Archive for the 'Thinking on the margin' Category

Cars as mobile battery packs for hire

The Economist’s Babbage (i.e. their Science and Technology section) has a great article on the possibility of electric cars being used as battery packs for the power grid at large.  Here’s the idea:

At present, in order to meet sudden surges in demand, power companies have to bring additional generators online at a moment’s notice, a procedure that is both expensive and inefficient. If there were enough electric vehicles around, though, a fair number would be bound to be plugged in and recharging at any given time. Why not rig this idle fleet so that, when demand for electricity spikes, they stop drawing current from the grid and instead start pumping it back?

Apparently it’s all called vehicle-to-grid (V2G).  That (wikipedia) link has some great extra detail over the Economist piece.  If you want more again, here is the research site of the University of Delaware on it.  If you want more again (again), I’ve included links to the UK study by Ricardo and National Grid referenced in the Economist piece below.

After reading about the idea of V2G, a friend of mine asked a perfectly sensible question:

If having batteries connected up to the grid is a good thing for coping with spikes in demand, then why wouldn’t the power companies have dedicated batteries installed for this purpose?

I presume that power companies don’t install massive battery packs to obviate demand spikes because the cost of doing so exceeds the cost they currently incur to deal with them: having X% of their gross capacity sitting idle for most of the time.

In particular, the energy density of batteries isn’t great, and batteries do have a fairly low limit on the number of charge-discharge cycles they can go through.

Interestingly, another part of the cost associated with battery packs will be in the form of risk and uncertainty [*], which are exemplified by precisely this idea.  If a power company were to purchase and install massive battery packs at the site of the generator only to see a tipping-point-style adoption of electric vehicles that, when plugged in, serve as batteries for hire situated at the site of consumption (i.e. can offer up power without transmission loss), they would have to book a huge loss against the batteries they just installed.

Technological innovation and adoption is disruptive and frequently cumulative, meaning that any market power created by it is likely to be short-lived, which in turn creates a short-run focus for companies that work in that space.  For an infrastructure supplier more used to thinking about projects in terms of decades, that creates a strong status quo bias:  by not acting now, they retain the option to act tomorrow once the new technologies settle down.

Anyway, I’m a huge fan of this idea.  For a start, I’ve long been a huge fan of massively distributed power generation.  Every household having an ability to sell juice back to the grid is just one example of this, but I think it should be something we could aim to scale both up and down.  Imagine a world where anything with a battery could be used to transport and sell power back to the grid.  My pie-in-the-sky dream is that I could partially pay for a coffee at my local cafe by letting them use some of my mobile phone’s juice for 0.00001% of their power needs for the day.

More realistically, the other big benefit of this sort of thing is that because the grid becomes better able to cope with demand spikes without being supplied by the uber generators, the benefit to the power company of maintaining that surplus capacity starts to fall.  As a result, the balance would swing further towards renewable energy being economically (and not just environmentally) appealing.

At a first guess, I suspect that this also means that it is against the interests of existing power station owners for this sort of thing to come about, which ends up as another argument in favour of making sure that power generators and power distributors are separate companies.  The distributor has a strong economic incentive to have a mobile supply that, on average, moves to where the demand is located (or better yet, moves to where the demand is going to be); the monolithic generator does not.

Back in December 2007 (i.e. when the financial crisis had started but not reached it’s Oh-God-We’re-All-Going-To-Die phase), Doctors Willett Kempton and Nathaniel Pearre reckoned a V2G car could produce an income of $4,000 a year for the owner (including an annual fee paid to them by the grid, about which I am highly sceptical).  The Economist quite rightly points out that V2G, like so many things in life, would experience decreasing marginal value, but apparently it wouldn’t fall so far as to make it meaningless:

Of course, as the supply of electric vehicles increases, the value of each to the power company will fall. But even when such vehicles are commonplace, V2G should still be worthwhile from the car-owner’s point of view, according to a study carried out in Britain by Ricardo, an engineering firm, and National Grid, an electricity distributor. The report suggests that owners of electric vehicles in Britain could count on it to be worth as much as £600 ($970) a year in 2020, when an electric fleet 2m strong could provide 6% of the country’s grid-balancing capacity.

If you’re interested in the study by Ricardo and National Grid, the press release is here.  That page also has a link to the actual report, but they want you to give them personal information before you get it.  Thankfully, the magic of Google allows me to offer up a direct link to a PDF of the report.

The ever-sensible Economist also raises the upfront cost of capital installation by the distributor as something to keep in mind:

There is, it must be admitted, the issue of the additional cost of the equipment to manage all this electrical too-ing and fro-ing, not least the installation of charging points that can support current flows in both directions. But if the decision to make such points bi-directional were made now, when little of the infrastructure needed to sustain a fleet of electric vehicles has yet been built, the additional cost would not be great.

I can’t remember a damn thing from the “Electrical Engineering” part of my undergraduate degree [**], but despite the report from National Grid, I’m fairly sure that there would still be significant technical challenges (by which I mean real engineering problems) to overcome before rolling out a power grid with multitudes of mobile micro-suppliers, not to mention the logistical difficulties of tying your house, your car and your mobile phone battery to the same account and keeping track of how much they each give or take from any location, anywhere.

If I were a government wanting to directly subsidise targeted research to combat climate change I’d be calling in the deans of Electrical Engineering departments and heads of power distribution companies for a coffee and a chat.  I’d casually mention some numbers that would make make them salivate a little and then I’d talk about open access and the extent to which patents are ideal in stimulating innovation. [***]

[*] By which I mean known unknowns and unknown unknowns respectively.

[**] Heck, I can’t remember a damn thing from the “Electronic Engineering” or the “Computing Engineering” parts, either.

[***] But that’s a topic for another post.

Mark Kleiman on Mexico’s drug violence

Mark Kleiman has an interesting idea on how to fight Mexico’s drug violence.  It’s short enough to quote in full:

Drug-related violence has claimed 35,000 Mexican lives since 2006, and the level of bloodshed is still rising. With legalization not in the cards and an all-out crackdown unlikely to succeed, good options seem to be scarce.

Here’s a candidate, based on a strategy of dynamic concentration:

Mexico should, after a public and transparent process, designate one of its dealing  organizations as the most violent of the group, and Mexican and U.S. enforcement efforts should focus on destroying that organization. Once that group has been dismantled – not hard, in a competitive market – the process should be run again, with all the remaining organizations  told that finishing first in the violence race will lead to destruction. If it worked, this process would force a “race to the bottom” in violence; in effect, each organization’s drug-dealing revenues would be held hostage to its self-restraint when it comes to gunfire.

This is parallel to David Kennedy’s “pulling levers” strategy to deal with gang violence.

Would it work?  Hard to guess. But it might.  That’s more than you can say for any of the other proposals currently on the table.

It’s a nice idea, but it would probably suffer somewhat in the politics.  If, in order to ensure the downfall of the most violent gang, the government needs to divert resources from fighting other gangs, it may look to some as though they were going easy on crime in one area in order to fight it properly in another.  It could also be tainted with a brush of tacitly legalising the trade for all non-violent traffickers.  Still … cool idea.

The perverse incentives of Queensland traffic law

In the Australian state of Queensland, a violation of traffic law is punished by a fine and the awarding of points.  Points for a conviction stay on your licence for three years.  If you ever have 12 points at the same time, you’re in trouble.  I’ll come to that in a moment.

Somebody I know, let’s call him Semaj, has recently got himself up to 11 points.  He doesn’t dispute that he broke the law for all of them; he did.  Most of them came from speeding, but the last three points came from driving through a yellow light.  In Queensland, just like everywhere else on the planet, you must stop at a red light; but for a yellow light, you must stop if you are safely able to do so.  Some people believe that the yellow light should just be to warn drivers that the red is coming and have no penalty tied to it, but that’s not what I want to focus on.  To really rub salt in the wound, the light was still yellow when Semaj left the intersection and the only other car in the area was that of the police officer that booked him.  That’s what those in the business call a “dick move” by the cop, but it’s not what I want to focus on either.  What I want to focus on is …


Perverse incentive #1

The punishment for not stopping for a yellow light when you were safely able to is the same as that for not stopping at a red light:  AU$300 and 3 points.  This is absurd, because it fails to make the punishment proportionate to the severity of the crime.  By doing so, the government offers an incentive to people to treat them as equivalent.  To illustrate the point, let me take the idea embedded here in Queensland law to a logical, but ridiculous conclusion:

The violation of all laws should be punishable by the same penalty. A serial rapist-murderer should be locked away for life. Therefore, overstaying your parking for just one minute should lead to your being locked away for life.

See?  Absurd.  Clearly there are gradations of severity and, just as clearly, there should be corresponding gradations of punishment.  If the punishment for running a red light is a fine and 3 points, then the punishment for running a yellow should be a smaller fine and 1 point.


Anyway.  Moving on.  Semaj now has 11 points on his licence.  The oldest of his points is only one year old, so he has two full years before any of them are removed.  If he gets even a single point over the next two years, he will be faced with the following choice when he turns up at the Department of Transport to pay his fine:

  • either give up his licence for three months;
  • or go on a probationary licence (with a limit of two points instead of 12) for a full year.

After this, he will be returned a regular full licence entirely clear of points.  Hopefully you can now see …


Perverse incentive #2

Semaj is in a position where he would be better off by breaking the law.  The government is giving him an incentive to break the law.  If Semaj follows the law, he will have a one-point buffer for two years, then a three-point buffer for a year before returning to a full licence.  That’s three years in total.  If he deliberately gets caught for a one point infraction tomorrow, he can have a two-point buffer for one year and then go immediately to a full licence.  The cost to him will just be the fine for tomorrow’s infraction; maybe $100.

Who wouldn’t take that option?  It’s crazy.  If you’re going to have a point system with the possibility of a probationary licence, then the length of the probationary period should be long enough that someone in Semaj’s position wouldn’t actually prefer to be on it.


As I’ve said before, I believe that all fines issued for misdemeanours should not be for a fixed amount, but for a percentage of the transgressor’s income. When faced with the prospect of a $400 fine, somebody earning $20,000 a year will pay attention, but somebody earning $200,000 will not care nearly as much.  The two people therefore face different incentives when it comes to obeying the law.

Of course, none of this comes close for the most ridiculous traffic law in Queensland.  That most dubious of prizes goes to this piece of nanny-state-run-amok trash:  Drivers on P-plates (that’s a “provisional” licence) “under 25 years of age can only carry one passenger under the age of 21 years who is not an immediate family member, when driving between 11pm on a day and 5am on the next day.”

For reference, the very earliest that somebody in Queensland can move from a provisional to a full licence is at the age of 20.  That is two or three years into university.  Most Queenslanders, if they go to university and don’t take a gap year, would turn 21 in their fourth year.

The “peer passenger restriction” of provisional licences is designed to prevent distraction (from drunk louts in the back seat) to the driver and so, presumably, lead to fewer accidents and thus fewer fatalities.  Whether it ultimately succeeds in reducing road deaths is an empirical question.  I don’t have access to the data, but to my mind there’s a fair possibility that we’ll actually see more road deaths from this, because …


Perverse incentive #3

By forcing university-age people to not share a car, the Queensland government is:

  • abandoning the idea of a designated driver; and
  • encouraging more traffic onto the roads at just the time of day when people are least likely to pay full attention to the road (what, did they think that those kids would stay home?).

Both of those effects will serve to push up the accident (and thus, fatality) rates.

If you want to keep drunk 20-year-olds off the roads, then give them a way to avoid them.  Improve public transport.  Lift the licencing restrictions on taxis.



The future of civil society (I hope)

In the Netherlands:

Potholes, stray garbage, broken street lamps? Citizens of Eindhoven can now report local issues by iPhone, using the BuitenBeter app that was launched today. After spotting something that needs to be fixed, residents can use the app to take a picture, select an appropriate category and send their complaint directly through to the city council. A combination of GPS and maps lets users pinpoint the exact location of the problem, providing city workers with all the information they need to identify and resolve the problem.

The application covers a wide range of familiar nuisances, from broken sidewalks to loitering youth (who will hopefully respond favourably to having their picture taken by concerned citizens). Compared with lodging a complaint by phone or in writing, BuitenBeter creates a nearly frictionless experience and will no doubt prompt a wider group of people to become active reporters of issues that need the city’s attention.

Besides giving people an easy way to send through detailed reports, city officials also believe the concept will create shorter lines of communication, and will facilitate quicker feedback from local government to citizens. Developed by mobile solutions provider Yucat, the BuitenBeter app will soon be available for Android and Windows Mobile phones, too. Eindhoven has signed on for a twelve-month trial, and Yucat hopes to roll out the system to other cities in the near future.

This is brilliant.  More!

Gray markets, PPP and the iPhone in China

Via Felix Salmon, I found this fantastic piece by “Bento” on the take-up of the iPhone in China.

Some background:  When Apple launched the iPhone in China, early sales numbers were disappointing.

Some background to the background:  Under Chinese law, WIFI-enabled phones are illegal, so Apple has to cripple the iPhones they sell in China.

From Bento:

The Chinese have long had access to iPhones. They are for sale at stalls in every cybermall and market in every Chinese city, and come in two varieties: The most expensive ones (at around 6000 RMB in Shanghai for a 16GB 3GS, or 880 USD, depending on your haggling skills) come directly from Hong Kong, where the factory-unlocked model is available from the Apple store for around 4800 RMB. That’s a nice arbitrage play by the stall owner, and everyone is happy. The cheaper model, at around 5000 RMB for a 16GB 3GS, was originally bought locked in the US or Europe, and has been unlocked by the stall owner’s hacker-genius cousin using 3rd-party software. This kind of iPhone is cheaper, because you are on your own when it comes to upgrades and iTunes compatibility.

The distribution model is extensive and robust, and in fact most Chinese buy their mobile phones from stalls like this. There are no iPhone shortages, as prices fluctuate to meet demand. The received wisdom is that around 2 million iPhones are in the Chinese wild; I’ve personally seen a good many of them here in Shanghai, where they are much in evidence among the eliterati. Still, this is a minuscule portion of the 700 million odd phones in use in China, of which a small but growing portion is smartphones.

What can Apple do to grow the number of iPhones on mainland China? Short of lowering prices in Hong Kong (not going to happen) it can do two things: Increase awareness of the iPhone via advertising, and bring the benefits of a Chinese-language App Store to Chinese iPhone owners.

To do either of these, you sort of need to sell the product locally first, though. Apple can’t really go round putting up banners in Chinese tier-3 cities urging consumers to head for the local iPhone aftermarket.
Apple … is not revenue-sharing with China Unicom, the local vendor, but selling the iPhones outright to them. It is up to China Unicom to flog them in China.

And that’s what China Unicom is trying to do. China Unicom stores all have iPhone banners up; I’ve passed several China Unicom road shows stopping by Shanghai extolling the iPhone. The iPhone is being talked about widely. But so is the fact that the China Unicom iPhone is crippled — the Chinese are sophisticated consumers; forget this at your own peril.

The upshot: anecdotal reports tell of aftermarket prices increasing for Hong Kong iPhones these past few weeks, as demand increased. Clearly, the advertising is working, even if China Unicom’s sales of wifiless iPhones are anaemic.

Arbitrage is clearly still happening — buy for 4800 RMB in Hong Kong, sell for 6000 RMB in Shanghai; that’s a 25% markup and well above any reasonable estimate of transportation costs — so Purchasing Power Parity (PPP) doesn’t even hold within the “one” country, but this is a great example of gray market imports.