Editor’s Intro: Nicolas Zart and Matthew Klippenstein recently recorded Cleantech Talk #30 for CleanTechnica. It’s an interesting discussion about coal phaseout in Canada, Nissan’s sale of 41% of its stake in Calsonic, and Volkswagen’s EV transition … or latest hiccups.
Canada Cancels Coal (by 2030)
Nicolas and I kicked this week’s episode of Cleantech Talk off with the news that the Canadian government has committed to phasing coal out by 2030. (Being Canadian, I delight in not having to be chronically apologetic for my country’s governmental policies anymore.)
This is far easier to achieve in Canada than in the United States, as coal (indicated by “conventional steam” in the chart below) only accounts for about 15% of electricity generation in the country. Hydroelectricity — beautiful, clean, dispatchable hydroelectricity — provides almost two-thirds of the country’s electricity, which means that there should be a lot of room for intermittent renewables in the grid.
Detail-oriented Cleantech Talk listeners will know that methane production from underwater biomass in shallow, tropical hydroelectric dams can make these as dirty as coal generators, so it’s worth pointing out that Canadian hydroelectric reservoirs tend to be deep and cold, so methane production is minimal.
It appears that careful thought was put into the coal phaseout plan, as evidenced by the province of Nova Scotia being allowed to keep a coal plant as a backup generator, as long as the province finds emissions reductions elsewhere. Unlike the United States, where air conditioning causes electricity demand to peak in the hottest days of summer, Canada sees its demand peaks in the coldest days of winter. Keeping the local coal plant operable in case long-distance transmission lines go down during a winter storm is a trade-off Matthew is willing to make, given that Nova Scotia promises to find the equivalent emissions reductions elsewhere.
(How will Nova Scotians accomplish these other emissions reductions? Well, the province’s own Efficiency One — North America’s first energy efficiency utility — will probably play a role. Canadian heat-mapping startup MyHeat.ca might also be able to help; it provides high-resolution thermal maps of city buildings, which helps identify which ones should be targeted first for energy efficiency upgrades.)
Looping back to the Canadian electric grid, its relatively low carbon intensity (thanks to hydro and nuclear) is probably one reason the country’s past governments haven’t tried to outdo their American counterparts on emissions reductions. The United States can substantially reduce its emissions simply by substituting natural gas for coal in power generation. Canada’s grid doesn’t offer up any such low-hanging fruit, since it’s always been relatively clean — coal and natural gas maxed at about 25% of the grid around 2001. Second-order consequences can be the strangest things!
EVs will turn suppliers into Kodak, not OEMs
Carlos Ghosn has continued his iconoclastic ways — at least by Japanese corporate standards — by having Nissan jettison its 41% stake in Calsonic, its biggest supplier. Japanese titans have historically grouped themselves into keiretsu — families of companies bound together by cross-ownership. (South Korean giants organize themselves into chaebols, which are somewhat similar).
These structures have advantages and disadvantages. On the one hand, suppliers are able to invest more into long-term research, because they have a relatively guaranteed customer for their products. On the other hand, the end-customers are might not get the best prices — their suppliers are basically family, and who plays hardball on price with family members?
As a supplier heavily dependent on internal combustion–related components (e.g. heat exchangers and exhaust systems), Calsonic risks being a “Kodak” of the future as we transition to electrified transportation. Hopefully its leadership is able to pivot, for the benefit of the company, its employees, suppliers, and communities. The automotive sector tends to evolve slowly, so Calsonic should have a few years to figure out how to reinvent itself.
Calsonic’s case is a good time to bring up the common misconception that electric transportation will turn OEMs into also-ran Kodaks, themselves. It’s very unlikely, and a careful look at the camera market explains why. Kodak seems to have seen itself primarily as a film supplier, and its various efforts to diversify were unsuccessful. (It’s poorly known that arch-rival Fuji Film did in fact survive the transition to digital.)
In the electrified future, the companies most at risk of becoming Kodaks are the oil companies (gradually, though, as demand hasn’t begun falling yet) and suppliers of combustion-related components. Though they may change owners occasionally, today’s automotive OEMs will probably still be around for decades, because they’re so efficient at manufacturing.
It can’t be emphasized enough that high-volume automotive-scale manufacturing is shockingly difficult to master: consider that in advance of Ford overhauling its Detroit factory to build aluminum F-150s, the logistics team worked with the Michigan Department of Transportation and even installed new traffic lights at potentially-problematic intersections! The oceans of money it takes to ramp up to global production scales means OEMs have an unusually long time to figure out how to respond to the competition. The best way to think of automotive OEMs is as super-efficient contract manufacturers (e.g., Foxconn) who sell directly to the consumer, and so have evolved brand identities which ensure some degree of consumer loyalty. Additionally, they are such a big part of national economies that they can probably access bailouts if necessary.
So, as much as we might love to see certain auto manufacturers caught up in a #FossilFuelsFail, Matthew just doesn’t think much industry turnover is likely. Could he be wrong? Well, he usually is… ?
VW’s Electric Pivot
What can we say? VW’s diesel scandal is so bad, the company’s been forced to commit deeply to electric vehicles to rehabilitate its image. And while part of its plan involves expanding its presence in the United States, Volkswagen’s never really been strong in North America.
A lot of electric vehicle advocates can be disappointed by how far away electric vehicle targets are, and misinterpret this as a lack of actual commitment. (For example, Toyota recently announced plans to have a long-range electric vehicle by 2020, the same year Ford is promising for a plug-in F-150.)
The reality is that the industry has settled on a development time of about 5 years. If you speed up too much, you have a much greater risk of running into quality issues, and you have less time to recover your development costs. (If you redesign every 6 years, then you have 6 years of profits from vehicle sales to pay off your development costs; if you redesign every 3 years, you need to sell the same number of vehicles in half the time!)
Given that electric vehicles are definitely here to stay, vehicles designed from here on out will probably be designed with plug-in options of some sort. The proportion of new vehicle models in 2021 which come with plug-in options will tell us how automakers felt about electric vehicles this year. Presumably, battery systems will be cheap enough that a plug-in hybrid / extended-range electric vehicle option will be available for the top trim line of most vehicle models sold in the developed world. And with Nissan making rumblings about an $8,000 battery-electric vehicle for India and China, there’s hope that electrification will continue to creep ever downmarket!