Ford’s Electric Cars in China: Good News or Bad?

By Greg Rehmke -- April 13, 2017

“Even with more wind and solar power, coal will continue to supply around two-thirds of the power for China’s  expanding electric car users.”

“Think in terms of opportunity cost. The resources for installing 12,000 charging stations could have been used to modernize Chinese coal power plants instead of catering to already-subsidized electric car buyers.

Electric cars are popular with investors, and the New York Times reports on booming market value as “Tesla Passes Ford in Market Value as Investors Bet on the Future,” (April 3, 2017). Tesla’s Elon Musk wants all future engines (except rockets) to be electric:

In his vision, Tesla is going to change the world, and is primed to cash in on the two transformative trends in the industry: the shift to electric vehicles as part of a broader societal move to cleaner energy, and the advent of automated driving.

Electric enthusiasm has reached China as well and CleanTechnica reports “China Electric Car Sales Demolish US & European Electric Car Sales” (January 25, 2017):

…the 351,861 electric car sales registered in China during 2016 represent approximately 46% of ALL plug-ins sold worldwide this year, with Chinese carmakers responsible for 43% of all EV production in 2016.

Wall Street Journal reports US carmaker Ford in China will be adding to the electric surge:  “Ford to Make Electric Cars in China Amid Green Drive,” ,April 7, 2017):

Ford’s local joint venture Changan Ford Automobile Co. will start building the Mondeo Energi plug-in hybrid vehicle in China next year, with a new all-electric sport-utility vehicle set to follow within five years, the company said in a statement.

Electric cars offer many advantages, but reducing pollution isn’t always one of them. Instead, electric cars shift the point of pollution to electricity sources. Electric cars charged in the Pacific Northwest draw power from very clean hydroelectric dams. But electric cars in California add to power imported from coal-fired generating plants in other states.

In addition, electric cars sold in the U.S., China, and E.U. receive significant government subsidies. Yet “Electric cars and the coal that runs them” (Washington Post, November 23, 2015) notes:

…Thanks to generous tax incentives, the share of electric vehicles has grown faster in the Netherlands than in nearly any other country in the world.

But behind the green growth is a filthy secret: In a nation famous for its windmills, electricity is coming from a far dirtier source. Three new coal-fired power plants, including two here on the Rotterdam harbor, are supplying much of the power to fuel the Netherlands’ electric-car boom.

A Wired article on Tesla’s electric cars (March, 31, 2016) explains:

Your electric car doesn’t need gas, but it still might get its energy from burning carbon. It depends on how your local grid generates electricity. “If you use coal-fired power plants to produce the electricity, then all-electrics don’t even look that much better than a traditional vehicle in terms of greenhouse gases,”  … But if your local grid incorporates a fair amount of renewable solar and wind energy, like California, your electric vehicle is pretty clean.

So electric cars in California can be clean on sunny, windy days, and less clean when the grid draws power from out-of-state sources (up to 50% from burning coal). California doesn’t generate much energy from coal, but does import a lot. “UPDATE: California’s quiet market for coal,” SNL (October 12, 2015):

In 2014, less than 5% of California’s total energy demand was served by coal and petroleum coke-fired plants, nearly all of it from plants outside the state, according to an Oct. 12 report from the California Energy Commission. By 2026, California will end virtually all its reliance on coal.

But at times, as much as 50% of Southern California’s electricity still comes from coal-fired plants, Steve Homer, director of project management for the Southern California Public Power Authority, or SCPPA, told SNL Energy.

Back to the China story, generating electricity from coal in United states power plants is far less polluting than electricity from coal in China. “In Coal-Powered China, Electric Car Surge Fuels Fear of Worsening Smog,” (Reuters, January 27, 2016) reports:

A series of studies by Tsinghua University, whose alumni includes the incumbent president, showed electric vehicles charged in China produce two to five times as much particulate matter and chemicals that contribute to smog versus gas-engine cars. Hybrid vehicles fare little better.

“International experience shows that cleaning up the air doesn’t need to rely on electric vehicles,” said Los Angeles-based An Feng, director of the Innovation Center for Energy and Transportation. “Clean up the power plants.”

The key policy point is to upgrade power plants before pushing (subsidizing) electric cars:

Tsinghua’s studies call into question the wisdom of aggressively promoting vehicles which the university said could not be considered environmentally friendly for at least a decade in many areas of China unless grid reform accelerates.

In addition to the problem of electricity source pollution are infrastructure challenges. “California bets on electric cars, at ratepayer risk,” (San Diego Union Tribune,  February 7, 2017), asks:

Should all utility consumers subsidize the wealthier few who like to drive electric cars?

It’s hardly a fair question. Yet that’s what the California Public Utilities Commission will eventually have to decide, now that utilities have proposed a $1 billion plan to build and effectively own the state’s retail charging network of tomorrow.

New charging stations cost money, and so does the renewable power generation grid:

… a second problem created mostly in California, a serious glut of renewable energy. Starting in 2006, lawmakers ordered utility consumers to subsidize rapid increases in wind and solar energy production.

Today the state has as much as 50 percent more power available than needed on a sunny, windy winter afternoon. And then, when the sun goes down or weather causes production to drop, fossil-fuel plants fire up because batteries are too expensive.

China where average incomes are much lower than California, has more severe infrastructure problems for charging electric cars. “What’s Driving The Electric Car Trend In China?,” (NPR Morning Edition, December 14, 2015 ) reports on government subsidies in boosting electric car sales in China. Yang Zhou discusses his new car:

ZHOU: I bought a hybrid model from a Chinese carmaker called BYD. And it stands for Build Your Dreams. I paid $24,000 for the car. And that’s 30 percent off the sticker price. But I paid no purchase tax. And the best thing that comes with the car is a free Shanghai license plate, which is worth $13,000.

Zhou explains that this special license plate allows him to rush-hour access to less-congested elevated Shanghai highways. But he also complains that charging his car is difficult:

ZHOU: I have to admit that charging the car is really a hassle. Every time I do it, I have to lower an extension cord from my apartment, which is on the 11th floor. …

ZHOU: Oh, yeah, it’s very long. And it’s really heavy (laughter). It takes seven hours to charge the car. And the car can drive 40 miles on one charge. But fortunately, I don’t have to charge the car every day. But I do expect that the infrastructure for these kind of vehicles will get better over time because China’s government has planned to build 12,000 charging stations by the year 2020.

Think in terms of opportunity cost. The resources for installing 12,000 charging stations could have been used to modernize Chinese coal power plants instead of catering to already-subsidized electric car buyers.

Shanghai does have a showcase clean coal plant. “China hopes Shanghai clean coal plant sets example,” (PEi, August 23, 2016) and “China’s drive to clean up its coal power, one plant at a time,” (New Scientist, August 22, 2016).

Yet coal still accounts for about two-thirds of China’s energy provision, and more than 200 new coal plants have been given the go-ahead. Globally, too, coal demand and production are forecast to grow until at least 2040.

Technology that improves coal-burning efficiency could be useful for retrofitting older power plants, and cut down their emissions.

Even with more wind and solar power, coal will continue to supply around two-thirds of the power for China’s  expanding electric car users.

Charles C. Mann’s “Renewables Aren’t Enough. Clean Coal is the Future,” (Wired, March 25, 2014) looks at high technology coal power development in China:

GreenGen is a billion-dollar facility that extracts the carbon dioxide from a coal-fired power plant and, ultimately, will channel it into an underground storage area many miles away. Part of a coming wave of such carbon-eating facilities, it may be China’s—and possibly the planet’s—single most consequential effort to fight climate change. …

China, like most of the rest of the world, “pretty much has to use coal,” says Dean, the fuel analyst. “Or, I guess, leave people in the dark.” And since coal is not going away, coal plants around the world will need to find a way to capture and store their emissions. “It’s just crazy not to develop this technology.”

An earlier post “For Still-Poor China, Coal Pollution from Home Heating,” reviewed the challenges of China’s antiquated coal-power plants, especially those for home heat.

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Gregory F. Rehmke has directed the Economic Thinking Program for high school, homeschool, and college students for more than 20 years. Mr Rehmke has also directed educational programs at the Center for the American Idea, The Reason Foundation, and the Foundation for Economic Education.

Mr. Rehmke has a degree in Economics from the University of Washington and has worked with the Reason Foundation, the Institute for Humane Studies, the Center for the American Idea, and the Foundation for Economic Education. He is published in The Freeman, Reason, DailySpeculations.com, the MasterResource blog, GlobalEnvision.org, and TechCentralStation.com.

Mr. Rehmke is coauthor of the Complete Idiot’s Guide to Global Economics.