New England is facing a real wrench in the transition to heat pumps- the high price of electricity is beginning to make oil price competitive.

The new price of heat pumps since the subsidies were announced makes them all too expensive just like EVs. I got a quote for a new heat pump system to replace my old one snd it was $13000. Then when new subidies were announced the same system was $20,000. And thats AFTER the rebates!!

"Yum", said the profiteers. I'm lucky to have moved early.

We do not burn much oil in New England for electricity (2%), but we do burn a lot of Gas (52%).

I agree, oil is used for home heating, but it had price spikes in the past. From 2021 to 2022, some parts of New England saw a 50+% spike getting to over $5 gal, it's dropping again back down to $3-4 range.

This winter we had a global gas price spike driven in part by war in Europe. Gas supply issues have eased and National Grid is lowering the cost by 58% on the 'basic supply rate'. No word on Eversource yet.

Liberty and Eversource certainly have a nice lock. Their gracious EV charging rate for off-peak is two cents less than the flat rate; the experimental battery rate is similarly generous. If I got a Tesla and charged at home on off-peak at %.305/kWh, I would be paying more per mile than I pay now with my 2011 Prius ICE.

I have solar and rely on grandfathered net metering to squirrel away electrons (starting about now) to use next winter. If I change my service I lose that.

Fortunately I have until December to figure something out, since I will not have to buy many before then.

New England is an interesting study of monopoly rents in electricity. In Massachusetts, investor-owned utilities Eversource and National Grid serve two-thirds of cities and towns, and charge twice the rates of the municipally owned utilities serving the other one-third!

So the issue is not electricity cost, but monopoly rents.

Most of New England also has net metering for solar, which has a much lower levelized cost of electricity than even the municipal utilities. Then again, this treats the grid as a free battery, which isn't sustainable in the long run.

As for Vincent Wolf in the short run you're correct, inelasticity increases the price by an amount equal to the subsidy. But in the long run, heat pumps are a competitive market, so within 3-5 years expect manufacturing to increase, and prices to decline to quite a bit below the prior prices ($13k in your case) due to Wright's Law.

EVs will follow the same trend.

We're at a 10 million annual production on EVs. Are there big economies of scale still coming?

A lot of that production is in china and there are already cheap EVs there. But, yes, big price drops will be coming to US too.

Electric vehicles are cheap in China because labor is incredibly cheap, materials are abundant, and safety, plant construction and vehicle regulations are lax.

So it's not battery cost anymore? Ok. Fine. Anyway the volume from China counts but the prices do not? Pick one side

I'm telling you that's why electric cars are so much cheaper in China than they are the rest the world.

China is still effectively a second world nation, and has extremely low labor rates, and poor regulatory environment.

Think about how much easier it was to build gigafactory Shanghai than it was gigafactory Germany.

You were the one who complained the EVs are not cheap yet. Now you are just coming up with all excuses when I show that's not true.

There is an obvious example of the company Tesla, which is engaged in the production of electric vehicles in the US, Europe and China.
1. The Gigafactory in Berlin employs 7,500 people and produces 5,000 Tesla electric vehicles per week.
2. The Gigafactory in Shanghai employs 22,000 people and produces 5,000 Tesla electric vehicles per day or 35,000 per week.
3. The Fremont Gigafactory employs 22,000 people and produces 15,000 Tesla electric vehicles a week.

Simple manufacturing efficiency arithmetic says that producing Tesla electric cars in the US and Germany is 2.5 times less efficient than in China. If we add to the calculation that wages in China are on average 3 times lower than in Germany and the United States, then the gap in labor productivity becomes simply cosmic. Strictly speaking, it is economically feasible for Tesla to produce electric vehicles only in China, and leave only R&D in the USA.

Sorry for my english, this is a machine translation.

Manufacturing labor isn't incredibly cheap in China anymore. It was about $8.31/hour last year, which is why much manufacturing has been shifting to Southeast Asia and Mexico.

Globally traded commodities aren't really cheaper in China either.

EVs are cheaper there mostly because they're smaller, have shorter range, and are built to less demanding standards, particularly with regard to safety. Somewhat cheap labor and few regulatory restrictions on building factories also help.

ETA: Here's the cite for $8.31: https://www.economist.com/g...

True to some extent. But even in China only BYD and Tesla are selling EVs at a profit. And they both have achieved volume.

Reading from the 2002 offshoring playbook? Its 2023 and we are making plans for on-shoring as those past decades prices have not held steady.

So you're using the future as evidence for your claim.

Smart.

I'm not sure how EV production scale is relevant to my post, which was on subsidies and pricing.

EVs, like residential heat pumps, are supply-constrained, very inelastic, so it makes sense that a large subsidy would accrue to the producers in the short run. In the long run, the market signal of the subsidy increases production to try to capture that subsidy, and the competition drives down prices.

Understand now?

But to answer your question, yes, despite the current scale, lithium battery EVs are still barely 15 years old, so there are new production economies still coming. We've seen the Tesla skateboard architecture adopted industry-wide, gigacastings are reducing manufacturing space requirements and growing in adoption, the structural pack is becoming more standard, etc. This industry is still very young, not mature like ICE vehicles by any measure.

We're supply constrained, so we're stoking demand? That's insane.

Also, a subsidy is not a 'market signal'.

In two years congress could completely end the subsidies.

Battery prices increased substantially last year. That tells me that efficiency gains are slowing and that, going forward, battery costs will be more influenced by materials costs, until a new chemistry is available.

LFP only works for some people.

The word cheap and monopolies can never be used in the same sentence. No matter how cheap the raw materials are the utility companies will just charge way more than a fair price. The only solution is to nationalize them all.

Bingo. Socialization of the grid is way overdue.

Crazy idea to have it private in the first place

Yup - privatisation and competition only really works when you have a choice... and in theory it *can* work, if it's set up correctly (but it still requires making a profit on what should be a basic human right these days, so personally I agree that privatisation is not a sensible option for something like electricity).

Anyway - the 'grid' itself cannot realistically have competition (unfeasible to have multiple grids on a single street, etc), so should always be publicly owned... but *supply* of electricity over that public grid could be privatised, if you have enough competition...

The catch is having enough competition (and ensuring ease of switching), and rules to mitigate the risk of a supplier going bust (and/or processes in place to ensure continuity of supply, etc... at the same cost to the customers, at least for a transition period)

That's how it is organiserd here in Norway. The grid is a publicly owned and financed infrastructure, anyone can "drive" there supplying power

Great. The government has done a fantastic job with health care and education.

You're aware health care provision and insurance are almost entirely private in the US, right?

Much more so with municipal electricity generation which is consistently cheaper for consumers than IOUs.

I'll just take your word on that.

Smart.

Municipal utilities are primarily in urban areas where it's much easier to maintain distribution lines. That's where any difference comes from.

Regardless, I'm not opposed to public distribution, as it's similar to other public goods like streets and parks.

$5B for the 345MW Terrapower unit to be constructed in WY.

Not precisely called a SMR, but has been referred to as one.

With zero cost of capital and a 60 year lifetime, the capitalization will be about $50/MWh. Then add on ops/maintenance. About $35/MWh for existing plants per Lazard.

Not horrid, but much higher than RE.

Edit. This has heat storage and a 500MW peak output, so that's some compensation on the cost.

Neither wind nor solar last 60 years. Shouldn't that be a consideration?

They may actually last 60 years. There are solar panels from 70s still working. But in any case, LCOE for Wind or solar is not calculated assuming a 60 year life span.

They may technically last that long but not nearly at original capacity

So what? The PPAs are in the 20 year range. Anything after that is bonus. And how much operating cost does it to take to keep the nuclear plant going and what about safely retiring it?

I think small nuclear reactors are nearly operating cost-free.

You don't have to clean the dust off of their surfaces.

Right. 7 layers of security, constant monitoring and regular maintenance are Sooo much chepaer than cleaning some dust occasionally.

Or just wait till it rains ..... one small benefit of UK based PV. ;-)

True. I have never bothered to clean the panels on my roof and have not noticed any degradation.

No. The cost of energy is what matters. It contains all the construction costs.

What is the cost of electricity when a wind farm is operating at 30%?

What is the cost of electricity at midnight in a solar farm?

Tell me again you don't understand the topic.

Okay. I normally just do that by ignoring questions. Oh, wait...

Just go read more about it.

That's what I thought.

You thought you'd be seen as a troll?

Right you are.

Sadly, it looks like someone wants to spread negatives, but doesn't understand how the LCOE is calculated.

And wants it to be my fault.