Germany’s gamble on P2G: Expensive electricity to expensive methane to expensive storage

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There isn’t much good news about Germany’s failing Energiewende. Because they have boxed themselves into a corner by eliminating their nuclear portfolio, they are facing the physical realities of trying to deploy unreliable wind and solar far beyond their appropriate penetration levels. According to the research by Lion Hirth (Vattenfall Europe AG) appropriate penetration would be 7% wind for today’s Germany, perhaps as much 25% in a future Germany optimized for VRE [PDF]. Germany is abusing neighboring grids by dumping excess generation while exploiting the neighboring grids to supply power when the sun doesn’t shine and the wind doesn’t blow.

To push VRE to meet their 80% commitment Germany obviously needs abundant cheap storage. Unfortunately they don’t have the enviable volume of hydro that Sweden and Norway have. So, as  Quirin Schiermeier writes in Nature Renewable power: Germany’s energy gamble, Germany is making a big bet on P2G:

P2G, however, could provide a vast amount of new storage capacity and Germany is leading the way. The plant in Stuttgart has 250 kilowatts of electrolysis stacks, which use electricity from renewables to produce hydrogen from water. To make methane, the hydrogen is reacted with CO2 from decomposing sewage and agricultural waste at a nearby biogas plant. Other P2G plants could scrub CO2 from the air.

But P2G is still an immature technology, with high upfront costs and an efficiency of only about 50% in converting electricity to methane. Synthetic methane plants have also struggled with the purity of their product. At the ZSW facility, the main goal is to routinely produce gas with low oxygen and hydrogen content.

For transport fuels, the P2G concept might make some economic sense IF powered by nuclear electricity. But Germany is trying to use this process to fix the serious grid instability problems they have created for themselves. Adding the high cost of variable renewable electricity to the high cost of the P2G conversion – this is good for the economy? How prudent is it to base an industrial economy on advanced proton-exchange membranes for electrolysis?

Toyota Bets Against Tesla With New Hydrogen Car

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Personal hero and hard-nosed engineer Elon Musk calls them “fool cells”. Contrast the Musk view to what seems to be a very big bet by very-smart-company Toyota. Here’s Fool.com “A big bet that puts Toyota at odds with Tesla“: Every time I examine the hype for the “hydrogen economy” I shake my head. Why would Toyota cancel their deal with Tesla while announcing a “new hydrogen fuel cell car (that) will start arriving at dealers sometime next year”?

The Fool quotes Bloomberg “the car is expected to be called the “Mirai,” the Japanese word for “the future”.” That’s appropriate because the “F” in FCV has so far stood for “10 years in the Future”.

In “Tesla Trumps Toyota: Why Hydrogen Cars Can’t Compete With Pure Electric Cars” Joe Romm argues the practical and economic superiority of BEVs over FCVs (Battery Electric Vehicles over Fuel Cell Vehicles). Good arguments — let me know what you think.

In the comments to Joe’s Energy Collective piece there are a number of useful comments. Especially this one by regular contributor Roger Arnold on hydrogen economics and footprint: 

(1) If you’re talking about the most economical and widely implemented production method for hydrogen (i.e., from reforming of natural gas), then the carbon footprint for the FCV is substantially worse than if the gas were used directly in an IC engine. You’ve gone to a lot of trouble and expense for a worse result.

(2) If, instead, you’re talking about the more expensive route of producing hydrogen by electrolysis of water using zero-carbon electricity, then you could get two to three times better mileage per kWh by using that electricity to charge batteries rather than make hydrogen.

The main potential advantages that FCVs can deliver over BEVs are driving range and fast refueling. But those are non-issues for the commuting and shopping trips that comprise the overwhelming bulk of miles driven. Going on a road trip? Then rent a gasoline vehicle for that purpose. With the coming era of autonomous vehicles, the rental agency will deliver the vehicle to your driveway, and drive it back to their lot after you’ve returned home.

And this comment by Nathan Wilson:

Fuel cell vehicles have momentum because of the hype. If we launched a petroleum phase out tomorrow, and hydrogen FCVs, BEVs, and ammonia ICE cars had to compete in the market, I would expect 80% of the sales to go to ammonia, 19% to BEVs, and 1% for hydrogen FCVs. This is mostly based on sticker price, but also on the much easier infrastructure situation for ammonia versus hydrogen (ammonia cars can be dual fuel with gasoline backup, but HFVC cannot; ammonia can be transported by truck, but H2 cannot).

The idea that any technology we like can be made cost competitive is appealing, but has no basis in reality.

Tyler Cowen: Tesla Says “All Our Patent Are Belong To You”

Tyler Cowen has some very big news from Tesla.

Elon Musk writes:

Yesterday, there was a wall of Tesla patents in the lobby of our Palo Alto headquarters. That is no longer the case. They have been removed, in the spirit of the open source movement, for the advancement of electric vehicle technology.

Tesla Motors was created to accelerate the advent of sustainable transport. If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal. Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.

When I started out with my first company, Zip2, I thought patents were a good thing and worked hard to obtain them. And maybe they were good long ago, but too often these days they serve merely to stifle progress, entrench the positions of giant corporations and enrich those in the legal profession, rather than the actual inventors. After Zip2, when I realized that receiving a patent really just meant that you bought a lottery ticket to a lawsuit, I avoided them whenever possible.

…We believe that Tesla, other companies making electric cars, and the world would all benefit from a common, rapidly-evolving technology platform.

Technology leadership is not defined by patents, which history has repeatedly shown to be small protection indeed against a determined competitor, but rather by the ability of a company to attract and motivate the world’s most talented engineers. We believe that applying the open source philosophy to our patents will strengthen rather than diminish Tesla’s position in this regard.

I believe that this announcement will be discussed in business schools for years to come much like Henry Ford’s announcement of the $5 a day wage.

 

Uber is a Dating Service

It is very interesting how people with different frameworks react to events. An example is the media storm related to SF startup Uber.com and dynamic pricing. For the second year now Uber has utilized dynamic pricing for peak demand periods such as Halloween and New Years Eve. Perhaps the media will continue to make January the “dump on Uber” month; or maybe they will go back to easy fillers like “Ten best of 2013″.  Uber seems to be like the political-horse-race meme, journalists can generate column inches without even getting out of their chair. They just need a Twitter account. 

Back to frameworks. I will offer only two examples to illustrate:

  1. computer science, economics
  2. journalists

#1 When I read about Uber inside my framework #1, I see Uber as a dating service that leverages machine learning. They earn a fee only when they match-mate successfully, and better than competitors. They earn more fees if their algorithms allow them to better position their drivers where the demand will be (micro demand prediction) They don’t “own” either side of these matches. In particular, it’s the drivers that are really setting the price and agreeing to the pricing scheme. Uber is providing the platform to enable the transaction. So given my framework, what I see is:

  • Charges of “greed” and “gouging” don’t make sense – if the Uber service doesn’t attract drivers to Halloween or New Years Eve then there is no match. No ride for me, no fee for Uber.
  • If Uber is going to be the winner in this match-making competition, then their secret sauce is going to have to make both buyer and seller prefer Uber to the other ride matching services. Profiles of the “daters” are absolutely essential. Yet journos complain that “the driver rated the passenger”. 

#2 On hearing somebody paid 7x the typical fare on to get home in a December snowstorm? Obviously that is the Uber corporation taking advantage of the helpless passenger. The alternative of the stranded passenger in the snow doesn’t come to mind. On hearing a story that Uber didn’t tell the passenger what the fare would be until they get a big Visa bill they think “Of course, that’s what that greedy corporation would do”. The alternative that the passenger didn’t pay attention to all the Uber price notices and warnings isn’t considered.

I was first aware of the Uber dynamic pricing trials in 2012 from Joshua Gans’ post Uber and the delicate business of creating a platform. Reacting to the first media storm, Joshua summarized Uber’s challenge

Basically, to satisfy one side of its market — the taxi drivers — Uber upset the other side — its customers.

At the time I thought Uber would experiment until they found the right balance to satisfy both “daters”. So far it appears that this techno-optimist called it wrong. I’ve investigated as best I can the bill-of-accusations against Uber. None of it holds up. I’ve examined their FAQ, their user guide, and a number of Travis Kalanick’s blog posts on dynamic pricing. I’m impressed — objectively Uber has worked very hard to avoid surprising a customer with a high fare. How can a client complain “Uber didn’t tell me what the ride would cost” when, from NZ (!), I was able to obtain a London Uber quote in about 60 seconds on my iPad on a slow internet connection. Starting with finding where on the Uber site to get my quote, then choosing London as my city, then typing in my route from Mayfair to Canary Wharf. 

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Further down the quote screen is the exact fare basis, which is the same time and/or distance fare basis as for most taxis, including Uber London competitor HAILO. In October Hailo’s minimum fare has gone up to £10 between 6am to 10pm Monday to Sunday; and £15 between 10pm to 6am.

And the famous London Black Taxis. I said same fare basis, not the same coefficients. 

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If you read through the Uber Happy New Year bulletin published Dec 30, the day before NYE, you’ll see how totally clear the Uber UI on what you will pay — you can’t just press I ACCEPT HIGHER FARE under the Huge Type multiplier, you also have to key in the multiplier (7 in my example above). And the depth of the coaching (“pro tips” to avoid paying high fares). Travis begins with this:

New Year’s Eve is upon us and we want to give you some quick pro tips for getting around with Uber! This New Year’s Eve we’ll have a record number of cars on the road ready to get you where you want to go. But, that doesn’t change one simple fact: on NYE, everyone wants to move around the city at exactly the same time!

You can avoid the peaks of surge pricing with good timing when you travel. Check out our smart tips below, and don’t forget you’ll always know the price before you request.

So here’s my question: what can Uber do differently than the above, or this (from a Travis Kalanick Dec 16 email reply to “outraged client”):

We regularly do surge pricing when demand outstrips supply. Remember, we do not own cars nor do we employ drivers. Higher prices are required in order to get cars on the road and keep them on the road during the busiest times. This maximizes the number of trips and minimizes the number of people stranded. The drivers have other options as well. In short, without Surge Pricing, there would be no car available at all.

Now granted, that the prices are significantly higher. BUT we notify every customer in big bold images in text, which each customer has to confirm in order to request. Furthermore, every customer also had to type in what the multiplier was in order to double confirm that they understood what they were agreeing to.

So, was it expensive. It was, and we wish it wasn’t necessary. But if you did indeed take the rides described then you confirmed the price which was very up front, and then entered the multiple you read into a text box in order to double confirm.

Airlines and Hotels are more expensive during busy times. Uber is as well. We don’t just charge to make a buck though, we take a small fee of the transaction, but the vast majority goes to the driver so that we can maximize the number of drivers on the road. The point is in order to provide you with a reliable ride, prices need to go up.

If you have other ideas for how to provide a reliable ride during busy times, I am all ears. In the end, Uber is reliable, always, and we will create a system that maximizes the number of people that can get safe and reliable rides. Not surging is saying you shouldn’t have the option. Not surging is saying we should be just like a taxi and be unreliable when people need us most. These are outcomes that take choices away from the consumer and make it harder to get around cities – these are outcomes that we put a lot of hard work in to avoid so that at least you have the choice if you want one.

Uber’s ride-matching encounters a wee bit of dynamic pricing resistance

Megan McArdle did a short post on why surge pricing is the optimal mechanism to clear the market. And also why it might be net bad strategy for Uber. A fragment:

At the core, Uber is not a taxi company; it's a technology company. The company has a lot of data on where its customers are, and where they like to go. That enables some cool stuff: Travis Kalanick, the company’s chief executive officer, told me that Uber can slightly outperform gambling spreads on whether a team will win a home game, just by looking at stadium trips. More practically, data enables them to move cars to where they might be wanted, which means it’s easier to get a car if you are outside the dense urban core. And when demand is very heavy, data enables Uber to dynamically price rides to ensure that cars are always available — if you’re willing to pay.

I love Uber’s surge pricing; it means that we can get a car home on New Year's Eve. Yes, it costs a lot, but the alternative is hoofing it for a few icy miles through some not-quite-safe streets.

But I’m an economic policy journalist, not a normal person. Normal people hate this sort of dynamic pricing, which they call “price gouging.”

This came to a head last week, when a brutal snowstorm on the East Coast kept taxis off the streets. Desperate folks in the New York metro area turned to Uber — and then screamed at the bills they got for hundreds of dollars, even though Uber’s smartphone app seems to have clearly warned them that this was going to happen. Economically illiterate recrimination ensued…

CEO Travis Kalanick posted his reply to outraged customer

Surge Pricing email that just came in and my response. Get some popcorn and scroll down…

————— Forwarded message —————
From: Travis Kalanick

Date: Mon, Dec 16, 2013 at 8:44 PM
Subject: Re: I'm OUTRAGED!
To:

We regularly do surge pricing when demand outstrips supply. Remember, we do not own cars nor do we employ drivers. Higher prices are required in order to get cars on the road and keep them on the road during the busiest times. This maximizes the number of trips and minimizes the number of people stranded. The drivers have other options as well. In short, without Surge Pricing, there would be no car available at all.

Now granted, that the prices are significantly higher. BUT we notify every customer in big bold images in text, which each customer has to confirm in order to request. Furthermore, every customer also had to type in what the multiplier was in order to double confirm that they understood what they were agreeing to.

So, was it expensive. It was, and we wish it wasn't necessary. But if you did indeed take the rides described then you confirmed the price which was very up front, and then entered the multiple you read into a text box in order to double confirm.

Airlines and Hotels are more expensive during busy times. Uber is as well. We don't just charge to make a buck though, we take a small fee of the transaction, but the vast majority goes to the driver so that we can maximize the number of drivers on the road. The point is in order to provide you with a reliable ride, prices need to go up.

If you have other ideas for how to provide a reliable ride during busy times, I am all ears. In the end, Uber is reliable, always, and we will create a system that maximizes the number of people that can get safe and reliable rides. Not surging is saying you shouldn't have the option. Not surging is saying we should be just like a taxi and be unreliable when people need us most. These are outcomes that take choices away from the consumer and make it harder to get around cities – these are outcomes that we put a lot of hard work in to avoid so that at least you have the choice if you want one.

Thanks,

Travis

On Mon, Dec 16, 2013 at 5:01 PM, wrote:
Dear mr. Kalanick,

I used to love uber… I have written several blogs about the amazing service and how amazing I thought your company was. Key word, WAS! I called uber on sat. To take me to a show that was 60 blks away, and also called uber to pick me back up to bring me home. I usually get an email with my receipts, but havent received one yet… did a little research and was SHOCKED to see that i was charged $180 each way! That's $360 to go 120 blocks!

I WILL NEVER USE YOUR COMPANY AGAIN! I AM OUTRAGED AND DISGUSTED THAT YOU WOULD JACK UP YOUR CHARGES THAT MUCH BECAUSE OF A SNOW STORM!!!

I hope it was worth losing a loyal customer-like myself! I plan on telling this story to everyone I know and plan on writing about this on my blog!

You should be ashamed of yourself!

Megan links to the work of Duke University's Mike Munger. I agree that Mike is a superb source on this behavioral issue. His Econtalk interview with Russ Roberts explores real world examples of illogical reactions to dynamic pricing. If you don't like 1 hr podcasts, there is a partial transcript and rich resource links to papers on this topic. Abstract:

Mike Munger of Duke University talks with EconTalk host Russ Roberts about the psychology, sociology, and economics of buying and selling. Why are different transactions that seemingly make both parties better off frowned on and often made illegal? In theory, all voluntary transactions should make both parties better off. But Munger argues that some transactions are more voluntary than others. Munger lists the attributes of a truly voluntary transaction, what he calls a euvoluntary transaction and argues that when transactions are not euvoluntary, they may be outlawed or seen as immoral. Related issues that are discussed include price gouging after a natural disaster, blackmail, sales of human organs, and the employment of low-wage workers.

Another Munger Econtalk I recommend is Munger on price gouging.

 

Uber is recruiting a Policy Economist!

We’re looking for a Policy Economist to tease smart answers to hard questions out of big data

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Uber is a fascinating enterprise. I think they are going to change cities globally. Not just reform the sclerotic taxi monopoly. Here is an example

Urban transportation has looked the same for a long time – a really long time – thanks in large part to regulatory regimes that don’t encourage innovation. We think it’s time for change. We’re a tech company sure, and we’re working in the transportation space, but at the end of the day we’re disrupting very old business models. Our Public Policy team prefers winning by being right over some of the darker lobbying arts, and so we’re looking for a Policy Economist to tease smart answers to hard questions out of big data. How do the old transportation business models impact driver income? What effect if any is Uber having on the housing market or drunk driving or public transit? To what extent are the different policy regimes in New York City and Taipei responsible for different transportation outcomes? Just a few of the questions we want you to dig on.

Read their placement ad for the full description of the opportunity. And note the Perks:

  • Travel like a European diplomat: employees are showered with Uber credits 
  • Ground floor opportunity at a fast growing company that is changing the face of transportation worldwide 
  • As an early member of our business operations team, you’ll shape the business direction of the company 
  • We’re not just another social web app: we’re moving real assets and real people around their cities 
  • We have access to an amazing list of advisors and investors that we actively engage

If I were a young economist that would look like a big chance.

Amazon PrimeAir: “The last quarter mile”

NewImage Michael B Sullivansees the implementation of Amazon PrimeAir much the way I do, as the last part of integrated logistics:

Taking as the basis for conversation a world in which both drones and driverless vehicles are technically possible and easy-to-use (I don’t think either are right around the corner), then I think you use both for your delivery.

Forget last-mile delivery, this is more about “last 15ish miles” and “last quarter mile.” You send your driverless big old truck out with hundreds of packages. It has with it a small fleet (maybe 5-10) of drones that handle the last quarter mile of the delivery. Your truck trundles along on big streets that can accommodate it; the drones blitz out with packages and back over short distances, charging up from the big batteries of the truck on a rotation. This allows you to deliver far heavier packages (the drones don’t need a battery capable of delivering X kg over 15km, they need a battery capable of delivering X kg over 0.5km), at overall lower cost (the majority of your trip is via low-energy rolling along roads, not high-energy helicoptering), but with the same convenience of the actual delivery (no giant truck moving along narrow residential streets, no need for some kind of klutzy mechanical linkage between a robotic vehicle and your drop-box at your house). It’s probably less legitimately awful in terms of aviation control, too.

Uber Might Be More Valuable Than Facebook Someday. Here’s Why

Über iPhone app

This is pure speculation – but it is an exciting spec. Not all of this will happen, but possibly other big opportunities will emerge. This is just a sample:

So, step one: Take over taxi industry. Step two: Kill ownership. From there, who knows what could happen in the long term? Uber could start using self-driving cars made by Google (one of its investors) to eliminate the need for human drivers, driving down its costs even more. It could introduce a near-instantaneous delivery service to rival Amazon’s drones. It could roll out a subscription service, akin to Amazon Prime, that would include perks like predictive transportation, so that, for example, when Uber sees an appointment on your Google calendar for a cross-town meeting, it sends a car to your office automatically at the right time. There’s no reason that other companies couldn’t try to do these things, too. But Uber has first-mover advantage, and it’s got most of the kinks – customer interface, payment, fleet management, supply-and-demand considerations – worked out already, making it a prime candidate to beat competitors to new product areas.

The result of Uber’s efforts, in other words, could be the creation of a techno-metropolis, in which people and goods are ferreted around seamlessly and, perhaps, automatically. It would be like something out of a sci-fi movie. And Uber would be standing at the center of it all, collecting a cut of every transaction.

 

Innovation, Disruption, and Progress: What Do Vaccines, Software, and Shipping Containers Have in Common?

You never know where the next shipping container will come from.

This August 9 Bill Gates dispatch on the multi-modal shipping revolution is a must read, which begins with this:

In the second half of the twentieth century, an innovation came along that would transform the way the world did business. At first, some people wrote it off as a fad. Others kept at it, convinced that it was going to have a huge impact. Some of the companies that made big bets on this tool were very successful, while others ended up going under. Ultimately, it helped accelerate the globalization that had already been under way for centuries.

I’m not talking about software. I’m talking about the shipping industry, and in particular an innovation you might not have thought much about: the shipping container. It is the subject of an excellent book I read this summer called The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger, by a former Economist editor named Marc Levinson. The Box is mostly about globalization, but there is also a larger story here that touches on business and philanthropy more broadly.

For centuries, cargo ships were loaded and unloaded by hand, one crate at a time. Each crate might have a different destination, which made the whole process slow and expensive. In 1956, a trucking magnate named Malcolm McLean had a clever idea: Instead of unloading a trailer’s worth of crates onto a ship, why not put the whole trailer on the ship?

It was the beginning of a revolution in the way goods move around the world. Shipping lines ordered bigger and bigger ships to accommodate the aluminum boxes that soon became the standard container. Port cities from New York to Singapore raced to modernize their facilities to accommodate the larger ships.

Do read Bill's complete review, then read The Box!