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The Forum > Article Comments > Why Buffett bet a billion on solar miles per acre per year > Comments

Why Buffett bet a billion on solar miles per acre per year : Comments

By Henry Hewitt, published 29/6/2015

During the late innings of the ICE-age (as in the Internal Combustion Engine age) it has become clear that feeding gasoline and diesel to the next billion new cars is not going to be easy, or cheap.

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This author has made numerous errors.. the first is comparing costs per mile by simply looking at the cost of the fuel. A proper calculation would take into account the cost of vehicle, and electric cars, like them or lump, are still fairly expensive. Of course Jaguars or BMWs may be more expensive but then comes the question of whether the people who own those cars would even notice an electric vehicle or care about the cost savings noted here.

Then the author grabs a figure from a power purchasing agreement and equates that to the actual cost of the power. Not so. The utility is required to take renewable energy so the price is designed to get that power, and would involve various subsidies, hidden or not, including charges on consumers.

So is any of this affecting electric vehicle sales? Last I looked these were miniscule - not worth mentioning. Hybrids were far more popular - that's the way the market seems to be going - although they are still just a fraction of sales.

There are many other errors but that will do for now.
Posted by Curmudgeon, Monday, 29 June 2015 10:29:21 AM
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Mark, the cost of the vehicle is not relevant for a couple of reasons. Firstly, the plants are still being amortised and simply for that reason, over time the cost will come down rapidly. Elon Musk has already announced that the next Tesla model will be aimed at a mass market and priced accordingly. His aim is US$35k, which is comparable with many fleet vehicles and very favourable when the cost savings on fuel over the life of the car are extrapolated. Second, the cost of fuel is what the argument is about!

The primary reason for electric vehicle sales being slow is the lack of availability of recharging points. Once again, this is a major focus of Tesla's strategic plan and is seeing large numbers of charging stations being rolled out across the US, Europe and China and that will continue.

Petroleum fuel prices are not remotely an example of free market operations. The oil market price has very little to do with the cost of production. In fact the very existence of the motor industry world wide relies heavily on Government assistance.

Your comments are reminiscent of the sorts of things we would have heard from those Curmudgeons who couldn't see the sense in horseless carriages a hundred or so years ago.
Posted by Craig Minns, Monday, 29 June 2015 10:40:31 AM
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Craig - sorry but most of your claims are quite wrong. The price of the vehicle most certainly does count in calculating the cost of travel. My suggestion is that you go and find a fleet manager and ask why. The point about "the plants are being amortised" makes no sense, while the following remark shows you're in a different world "The oil market price has very little to do with the cost of production. In fact the very existence of the motor industry world wide relies heavily on Government assistance."

The oil market in fact has everything to do with the cost of production plus taxes.. petrol is taxed not subsidised like solar power. Although car production is supported by governments in some countries, if that all were withdrawn overnight just as many cars would be produced just in different countries.

The only point of substance you make is about electric points and electric car prices coming down. They have been talking about more electric points for well over a decade now. The problem is that there are so few cars to use them - whether more such points would overcome evident consumer reluctance to buy EVs so that there would be cars to use the points is another question. Cheaper EVs may help but as EVs already have enough range to handle suburban commutes and even mid-range out of town trips, I doubt it. A passing fad that doesn't even save carbon in most states (they don't - look it up!)
Posted by Curmudgeon, Monday, 29 June 2015 1:38:10 PM
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There are two things about the solar PV issue that no one seems to have noticed:

1. The Western Sahara and Central Australia are both big enough to supply the whole world demand and are about 150 degrees apart. In effect 24 hour solar power.

2. I was most surprised when I discovered that the rainfall in London is less than in Bloemfontein - the result of differential insolation. Hence I wonder if the effect of shading square kilometers of desert will not or could not be made to cool the ground under a solar farm to the point where desert could be converted to viable dry land farming. In effect would the appreciation in land value not more than pay for the cost of the land.
Posted by Amanzi, Monday, 29 June 2015 1:53:45 PM
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Mark, the cost of the vehicle has to be amortised just as the cost of the plant does. However, the cost of the vehicle that the customer pays is directly related to the amortisation of the capital cost of the plant and of the development of the technology. In every technological case, as the cost of plant is amortised, the cost of product is reduced. Can you give me a single example of that not happening?

Oh and in case you're wondering, I've actually run my own small fleets, both as an owner and as a manager.

The point about petroleum is that it is not a free market and that the reason it has been cheap historically is that the Saudi government via OPEC has been willing to keep prices low to maintain an oligopoly. Oil has always been regarded as a strategic resource and that means the price to the consumer has very little to do with anything real like returns on investment. Shell has divested all its retail petrol operations and the oil companies are among the biggest investors in renewables, especially solar PV. I guess they must be as deluded as I am, the poor things. Don't they realise the future is powered by V8s?

Your final paragraph is a classic chicken and egg and was aroung in a slightly different form a hundred years ago. "Horseless carriages will never catch on. They need smooth roads and petrol stations and who's going to build those when there are so few horseless carriages and they're so expensive?"

Then along came good old Henry Ford...
Posted by Craig Minns, Monday, 29 June 2015 1:56:24 PM
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The debate is irrelevant here in Australia.
As one who placed an order for a Nissan Leaf and then cancelled it the
cost was very relevant.
In 2012 they wanted $51,500 for it and because they could not sell them
at that price they put the latest price up to $57,500 !

For comparison, in the US at that time the Nissan leaf sold for just
under $30,000.
It is a beautiful car to drive and is very well equipped and fitted out.
It's range would have suited me very well.
A friend has a Mitsubishi ieMEV and it costs him 1 cent a KM to
drive to work every day.

No the main problem is the GARO, the Great Australian Ripoff.
Posted by Bazz, Monday, 29 June 2015 3:24:41 PM
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