New Jobs and New Math

The job market seems to be the #1 subject on people’s minds.  And government has a role to play at many levels.  We hope the role is helpful.  But it’s not always so.

The oil industry has known for many years that oil can be extracted from shale rock by heating it.  But in the past, when oil was cheap, this process was too expensive, oil would have to be around $50/barrel to make it profitable.

Well, we hit that and more.  Recent crude pricing has been hanging out at $75 a barrel.  So it’s not surprising that shale oil has been developing in the background.  Shell Oil had fully operational pilot plants, spent the money, applied for the permits.  Shell also announced that the industry would create 10,000 jobs nationwide and capacity to directly reduce a fraction of our oil imports from foreign sources.

The Canadians were sitting on similar resources.  I guess the geology of the Rocky Mountains is the same from Colorado to Canada.  And the Canadians spent the money on pilot plants, applied for the permits and started building plants.

This is pretty big stuff.  Getting tons of rocks crushed, transported, cooked until they release their oil, distilling the oil into a usable form.  Big machinery, lots of equipment.  Lots of work.

The only difference with these two stories is that the Canada has completed its first two plants and is planning on a pipeline to the US where they are going to sell the crude to US refiners.  In the US Interior Secretary Salazar denied the permits to Shell Oil saying that the land use was not consistent with our national goals for the use of the land.

As a former resident of Colorado, I have to say, the land in question is some of the most remote and unusable land anywhere to be found.

So what’s the deal?

Before an election its all about the jobs coming back to the auto workers.  After the election its jobs that are never coming back to automotive sector.

State governments have fallen victim to a similar myth in the green economy.  Alternative energy is reportedly going to bring tens of thousands of new jobs to the economy.  And government officials at the state level are trying to parlay renewable energy projects into increased employment in their states.  And that’s fair.  They should be looking for all the help they can.

But many renewable energy jobs are temporary.   A wind farm project may only employ a few hundred people and after the project is done they have to find a new project.  A new wind turbine manufacturing facility in a state is not like an automotive plant.  The plants are usually manufacturing a sub assembly or part for the wind turbine.  The actual number of people required to build a certain part may be 80-100.  Much of wind turbine machinery content is offshore.

The other “new math” of the job conversation is jobs that are “created or saved” by government intervention.  Well, that’s a tough one to prove.  I surveyed several industries using the Department of Commerce industrial output data.  For many industries the relationship is $220,000-300,000 of sales per employee.  Obviously this number can vary quite a bit.  But to “save or create” 30,000 new jobs takes sales of $7.8 Bil of new products or services.

Somebody has to spend a lot of money.  Which means that somebody also has to earn a lot of money. Government cannot spend to offset a recession.  They can only dig the hole deeper.  New products come from entrepreneurs.  And people who are working buy new products.

We need government to help create new jobs, not destroy them.

Robots and the Future – Part 2

Robotics researchers have been pushing the envelope for the last 30 years since the inception of “artificial intelligence”.  The basics of artificial intelligence programming is the modeling of human expertise and mimicking human behavior in a variety of circumstances.

One aspect of artificial intelligence gave rise to expert systems.  Complex systems like diesel locomotives are very difficult to repair because of the large number of parts operating together.  Human experience accumulated after years of working with diesel locomotives needed to be captured in order to prevent each generation from having to apprentice workers over long periods of time in order to learn how to troubleshoot these systems. So programmers in the early days of AI were employed to learn and program the diagnostic procedures developed by skilled workmen over many years.

These programs were very successful.  But in no way do they replace human intelligence and insight.  This is simply an example of subtlety in programming a specific area of human experience.  Speech recognition continues to be a challenge after decades of effort, limited to transcription applications and simple material handling instructions.

Another area that came up was large scale logistical mapping, another Expert System.  What is the most economical way to use airplanes to transport people around the US?  When you think of a large air carrier and the number of airplanes, flights, destinations and how they might be mapped together to get the best use out of the airplanes, it is a problem that is too large and complex for a single human to work with.  Enter the expert system programmer.

But in none of these cases can a computer program exceed the boundaries of it’s programming.  Can the autonomous Jeep get from it’s starting point to it’s destination?  Yes.  With many man-years of programming and a vast array of computing power, proper deployment of sensors and actuators, and a lot of stored energy.

Can the autonomous Jeep perform any other task?  No.  Regardless of the sophistication, the machine cannot exceed the boundaries of it’s programming.

Can we teach machines to learn?  So far, only in the most crude and rudimentary way.  But the course of the learning is again bounded by the programming.

And again, I will defer discussion of true intelligence or consciousness.

But what robotics can do to expand it’s usefulness is to mimic simple human tasking where it is cost effective and where the robot can “outproduce” or exceed the precision of a human.  Robotic welding, for example, has reached the point where a basic robot welding cell is less than $50,000.  So the cost of entry, the learning curve and complexity of implementing a welding robot cell in a small production facility is very reasonable.

Will robots be used in “human service” applications?  Sure.  ”Robot, vacuum my living room”  No sweat.  We can already do that with a Roomba only it doesn’t have voice recognition yet.  We have robots that can mow the grass in the front yard and avoid shrubs and trees.  Very cool.

Will we have robot servants like C3PO in Star Wars?  Hopefully more intelligent, C3PO was kind of dumb.  Simple tasks like serving a drink at a bar? Yes, that’s been done too, although it doesn’t have philosophical conversations with customers.

Will robots be able to provide basic care in hospitals and for the elderly?  Anything is possible. It will come down to how far we can push the envelope of programming, safety and return on cost.  Certainly we get robots to get a cold beer from the fridge.  But if the fridge is empty can it run out to the store and get us a six pack?

Not anytime soon.

Robots and the Future

In the field of Robotics, where is the line between between remote control, software control and autonomous control?  (No, I’m not going after the consciousness thing, it’s way too complicated)

Part of the problem may have to do with our use of the word “intelligence”.  We talk about the increasing “intelligence” of processors and particularly about the cost of “intelligent” control dropping to the point where it is suddenly economical to put a microcontroller together with a motor in order to achieve new levels of performance in either energy management or some other critical parameter.  Which opens new performance capability in robot design.

Increasingly, industrial robotics involve the use of vision systems to acquire information about the location and orientation of parts so that the robot system can interface smoothly to the “real world”.  If any of you have been to an industrial trade show and witnessed the Delta Robots making cookies, it is a very impressive sight to behold.  Incredible throughput and accuracy.  And that’s what it’s all about in industry. Higher productivity, improved product quality.

But where is the line between remote control and automatic control?  A remote manipulator for working in the nuclear industry, which was the big application that drove early robots, is a remote servo loop operating a series of servo motors and controls and powering mechanical systems, in order to do work that is dangerous to humans from a safe distance.  The DaVinci medical robot is a phenomenally improved version of the same thing.  A remote controlled robot, guided by direct haptic inputs from a surgeon, and with very sophistical tactile feedbacks, whose end effectors operate a variety of surgical instruments and actually increase the precision and speed with which doctors may perform certain procedures.

Is this a robot? Sure!

When we watch welding and painting robots making cars, we are watching decades of technology development in action.  There has been significant effort to improve the actuator hardware, and probably many man-years of software development to improve our description of the task and its safety and performance constraints in order to create not only reliable, but increasingly efficient machines to do the tasks that humans cannot compete with for productivity.  These are very sophisticated automatic applications, but certainly not autonomous.  The boundaries of the application and the programming for it are very finite.  Again, its about repetition, speed and accuracy.

And, yes, we call these robots, too.

But increasingly, there is discussion about the next frontier of robotics.  Where are the next big apps coming from?  Most of the big robotic companies in Japan and Europe are talking about personal service robots.  You can let your imagination run wild here.  Anything is possible. Certainly the service robot for NASA is interesting because it, again, follows the concept of doing tasks where it is difficult for humans to operate.

Is a Jeep that can be programmed to find a path and drive from one place to another autonomously a robot?  Yes, but we may be pushing the boundaries here just a bit.  These applications fall into the realm of Artificial Intelligence.  The programming and software languages for which were just being described for the first time about 30 years ago.  And at this point we are forced into the debate about what is intelligence.  In addition, are these systems which are capable of “learning” and what is learning exactly?  And more importantly, as all good science fiction movie watchers will ask, can a machine exceed it’s programming?  (See?  I didn’t even start on consciousness yet)

These are all serious considerations for the Future of Robotics which I will pick up further next week.

Mechatronics and Economics

Recently, I did some industry analysis on jobs and revenue.  How many dollars of sales are required to “create or save” a job in a given industry.  I only looked at a couple of industries and found that it ranged from $219,000 to $275,000 in sales for certain types of processed materials to employ a worker in that industry.

Obviously, this type of metric will vary wildly depending on how highly automated a particular industry is.  The beverage industry is highly automated and doesn’t have a large employee staff to generate finished products.  But interestingly, the companies that build machinery for the beverage industry have fairly high employment because it takes a combination of technically trained skilled workers to make the machinery that makes the beverage products.

The agricultural economy has grown dramatically with the introduction of machinery to assist in the process. Complex machines have been developed for many applications to increase productivity.  The latest round of enhancements are tilling and planting equipment that uses Global Positioning Satellite information to keep the tractors in a straight line and computer plots of the land to maximize the planting area per acre.  Pretty amazing stuff.

In the automotive area, there are some interesting statistics.  In the ten year period from 1998 to 2008 the industry increased its gross output per employee by 33%.  This is a huge statistic and represents the long term impact of automation on the manufacture of vehicles.  The other interesting statistic is that the average internal price of a car today is the same as that ten years ago.  Given that the US industry has pushed it’s quality to compete with the Japanese cars that were perceived as superior to US in quality, this is an amazing feat.

Of greater interest is the comparison of total vehicle shipments.  The most cars and light trucks ever shipped by the US Auto makers was in the year 2000 when we shipped 17.8 million units according to Ward’s Auto which reports on the car industry.  This feat was almost duplicated in 2005 when 17.4 mil units were shipped.

A relatively stable manufacturing base over the years, the US auto industry hit a disastrous slide in 2008 shipping an anemic 13.49 mil units followed by an even worse 2009 when we shipped 10.6 mil cars and trucks.  This was the year in which the Chinese automakers topped the US manufacturing rate for the first time ever.  A point that the Chinese press made with great vigor in spite of the fact that the majority of Chinese automakers are actually joint ventures with foreign companies, the single original Chinese auto maker being in great difficulties due to poor product quality.

The 2009 US auto showing is particularly dismal when you consider the “cash for clunkers” incentive which spent $1.4 billion taxpayer dollars to generate 200,000 additional unit sales.  A small showing in the scheme of things even if the market was 10 million units.

Will the US auto market pick back up? Certainly, but not to the former highs of 2000 and 2005.  2009 shipments were off by 40% from the 2005 high, and that is too much of a gap to be easily recovered.  Especially when unemployment continues to be running in the 10% range and higher.

Is there hope?  Yes.  Serious electric hybrids and battery manufacturing for the US automakers will create tens of thousands of jobs in the next couple of years.  Demand for foreign hybrids has been running at over 400,000 units per year, and will likely increase once there are quality US made products available.

States that pay attention to the needs of the industries they provide locations for are States that will thrive with low unemployment and low deficits.

Semicon 2010

This year’s semiconductor industry gathering, Semicon 2010 is over.  And it was a good show with a lot of technical content targeted at the ongoing effort to achieve ever higher density parts.  The forecast for 2010 and 2011 is for the highest growth levels in a decade.  Certainly, at $295 Billion in projected sales for calendar year 2010, the semiconductor industry is the largest economic activity in the world. And it is just as certainly a more significant economic activity in the US economy than the automotive industry.

Which is saying a lot.

Some of that economic activity is the obvious stuff.  Jobs.  Making things that are important to the industry.  Like all the silicon ingot, water treatment, chip encapsulation compounds, chemical solvents, and gases that are needed.  And all of those feedstocks require people in their respective industries.

There is also the capital equipment market.  Companies that make machines that make chips.  Machines that grow silicon ingots, machines that slice silicon into thin wafers.  Polishing machines that make the surface smooth enough to create the nanometer sized features that become semiconductors.  Wafer probing machines that do functional testing, dicing machines that slice the wafer into the single chips, wire bonding the bare die into lead frames to we can attach the circuits.  Encapsulation, labeling, testing and packaging the final products.

The Semiconductor Industry Machinery business is estimated to be an $11B activity separate from the sale of chips.  The semiconductor equipment market is still the largest target market for motion control products and mechatronics of any market I know of.  At a close second place would be the electronic assembly machinery market  with it’s pick and place, adhesive dispensers and inspection machinery.

Interestingly, the semiconductor industry also provides trickle down technology.  Hard disk drive spindle motors require the exact same 3 phase brushless drive and control as industrial servo motors.  The difference is that the spindle motor is manufactured in quantities of tens of millions of units.  This allows disk drive manufacturers to explore the ultimate boundaries of cost reducing the technology and introducing new techniques to improve performance.  Much of this technology has migrated to the motion control industry in the way of integrated motor control chips.

The semiconductor industry is now made up of two major markets.  Chips and Solar Cells. The solar cell market is counted separately and does not overlap with traditional semiconductor business.  Many of the companies that make semiconductor machinery have extended their capabilities to the solar industry as a way of diversifying into new markets and making up the lost ground that was experienced in the machinery business.

While Solar is still an emerging industry to some extent, it will continue to drive large segments of the economy. Solar photovoltaics and solar hot water drive a lot of jobs in manufacturing and installation of systems.

What we need in the public policy sector is better understanding of the business needs that these industries require.  Generating enough electricity for these industries to thrive is one requirement.  And most states in the US have failed to bring any new capacity on line over the last 30 years. States that recognize these needs and are willing to meet them are going to be the States that prosper with low unemployment and thriving economies.  And that’s where we all want to be.

Intersolar 2010

Intersolar 2010 is one of the larger gatherings of the Solar Energy industry.  I had the opportunity to attend InterSolar 2008 when it was still relatively new.  In the last two years the Solar Energy industry has grown very quickly, chalking up 35% growth in 2009 over 2008 and with similar forecast growth for 2010.  Overall revenue generated from the sale and installation of solar energy systems in the US was estimated at over $2.4 billion.  This is made up of solar panel sales across the residential, commercial and utility customer projects with a mix of technology including some solar hot water systems, some large scale solar concentrator systems and a whole lot of solar panels being installed with racking, inverters, tracking systems, engineering design, contractor labor, etc.

The contrast between InterSolar 2010 and 2008 was very noticeable.  This year’s trade show reflected the growth and sophistication.  Tremendous effort is being put into every aspect of the photovoltaic technology, tandem junction semiconductors that produce the photovoltaic effect at 2 different light frequencies, enhanced surface texturing of the surface glass to improve transmission of light and reduce the problem of incident angle of light, new chemistries like Copper-Indium based photovoltaics which are now “printable” as ink coatings, and ongoing development of thin film silicon, concentrated light focusing on silicon, recycling of the silicon itself, and a host of improvements all targeted at reducing the cost of producing electricity from sunlight.  As you might expect, incredible support from semiconductor equipment makers to provide new equipment to make the technology scalable in production and cost effective in the marketplace.  Solar is the new growth engine in semiconductor equipment.

Solar Panels, like other types of semiconductors, are subject to decreasing cost with increasing volume.  In typical Semiconductor Industry fashion, a lot of capacity has been ramping up since early 2000 which led to a 40% correction (read “drop”) in the price of solar panels during 2009 which played havoc with project bids and created serious difficulties for distributors with inventories or contracts for solar panels at the higher prices of early 2009.  However, now that prices are lower, more demand is expected, and hopefully, companies that had a tough time during 2008-2009 will find business conditions in 2010 and 2011 more favorable.

There is continued optimism that the US solar market will continue to grow at 30%+ per year for the next couple of years, some forecasts are 50% per year and one forecast from Europe suggests 100% growth in the US market next year.  Huge growth forecasts combined with caution on the manufacturing side has created shortages and long lead times for new deliveries.

But we should note, with caution, that this market is largely subsidized by State Renewable Energy Portfolios mandating the alternative energy systems, Utility Company Rebates and Federal Tax Incentives.  Solar energy technology is generally sold on the basis of avoiding future increases in energy costs, not on the basis of eliminating energy costs.

So there is still a big gap in bringing electricity costs down using solar power.  Modern coal plants produce electricity that the utility company can sell at a profit for 6 cents per kilowatt/hour.  By comparison, a 300 watt solar panel will cost at least $1500 installed and functioning.  It can only produce about 756 kilowatt hours per year, and even at 12 cents per kilowatt/hour, won’t break even for about 16 years without government incentives.  So you’re not eliminating your electric bill, you’re prepaying it with a bank loan for a bunch of equipment that doesn’t burn coal.

That’s OK if you can afford it, just don’t make the mistake of thinking you are getting rid of your electric bill.   But be on the lookout for the next breakthroughs in solar.  They are coming.

Linear Actuators

Linear Actuators are a class of mechatronic systems with some unique design constraints.  As a result there are dozens of approaches, dozens of vendors, the option of designing the actuator from scratch, and, frankly, a lot of confusion.  The problem lies in the fact that the actuator as a subassembly is the combination of a number of separate technologies.  This means there are a number of design tradeoffs incorporated into the resulting actuator that must be acceptable in order to use that actuator.

Categorizing linear actuators is not entirely straightforward because many categories overlap.  The “motive power” category can be any type of power source, rotary motor or linear motor powered.  Linear motor solutions are much more commonplace in linear actuators today due to declining costs for this technology choice.  But in a linear motor based actuator, the linear motor is both the motive power and the mechanical transmission at the same time.

Categorizing linear actuators by their mechanical transmission style is another approach.  The most common categories are screw type, belt and linear motor.   But the motive power for a screw based actuator could be a stepping motor or a servo motor.  The stepping motor is predominant because of it’s suitability for positioning, but it may be underpowered for some applications where a servo is needed.   So the linear actuator transmission category can have overlaps because of the different motor types that are used in conjuncion with it.

Price seems to be one means of eliminating the ambiguity.  Stepping motor and lead screw combinations are popular because they are economical and maintaining 0.001″ accuracy is very easy.   Linear motor systems are capable of .5 micron accuracy with little or no friction, acceleration and speed that is incredible, but generally the higher performance comes at a higher price.

But in the end, the selection process is best guided by the criteria of the application.  The list is, thankfully, short.  Load weight or force that must be generated, speed, accuracy and life expectancy or number of cycles of operation.  This last is probably the key determinant in system selection.  Long life or high cycling goals lead to linear motors actuators with little or no friction. You have to familiarize yourself with the overall field because the tendency of confusing the technology and the application needs.

At the recent Semicon gathering of manufacturers involved in semiconductor manufacturing, a lot of attention is given to the mechatronic content of machinery.  And as far as I have been able to determine from many different market research projects, semiconductor manufacturing is one of, if not, the largest market for mechatronics every.   So it’s also not a surprise that a lot of vendors come to the Semicon show with their latest and greatest product offerings.

Among the most interesting, Nanomotion continues to extend the reach of piezoelectric linear motors, yet another technology choice within the linear actuator sphere.  Piezo motors have only one moving part, and meet the high precision, high reliability criteria.  With increasing usage, there has been decreasing cost for this unique solution, along with superior position feedback technology and excellent packaging for space constrained applications.

In addition, IKO has released a number of new linear actuator assemblies, both screw driven and linear motor driven.  They are also showing a number of unique 2-axis configurations one of which is the thickness of a tape reel and is targeted to unloading parts for electronic pick and place machinery.

Brilliant examples of manufacturers continuing to integrate mechatronic technology to make it more convenient for the customer.

Cars, Cars, World Cars

They are everywhere.  And even in the electronic age, the economic impact of the automobile is probably the second largest segment of the economy in the US.  And a very large feature in every industrial economy in the world.

Worldwide, we hit a recent high of 54.9 million cars built in 2007.  But there have been steady declines since.  2008 saw a slide of 3.7 percent with 52.9 million cars shipped.  2009 was down nearly 2% at 51.9 million, and 2010 appears to be on track for another sluggish year with just under 51 millions units expected to ship by year end.

The regional variances are really interesting.  Fiat’s CEO estimates European car sales to slow down by 15% during this year.  US sales, briefly bolstered by “cash for clunkers” were the worst in 24 years at 10.4 million units with sales by the Big 3 reportedly off by 20+ and 30% levels.  So if Europe and the US are off by double digits, and worldwide sales are only off by a percent or two, where are the rest of the cars being sold?

Amazingly, China’s market for new cars is exploding in double digit growth and the Chinese Auto Industry reports 13.6 million units sold in 2009.  That much more extraordinary since in 2006 they sold only 5.4 million cars.  This report has made the news everywhere.

It is certainly with great pride that the Chinese Auto Industry makes this announcement.  However, as I read the announcement more closely, they include in their data commercial trucks, which may not be the same as our light duty truck category, and buses, which are generally low in volume and shouldn’t really make much of a difference.  But differences in the reporting basis are a cause for concern about the claim and the comparison.

China has, over the two decades, worked very hard to bring its massive industrialization into the world market.  They began an aggressive program to graduate 5000 students per year with qualifications in the semiconductor industry.  With considerable forethought, they have battled their way into the mainstreams with wafer fabs and all the needed resources to become a world leader in electronics.  The years of effort have paid off.  China is the low cost leader worldwide in electronics.  But you still have to watch quality and consistency closely.  And there is still a logistics cost to ship to foreign markets like the US.

In the automotive industry it’s a bit more difficult.  Every major material science and manufacturing process must be mastered to build complex machines, often containing more than 10,000 unique parts per vehicle.  Every mechatronic discipline is involved in the vehicle operation and even more complex mechatronic challenges exist on the manufacturing floor when you are trying to make 1,000,000 of something.  It’s a daunting challenge.

Of the top ten brands in China’s car market, 9 of them are foreign joint ventures.  BYD, the lone Chinese supplier among them, is experiencing great expansion, great sales success, but significant quality problems as well.

There are a wide range of choices in the worldwide auto market.  From the Smart Car’s 45 mpg and $12,000 sticker price to the late-great Hummer’s 9 mpg and incredible $40 to $60K selling price. Italy’s Fiat has re-issued the 500 model with an impressive 69 mpg fuel rating and a price of about $13,000 (this will vary quite a bit with the Dollar versus Euro swinging around a bit).  This car hasn’t been available in the US but with the recent shuffle with Chrysler, it is possible we could see it in the future.  And 69 mpg would bring a lot of interest, even at current gas prices.

Is China going to be the giant in manufacturing over the next 10 years?  Without a doubt.  But there is still a lot of work to be done.

Are US Auto Sales coming back?  Several forecasters are projecting significant increases in 2011.  Many people, rightly concerned with a soft US economy, are uncertain.  But financial incentives for new car purchases may again be on the horizon.  And more innovation is coming as American car makers introduce more electrics, hybrids and high mileage gasoline vehicles to the market.  With a little luck, things could get a lot better.

And I am betting that they do.

Electric Car Prequel

The electric car, hybrid or plug in, continues to be an elusive goal.

One model sports optional 2 wheel or 4 wheel in-hub mounted drive motors.  With a large battery pack and a curb weight of 3300 pounds, it’s a bit ponderous.  But it has a 50 mile drive radius and rarely requires any maintenance.  What year will this vehicle be ready?  1899. It’s the Lohner-Porsche.

Recognizing that the weight the battery pack was a major obstacle, Ferdinand Porsche, still working for the Lohner Coachworks, came up with a hybrid model.  The vehicle used a small gasoline engine to power a generator and a single motor mounted on the rear axle of the vehicle. Porsche raced the car himself in the Semmerling competition near Vienna, and with top speeds of 75 miles per hour, won against a very competitive field which included Benz gasoline powered cars.  The 75 mile per hour top speed was unprecedented, especially from an electric hybrid.  The year? 1900!

So all things old are made new again.  If the 2200 pound weight of the Lohner Porsche battery pack could be reduced by 4:1 by using Lithium batteries, then a curb weight around 1500 pounds should be feasible.  The reduced weight of the vehicle leads to significantly greater driving range.  The Smart Car electric model is expected to have a range of 120 miles per charge.  Which, actually, is enough for a lot of vehicle applications.

In wheel drive motors are not my favorite solution, but if the weight can be reduced, then problems relating to suspension dynamics can be managed.  And that’s exactly what the folks at Protean Electric are doing.  They have produced a number of conversion vehicles as demonstrations of their electric motor technology.  And if the motors perform as expected, they will carve out a niche in the plug-in and hybrid electric vehicle world.

There are a couple of important points that need to made here.

#1) based on the “Absolute Value of Technology”, the only thing that matters is the vehicle costs per transportation mile.  That is made up to two components, the purchase price and the expected cost per mile driven.  Admittedly, if you can run an electric vehicle at $.04/mile, it is cost effective to own, even if the car costs more up front, because over the life of the vehicle, the low operating cost will overtake the purchase price.

The IRS deduction for vehicle operation is $.50/mile.  Electric hybrids and especially plug-in electrics are not expected to have any major maintenance costs.  Even if you add insurance, the cost per operating mile will be significantly lower.

But the higher price of the vehicle will be an obstacle from a pure economics standpoint.  For this reason, some manufacturers have considered the option of the local power utility company supplying the battery pack and maintaining it.  Since this is the single largest expense, leasing it to the vehicle owner in the monthly power bill is a good deal.

The second major point to be considered is plug in electrics, even with limited drive range, are the biggest contributor to American energy independence.  These vehicles will directly reduce oil imports every day they are operated.  Because almost none of the electricity in the United States is generated using fuel.  It’s either coal, natural gas or nuclear.

So if we really want to get after the issue of energy independence and stop funding governments that support terrorist activity, the electric car is the path forward.  As are 40+ mpg gasoline cars, and drilling and refining of oil in the US.

Let’s get after it!

$2 Bil more for Solar

The President announced $2 billion dollars will be given to fund solar projects in Colorado, Arizona and Indiana yesterday in a radio address.  The funding will pay for several large solar plants that will add permanent power capacity to the respective states.

One report indicated that the $2 billion would be funded as part of the scheduled $863 billion stimulus fund already appropriate by congress.  Another report indicated that the funds would be provided as loans.  There is a huge difference between the two, and the fact that the various reports are not clear on this point is very curious.

As a sidebar, I guess this is the new style of legislation.  The government passes a law first and decides what it means later.

$400 million is provided as a loan (or loan guarantee) to assist Abound Solar to add 2 major manufacturing facilities and new product lines for the company.  One facility in Indiana will be built from an existing automotive plant that will be re-tooled for solar manufacturing.  The company is expected to add several hundred new production jobs.

Abengoa Solar of Spain, which has operations in the United States will be receiving $1.45 billion, although it is not clear if the money is a loan or a grant.  And while Abengoa has operations in the US and has an excellent reputation as a contractor of large energy projects, it seems very peculiar to be giving money to a foreign entity.

This leads to a couple of really important questions about American energy policy.

From the standpoint of cost effectiveness, if you take the $1.45 billion for Abengoa and divide it by the 1500 projected jobs, the cash cost of each job is over $966,000,  per position.   It would be the same as paying $96,000 to each employee for 10 years.  This has to be the most ineffective use of public funds imaginable.

The other public policy question which has come up before is, why are US taxpayer funds being given to foreign companies?  Major green energy projects in every sector are being built by foreign companies with US government funding.   There needs to be a “Buy American” clause in all this pork barrel spending.  If these are loans, or loan guarantees, how does the government get paid back?

The corollary question for US Energy policy is why should the Federal Government be making loans or guarantees to private companies?

Fiskar Automotive, for example, has secured $500 million in loan guarantees from the DOE for it’s electric car program.  But Tesla Motors raised $2.1 billion in the private financial markets.  Does this constitute a scenario where the Federal Government is creating unfair competitive conditions by providing financial support to companies of their choosing?  And not providing similar funding to other companies.

This is also true on the larger scale.  As the Federal government continues to direct where the majority of US research and development funds will be spent, the process itself disconnects the efforts of the research community from the potential economic benefit that the research should be targeting.

The goal of all research is to produce a benefit.  And the benefit must be weighed in the context of economic utility.  When the development of technology is subjected to bureaucratic decision making, it is dissociated from the decision making process of economic benefit.

This will result in massive waste as limited resources are put into projects with poor return in value.  We appear to have entered a period of time where the process of free market decisions are being circumvented, and everything is to be decided by government.

Because, after all, these folks are professionals at spending your money and they know better than you, or the market, what is most important.

Next Page »