Wednesday, November 4, 2009

Connected Cars: The 'Killer App' For The Smart Grid--And The New Driver of Growth

Job figures are lagging indicators but nobody feels reassured right now. It is hard to imagine Americans returning to something like the full employment of the 1980s and 1990s without new industries like telecom and computers engendering a vast new ecosystem of entrepreneurial businesses; companies in which American technological talent can distinguish itself; companies that either require local workers for infrastructure projects, or, design and manufacture products and components whose labor content is too small for managers to consider outsourcing to the Far East.

The good news is that the electric car is around the corner. The bad news--which is the best news of all for the economy, ironically--is that the electric grid cannot begin to cope with the electric car's demands and possibilities. Layering in all the network technology that will smarten the grid, and preparing electric cars to communicate with it (and each other), will transform our economic and physical landscape. These changes will require a new role for government--something the Obama administration seems to understand. I explore the new ecosystem and its implication in the current Inc. Magazine:

At ground level, electric cars like GM's Chevrolet Volt -- due to be launched in November 2010 -- are pretty much everything the U.S. economy is banking on. The cars promise innovative engineering and a resurgence of the American auto industry. They mean an America that is manufacturing things rather than just bundling financial instruments. Cosmically, electric cars mean green technologies that will migrate to China, India, and Brazil, where they will allow for Western styles of personal freedom yet not threaten to overheat the earth.

And you don't have to be George Clooney to want one. Electric cars may be vaguely cool, but GM executives are counting on drivers with nothing more than a householder's logic, something like the good sense to refinance a mortgage when the 30-year-fixed drops more than 2 percent. Jon Lauckner, GM's vice president of global product planning, tells me that his team set out to trump gas-powered cars as a matter of straightforward economics, especially as economic recovery pushes the price of gas back over $3 a gallon. "At that level," Lauckner says, "the cost of running a Volt in full electric mode will be about one-sixth that of a gas-driven car of the same size, 2 or 3 cents a mile rather than 12 to 15 cents a mile. We figured that, for most people, this means a savings of about $1,500 a year." Sticker prices will be high; the suggested price of the Volt will be about $40,000. But federal tax rebates are anticipated to be as much as $7,500, not to mention various state incentives. So the actual price will probably be closer to $30,000 -- not a bad deal, given that borrowing costs will be low for some time.

When he speaks of "full electric mode," Lauckner is acknowledging another barrier he expects the Volt to take down, namely range anxiety, the fear of getting stuck with rundown batteries while driving in a snowstorm, bumper to bumper, on a 150-mile trip to the in-laws'. The Volt will come equipped with a small gas engine, unlike its forthcoming competitors: the smaller Nissan Leaf, BMW's plug-in Mini Cooper E, and Ford's electric Focus. This engine will not drive the wheels, as with the hybrids now on the market (actually, GM likes to call the Volt an "extended range electric car," not a hybrid), but will act as a dynamo to supply the electricity for the car after 40 miles of running on stored power.

The Volt's designers assumed, per Department of Transportation data, that nearly 80 percent of Americans drive 20 miles or less to work. This is why GM was able to make the technically true but sly announcement that the Volt earned a 230-mpg rating for city driving from the EPA. "Most drivers will hardly ever use this engine," says Tony Posawatz, the Volt's line director. "We may have to educate people to change their oil because it hasn't been used for a year! Anyway, when the range-extending engine kicks in, drivers can go up to 300 miles, like a conventional car. In a pinch, they can make use of the existing gas-station infrastructure."

And so, assuming these cars prove safe and reliable, American consumers will almost certainly consume them. U.S. auto companies will make them, and that's good for the planet, right? Yes, but.

Continue with the article here.