October 21, 2021
In our last chat, we started talking about renewable energy as a potential investment.
Strictly from a perspective of physical science, renewable (or green) energy sources simply don’t generate the amount of power we need to run the world that hydrocarbon-based energy has created (and, according to green advocates, put on the path to destruction.)
We want our cell phones and our bitcoins, but we don’t want to acknowledge or accept the costs that come along with them.
So currently, there’s no compelling physical case for jumping on the green bandwagon.
But certain industries aren’t letting that stop them…
Green Talk from a Not-So-Green Industry
There has been a lot of talk out of typically non-green industries claiming that they’re moving to green energy in the very short term. Most notable is the auto industry.
It’s a bold pledge given that as recently as 2019, battery powered EV and plug-in hybrids combined comprised only 2.1% of auto sales in the U.S.
Still, they’re making some pretty big headlines:
“Rolls-Royce, the British manufacturer of very large and very expensive cars and SUVs powered by 12-cylinder engines, announced Wednesday that it will stop selling gasoline powered vehicles by 2030. From then on, Rolls-Royce will be all electric.”
“Subaru claims that hybrid- and pure electric-powered models will represent at least 40 percent of its annual global production by 2030, with all hybrids discontinued within another half decade or so.”
“German luxury carmaker Audi said Tuesday it will stop manufacturing diesel and petrol cars by 2033 as part of an industry-wide pivot towards more environmentally friendly electric cars.”
But how serious are these goals?
Crystal Balls can Get Foggy in a Hurry
The problem with these headlines is that 10 years is a helluva long time for any industry to make these kinds of definitive statements about trends.
What will battery technology look like a decade forward?
They really can’t know for sure…
Will future technology be able to match the performance that our current carbon-guzzlers currently offer?
Maybe — maybe not…
Questions like these aside, the most important one is how affordable will that future technology be?
By today’s numbers, electric vehicles lose out in a side by side cost comparison.
On average, EVs cost 63% more than their gas powered grandparents based on sticker prices.
Then you have to factor in the costs of “filling up your tank” beyond your electric bill. You’ll need a home charging setup which can run into the thousands of dollars.
(You do get a nice kickback from the government in the form of a tax credit for buying green.)
But even with that incentive, an EV will cost a driver 22% more than a gas model over the long run according to the website walletgenius.com.
The bottom line is if you’ve got money to burn and want the virtue signaling prestige of driving a Tesla, an EV may make sense to you. But currently there is no financial advantage to buying an electric vehicle.
And as far as I’m concerned, until that cost gap is closed completely (and without the government subsidy), green energy in the auto space won’t be a great bet.
These are the issues these manufacturers are doing their best to figure out. But the truth is, there is no way for them to know.
But Bob, the Auto Industry is Promising…
So why all the clamoring to go green in the automobile industry?
Trevor Hoffman from Car Magazine sums that up nicely:
“The win-win for Subaru is garnering green accolades now without much action initially being taken, making its owners feel as if their brand of choice is righteously marching toward utopia within a decade and a half, but the reality is an ultimate target that’s so far off into the future that it represents little if no real commitment, other than the likelihood of a new hybrid model or two within the next couple of years, plus at least one EV.”
And it’s the same “win-win” for all these car manufacturers.
I’m not saying that investigating new technology trends or keeping up with potential industry breakthroughs is a bad idea. Any company management team worth their salt will always look for ways their company needs to evolve to stay competitive.
But definitive statements like these aren’t a guarantee of anything…
There’s one more thing you should consider when thinking about the green revolution. I’ll tell you about it in our next letter.
Make the trend your friend,
Bob Byrne
Editor, Streetlight Daily