What Future for Electric Cars?

Posted on December 27, 2017 by matt ohern
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For many years, I’ve been skeptical of a vehicle future dominated by all-electric vehicles. Not that zero-emission cars wouldn’t be great (assuming a low- or zero-emission electricity supply). It’s just that most of the media and consulting firm hype seemed so over the top, ignoring real problems such as low range, slow charging, absence of supporting infrastructure (such as EV charging stations), very low market penetration, and other factors. On the other hand, there was Tesla, producing elegant, advanced-technology EVs that can actually go 300 or more miles on a full charge, but whose prospects of scaling up to mass-market volume and pricing are still in question.
This array of challenges has led governments—in China, much of Europe, and the United States—to try to force the market to develop. Policies include significant subsidies to those who purchase EVs (usually tax rebates), subsidized charging stations, and proposed bans on producing and selling vehicles with conventional petroleum engines (but allowing hybrids) after some future year such as 2040. This year the California Assembly passed a bill that would have quadrupled the state EV rebate, from $2,500 to $10,000, at an annual taxpayer cost of $3 billion per year—but it died in the Senate.
Despite all these subsidies and regulations, EVs in the USA constitute only 1% of the personal vehicle fleet, and annual sales are 0.2% of total sales. Worldwide, EVs are also only about 1% of the fleet, despite an all-out effort in China (where 75% of EVs are bought not by individuals but by government agencies and state-owned enterprises). General Motors sells fewer than 50,000 EVs per year worldwide.
Recently there have been some policy changes in the opposite direction. The House tax reform bill would eliminate federal tax rebates for EVs, and seven states have rescinded their state rebates. Nineteen states have enacted annual highway-use fees for EVs that use no motor fuel and hence pay nothing for road use. They average $75-150/year, which compares to an average of about $220 per year paid by petroleum-fueled cars (federal + state fuel tax at 2.2 cents/mile times about 10,000 miles/year). And a sobering new study from Morgan Stanley estimates that it would cost $2.7 trillion worldwide to provide the infrastructure necessary to support 526 million EVs worldwide by 2040.
On the other hand, if EVs can be perfected as affordable, mass-produced vehicles, they would have a number of advantages. If you’ve driven or ridden in a Tesla, as I did earlier this year, you can’t help but be impressed by its performance—amazing acceleration, very high torque, quiet, and far fewer parts and hence likely much lower maintenance costs. And that’s in addition to the zero emission benefits, especially valuable in urban areas (and to the planet, assuming the electricity is not from coal). So I’d like to become a believer in an EV future. Are there signs that this is becoming less of a pipedream?
First, there is a mountain of money going into battery research and development, and I’ve seen a number of graphs showing ongoing decreases in battery unit cost ($/kwh) and a corresponding uptrend in battery energy density (watt-hrs/liter) from sources such as the U.S. Department of Energy. Second, just about every global car company keeps announcing plans for new EV models. Third, as a possible EV alternative, Honda and Toyota are putting a lot of investment into EVs that get their electricity from hydrogen fuel cells rather than batteries. Those cars could be refueled in minutes, just like current cars, rather than requiring half-hour (or much longer) recharging periods. Of course, the fuel-cell route will require a nationwide hydrogen infrastructure, with its own massive investment need.
A more cautious study on an EV future was released last month by Boston Consulting Group. It projects EVs as unlikely to gain much traction until 2025 or later, and will account for only 14% of annual vehicle production by 2030 (and a much smaller portion of the total personal vehicle fleet by that date). That strikes me as far more realistic than what you can read in some rah-rah articles even in respectable publications such as The Economist and The Wall Street Journal.
(This article first ran in the December 2017 issue of Surface Transportation Innovations)
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Christmas Comes from Purdue Affidavit

Posted on December 27, 2017 by matt ohern
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State Attorneys General Curtis Hill, IN, Josh Hawley, MO, Leslie Rutledge, AK, Wayne Stenehjem ND, Sean Reyes UT, and many others have filed Bills of Complaint against California and Massachusetts in the United States Supreme Court in an effort to defend agriculture. (What a Christmas present!)
Purdue University, through Jayson Lusk, delivers a large Christmas present for all engaged in animal agriculture. Dr. Lusk and a colleague, Dr. Conner Mullally, published a paper on September 13, 2017. Lusk relies on this peer-reviewed report to help animal agriculture in the U.S. Supreme Court.
The affidavit filed by Dr. Lusk is based on a report entitled The Impact of Farm Animal Housing Restrictions on Egg Prices, Consumer Welfare, and Production in California. It explains what happened in California as a result of its enactment of Proposition 2. It declared “…that as a result of passing the law, farm animals would have sufficient room for lying down, standing up, and fully extending their limbs; and turning around freely.”
Lusk reviews his previous research of the California law on egg production, costs, and the impact on consumer prices for eggs. His research demonstrates California’s Animal Welfare Law created significant impacts on farmers because they reduced the size of their flocks enormously. In his affidavit, Lusk declares “[i]n the thirty-four months covered by our forecasts, the number of egg-laying hens in California was reduced by an average of 4.4 million birds each month relative to what would have been observed in the absence of the [California] AW laws.”
The explanation is due to higher production costs because farmers determined the increased costs would not be offset by increasing prices to consumers i.e. consumers will not pay higher prices for cage free eggs! Therefore, the only way to bring costs into line for the consumer was an enormous cutting of flocks by approximately 26% each month.
Apparently farmers in California started reducing expenditures on building new facilities almost immediately after passage of the California law. Lusk claims “Twenty months after the implementation of the [California] AW laws, the number of egg-laying hens and total egg production in California had each fallen by about 35% because of the policy.”
(This article first ran in Farm Futures on December 18, 2017)
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Ideas for the Next General Assembly

Posted on December 13, 2017 by matt ohern
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The elections this fall brought a philosophical sea change to the General Assembly.  The dynamics have changed.  But critical issues remain and good ideas can hopefully prevail if the goal is to truly improve Virginia in a few critical areas.
Medicaid expansion will be major issue confronting the General Assembly. This program aimed at the most needy and most vulnerable in our society needs to better managed. And reforms that Virginia might bring to that program could become a template for other states. There are a number of creative ideas being discussed. And with an Administration in Washington seemingly willing to move more responsibility for this program to the states, the General Assembly should ask for the authority to truly reform the system. Virginia could ask for the ability to create a better and more efficient program. Many feel that the current Medicaid program could be much more efficient and offer better health care to those who qualify. Virginia could prove this can be done. It should ask for that authority.
Several reforms to the health care system will be outlined in a soon-to-be-published “Handbook on Healthcare Reform” by the Thomas Jefferson Institute.  This Handbook outlines several reforms that can be considered to improve our current healthcare system regardless of what happens to Obamacare down the road.
And just as President Nixon was the right person to “open up China” in the early 1970’s, our incoming Governor would be the ideal person to take the lead in restructuring our antiquated tax system here in Virginia.  This can be done in a revenue neutral manner that can eliminate the remaining tax on groceries, eliminate the bottom two tax brackets (helping those most in need) as well as eliminating the impact of the job destroying gross receipts (BPOL), machine and tool, and merchants capital taxes.  Our tax system needs to reflect today’s service-oriented economy and not the economy that existed in 1971, when the current system was established.
Our growing economy needs a reliable energy supply and getting both major new gas pipelines constructed needs to be a top priority if we are to have the necessary power required in a growing economy.  This can be done in an environmentally sensitive manner.  There are tens of thousands of miles of pipelines in this country and they are a safer way to transport natural gas than by truck or train.
Job training has become a major issue here in Virginia.  There are many jobs that do not need a college degree and these jobs are, in many cases, pretty well paid.  Let’s focus on developing these jobs.  One way to do that is to bring a serious analysis to those state funded job training programs that exist today.  There are some 22 or more government job training programs today.   How much per graduate do these programs cost?  How many graduates of these programs actually secure a job and have that same job three months later?  Once we have those numbers, then the least effective programs can be eliminated and those funds put into the more effective ones.
Continued expansion of our road network is needed if we are to try to relieve the congestion in the major population centers of our state – most particularly Northern Virginia and Hampton Roads.  How to do that and the costs need to be carefully considered.  Ten years or so ago, the Reason Foundation did a fascinating study about the road network that needs to be built over a twenty year period to confront the projected population increases we face.  This study outlined the road “skeleton” that could be built and where it is needed.  The idea is simple:  built the major skeleton that is needed – the major highways – and commit to get this done and commit the money over those years that will be prioritized in the state budget.  Then, if and when more money is available at the state and local level, build the connecting roads needed.  This is a good idea if we want to stay ahead of the population increases and not always be playing “catch up.”  A long term transportation plan focused on the major road requirements, properly funded, makes a lot of sense.  And the budget projected by Reason to get this done was quite reasonable.
Finally, there are at least two “Bernie Sanders” ideas that could well come up that need to be defeated if Virginia is going to truly grow our economy and encourage folks to move to Virginia.
One is the idea of a $15 per hour minimum wage. That will deny young, new-to-the-job- market employees from getting that first step on the ladder toward a better future.   Automated food ordering in some fast food establishments is just one example of what will happen more quickly with a minimum wage that employers simply cannot afford for entry level jobs.
And the other “Bernie Sanders idea” is “free” community college education.  Of course, there is no such thing as “free education” as everyone knows who pays property taxes in this state.  Much of those taxes on our homes and apartments go to “free” K-12 public education.  And if community college education is “free” it only means that our taxes will have to be significantly increased in order to pay for this new entitlement.
Our state legislature convenes next month and our new Governor will be sworn-in soon afterwards.  In the General Assembly’s two month “long session” a lot of bills will be considered.  How our elected leaders handle these ideas and others will help determine what our states looks like in a few short years.
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Holiday Sales Look Stronger This Year

Posted on December 13, 2017 by matt ohern
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The holiday selling season got off to a strong start on Black Friday but the results were mixed when comparing online versus in-store sales.
Online spending for Black Friday, the traditional start of the holiday selling season, was up 16.9 percent compared with the same day in 2016, according to Adobe Digital Insights, which tracks online spending in the nation’s 100 largest retail websites.
On the other hand, data from research firm ShopperTrak shows Thanksgiving Day and Black Friday foot traffic at brick-and-mortar stores fell when compared to the same days in 2016. Shopper traffic at stores just on Black Friday has essentially been unchanged for the last two years, but flat foot traffic doesn’t necessarily translate into flat revenue.
So how will overall holiday sales fare during this time of year that represents about 20 percent of the retail industry’s total sales?
One method for predicting holiday spending is comparing back-to-school spending during the same year.
For instance, back-to-school spending in August 2012 increased 2.9 percent, while holiday spending — defined as sales in November and December of the same year — also rose 3.1 percent. The retail spending figures exclude food and auto sales.
The relationship between back-to-school and holiday sales is not perfect, and sometimes back-to-school sales are a bit higher than holiday sales (as what happened in 2011, 2013 and 2014) or a bit lower (as in 2015 and 2016).
But back-to-school spending generally is a reliable gauge of holiday spending.
This year’s August back-to-school sales rose 4.3 percent over 2016 sales, suggesting strong growth in holiday sales this November and December. And that’s great news for retailers.
Recent announcements by some national retailers and online sellers to hire more seasonal workers than last year supports an optimistic outlook for the upcoming holiday selling season.
Results from Cyber Monday also point to a good year. According to Adobe Analytics, Cyber Monday was the biggest U.S. online shopping day ever, with a record $6.59 billion spent, up 17 percent from last year.
The National Retail Federation, the nation’s largest retail trade group, predicts an increase in holiday sales between 3.6 to 4 percent, including online business, to $678.8 billion compared with $655.8 billion in 2016.
Global financial services firm Deloitte is more optimistic, looking for this year’s holiday sales to rise between 4 percent and 4.5 percent from November through January compared with the same period a year ago.
Economic reports also point to higher sales this year. Employment in the nation is picking up and the jobless rate is declining.
Personal income is up 3.4 percent for the 12 months that ended in October, or by $539 billion. American consumers like to spend, so much of that increase in income will translate into purchases.
Based on the most recent economic figures, retailers in Virginia and the Richmond region also should do well.
Nonfarm employment grew 0.9 percent in Virginia during October compared with a year ago. During the same period, employment increased 1.3 percent in Richmond and 1.5 percent in the nation.
Virginia’s seasonally adjusted unemployment rate remains below that of the nation and at 3.6 percent in October, it is at its lowest point since March 2008.  The U.S. rate stood at 4.1 percent in October.
For the Richmond region, the seasonally adjusted jobless rate rose slightly from 3.7 percent in July to 3.8 percent in October.
The latest retail sales figures reflect some strength as well in Virginia and the Richmond area.
A seasonally adjusted six-month moving average of retail sales in Virginia shows 3.1 percent growth from a year ago in September.
The Richmond area has seen an average retail sales increase of 5.6 percent over the same period.
With the potential for federal tax cuts in 2017 or early 2018 and a more optimistic outlook for national growth, a 3.5 percent to 4 percent growth in retail sales in Virginia and around 6 percent growth in the Richmond region this holiday selling season compared with last year is possible.
But, then again, sales in Virginia will suffer if a federal government shutdown occurs in early December.
(This article first ran in the Richmond Times Dispatch on December 4, 2017.)
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Before Expanding Medicaid, Examine the Program’s Outcomes

Posted on December 13, 2017 by matt ohern
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When Virginia lawmakers start cranking up the old Medicaid-expansion jalopy in January, they would be well advised to pay attention to a new study out of California — not exactly your reddest of red states, so this is not Republican propaganda.
The study, published in the Journal of the American Medical Association Oncology, used a California data registry to compare cancer survival outcomes of insurance over two decades (1997–2014). Summarizes the Federalist: “Improvements in survival rates during the time period the survey examined came almost exclusively from individuals with private insurance or Medicare. “[F]or patients with other public [i.e., Medicaid] or no insurance, survival was often stubbornly unchanged, or, in some cancers, declining.”
While survival falls short of that achieved by patients with private insurance, public insurance such as Medicaid does confer a survival benefit over no insurance for breast, prostate, and lung cancer. However, there was little or no benefit of public insurance over no insurance for colorectal cancer or melanoma, and the lack of improvement in survival is a concern. These findings suggest that the health care provided to publically [sic] insured patients with cancer in California is not adequately meeting their needs.
Got that? Medicaid is somewhat better than zero insurance for some cancers but no better for others. And in some cases, the study implies, it’s worse.
Meanwhile, debates are raging over whether Medicaid expansion has led to an increase in opioid addiction, and whether or not emergency-room usage has declined, as envisioned by the architects of the Affordable Care Act.
The assumption behind Medicaid expansion is that any health coverage, no matter how crappy, is better than none at all. But Medicaid reimburses physicians far less than private insurance and Medicare do, with the result that (a) many physicians don’t take Medicaid patients, and (b) some physicians may not provide the same quality of treatment. Also, one must consider the nature of Medicaid patients. By definition, they are poor, and poor people may interact with the health care system differently than the non-poor.
The California study inevitably will be cited by Virginia opponents to Medicaid expansion. And just as inevitably, supporters will find reasons to criticize it. Here’s how it works in early 21st-century America: Pick your desired political outcome, choose the study to justify it, and then shoot holes in opposing studies. Medical science becomes politicized just like everything else in our society that is mediated by the political class — but, of course, it’s all the other side’s fault.
(This article first ran in Bacon’s Rebellion on December 8, 2017.)
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