Native American Lands Have 61 Gigawatts of Economic Solar Potential; Federal Loan Guarantees Available

By Will Driscoll

Native American Tribes could install 61 gigawatts of utility-scale solar, and sell the resulting electricity wholesale at a profit, according to a report from the National Renewable Energy Laboratory (NREL).  The potential for a specific tribal land area may be analyzed using NREL’s online Tribal Energy Atlas.

A new $2 billion federal loan guarantee program for energy developments on tribal lands can assist with financing.

NREL’s analysis first identified the technical solar potential on tribal lands (6,035 gigawatts), then estimated the levelized cost of energy (LCOE) for each location, and compared that to the levelized avoided cost of energy (LACE), which is based on regional wholesale market electricity prices.  Where the LACE was higher than the LCOE, NREL identified “economic potential.”  The result was 61 gigawatts (GW) of economic solar potential.

NREL did not estimate or include transmission costs in the LCOE, noting that “a subset of sites would likely hold enough economic potential to be examined in more depth for additional inputs such as transmission cost and interest of potential energy buyers.”  (Electricity-intensive industries on tribal lands, possibly data centers, are another option that would not require transmission.)

Counterbalancing the omission of transmission costs, the analysis used solar cost data from 2015 and early 2016, and solar costs have declined dramatically since then.

The analysis used financing costs of 9.02 percent, from NREL’s 2017 Annual Technology Baseline report.  It also assumed a ten percent investment tax credit, and that Tribes would be able to partner with a taxable entity to benefit from tax-based solar incentives.

A sensitivity analysis using a recent low price of natural gas ($2.45/Mmbtu) yielded the same amount of profitable solar: 61 GW.  An analysis using a recent high price of natural gas ($7.18/Mmbtu) yielded a much larger amount of profitable solar: 266 GW.

If Native American Tribes added tens of gigawatts of solar to regional grids, the wholesale electricity price would decline during periods of high solar generation.  NREL noted that it did not model that scenario.  Were that to happen, solar-plus-storage could support the value of solar generation.

NREL’s report acknowledged some limitations of its analysis, noting that “Future work in the economic potential assessment may include incorporating both in-region and out-of-region transmission costs; environmental benefits; policy drivers, such as renewable portfolio standards; and any sensitivities to tax-oriented policies.”

Alaska Native villages were not considered in the analysis, although they are included in NREL’s Tribal Energy Atlas.

Michigan could create 69,000 job-years on a path to 30% renewables by 2027

By Will Driscoll

Michigan could generate 69,000 new job-years by reaching 30 percent renewables by 2027, per a report funded by the Michigan Conservative Energy Forum.  The 30% scenario, one of three considered, “was chosen based on the current growth factor of renewables,” and compares to the state’s recent 10 percent renewable percentage.

The analysis calculated that adding 3.1 GW of solar capacity and 4.7 GW of wind capacity by 2027 would generate 5800 job-years per GW in the construction phase.  That includes direct job-years (1600 per GW), indirect job-years in supporting industries (2400 per GW), and induced job-years, as direct and indirect wage-earners spend their earnings (1800 per GW).

Over the lifetime of the solar and wind installations, the report also estimated 3000 job-years per GW in operations and maintenance.  That includes 1200 direct job-years per GW; 1100 indirect job-years per GW; and 700 induced job-years per GW.

The Michigan Conservative Energy Forum’s website says it favors an “all of the above” energy policy “that includes increasing our commitment to clean, renewable energy and energy efficiency.”

The analysis was conducted by the Hill Group, using the National Renewable Energy Laboratory’s Jobs and Economic Development Impact (JEDI) model, as well as MIG Inc.’s IMPLAN model.

 

Will Driscoll, MPA, JD, is an energy and environmental policy analyst who has worked primarily for the U.S. EPA via the contractor ICF Consulting. 

With more solar and wind, North America’s grid is getting more reliable

By Will Driscoll

The North American electric grid’s annual checkup shows that it is becoming increasingly reliable, as solar and wind gain share, according to the North American Electric Reliability Corporation (NERC).

For solar, one grid reliability factor—frequency response—is of great interest because of concern, as stated in the report, that “a changing resource mix and increase in renewable resources” may have a “potential impact on frequency response performance.” 

Frequency response has steadily improved since 2013, as shown in the last two columns of this table (i.e., one or both measures are improving in each interconnection):

The report notes that inverters from solar and wind farms now provide frequency support, alongside the frequency support that has traditionally been provided by synchronous inertia from fossil-fired generators.  (See, for example, a report on solar and frequency support, prepared by California’s grid operator, First Solar, and the National Renewable Energy Laboratories.) 

The 2017 solar eclipse was another bright spot for solar, as “no issues developed” from the transitory loss of mid-day solar power, because utilities had planned for the occurrence—just as they plan for cloudy days.

Beyond frequency response, the report covered all 13 of NERC’s grid reliability metrics. NERC found that all metrics were either improving, unchanged, or stable, with the exception that the Texas Interconnection is expected to have tight reserve margins this summer.  Even there, the report noted that “ERCOT [the Texas grid operator] has a variety of operational tools to help manage tight reserves and maintain system reliability.”

The report provided updates on two incidents related to California wildfires and solar PV inverters.  After the first incident, related to a 2016 wildfire, NERC advised utilities to contact a specific inverter manufacturer to implement a reliability solution specific to that manufacturer’s inverters.  NERC also formed a task force that will produce a guideline for “inverter-based resource performance” to support grid reliability.  After the second incident, related to a 2017 California wildfire, NERC issued a follow-up to the first alert. 

Beginning in 2021, NERC expects to collect data on solar generating units that are 20 MW and larger, as part of its Generation Availability Data System that now covers fossil units and is phasing in wind units.  Utilities use the data for benchmarking the performance of their own generating units.

NERC was certified by the U.S. Federal Energy Regulatory Commission as the nation’s electric reliability organization in 2006, pursuant to the Energy Policy Act of 2005.  Alaska, Hawaii, and Puerto Rico are not included in NERC, although an Alaskan organization has an affiliate membership.

35 to 70 GW of solar, plus wind, could power all freight trucks in the U.S. or Europe

By Will Driscoll

Many truck manufacturers are developing electric freight trucks, whose projected lower costs for fuel and maintenance would, by one estimate, quickly outweigh their higher purchase price. With this cost advantage, electric trucks could ultimately dominate freight trucking. A charging infrastructure for an all-electric continent-wide fleet of freight trucks in the United States or in Europe could be powered by 35 to 70 gigawatts of solar farms, plus an equivalent amount of wind farms.

Tesla and Peterbilt are the first firms to develop electric heavy-freight trucks—the global term for tractor-trailers or Class 8 trucks. BYD already offers medium-sized electric trucks and a larger electric freight truck with a short range, while medium-sized electric trucks have been announced by Daimler, Cummins, Volvo, DAF, and a Navistar/Volkswagen joint venture.

The North American Council on Freight Efficiency predicts that electric trucks will have an “increasing role” in freight transportation. Also relevant—because freight trucks, like city buses, operate many hours per day—is a projection by Bloomberg New Energy Finance that electric city buses will capture 84 percent of global bus sales by 2030, due to low operating costs and declining battery costs.

In the policy arena, a report from the International Council on Clean Transportation, which supports national governments in reducing transport sector pollution, notes that “electric-drive heavy-duty vehicle technologies are essential to fully decarbonize the transport sector.”

These market and policy drivers point to a new market opening for solar power: solar farms, possibly near truck stops, to power electric freight trucks. A spreadsheet calculation shows that 35 to 70 gigawatts of solar power, plus an equivalent amount of wind power, would produce an amount of electricity each year equal to the needs of an all-electric fleet of heavy-freight trucks in the U.S. or in Europe. That’s because by coincidence, the fleets of heavy-freight trucks in the U.S. and Europe travel approximately the same distance each year. (A technical note below provides details of the calculation.)

Pursuing this market opening could help the solar industry maintain its approximate 30 percent global growth rate in recent years, even as the industry keeps expanding. Maintaining a 29% growth rate, deemed “challenging but feasible” in a research studypublished in Science magazine, would result in a global installed base of 10 terawatts of solar power by 2030.

As electric freight trucks become more widely available, solar industry participants could help ensure that charging stations for the trucks are solar-ready, and ultimately solar-powered. This could involve research and decisions regarding optimal placement of charging stations; ensuring that a sufficient number of charging stations is always available to meet growing demand; possibly optimizing charging during times of peak solar and wind production; and providing electricity storage as needed.

Powering electric heavy-freight trucks with solar and wind power would also cut CO2emissions by displacing diesel fuel. Globally, road transport accounts for 22% of energy consumption, of which 30% is long-haul road freight. Therefore, CO2reductions of about 7% (i.e., 30% of 22%) could be achieved by powering heavy-freight trucks with renewable energy, in each region that follows this path.

If most trucking firms ultimately conclude that electric heavy-freight trucks save money, they could aim to replace their diesel trucks with electric trucks as their diesel units reach the end of their useful life. The Bloomberg projection noted above projects that will happen for electric city bus sales by 2030. With global production of heavy-freight trucks estimated by Deloitte at 1.7 million in 2014, the pace of diesel truck replacements could be limited by global manufacturing capacity for electric heavy-freight trucks.

Technical note: The calculation starts with the annual distance traveled by the current U.S. and European fleets of heavy-freight trucks in 2015, as reported by the International Energy Agency; each is approximately 200 billion kilometers. For the energy needed to power a heavy-freight truck, the lower bound analysis uses an estimate of one kilowatt-hour per mile, developed by University of California/Berkeley materials science professor Gerbrand Ceder. The upper bound analysis uses a specification that Tesla reported subsequently for its heavy-freight truck of “less than 2 kWh per mile” (the upper bound uses 2 kWh per mile). Converting kilometers to miles, and kilowatt-hours to gigawatt-hours, and then multiplying shows that 124,000 to 248,000 gigawatt-hours per year would power such a fleet in either the U.S. or Europe. At a U.S. national average capacity factor for a solar farm pegged at 20 percent by the National Renewable Energy Laboratory, 70 to 140 gigawatts of solar would produce this amount of electricity each year (given 8760 hours per year). If solar and wind each provided half the energy needed, solar’s contribution would be 35 to 70 gigawatts.

Sensitivity analysis: Regarding solar’s capacity factor in the U.S., Lawrence Berkeley National Laboratory has reported the median capacity factor for utility-scale solar to be 26 percent. If this were to be the average capacity factor for future utility-scale solar installations, rather than the 20 percent value used above, the solar capacity needed would be reduced accordingly.

Hot Roofs Above Bedrooms Cause Sleep Deprivation—Can You Solve the Cool Roof Puzzle?

By Will Driscoll

People who sleep in a top-floor bedroom under a black asphalt roof are likely to lose sleep on summer nights due to heat from the roof, with serious consequences.  Technically, the fix is simple—coat every black asphalt roof with a white coating—but progress toward that goal is slow.  Can you advise on how to make it happen, in the comments section below?

The issue: black asphalt roofs get really hot, keeping people from sleeping well, and causing real problems

Black asphalt roofs, which are common on Northeast urban row houses (townhouses), “can reach temperatures of 150°F or more in the summer sun,” reports the U.S. Department of Energy.  With or without air conditioning, a roof that hot above your bedroom will radiate heat at you all night long.

And people can’t sleep well when it’s too hot.  A research study using data reported by 765,000 people over 10 years found that “increases in nighttime temperatures amplify self-reported nights of insufficient sleep.”

Losing sleep is far worse than a nuisance.  “People make cognitive errors that matter when they sleep badly, whether crashing vehicles or making poor decisions in the workplace,” said UC Berkeley professor Solomon Hsiang in response to the study, as reported by Bloomberg.  He added, “Students learn poorly when they don’t sleep, and consistent lack of sleep harms people’s health.”

The technically easy solution:  white roof coating of asphalt roofs

Any roofing firm can apply an “elastomeric” white roof coating to a black asphalt roof, which can reduce a roof’s temperature on a 90-degree day from 150°F to 95°F.  (“Elastomeric” means the coating will stretch with the roof as it expands when it’s warm, and contract with the roof as it contracts when it’s cold.)  A homeowner who can safely get up on their own roof, with tools and supplies, can also do the job.  The cost is modest, since the job is relatively small: clean, patch, prime, and apply the finish coat.

But progress in getting black asphalt roofs coated white is slow.  For example in Philadelphia, where people have been talking for a decade about this issue, look closely at the Google Maps satellite view of the city and you will see mostly black roofs, while the roofs that aren’t black are generally gray—a color that provides only about half the cooling benefit of a white roof.

The puzzle:  How to persuade landlords and homeowners to apply white roof coating to black asphalt roofs?

This section offers some possible solutions to the white roof puzzle.  Please share your ideas in the comment section below.

Community group involvement:  People who have black asphalt roofs may not know that their roof gets as hot as 150°F in the summer, or that a simple white roof coating would fix the problem.  Community leaders could work with roofing companies to advertise the benefits of white roof coating—soliciting testimonials from those who already have a white roof—and its modest cost.  By aggregating the orders of a number of homeowners at a time, a community group could request bids from roofing companies and obtain a lower price for the work.  The challenge here is that community leaders are already busy pursuing other initiatives.

Residential “PACE” financing:  As states and cities gain experience with commercial PACE financing (i.e., “property-assessed clean energy” financing to fund energy-saving measures on commercial buildings), more states and cities are now adding residential PACE financing, to allow homeowners to borrow money for approved energy-saving expenses.  In a PACE program, a building owner’s loan repayments are billed via their property tax bill.  PACE financing could help homeowners who don’t have adequate savings to pay for white roof coating.  By making financing easier, it could also expand the market for white roof coating, and with a larger market, roofing companies might be more inclined to advertise the service.  The challenges are that some states have not yet enabled residential PACE financing, and in states that have done so, launching a city PACE program takes time and energy.

Leapfrogging to rooftop solar:  As the cost of rooftop solar installations decline, this solution becomes economical in more locations every year.  A rooftop solar system that effectively shade the roof, and does not radiate much heat to the roof, would effectively keep the roof cool.  In some locations the electricity cost savings provided by a solar panel system could pay for the system and its financing costs.  The challenge is the same as the basic challenge for white roof coating: how to persuade homeowners and landlords to take this step.

A new public health law:  Landlords who don’t pay their tenants’ air conditioning bills are under no pressure to apply a white roof coating to their properties and thus improve their tenants’ health.  Cities could institute a public health measure requiring white roof coating.  Then, if a landlord failed to comply, the city could coat the roof white and bill the landlord via the property tax bill.  (In my suburban town, letting your grass grow tall is considered a public health problem, and if you don’t cut your grass the city may cut it for you, and bill you for the work.)  The challenge is that to my knowledge no city has yet recognized hot roofs over bedrooms as a public health issue.

Other ideas:  What is missing here?  What are your ideas?  Please share them in the comments section below.

A Fast Solar Ramp in Hawaii Can Save $3-7 Billion

By Will Driscoll

Hawaii can save $3 to $7 billion by accelerating its transition to solar, according to an independent utility modeling analysis.  That conclusion is validated by the experience of the Hawaiian island of Kauai, where a new solar-plus-storage park will bring down the island’s electricity rates. 

A new state law in Hawaii advances its commitment to pursuing renewables aggressively, so now it’s up to Hawaiian Electric to verify the massive $3-7 billion savings potential from an aggressive solar transition, and then pursue that path.

Savings of $3 to $7 billion

Hawaii’s legislature has set a goal of 100 percent renewables by 2045, and Hawaiian Electric Industries is pursuing a state-approved plan to meet that goal.

Yet a new study of Hawaii’s grid by the Rhodium Group found that moving faster on solar (with minimal growth in other renewables) would save Hawaii $3 to $7 billion between 2020 and 2045.

Whereas Hawaii on its current path would reach 40 percent renewables by 2030, the study found that the least-cost path would achieve 46 percent renewables just three years from now, by 2021, and then 58 to 84 percent renewables by 2030.

The range in savings, between $3 and $7 billion, reflects two bounding analyses: 1) moderate renewables costs combined with low oil prices (for $3 billion in savings); and 2) low renewables costs combined with high oil prices (for $7 billion in savings).  (Hawaii generates most of its electricity using imported oil.)

Beyond solar, the study found that Hawaii would need “up to two gigawatts of lithium-ion battery or functionally equivalent storage in 2030” to achieve the least-cost energy system. Kauai has shown the way here, as it is relying on battery storage provided by Tesla and the AES Corporation to store solar power for later release onto the grid.  (The study’s methodology is described in a technical note below.)

Kauai’s new solar-plus-storage park will bring down electricity rates

Kauai, where a member-owned co-op utility provides the power, shows how easy it is to adopt renewables quickly. Kauai has advanced from 8 percent renewables in 2011 to 44 percent now.

That’s well above the 27 percent for the rest of Hawaii, which is served by Hawaiian Electric.

Kauai aims to generate 50 percent of its electricity from renewables by 2023, and 70 percent by 2030. That 70 percent figure is the approximate midpoint of the 58 to 84 percent range found in the Rhodium study to be the least-cost range for Hawaii as a whole by 2030.

The cost of electricity from a new AES-built solar-plus-storage system on Kauai will be 11 cents per kilowatt-hour—significantly lower than the 14.5 cents per kWh for Tesla’s system just two years ago—and “will provide downward pressure on rates,” said the Kauai utility’s CEO David Bissell.

The Government of Hawaii wants affordable electricity and rapid integration of renewables

Hawaii’s governor recently signed a law providing that by 2020 the public utilities commission must set performance incentives and penalties to tie an electric utility’s revenues to its achievement on performance metrics—breaking the direct link between investment levels and allowed revenues. Two of the key performance measures align with the solar progress in Kauai and the results of the Rhodium Group study—namely, affordability of customer electric bills, and rapid integration of renewable energy.

Hawaii’s elected officials have been concerned about Hawaiian Electric at least since 2015, when 40 elected officials called for a study of publicly owned electric utilities, as on Kauai, for all of Hawaii.

The Rhodium Group study itself indicated interest across Hawaii in accelerating solar, as it gained the participation of Hawaiian stakeholders in 200 hours of focus groups and interviews, and was funded by a Hawaiian technology firm incubator, Elemental Excelerator.

It’s now up to Hawaiian Electric to verify the projected $3-7 billion savings, and pursue a fast solar ramp

The best course for Hawaiian Electric would be to run the Rhodium Group’s numbers through its own utility model to develop its own estimate of the cost savings possible from a fast renewables ramp. If Hawaiian Electric does not yet have a sophisticated utility planning model for this purpose, which includes, for example, battery storage as an option, the utility would be wise to first upgrade its planning model, and then re-run the Rhodium Group’s analysis. Or, if Hawaiian Electric’s most recent planning analysis, as reflected in its December 2017 Power Supply Improvement Plan, was limited by any artificial constraint on the amount of solar that it would allow, the utility would do well to re-run its analysis without any such constraint.

Assuming that Hawaiian Electric confirms the Rhodium study’s results—which Kauai’s experience already validates—then it should roll out an aggressive solar ramp. To its credit, Hawaiian Electric has been working with the National Renewable Energy Laboratory to understand how it can best modernize its island grids to incorporate low-cost solar. Hawaiian Electric could now quicken its pace to accelerate its renewables transition. Its customers would be happier paying less for electricity, and Hawaiian Electric could receive performance incentives, rather than pay penalties for failing to meet performance metrics, under Hawaii’s new state law.


Technical Note: 
The Rhodium Group study simulated Hawaii’s grid using a modified version of SWITCH, an “open source optimization modeling platform,” which contained detailed representations of the electric grid on Hawaii’s four most populous islands. For oil price scenarios, the study used the upper and lower bounds of electric power sector diesel and residual fuel oil prices in Hawaii between 2006 and 2017. For renewable price scenarios, the study started with renewable energy costs assumed by Hawaiian Electric in its December 2017 Power Supply Improvement Plan. Then, to account for future cost reductions for renewables due to technological improvements and economies of scale, the study “scaled those prices to projections from NREL’s mid-cost and low-cost scenarios.” The study’s authors then ran the modified version of the SWITCH model to find the least-cost energy system for 1) moderate renewables costs combined with low oil prices, and 2) low renewables costs combined with high oil prices.

Global Battery Production Capacity Must Grow 21 Times To Electrify The Global Vehicle Fleet

By Will Driscoll

  • Market and policy forces may drive a global transition to electric vehicles.
  • Current and planned global battery manufacturing capacity is 313 gigawatt-hours per year.
  • An estimated battery manufacturing capacity of 6600 gigawatt-hours per year would be needed to electrify the global vehicle fleet.
  • That is about 21 times the current capacity.

Vehicle manufacturers are announcing plans for new and improved electric vehicle models on a seemingly daily basis. For passenger vehicles, the appeal is improved performance and lower operating costs; as prices fall, consumer demand will expand. For trucks and city buses, the appeal is lower life cycle costs and, especially for buses, cleaner air.

Nations may favor electric vehicles to reduce oil imports and protect the climate. Indeed, stabilizing the climate will require electrifying the global vehicle fleet and powering vehicles with solar and wind power.

Current and planned global battery manufacturing capacity is 313 gigawatt-hours (GWh) per year

The world’s major battery manufacturers include Panasonic, LG Chem, Samsung SDI, and Chinese newcomer CATL. These and other battery makers have an existing and planned manufacturing capacity of 313 GWh per year, according to Bloomberg.

About 6600 GWh of battery manufacturing capacity would be needed to electrify the global vehicle fleet

This analysis considers heavy commercial vehicle (HCV) trucks, medium commercial vehicle (MCV) trucks, city buses, passenger vehicles, and commercial vehicles made by auto manufacturers.

Because electric vehicles driven many hours per day achieve the greatest operating savings, fleets of trucks and buses are the strongest candidates for electrification, and thus are considered first.

Electric HCV trucks would require 900 GWh of battery manufacturing capacity

Deloitte projects that 1.8 million HCV trucks will be sold annually by 2026, while a Tesla Semi HCV with a range of 500 miles has been estimated to require a 500 kilowatt-hour (kWh) battery. Multiplying the two values yields an estimated 900 GWh of battery manufacturing capacity needed for HCV trucks. (Note that one million kWh equals one GWh.)

Electric MCV trucks would require 180 GWh of battery manufacturing capacity

Deloitte projects that 0.90 million MCV trucks will be sold annually by 2026, while Volvo plans an electric MCV with a 200 kWh battery. Multiplying the two values shows that about 180 GWh of battery manufacturing capacity would be needed for MCV trucks.

Electric city buses would require 50 GWh of battery manufacturing capacity

Bloomberg projects that 0.18 million city buses will be sold annually by 2025, while Proterra offers an average 275 kWh battery pack size for its city buses. Multiplying the two values shows that about 50 GWh of battery manufacturing capacity would be needed for city buses.

Passenger vehicles would require 3550 GWh of battery manufacturing capacity

An automaker’s association estimates that 71 million passenger vehicles were sold in 2017, while the standard Tesla Model 3 will have a 50 kWh battery pack. Multiplying the two values shows that an estimated 3550 GWh of battery manufacturing capacity would be needed for passenger vehicles.

Commercial vehicles made by auto manufacturers would require 1950 GWh of battery manufacturing capacity

An automaker’s association estimates that 26 million commercial vehicles were sold by automakers in 2017. This analysis assumes that on average they would have a battery capacity 50 percent larger than that for a passenger vehicle, or 75 kWh. Multiplying the two values shows that about 1950 GWh of battery manufacturing capacity would be needed for commercial vehicles.

Summing the capacity needed across the five vehicle types = 6600 GWh needed

Summing across all vehicle types shows that an estimated 6600 GWh of battery manufacturing capacity would be needed to electrify the global vehicle fleet.

Dividing 6600 by 313 (which is the current plus planned battery manufacturing capacity) shows that capacity must grow about 21 times to meet that target.

China’s Electric Buses Will Cut Global Oil Consumption By 0.5 Percent

By Will Driscoll

Shenzhen has replaced its diesel buses with 16,000 electric buses, and authorities there have determined that the electric buses will eliminate the use of 345,000 tons of diesel fuel per year.

China is promoting electric buses to improve urban air quality and cut greenhouse gas emissions.  Because electric buses are far more efficient than diesel buses, net CO2 emissions will decline significantly even with fossil-fired electricity generation.

Bloomberg has projected that China will have 1.2 million electric city buses by 2025.  To support the manufacture of electric buses, China has a large and growing battery manufacturing capacity.

In 2016 the world consumed 97 million barrels of oil per day, or 35 billion barrels of oil per year. Scaling up the savings of diesel fuel from Shenzhen’s 16,000 electric buses to China’s projected 1.2 million electric buses—and converting the units from tons to barrels—shows that China’s electric buses will eliminate the use of 194 million barrels of oil per year.

Simple division shows that China’s electric buses will reduce global oil consumption by 0.5 percent.

The impact of China’s electric buses on global oil consumption is a leading indicator of the changes to come, as the world transitions to 100 percent clean renewable energy.

Tesla Could Cut Vehicle CO2 Emissions by 39 Percent by Selling Tesla Semi Powertrains to Truck Makers Worldwide, for Renewable-Powered Trucks

By Will Driscoll

Displacing the world’s heavy-duty trucks with electric trucks powered by solar and wind would cut global transportation CO2 emissions by 39 percent.

Tesla is the first to develop such a long-range truck (the Tesla Semi), which will save trucking firms money. Yet even if Tesla could maintain a 30 percent annual growth in Tesla Semi sales, it would require eight years of full production for Tesla to saturate the North American and EU replacement markets for heavy-duty trucks.

That would still leave untouched much larger markets for electric heavy-duty trucks, e.g., in India and China.

To spark a global takeover by renewables-powered electric heavy-duty trucks, and an 8 percent reduction in global CO2 emissions, Tesla could quickly ramp sales of Semi powertrains (i.e., battery packs plus motors) to other truck makers—e.g., building one factory to produce Tesla Semi powertrains in India, and another in China.

The Climate Impact of Rapidly Electrifying Heavy-Duty Trucks

Heavy-duty trucks account for 39 percent of vehicle CO2 emissions worldwide.

Rapidly replacing these heavy-duty trucks with electric trucks, and powering them with solar and wind power, would be one of the fastest ways to reduce global greenhouse gas emissions.

Tesla could eventually make enough Tesla Semis to achieve these CO2 reductions on its own, even if no other truck makers joined in, or Tesla could spark a far more rapid transition by teaming up with other truck manufacturers.

Tesla’s Semi Will Save Trucking Firms Money

The operating and maintenance savings from a Tesla Semi can recoup its incremental capital cost in as little as 18 months, per a DHL executive. That’s because a Tesla Semi replaces a lot of costly fuel with cheaper electricity, and because electric motors require little maintenance. (I assume that DHL’s projected operating savings do not account for any use of the Tesla Semi’s autopilot capability.)

Tesla Will Undersupply the Market for Tesla Semis for Decades

Given the tremendous cost savings of the Tesla Semi, it’s the proverbial better mousetrap, and the world should beat a path to Tesla’s door.

Yet Tesla CEO Elon Musk said on the last earnings call that he expects Tesla to make only 100,000 Tesla Semis per year by 2022. He also noted that Tesla is growing its revenues at 30 percent per year.

Tesla would face many challenges in ramping Tesla Semi sales by 30 percent per year after 2022 – alongside a 30 percent ramp in all its other segments. These challenges include constraints in capital, engineering, factory space, manufacturing equipment, sales, distribution, maintenance, and charging infrastructure. Outside North America and Europe, fleet-wide learning also would be needed to train Tesla’s autopilot.

In the best case, if Tesla could achieve a 30 percent compound annual growth rate for Tesla Semis, Tesla could produce almost 300,000 Semis per year by 2026, which about matches Deloitte’s projected North American annual sales for heavy-duty trucks (or HCVs, in global parlance).

If Tesla continued at the same growth rate, it could then produce an additional 300,000 Semis per year by 2029, which would about match Deloitte’s projection of the EU’s annual HCV sales.

That Would Leave Untouched Much Larger Markets in India and China

Deloitte projects larger annual HCV sales figures for India and China—about 350,000 for India and 700,000 for China.

If Tesla were to produce only complete Semis, starting with North America and the EU—regions where fleet-wide learning is already training Telsa’s autopilot—Tesla might not begin to serve other markets before 2029.

To More Quickly Stabilize the Climate, Tesla Could Sell Semi Powertrains to Other Truck Makers

Tesla could help stabilize the climate more quickly by selling Semi powertrains to other truck makers. Those truck makers could then install fast-charging stations at truck stops along the routes to be used by electric trucks. Tesla could help ensure that solar farms and wind farms are installed near these truck stops, to power the fast-charging stations.

In regions with relatively modest wages, any operating savings from Tesla’s autopilot would be less influential to a trucking firm’s purchase decision, and so the trucks would not need autopilot.

Given Tesla’s lead in electric powertrains, and the operating cost advantages of electric heavy-duty trucks, Tesla might find several truck manufacturers interested in pursuing a deal. One truck maker in India might buy Semi powertrains, while two or three in China might do so.

As an indication of this opportunity, Volkswagen, seeing the light on electric vehicles, has contracted for $25 billion worth of battery supplies, and will not produce its own battery powerpacks, according to Bloomberg.

Tesla already has mastered production of the Model 3 motor, which is also used in the Tesla Semi.  The company expects to soon master production of Model 3 battery packs, with the installation of the Tesla Grohmann battery pack line at the Gigafactory (suggesting easy manufacturing of Semi battery packs).  And Tesla is already testing prototypes of the Tesla Semi—which proves that the powertrain works.

So it would be relatively simple for Tesla to rapidly scale up production of the Tesla Semi powertrain—possibly at a much faster rate than 30 percent per year—and sell the powertrains to interested truck manufacturers.

At a combined annual sales of 1 million HCVs in India and China (per Deloitte), and an estimated sales price of $90,000 for a Semi powertrain (i.e., half the price of a long-range Tesla Semi), the annual addressable market would be $90 billion.

Big EV deals like Volkswagen’s $25 billion battery deal—which locks up key suppliers—indicate that a scramble has begun among vehicle manufacturers to position themselves for success with EVs.

Tesla may have an opportunity to sign Semi powertrain deals with truck manufacturers that don’t want to be left out, as everyone catches on that electric HCVs save money.

It’s anyone’s guess how much of the market Tesla, as the first mover in long-range electric HCVs, could secure, but 50 percent of the market would represent $45 billion in sales per year in India and China.  At a net margin of 6 percent, which is about Daimler’s margin, Tesla’s hypothetical profits from capturing half this market would be $2.7 billion per year.

Dominion’s Wires Are Its Only Natural Monopoly; Let Engineering Firms Build Low-Cost Solar, Wind

By Will Driscoll

Many firms have more experience than Dominion Energy in building solar and wind farms and connecting them to the grid.  And these other firms provide the lowest prices for solar and wind, as seen in Tucson’s and Austin’s recent solar costs below 3 cents per kilowatt-hour, and Lazard’s estimated 3 to 6 cents per kilowatt-hour for onshore wind.

Dominion’s relative strength is in maintaining the electrical transmission and distribution grid.  There is no sense in building a second grid, so Dominion has a natural monopoly there.

State legislation can promote low-cost renewable electricity by starting from this foundation. Let big, reliable firms that can build low-cost solar and wind for Virginia do so, competing with each other to provide the lowest cost. Let Dominion run the grid.  And to make sure we get the lowest prices for solar and wind, don’t allow Dominion to bid, so that it can’t rig the bid requirements in its favor. (A Dominion subsidiary could still bid on solar and wind farms in other electric utility territories.)

Dominion has become better qualified to run the grid, as it has recently adopted a renewables-friendly grid planning and management software called Plexos.  With this sophisticated tool, Dominion should no longer have the difficulties its executive Robert Thomas expressed in 2016 when he said a high-solar option “could create reliability issues.” Now, Dominion can use Plexos to plan a renewables-integrated grid.  And each day Dominion can take day-ahead weather forecasts and run them through Plexos to develop a round-the-clock “unit commitment” plan for the following day. With this new capability, Dominion can join the ranks of well-managed high-renewables utilities in Iowa, South Dakota, California and Europe.  Adding cost-effective storage to the grid, from the likes of Virginia’s AES, will make running the grid even easier, by helping to balance solar generation and end-use demand.

State legislators can do their part to bring low renewable electricity prices to Virginia, like those seen in Tucson and Austin.  The key is to pass laws that focus Dominion on running the grid, and that leave solar and wind farm development to firms specializing in EPC (engineering, procurement and construction) that are willing to bid in an unfettered competition.