The San Diego “Chargers” and the New Commodification of Energy

The Atlantic‘s nifty Cities page has a brief item up about San Diego’s push for increased electric car usage.  The new initiative came together in early 2011 via a seemingly too-good-to-be-true collaboration between the utility companies, the local government, university research departments, and clean energy non-profits.  It’s the stuff of Davos dreams, except that it appears to have actually worked.  In November, San Diego introduced its  fleet of 300 electric vehicles available for short term rental.  The program works very similar to ZipCar in that vehicles are available on an hourly basis, able to be picked up and returned at various charging stations throughout the city.  The stations draw solar power from photovoltaic cells and connect to a localized grid infrastructure.  Keep those shopping excursions minimal, though: many of the small “fortwo” [sic] vehicles only have enough room for a driver, a passenger, and maybe a bag of groceries.

The article,  however, neglects to mention cost, which seems essential to any discussion of clean energy technologies.   It’s notable that San Diego is not exactly a representative sample population.  It is consistently one of the ten richest cities in the country, which means that residents can afford to tinker with new, pricy technologies in a way that other areas of the country can not.  It also has consistently fair weather, with no shortage of sunlight to power all of those cells.  Could you run this program in, say, Minneapolis?  Nobody quite knows yet how consumers will react to all-electric cars.  That’s not to suggest that San Diego shouldn’t run the experiment; it absolutely should.  But the results will vary significantly in other urban markets (and for that matter, the surrounding suburbs served by public transportation networks), meaning this will be the first step of many rather than a surefire panacea.

It’s no secret that consumers ultimately act with their wallets in mind, so any electric fleet will need to offer an appealing financial incentive.  In a densely populated metro area, that incentive is having a car available instantly without having to purchase it, garage it, fuel it, repair it, etc.  But the rental program – which does have to pay for all of those things – will need to keep its own costs low in order to keep the consumer price point reasonable.  Electrical grid energy, though cheap, is not entirely free.  Additional demand from hundreds of power-sucking cars will put strain on the city’s network and require high-frequency monitoring to avoid outstripping the supply.  In November, Reuters blogger Felix Salmon got excited about the possibility of charging up a vehicle at night (when energy is cheap) and then plugging in and “selling” energy back to the grid during the day (when energy is more expensive) to turn a small profit.  Small cottage industries already do this with home solar panels and the idea has been in circulation for a while.  But only now, with electric vehicles poised to roll out on a larger scale, has that thinking extended to cars.   Commenters point out that constantly draining the battery will shorten the car’s life.  Most owners actually need to use their cars during the day (if not, why bother investing in a pricey plug-in at all?), making it unfeasible for them to “sell” at peak hours.  (Others, including Dan Ferber at Miller-McCune, argue that this problem isn’t as big a deal as it may seem).  The San Diego cars are well suited to test the theory.  A given percentage of the electric rental cars could be “selling” throughout the day while they’re on the lot, just so long as enough “driver” cars are available to meet customer demand.  By cleverly rotating which cars are “sellers” and which are “drivers,” the longevity of each individual vehicle could be extended.

What we’re seeing, I think, is the beginning of an age where our conception of energy will change and we will start thinking of it as a more fungible currency.  Yes, most of us pay an electric bill already, but it’s money that only flows one way: out the door every month.  Right now, the only way any of us can “save” is to reduce usage, which is undesirable.  But in the future, electric energy might be traded and attained in other ways.   An idle car can earn back some of its value while you’re not using it, much like interest in a savings account.  In that way, it is fungible in a way that gasoline is not.  Brad Plumer is bullish that solar power is only getting cheaper and that it might only be a matter of time before it can achieve parity with fossil fuels without the aid of subsidies.  He also notes that a carbon tax from the U.S. government would go a long way toward that end, but doesn’t appear likely in the near future with Republican control of the House.

Whatever the results of San Diego’s initiative, California is likely to remain the proving ground for all-electric vehicles.  Not only is it the top car market in the nation, but it has the strictest emission standards.  These can significantly alter an auto’s fortunes.  Chevy’s Volt roared out of the gate and and won MotorTrend’s 2011 Car of the Year Award (much to Rush Limbaugh’s chagrin).  But the car failed to meet the Golden State’s requirements, causing it to lose out on state subsidies and miss its sales projection by 25%.  California has set a goal to generate 33 percent of its total energy from renewable sources by 2020, so there is strong incentive for San Diego’s unique collaboration to pay dividends – and a risk of significant backlash if it doesn’t.

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