Fleeting Opportunity to Jumpstart the Electric Vehicle Industry

Electric vehicles (EVs) are getting a lot of attention these days in auto shows and TV shows.  Looking beyond the buzz, the multi billion dollar question for the auto and energy industries is whether there will be millions or thousands of EVs on the road in the next several years. As with any innovative product or service, the speed and magnitude of adoption will depend on having sufficiently numerous and influential early adopters able to talk favorably about the benefits of driving and operating EVs.  Early success stories are critical to convincing the more skeptical masses to become part of the momentum that is building as the auto industry revs up its launch of EV models in 2010 and beyond.

One of the best opportunities to create groups of early adopters is to focus on organizations with large fleets of vehicles that tend to travel within a limited radius before returning to a centralized location where battery charging equipment could be used between trips or overnight.  Given the limited mileage and charging options expected to be available for most EV drivers in the early years, the auto industry should be speeding to provide customized EV models and charging stations that make it easy to convert entire fleets of cars and light trucks from gas to electric power.

Government subsidies and financing of the production and purchase of EVs suited for fleets would jumpstart the EV industry by providing a volume of demand for EVs that is needed to achieve economies of scale in producing, distributing and servicing EVs.  This would be an especially worthwhile investment since it would not only benefit EV producers and their supply chains but it would also benefit purchasers who would see lower priced EV models due to the costs of producing EVs and key components such as batteries being spread across a much larger number of EVs sold.

Examples of organizations with fleets that have recently announced considering or committing to electrifying their fleets include:
1) US Postal Service
2) Duke Energy Corp. and FPL Group Inc. 
3) Nihon Kotsu taxi operator

Organizations like these can provide the early success stories needed by the EV industry to compete against the incumbent gas-powered vehicles in the multi billion dollar race for winning the hearts and budgets of vehicle buyers.

Thoughts?

Show Me the Money: Cost/Benefit Analysis Needed for Green Marketing

According to recent research from the Institute for Public Policy Research (IPPR), consumers in the United Kingdom are tired of hearing about climate change.  Despite acceptance of climate change as a growing problem, people don't want to be told to do their share by cutting carbs out of their personal carbon footprints. The report recommends that green marketing campaigns focus on cost-savings benefits of low carbon products, rather than rely on an environmental appeal.

On this side of the pond, a similar attitude prevails among both consumers and organizations which should inform how green products and services are marketed and sold.  While the need for global action to address climate change has gained broad acceptance, the willingness to change local behavior and, more importantly, to dig into personal or corporate budgets to fund green initiatives is driven more by a practical cost-benefit analysis than idealogy. The analysis typically considers both tangible ("hard") and intangible ("soft") benefits and costs but assigns more weight to tangible ones.  Green marketing must be able to demonstrate that the sum of the benefits sufficiently outweighs the sum of the costs. 

Here are examples of the kinds of benefits and costs associated with green energy solutions:

Benefits:

• lower bills for energy, waste and recycling storage and removal, operational or maintenance staff (hard benefits)
• faster and more consistent heating & cooling (mainly soft benefits) 
• better reputation for social or corporate responsibility inside and outside the entity (soft benefit)
• reduced liability for violating air and water pollution regulations (soft and hard benefits)

Costs:

• upfront purchase or project price (hard costs)
• ongoing operational and maintenance charges such as financing, fuel, repairs, administration (hard costs)
• time, effort, and expertise needed to investigate, select, and start using it (soft and hard costs)

Let's take a look at green IT to see what motivates organizations to act.  Few organizations are willing to spend much money just to improve their reputations among workers or the public.  What does motivate organizations is the ability to reduce costs.  The energy needed to power and cool computer server and storage equipment in datacenters represents significant costs.  Green IT solutions such as server consolidation through virtualization and switching to servers and networking equipment that consume less power and generate less heat are a win-win for the IT budget and for the environment.

Now let's take a look at efficient cars to see what motivates individuals or businesses to act.  Only a limited segment of the population is willing to pay $5-20K extra for a car especially if it has reduced mileage, passenger, or storage capacity just to be a good green citizen.  The cost differential between a traditional gas car and a hybrid, plug-in electric or fuel cell car must be small enough to enable the customer to recover the difference through fuel savings within the anticipated period of ownership, say 5-7 years.  This is easier when gas prices are high and are headed even higher.

Given the emerging nature of green products and services, two additional considerations need to be addressed.  First, is the green product or service available to be examined or "test driven" and purchased in a convenient venue connected with an existing supplier or partner?  Second, is the green solution a straight forward substitute for something that the customer already plans to buy or replace?  If the answer to either question is no, then demonstrating a favorable cost-benefit analysis will be harder and marketing will need to be even more creative and targetted to show that the green solution fits in today's marketplace.

Thoughts?

Solar Panels Made in the USA Need the Right Government Tax Incentives

In an Op-Ed column in today's NY Times, Thomas Friedman describes the problem of a major maker of machines that make solar panels not having a single customer plant in the United States. While there are solar panel factories in the United States, he is right on the mark in pointing out the threat to the U.S. economy, jobs, and global competitiveness in not having more domestic manufacturing capabilities. His proposed solution is to have the United States adopt the kind of customer incentives for deploying solar that is present in other countries to drive greater purchasing of solar panels in the United States.

Where the analysis and proposal in his column fall a bit short is in not acknowledging the wage/cost factor. The top reason why companies choose to locate manufacturing plants outside of the United States is because of the desire to take advantage of lower manufacturing costs based on lower wages, worker benefits, safety and environmental regulatory compliance. To be competitive in a global marketplace, companies are business driven to squeeze as much cost as possible out of every unit produced. What's the United States to do?

One possible solution would be to impose tariffs on imported solar panels. However, this could violate international trade agreements and result in other countries retaliating by imposing tariffs on U.S-made solar and higher volume products. It would also hurt customers choosing imported products because they would have to pay more.

A better solution would be to let the market determine the prices of domestic and imported solar panels without imposing any import tariffs. However, the United States should balance the playing field by providing customers with added financial incentives to buy domestic by offering higher tax credits for solar panels produced in the United States. Massachusetts did just this with panels produced in the state in its tax credit incentive for solar PV systems made in Massachusetts. This type of indirect subsidy of domestic solar panels would bolster the manufacturing tax incentives already available to any U.S. or foreign company manufacturing in the United States.

Thoughts?