Henry Ford's Model-T

A Free Ride For Electric Cars?

Jul 13, 2010 • Environment, Macroeconomic Measurement, Regulation • 164 Views    No Comments

Imagine a world filled with electric cars. In private homes, people could install their own charging devices. Others could be built in apartment building garages and on city streets. Some envision restaurants, department stores, and movie theaters offering a charge as you eat or shop. One firm hopes to build battery switching stations “manned’ by robots that would replace depleted car batteries during long trips. Demand for oil would drop. Energy independence could become a reality. Yes? Not so fast.

Let’s first look at home. For a 20 hour charge, it would be easy. Just use your wall outlet. More speed, though, means lots more voltage and upgrading home capacity.

We should also ask about the role of government. Raleigh, N.C. officials told Nissan that it would require permits, inspections, and electricians for homeowners to install faster charging docks. Electric utilities point out that 15 minute fast charges requiring 440 volts could overload grid capacity. In response, California regulatory authorities expressed concern while Houston says it can turn to wind farms and natural gas fired facilities to satisfy higher demand. In addition, California says it will end its HOV perk for hybrid owners but not for electric and natural gas powered vehicles.

The U.S. auto-related infrastructure began to develop 100 years ago. In 1909, there were 3 “filling stations” in the United States. By 1925, millions owned Model-T Fords and General Motors advertised a car for every pocketbook by producing Chevrolets, Pontiacs, Oldsmobiles, Buicks, and Cadillacs. Government built an interstate highway network and private industry took care of gasoline stations, motels, and roadside restaurants. Is the next step electric?

The Economic Lesson

Two economic questions come to mind that always apply to innovation: 1) What are the tradeoffs? Yes, there are benefits but what are the costs? 2) What role should government play? 

Furthermore, we should remember Joseph Schumpeter’s explanation of how creative destruction accompanies innovation.

Related Posts

« »