Tesla Semi's huge power needs might face surge pricing

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Hot weather could increase cost of electricity by 4x

In November, Tesla unveiled its long-awaited Semi truck, and Elon Musk pumped up the adoring crowd with his usual questionable claims about the vehicle’s capabilities and price and the timeline for rolling it out. FreightWaves covered some of the initial skepticism from the transportation and investor community. Since then, a fresh wave of naysayers has spoken out about the economics of electricity that have to be priced in to any estimate of the Tesla Semi’s commercial viability.

Unlike Tesla fanboys who are willing to pay luxury prices for vehicles with subpar build quality, trucking carriers make their acquisition decisions based on total cost of ownership (TCO). The TCO is calculated by taking the upfront cost of the vehicle, and adding the cost-per-mile multiplied by the expected lifetime mileage of the vehicle. Musk claimed that the Tesla Semi would operate at a substantially lower cost-per-mile ($1.26 vs. the $1.51 he quoted as the average for diesel trucks) largely because the truck wouldn’t need diesel fuel. When Musk first tried selling his truck on the basis of those statistics, industry insiders immediately pointed out a problem with the comparison—Musk compared the Tesla Semi’s per-mile cost to an industry average, but the Tesla truck will only be competing against diesels trucks in day operations, which have lower cost-per-mile than OTR trucks. By averaging in the OTR carriers, Musk artificially inflated the cost-per-mile of conventional diesel trucks.

Now it turns out that there’s another big issue with Musk’s figures, this time on the Tesla side. Governments will be forced to make massive investments in energy infrastructure in order to accommodate the demand and generate the power necessary to charge the Semi’s batteries within 30 minutes. John Feddersen, an Oxford University professor who also leads a company called Aurora Energy Research, said that the power needed to charge just one truck battery would be approximately 1,600 KW, equivalent to the energy requirements of 3,000 to 4,000 average houses. Feddersen’s team estimated that in an ‘extreme scenario’ Great Britain would have to construct 16 new nuclear power plants to meet the new 18-gigawatt demand created by electric vehicles.

Who’s going to pay for new power generation and the grids that can move that energy quickly, store it locally, and then quickly release it? SP Energy Networks, one of the main firms in charge of distributing energy in the UK, said that electric vehicles charging during peak daytime hours should be subject to surge pricing. Frank Mitchell, the company’s CEO, told the Financial Times that people charging their cars at peak time should “have to pick up the cost of it.”

“I do think there is a difference between somebody who wants to have a fully controllable high speed [EV] charging unit at their discretion to do with what they want, versus somebody who is happy to have one that is a managed service that allows us to balance the costs to society,” said Mitchell. 

Tesla will have to recalculate the TCO it’s using to sell its Semis if power companies rely on peak surge pricing to build out their capacity and meet the increased, intensifying demand for electricity. In Chicago, an experiment with surge pricing saw the cost of a kilowatt-hour of electricity swing from 8.25 cents to 36.5 cents and back, depending on demand. It’s already well known that the performance of electric car batteries suffers in cold weather (the Tesla Model S can lose half its range in temperatures below freezing); if surge pricing for electricity is widely adopted, it will cost 4 times as much money to charge a Tesla on hot days when everyone’s running their air conditioners. Headwinds and elevation changes will also cut into the 400 mile range that Tesla quoted for its trucks under ideal conditions. The range of use cases where Tesla Semis can compete effectively keeps narrowing.

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