this topic.  I was recently skimming VentureBeat and saw an article on a new solar farm that San Fransisco is developing.  Or, to be more precise, San Fransisco has committed to a multi-year PPA with Recurrent Energy which will own and operate the plant.  The PPA rate will be $.235/kwh rate and will be used to power government buildings.

It seems a little odd to me that San Fransisco would enter into a PPA rather than purchase electricity directly from the utility.  California has a (comparitively) very progressive set of utilities and aggressive renewable portfolio standard.  It seems to me that utility and power generation regulation are appropriate ways for a state to shape energy policy.  Making independent, risky, and complicated power purchase arrangements is not.

I also wonder whether the price being paid is reasonable.  I don’t know what PPA rates typically are in CA (although I did try looking it up).  I was able to find a very interesting report on the state’s renewable portfolio standard and energy price projections called MPRs that they use to evaluate potential projects.  In short, the $.235/kwh price is about double the comparable baseload MPR.  There are two legitimate reasons why this price discrepancy could exist.  First, solar is not a baseload resource and so some element of the premium is due to the fact that on-peak power is more valuable.  Second, the city may be able to sell renewable energy credits for the power it generates. 

There is another possibility, however: San Fransisco may be purchasing power at a non-economically-optimal price.  At first glance this would seem to be completely fair—if the voters of San Fransisco want to have their own supply of solar electricity then more power to them, right?  I disagree.  Government, as business, has limited resources and needs to deploy them in the most economically efficient ways possible.  Solar is a very legitimate public policy goal but needs to be pursued using the most appropriate tools.