Electric Vehicles are Dangerous on Curves

Alberta risks getting run into the ditch by electric vehicles, but the most dangerous curves are not on the road. The global energy supply and demand curves, and the technology adoption curve, could sideline Alberta's energy industry.

 “World demand for oil is projected to increase 37% over 2006 levels by 2030 ... (to) 118 million barrels per day”, says Wikipedia’s Peak Oil article. Ain’t gonna happen. The 37% number comes from the 2007 IEA World Energy Outlook Report. The 2010 IEA report says “99 million barrels per day by 2035”. The IEA number is falling, but it still ain’t gonna happen, and the reason is electric vehicles.

In the US, 2/3 of oil is used for transportation, mostly in cars. The IEA scenarios are based on growing demand for cars, especially in China as that country becomes wealthier. In effect, the IEA assumes that demand for cars means demand for oil, but I’m pretty sure that people actually want cars, not oil.

What if cars didn’t use so much oil? This year, several manufacturers introduced plug-in hybrid cars. Most of the time these cars use no gasoline at all, but you can still visit Grandma in Kansas using gasoline on the highway.

A US DOE study says that the existing US electrical grid could support enough plug-in hybrid cars, light trucks and vans to reduce US oil consumption by 6.5 million barrels per day. That’s more than a 40% reduction in US oil demand! And, the cost for consumers to charge these vehicles works out to around $0.20 per equivalent litre of gasoline.

Globally, electric vehicles could reduce oil demand drastically. If 2/3 of world oil demand is for transportation, and electric vehicles take 10 years to reach 50% market penetration, world oil demand will drop by 30 mbbl per day to around 60 mbbl per day by 2021.

What will electric vehicles do to world oil prices? After the financial crash of 2008, the IEA says world crude oil demand dropped by 1.3 mbbl per day in 2009 (86.2 mbbl vs 84.9 mbbl per day), and this resulted in a peak price drop from $155/bbl in 2008 to $35/bbl in early 2009. Factors such as speculation probably exaggerated the price swing, but it’s still not hard to guess that a 30 mbbl per day drop in demand would result in much lower oil prices.

Changing technology can change prices permanently. Natural gas prices have dropped to around $4/tcf (from more than $10 in 2008) due to a change in drilling technology, and no increase is in sight. The same thing can happen to oil. Maybe we should start steering for these technology curves rather than driving off the road.

What would this mean for Alberta? 99% of Alberta oil is in the oil sands, the most expensive oil in the world to produce. Oil sands production costs vary from about $35/bbl for the old Suncor and Syncrude mines, to around $75/bbl for new SAGD projects. If the price of oil drops permanently below the cost of production, these operators will go broke long before they run out of bitumen.

Electric Vehicles are ABCtech's technology theme for 2011. The effects on Alberta could be profound, even if everyone in Alberta keeps driving F350 pickups. Check out the Electric Vehicle events at www.abctech.ca and join the discussion!

Flexible Film

Last week I met with three student researchers from NINT who are developing a new flexible film with very useful properties. They suggest it could be a coating for buildings, but I wonder if there might be a better application for such a revolutionary material, especially an application that uses its flexible property. Problem is, no such application currently exists in the market.

Kodak Brownie No. 2, a tool to create a market

A mention on CBC radio reminded me of George Eastman, who patented a flexible photographic film in 1884. This was 45 years after Louis Daugerre  launched modern photography with his daugerrotype process, and 58 years after Nicéphore Niépce's earliest photograph from 1826. Clearly, Eastman was late to the photography game.

In 1884 all existing cameras created images on rigid glass plates, often prepared by the photographer himself, so Eastman’s flexible film initially had no market. Even after Eastman began selling his own “Kodak” roll film camera in 1888, few photographers switched to the new technology, although Eastman’s roll film did enable others to invent motion picture technology.

Said Eastman, "When we started out with our scheme of film photography, we expected that everybody who used glass plates would take up films. But we found that the number which did so was relatively small. In order to make a large business we would have to reach the general public.". In other words, establish a new market, rather than trying to compete in the old one.

With the slogan “You push the button, we do the rest”, Eastman went after the majority of the population who were not already photographers. He introduced the concept of a “snapshot”, and brought it to everyone with his low-cost Brownie cameras, advertising extensively in newspapers and at expositions.

Eastman became a very rich man, giving away almost $100 million back when that was real money. His favourite charities were the University of Rochester and the Massachusetts Institute of Technology, “MIT”.

The researchers from NINT are trying to attract development funding for their flexible film, and the funders want to hear about the market. Apparently “there isn’t one yet” is not an attractive answer, and the Alberta innovation system doesn’t fund market creation. Too bad, really, because NINT and the University of Alberta could use some wealthy new philanthropists.