Why Energy Storage Investors Must Understand Newton's Laws | Alternative Energy StocksVinod Khosla, the founder of Sun Microsystems and an icon of cleantech venture capital investing, is famous for bluntly telling audiences that "Economics matters, NOTHING that defies the law of economic gravity can scale." This principle is a simple yet self-evident adaptation of Newton's law gravitation to the human condition.
An equally self-evident characteristic of the human condition is explained by Newton's laws of motion, which state:
First, that a body at rest will remain at rest, and a body in motion will remain in motion with a constant velocity, unless acted upon by a force.
Second, that a force acting on a body is equal to the acceleration of that body times its mass.
Third, that for every action there is an equal and opposite reaction.
While human beings are far more complicated than physical objects, the reality is we all resist rapid, pronounced, or uncontrollable changes in our lives, our habits and our established rituals, even when the changes might be beneficial. In the final analysis we're all bound by inertia. We praise change, adaptation and progress as desirable goals for others but resist them mightily in our own lives.
By now you're probably wondering where I'm going with the physics discussion so I'll cut straight to the chase. I believe all of the widely publicized forecasts about the future rate of vehicle electrification are wildly optimistic because they ignore the laws of economic gravity and human inertia.
In November of this year JD Power & Associates released "Drive Green 2020: More Hope than Reality?" The JD Power report was widely criticized for being far too conservative in forecasting HEV, PHEV and BEV penetration rates that were less than a third of the rates forecast by the Boston Consulting Group in its January 2009 report, "The Comeback of the Electric Car? How Real, How Soon and What Must Happen Next." When it came out, the BCG report was similarly criticized for being far more conservative than forecasts published by other analysts.
To put things into perspective, the following graph from the Electrification Coalition summarizes the PHEV and BEV market penetration forecasts published by a variety of analytical organizations. The JD Power forecast would have fit nicely between the EIA forecast and the Deloitte forecast.
