By Marc Gunther on 03/02/2010
Why on earth would Houston, the city of drill-baby-drill, the fossil-fuel capital of America, the city whose NFL franchise used to be called the Oilers, embrace the electric car? For good reason, it turns out–so says the city’s mayor, the local utility company, Reliant Energy, its parent company NRG Energy and NRG’s CEO, David Crane.
“Houston’s not a natural market for electric cars,” Crane admitted, when we met the other day. “But electric cars are good for our business in all kinds of ways,” he added. So NRG and Reliant is working with officials Houston, America’s 4th largest city, to persuade Nissan to make Houston one of the leading launch markets for the Nissan Leaf, the all electric vehicle that the Japanese automaker plans to start selling later this year.
“We are the Petro Metro, but we are also a car city,” said Houston’s newly-elected mayor, Annise Parker, at an event earlier this month to welcome Nissan to the city. Certainly there’s a sizable market awaiting Nissan in the city. Houston is home to 4.5 million vehicles that travel 86 million miles a day, according to Reuters.
The problem for Houston–and for most other cities that want to welcome electric cars–is that it lacks an infrastructure of charging stations where electric car owners can fill up their cars with, er, electricity. This winter, Nissan took the Leaf on a three-month, 24-city tour designed to spark excitement about the car, a five-passenger car that the company says will travel about 100 miles on a single charge.
But because the Leaf will be produced in limited numbers, at least at first, the tour was also a way for Nissan to solicit partners, mostly cities and utility companies, that will assume the costs of building charging stations that will allow electric car drivers to overcome what is known as “range anxiety”–the feeling that they might run out of electricity without a charging station nearby.
Nissan has persuaded a number of cities to build charging stations, including those that are part of the EV Project, which the company says is the world’s largest EV infrastructure deployment. Nissan says:
The EV Project, funded by a $98 million grant from the Department of Energy and led by EV infrastructure provider eTec, a division of Ecotality, will provide an unprecedented number (6,510) of public charging stations across the 5 participating markets and will provide home charging stations for up to 4700 Nissan Leafs sold in those markets. The public stations will include both Level 2 (240V) and Level 3 DC fast chargers. The EV Project markets are Seattle, Oregon, Tennessee (Knoxville, Nashville and Chattanooga), Phoenix/Tucson, Ariz., and San Diego.
You’ll note that Houston isn’t on that list. That’s where Crane, NRG and Reliant come in. Last fall, Reliant and Nissan said they’d work together to build a network of charging stations. Reliant also launched an EV pilot project with 10 city-owned Toyota Prius cars that have been converted to plug-in hybrids. “Those are just a taste of what’s ahead,” Crane told me.
Crane’s one of the liveliest and most likable energy executives around. The Princeton- and Harvard-educated CEO is smart, straightforward and funny. As CEO of NRG, he leads an independent power producer (meaning that its electricity is usually sold to consumer-facing utilities, not directly to homeowners or businesses) that is investing in an array of low-carbon energy sources–nuclear power, utility-scale solar thermal plants and solar photovoltaic arrays. NRG is exploring offshore wind energy and so-called clean coal, too.
For electric power companies like NRG, which have seen demand for electricity slip during the recession, the electric car represents a new business opportunity, at least in theory. As Kevin Book, managing director of research at ClearView Energy Partners LLC, told Reuters: “What a salvation the electric car revolution would be for generators that are well below their capacity margins and trying to figure out how to make money.”
While Houston may lack the green culture of, say, Portland, Oregon, the city wants to welcome electric cars for a couple of reasons, Crane explained.
First, west Texas has an abundance of cheap wind energy (See my blogpost, Electricity That’s Cheaper Than Free) that is available overnight and during periods of low demand to recharge electric cars at a low cost.
Second, Houston has a serious smog problem. The EPA is proposing tougher limits on ozone pollution, which contributes to smog, and those limits “will force Houston to make deeper emissions cuts just as the former smog capital met the previous standard for the first time,” according to The Houston Chronicle. Cities that fail to comply with EPA air pollution rules run the risk of losing federal highway funds.
No wonder Houston’s civic and business establishment are eager to welcome the Leaf, which markets itself a Zero Emission Car, apparently choosing not to count the emissions created when coal or natural gas is burned to make electricity.
All this, in the end, will be driven by the compelling economics of electric cars. (See Electric Cars: All Systems Go.) In the U.S., assuming $3 a gallon gas, fuel costs for a mid-sized car with an internal combustion engine are about 12 to 14 cents a mile. For an electric car, with its more efficient engine, electricity costs are 2 to 4 cents a mile. That doesn’t include the substantial cost of amortizing the battery but, even so, as Crane put it: “There’s a big delta in there that you can use to pay for other services.”
He envisions Reliant helping Nissan to sell the Leaf by providing a Level 2 (medium-fast) charging station for the home and then selling the new car owner a contract to buy as many miles as desired. “Think of the electric car as a cellphone,” Crane says, where the utility is the equivalent of A&T or T-Mobile, selling access to a network and minutes instead of miles. Crane can get even more excited talking about V2G, or a network of electric vehicles tied to a smart grid, where owners could buy cheap, clean, wind-powered electricity at night and sell it back to the grid during the day when demand peaks.
A futuristic vision? Maybe. Then again, Crane gets around his home town of Princeton, N.J., in a Tesla that he’s been driving for seven months. It’s too small to ferry his kids to their hockey games but otherwise it’s been trouble free, it’s got a range of more than 200 miles, and it charges overnight.
“Your garage,” he says, “is the service station of the future.”
I’m pleased that David Crane will be joining us again in April at FORTUNE’s Brainstorm Green conference on business and the environment, where he’s talk about electric cars, NRG’s nuclear ambitions and the Washington scene.
Source: MarcGunther.com
Philippe Desmazes/Agence France-Presse — Getty Images Wang Chuanfu, chairman of BYD Auto, at the Geneva auto show on Tuesday. 
Slide Show: 2010 Geneva Motor Show
