2GreenEnergy super-supporter Gary Tulie of idyllic Buckinghamshire England (see pic if you doubt my claim) sent me this thoughtful piece on the EV adoption curve. I responded:
I agree with the basic concept, i.e., that a slight drop in the demand for oil, which will most certainly be occasioned by the adoption of EVs, will mean a precipitous drop in the price of crude, and cataclysmic effects on the industry. The demand curve for oil is very inelastic (we don’t change our consumption much as a function of changes in price), but we WILL reduce consumption as new technologies (EVs, mass transit, ride-sharing, etc.) provide attractive alternatives. With falling demand and thus falling prices, suppliers will be unwilling to stay in the game, which will be especially true as oil exploration becomes increasingly difficult and expensive. Shrinkage in both supply and demand will have a mutually re-enforcing effect on each other.
This is reason #2 that I’m 100% in non-extractive stocks; it’s only a matter of time before they crash, and there is no telling (for me, at least) when that’s going to happen. And when it happens, it’s going to happen hard, because of the enormous write-downs of stranded assets and obsolete infrastructure. (Reason #1, of course, is that I actually care about the world around me and the people living in it.)
I disagree that the ultimate cause of the falling demand is the number of moving parts (and thus maintenance costs) associated with internal combustion engines. Most car buyers are content with whatever warranties come with their purchases; few worry about what happens when they expire and costs start to climb. To the degree that they think about this at all, they simply plan to replace the old car with a newer one.
Also, not to sound like a nit-picking arse, but I refrain from predicting “exponential” growth, because it raises the question: what’s the exponent? If it’s 1.05, it takes 14 years for sales volumes to double. The way I see it, the demand for EVs will enjoy a meteoric rise (of whatever shape), not unlike the demand for cell phones we saw 15 years ago. This will be driven by falling prices based on improving battery technology, and better value: longer range, as well as ubiquitous fast charging stations.
Falling prices of rooftop solar will also make all this happen that much faster; even gearheads find a certain attraction associated with driving purely with the photons of the sun.
The other factor here is environmentalism. This, ironically, is not a requirement for the successful adoption of this or any other aspect of cleantech, as I argue in the book you helped me write (Bullish on Renewable Energy), but it certainly can help. It’s impossible to imagine that, over time, people won’t become more concerned about climate change and the numerous other ecological challenges associated with fossil fuels.
