Winning the Hardware Software Game book Winning the Hardware-Software Game

Using Game Theory to Optimize the Pace of New Technology Adoption

Innovators of new technology systems requiring users to combine both hardware and software components often face delays in adoption of their new systems.  Users will not buy the hardware until enough software or content is available, while at the same time software providers will not provide content until enough users have adopted the new system.  This book examines the dynamics of this adoption process and provides methods for optimizing the pace of adoption of new technology systems.     Read more...

eco/energy

  • Electric Vehicles and Social Welfare

    Terminology/Technical Information

    Players in the Electric Vehicle Game

    Current Stages of Adoption of Electric Vehicles

    Advantages and Disadvantages of Electric Vehicles

    Energy Inputs and Emissions Costs of Electric Vehicles

    Should the Construction of Electric Charging Stations be Subsidized by the Public?

     

     

    A recent article in the WSJ, “U.S. Utilities Push the Electric Car” by Cassandra Sweet, notes that electric companies nationwide are seeking to charge electricity consumers extra fees to fund construction of electric vehicle charging stations by the electric companies. The rationale is that having more charging stations available will speed adoption of electric vehicles by consumers, thereby leading to fewer pollutant emissions, and thus higher air quality for everyone.

    Should all electricity consumers be required to pay the construction costs of electric vehicle charging stations?

    The answer to this question requires understanding the underlying distribution of the private and social costs and benefits associated with manufacture and use of conventional versus electric vehicles.

  • Energy Taxes vs. Cap and Trade

    Why Does Energy Usage Compel Government Intervention?

    Optimizing Government Intervention

    Examples of Energy Taxes and Regulations

    Conclusions: Carbon Tax (Cap & Trade) vs. Command and Control Regulations

     

    A recent article in the NYT, “Saving Energy, and Its Cost” by David Leonhardt, advocates for the use of a carbon tax, rather than command-and-control regulations, as a means of reducing carbon emissions.

  • Has the Time for Electric Cars Finally Come?

    A recent article in the NYT, “Sites to Refuel Electric Cars Gain a Big Dose of Funds” by Nelson D. Schwartz,described the latest development in the evolution of the market for electric cars:

    Better Place, the closely watched start-up that hopes to create vast networks of charge spots to power electric cars, is set to receive a vote of confidence on Monday, in the form of $350 million in new venture capital.  Although Better Place will most likely require billions more in financing, this investment is an important step for the company...

  • How Green is OfficeMax’s New Green Initiative?

    According to a recent BW article, “OfficeMax Calls Delivery Cutbacks a ‘Green’ Initiative” by John Carey, “motivated by environmental concerns”, OfficeMax announced that it will eliminate its Monday deliveries in the Washington, DC area.

    … [C]ompressing 5 delivery days into 4 … reduces carbon emissions from delivery trucks (and from drivers commuting to work), and brings less traffic congestion. The company figures that just having the drivers stay home, instead of coming to work on Monday, eliminates 60,000 miles of commuting. The company is rolling out the program nationally this month, with different no-delivery days in different regions.

  • Should Gadget Users Pay Extra for Gobbling Up Energy?

     

    A recent article in the NYT, “An iPod World, With a Hunger for Electricity” by Jad Mouawad and Kate Galbraith, indicates that US consumers own so many electronic gadgets that the amount of energy they use now constitutes a large and quickly growing portion of total US energy usage.The article goes on to suggest that the only response to this trend is to mandate minimum efficiency standards to decrease the gadgets’ future energy use.

  • The Auto Emissions Game, Part 1

    The Players: Incentives and Potential Actions

    Regulators

    Users

    Automobile Manufacturers

    Emissions Testers

    Gasoline vs. Diesel vs. Hybrid Automobiles

    US vs. European Automobile Standards and Procedures

    Standards

    Approval Process

     

    The VW emissions scandal has brought the issue of automobile emissions to the forefront of discussions. Recent scrutiny of industry practices has led to further revelations about behaviors of industry players. In particular, auto manufacturers have been gaming the emissions testing system by increasing amounts over time, while regulators – particularly those in Europe – have been lax in establishing/enforcing appropriate standards. Taken together, the actions taken by auto manufacturers and regulators have led to real-world levels of pollutant emissions from automobiles that significantly exceed healthy limits.

    This analysis examines the evolution of incentives and actions taken by each set of automobile industry players (Regulators, Users, Manufactures, and Emissions Testers), together with the actual outcomes that have occurred, as well as the potential alternative outcomes that might have occurred under alternative scenarios.

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

  • The Auto Emissions Game, Part 2

    How Did We Get Here?

    Actual vs. But-For Outcomes

    Actual Outcome

    But-For Outcome

    Other Possible But-For World

    Other Questions

    Why Didn’t a Competitor Blow the Whistle on VW?

    Will VW Users Take Their Cars in for Repair?

    Will Users Punish Automobile Manufacturers for Gaming the System?

     

    In Part 1 of this analysis, I described the evolution of incentives and actions taken by each set of automobile industry players (Regulators, Users, Manufactures, and Emissions Testers). In this section I examine actual and potential alternative dynamics of the game.

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    How Did We Get Here?

    Recent investigations of automobile industry practices – mostly as a consequence of the VW scandal – have shown that pretty much all Automobile Manufacturers have been gaming emissions testing procedures by an increasing amount over time, while Regulators have largely condoned their actions. VW’s “defeat device” was clearly illegal and will be sanctioned. However, the other general practices by all industry players, such as vehicle and equipment priming, which have led to actual levels of emissions far above those intended, have long been accepted as legal and standard practice in the industry by both Regulators and Auto Manufacturers.

    Brad Plumers published two separate articles in Vox that provide fantastic descriptions of the European Government’s encouragement of diesel-fuel automobiles in Europe: “Europe's love affair with diesel cars has been a disaster”, together with the specifics of VW’s actions: “Volkswagen's appalling clean diesel scandal, explained”.

  • The Clash between Clean Energy and Environmental Amenities

    A recent article in the WSJ, “Renewable Energy, Meet the New Nimbys” by Jeffrey Ball, highlighted one of the key threats to increasing the availability of clean energy supplies:At what point do priority national interests – producing nonpolluting domestic energy -- need to override local goals – protecting environmentally valuable places?

  • The Current State of Electric Vehicles Part 1: Electric Vehicle Battery Basics

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    The following are the essential factors at issue when considering batteries for use in powering electric vehicles:

    Amount of Energy that Can Be Stored

    The batteries of any given size that are able to store the greatest amount of energy in terms of both weight (specific energy) and volume (energy density) of the battery are the most desirable (efficient) to power electric vehicles. Perhaps the largest current disadvantage in terms of the state of battery development for electric vehicles (EVs) is the fact that currently EVs cannot go very far without having to have the battery recharged, creating so-called range anxiety. Lower battery range would be less of a problem if (i) there were more fueling stations around (currently there are very few refueling stations), and/or (ii) it didn’t takes so long to recharge the battery (20 minutes to several hours, depending upon the technology of the charger). Currently, EV manufacturers are working fiercely to increase both the specific energy and/or energy density of batteries for EVs so as to achieve greater vehicle range.

  • The Current State of Electric Vehicles Part 2: The Earliest Electric Vehicles (Hybrids) Used NiMH Batteries

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    The relationship between specific energy and energy density for various types of batteries are presented in Figure 1, which was taken from Justin Amirault, et. al. “The Electric Vehicle Battery Landscape: Opportunities and Challenges”

    Figure 1

  • The Current State of Electric Vehicles Part 3: Electric Vehicles Now Use Lithium-ion Batteries

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    From the beginning, the biggest problem facing all-electric vehicles has been their short range, that is, they cannot go very far without having to recharge their batteries. Since lithium-ion (Li-ion) batteries offer the greatest energy capacity and density of all the batteries, and thus the greatest potential for longer range, Tesla chose to use Li-ion batteries to power its first all-electric vehicle, the Tesla Roadster. As Tesla notes:

    Tesla battery packs have the highest energy density in the industry

    ...

    Nickel Metal Hydride (NiMH) batteries are commonly used in hybrid cars. However, a 56 kWh NiMH battery pack would weigh over twice as much as the Roadster battery. Instead, Tesla uses Li-ion battery cells which dramatically decrease the weight of the Roadster pack and improve acceleration, handling, and range.

  • The Current State of Electric Vehicles Part 4: Current Electric Vehicle Offerings

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    Now let’s take a look at the characteristics of the current offerings of electric vehicles across manufacturers, which are presented (above in Figure 2 and) in Figures 4 and 5.

    Figure 4

    Figure 5

  • The Current State of Electric Vehicles Part 5: The Costs of Manufacturing Li-ion Batteries

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    This section examines the structure of costs associated with manufacturing Li-ion batteries for use in electric vehicles.

    The battery packs used in electric vehicles consist of numerous individual batteries connected together and packaged into modules, which are then connected together and packaged into battery packs.  David L. Anderson, in “An Evaluation of Current and Future Costs for Lithium-ion Batteries for Use in Electrified Vehicle Powertrains” explains this process in a bit more detail:

    [F]or automotive applications, individual cells are typically connected together in various configurations and packaged with associated control and safety circuitry to form a battery module. Multiple modules are then combined with additional control circuitry, a thermal management system, and power electronics to create the complete battery pack…

  • The Current State of Electric Vehicles Part 6: The Future of Electric Vehicles

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    In Part 1 we learned that the essential factors at issue when considering batteries for use in powering electric vehicles include (i) the amount of energy that can be stored, (ii) longevity, (iii) cost, and (iv) safety.

    In Part 2we learned that (i) theearliest EVs (hybrids) used NiMH batteries, due to their greater safety, longer life, and lower cost; and (ii) two factors led to the industry-wide adoption of Li-ion batteries as the battery family of choice for electric vehicles: (a) their potential for greater vehicle range, and (b) patent access problems to NiMH battery technology.

    In Part 3 we learned that (i) current EVs use Li-ion batteries because they offer the greatest potential energy capacity and density; (ii) Li-ion batteries include a family of batteries composed of different materials; (iii) the cost of the battery is the largest cost component of electric vehicles; of the battery costs, the most significant contributors are the costs of the raw materials, which vary greatly in price; and (iv) different material constructions of Li-ion batteries generate differences in battery performance, where the ranking of battery potential from least to greatest is (a) LCO (1st gen) and LMO (2nd gen), (b) LFP (3rd gen) and NMC (4th gen), and (c) NCA and LTO.

    In Part 4 we learned that information on current EV offerings provide three indications: (i) many of the current EV offerings are “compliance cars”; (ii) the performance of most EVs is clustered around similar levels of energy capacity and range; and (iii) the battery manufacturing industry is consolidating around a few key suppliers.

    In Part 5 we learned that (i) high quality control standards for the manufacture of batteries for EVs result in low manufacturing yields, on the order of about 60%; (ii) materials account for about 75% of total manufacturing costs of batteries for EVs; and (iii) cost reductions in the manufacture of lithium-ion batteries may be achieved through larger scale production volumes and technological breakthroughs.

    Putting it all together yields the following insights.

  • The EPA Values Your Life 15 Times More Than the Markets Do

    A recent article in the NYT, “Fossil Fuels’ Hidden Cost Is in Billions, Study Says” by Matthew L. Wald, described a study that Congress ordered to be conducted “to measure the costs not incorporated into the price of a kilowatt-hour or a gallon of gasoline or diesel fuel.” The study ended up measuring only those costs associated with “excess mortality — increased human deaths as a result of criteria air pollutants emitted by power plants and vehicles.” The study concluded that [emphasis is mine]

    Nearly 20,000 people die prematurely each year from such causes, according to the study’s authors, who valued each life at $6 million based on the dollar in 2000.

  • Understanding Cap and Trade through Example, Part 1

    Emissions Calculation Example

    Emissions Reduction Example

     

    A recent article in the NYT, “California Panel Considers Money From Climate Rules” by Jesse McKinley, describes different tactics for California’s implementation of a cap and trade system:

    Offering an early glimpse of how California might manage a central element of its ambitious greenhouse-gas law, a state committee has recommended that residents receive cash or tax breaks resulting from auctions of emission allowances to industries and other polluters.

    Under the proposal, described by the committee as a “household friendly” approach, Californians would receive 75 percent of the proceeds from emissions auctions, either in tax decreases or checks sent directly to residents…

    In cap-and-trade systems, individual polluters are given allowances to pollute to a certain level, with the total number of permissible emissions slowly reduced year by year.

    In some cases, the allowances have been offered to polluters without charge to soften the economic impact or to win the confidence of businesses, which will bear higher costs to reduce emissions and which can sell unused allowances. The cap-and-trade legislation passed by the United States House last summer had some free allowances, as does much of the legislation being considered in the Senate…

  • Understanding Cap and Trade through Example, Part 2

    Proportional Reduction Scenario

    Equal Reduction Scenario

    Minimum Cost Reduction Scenario

    Discussion of Alternative Reduction Scenarios

     

     

    Alternative Emissions Reduction Scenarios

    My previous blog entry, Understanding Cap and Trade through Example, Part 1, described how CO2 emissions associated with the generation of electricity from different types of inputs (coal, natural gas, renewable resources) are calculated, how utilities achieve reductions in emissions, and how under the requirement that utilities must reduce emissions, they are better off if they can buy and sell rights to pollute, as opposed to being forced to retool operations so as to achieve reduced emissions on their own.  Now that we have a better understanding of the basics of emissions reductions, let’s consider some alternative scenarios.

  • Understanding Cap and Trade through Example, Part 3

    Give All Permits to Polluters Plan

    Auction All Permits to Polluters Plan

    Other Emissions Allocation Plans and Conclusions

     

    A Comparison of Proposed Initial Allocation Schemes

    My previous blog entry, Understanding Cap and Trade through Example, Part 1, described how CO2 emissions associated with the generation of electricity from different types of inputs (coal, natural gas, renewable resources) are calculated, how utilities achieve reductions in emissions, and how under the requirement that utilities must reduce emissions, they are better off if they can buy and sell rights to pollute, as opposed to being forced to retool operations so as to achieve reduced emissions on their own.

    My next blog entry, Understanding Cap and Trade through Example, Part 2, presented a couple of different initial allocation scenarios for rights to permit, discussed how the costs of achieving emissions reductions varied under the different scenarios, and established that the same pattern of pollution would result under all scenarios, equivalent to that in the minimum cost scenario, but payments for rights to pollute among the utilities will vary across scenarios, depending on the initial allocation of permits.

    This blog entry will examine specific proposals for initially allocating emissions permits to polluters and see how their end results differ.  Various emissions reduction plans have been proposed:

    • Give all permits to polluters;
    • Give some permits to polluters and auction the remaining permits to polluters;
    • Auction all permits to polluters and have government keep the proceeds; or
    • Auction all permits to polluters, but return some of the proceeds to the public.
  • Who Is the Smart Grid Technology Leader?

     

    One of the hot technology trends over the past many months has been development of the smart grid (SG).  Reading Smart Grid News and other industry, and even mainstream, publications reveals an enormous amount of coverage of smart grid (SG) developments, both technical and commercial. Most of the coverage seems to be focused in two areas, smart meters and the standards-setting process.