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Michael McDonald

Michael McDonald

Michael is an assistant professor of finance and a frequent consultant to companies regarding capital structure decisions and investments. He holds a PhD in finance…

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Could This Innovation Pave The Way For An EV Revolution?

Investing is about staying one step ahead of the crowd, and right now the crowd is paying a lot of attention to Tesla and its gigafactory and electric vehicle (EV) charging station network. But what if there were a way to avoid that charging network altogether? What if Tesla’s cars and other electric vehicles could be charged constantly while moving? That’s the dream behind Britain’s almost $800 million effort to develop smart highways.

These smart highways will be designed to charge electric vehicles while the car is in motion effectively eliminating the need for EV charging stations and huge expensive long range batteries. The technology underlying the effort is called inductive charging and it is still in early stages, but the basic concept has been proven. Researchers at Stanford among other schools have shown the technology works, and the technology has advanced substantially in the last couple of years. Utah State University for instance is building a test track to allow research on putting the technology into use. Now countries like Britain and the Netherlands are getting involved. Related: A Key Tool For Energy Investors

Politicians have long talked about the need to upgrade American infrastructure, and various bills have been introduced over the years, but most of the upgrades have been limited.

However, a technological system that enabled EV charging while driving could capture the public’s imagination, especially in environmentally friendly states like California (which also happens to be a state with notoriously long commutes for many drivers). If the U.S. were to engage in wide-spread infrastructure upgrades to allow wireless charging of EVs, it would be an enormous game changer for Tesla and other EV makers. Without range anxiety issues, EVs would be a lot more popular and would resolve much of the hang-ups that customers have about going electric. Related: How Much Pressure Will Iran Put On Oil Prices?

The cost for a system like this is very hard to determine. After all, the technology is still being developed and there are no commercial systems available yet. But the technology has enough potential that large companies are starting to get involved. For instance, BMW is working on developing inductive charging systems that would go in homeowner’s garage floors at night so the homeowner does not have to remember to plug their car in. This kind of development work will undoubtedly bring costs down over time.

Still, it is possible to approximate costs for an EV charging highway system. Given the cost for materials and component parts, a Clemson University professor estimated that the cost for inductive charging per mile might run anywhere from around $500,000 per mile to a few million dollars per mile. Related: Low Oil Prices And China Pull The Rug From Under Latin America

Of course, the big issue here would be economies of scale. Installing a system in one mile of highway might cost $5 million. Installing it over 100 miles might cost $1 million per mile. Using $1 million per mile as an admittedly rough estimate of cost, and given that the U.S. has around 50,000 miles of interstate highway, that suggests the cost of a national EV system might be around $50 billion. That’s a lot of money – but not to the U.S. government. During the recession in 2009, the U.S. government spent more than $800 billion on the American Recovery and Reinvestment Act of 2009. In comparison to that outlay, smart roads across the country look very affordable indeed.

By Michael McDonald of Oilprice.com

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