Dark clouds on the horizon.

IRS logoAccording to an article posted by Green Car Reports today, the Federal Income Tax Credit for plug-in vehicles may be in danger of being eliminated prematurely. Based on the picks that have been made to head up departments like the EPA, Department of Energy, etc, this could be a very real threat.

There are two courses of action:

  • If you’ve been considering a plug-in vehicle, you may want to purchase or lease one before the end 2017.
  • If you’re opposed to this action, contact your elected representative and make your voice heard!

Book review: Dark Money

Dark MoneyWant to get really depressed? Have I got a book for you!

Jane Mayer’s “Dark Money,” is a thoroughly researched, very detailed account of how small, tactical changes to laws have changed politics in our country. At a time when Americans are deeply disgusted with politics, it’s an interesting and important book.

I realize both sides of the political spectrum are using dark money to manipulate the masses and to frame today’s political discourse, but this book really explains how it has been done. It describes how our democracy has been stolen from us, with our approval. It explains how we, as a people have become so polarized, but more importantly, who (at least in the case of conservatives) is behind it and why.

The names involved include a who’s who of current political events, like Charles and David Koch, The DeVos family, Karl Rove, Dick Cheney, Mitch McConnell, as well as other names familiar to you.

My interest is in the current climate change debate and how we went from a point where the majority of Americans believed the scientific consensus to the current point of constant debate. Make no mistake, the same firms that confused the public about whether or not tobacco was harmful were involved in creating the confusion about global climate change. In fact, their slogan was “Doubt is our product.” And who pays these firms for their work? Why those who have been fined millions upon millions of dollars for damage to the environment and see rules preventing them from doing this as infringements on their freedom. Those who, to make an extra $7 million, reopened a gas pipeline they knew to “leak like swiss cheese,” killing two teenagers, when it exploded, resulting in a $298 million dollar civil judgement against them. Those whose employees, when they reported dumping of MERCURY onto the ground near rivers, were terminated for reporting the crime to management or the authorities. One instance of mercury dumping poisoned the fish for fifty miles downstream and made it into people who unknowingly ate those fish.

Did you know your politicians created a law allowing the very wealthy to place their children’s inheritances into trusts, where if the funds remained untouched for twenty years and the interest earned was donated to non-profit organizations, became a tax free inheritance? That doesn’t sound so bad, until it is uncovered that those same rich people created their own non-profit organizations which then distributed the interest earned to political campaigns, via donations to other non-profits, which removed their fingerprints from the funds. Some of the schemes were described by the officials trying to investigate them as “Russian nested dolls.”

It is one thing to confuse smokers into believing that the product they’re using isn’t killing them. That affects the users of tobacco and their families, but leaves the rest of us unscathed.

It is quite another thing to confuse the public into believing in “clean coal” or that global climate change is a “job killer” or is an evil plot by liberals to redistribute wealth from “doers” to “takers.” In this latter case, we all lose if we kill the planet.

Again, I believe both sides are doing this and the media is complicit, focusing on false “outrages” to keep the people of America distracted.

When will we wake up?

Will it be too late?

Where are the true statesmen/women?

Tax planning

IRS logoAs we’re about to enter the final quarter of the year, thoughts turn to the holidays and then…tax season. This year and next planning is especially important. The three top producers of plug-in vehicles, that qualify for the full $7,500 Federal Income Tax Credit for all-electric and plug-in hybrid vehicles will probably hit their 200,000th unit sale in 2018. Depending on the modeling you employ, this could start happening as early as mid-year or closer to the end of 2018.

For the uninitiated, there is an income tax credit for those who buy (not lease) all-electric and plug-in hybrid vehicles. But not all vehicles get the same tax credit. The amount of the tax credit is determined by the size of the battery pack. Also, it is important to understand the difference between a tax deduction (like the deduction for having a child, property taxes paid or mortgage interest paid) and a tax credit.

A tax deduction is a deduction off your income, so if you have a deduction, with a value of $2,000, it reduces your taxes by the deduction multiplied by your tax rate. It’s a little more complicated than that, due to how tax brackets affect the calculations, but this example is close enough for horseshoes or hand grenades. If your tax bracket is 25%, the tax deduction of $2,000 only reduces the taxes you owe by $500 ($2,000 X 25%).

A tax credit actually reduces your income tax by the stated amount of the credit. So, in the example above we used a value of $2,000. A tax credit would of that amount would reduce your taxes by $2,000. Easy, peasy. There are some other considerations, so consult your tax preparer.

The plug-in vehicle income tax credit phases out for a manufacturer’s vehicles over the one-year period beginning with the second calendar quarter after the calendar quarter in which the 200,000th of their plug-in vehicles has been sold. Qualifying vehicles from that manufacturer are eligible for 50 percent of the credit ($3,750) if purchased in the first two quarters of the phase-out period and 25 percent ($1,875) of the credit, if purchased in the third or fourth quarter of the phase-out period.  After that point, the credit goes away completely.

Who are the three manufacturers that will be affected first? They are Nissan ( maker of the Leaf), Tesla Motors (maker of the Roadster, Model S, Model X and Model 3) and General Motors, (maker of the Cadillac ELR & CT6, Chevy Volt, Bolt EV and Spark EV).

So, in planning your taxes, if you want to make a purchase in 2017 and collect the tax credit when you file in 2018, you need to be working on that purchase now. If you want to order exactly what you want, it’s too late for a Tesla, since their waiting list is so long. For the current GM models, you should place your order no later than October 15th, as it usually takes eight weeks from order to delivery (depending on dealer allocation). Unfortunately, I do not know what the order cycle is for the newly redesigned Nissan Leaf.

If you want to make a purchase in 2018 and collect the tax credit when you file in 2019, you need to keep an eye on how the manufacturers are each progressing toward the 200,000 vehicle limit. As of last month, it shaped up like this:

  • Tesla Motors – 138,469
  • Nissan – 113,263
  • General Motors (Cadillac and Chevrolet) – 149,649

The Tesla numbers were based on estimates. I will endeavor, over the next year, to keep an eye on this and post my findings here.

Will the EV income tax credit punish the pioneers?

We’re approaching the 7th anniversary of mass-produced plug-in vehicles. Although the $7,500 income tax credit was expected to get 1,000,000 plug-in vehicles on the road quickly, we’re only about 2/3 of the way there, in the U.S. market. As of the end of last month, there were 686,192 plug-in vehicles that had been sold, in the U.S. Every single year, sales have increased. We are on track this year to possibly hit the 200,000 unit mark for the first time in a single year (depending on how December goes). December, due to year end sales promotions and the nearness to tax time, is always a very high production month.

This got me thinking about the pioneers and the stragglers.

The tax credit begins to go away, once a manufacturer sells their 200,000th plug-in vehicle. Three manufacturers are already well over 100,000 units sold: Tesla Motors, General Motors and Nissan. These are the manufacturers that paved the way for all the newcomers we’ve been reading about, with great expectation. However, they may be punished for their risk taking. When these three manufacturers hit the magic 200K units, the newcomers will have a distinct price advantage, as their customers will still be able to get the full tax credit, while the customers of the more established PHEV manufacturers will suddenly lose half the tax credit, a few months later 3/4 of it and shortly after that, all of it.

My question: Was this the strategy of the stragglers?

In the darker places of my mind, I can see a boardroom, where the executives are saying, “Let them take the risk! We can sit back and see how things develop. If PHEVs take off, we’ll be late to the game, but we won’t have paid the price of educating the consumers about them. Better yet, when the other guys lose the tax credit, we’ll have an amazing price advantage over them, giving us a huge leg up, into the market!”

I have complained about the implementation of the tax credit before. There were so many ways it could have been a much better tool to stimulate sales. It probably would have been a better stimulus, if the tax credit had been available until the total sales of all PHEVs in the U.S. reached a benchmark. For instance, if the goal of one million PHEVs had also been used as the end of the tax credit, the incentive would be to ramp up production much more quickly. To the bold would go the spoils! Stragglers would have the same tax credit available, but by dragging their feet, fewer of their vehicles would have qualified for it, because the pioneers would have gobbled much of it up. There would have been a race to produce quickly. Instead, we seem to have incentivized caution and failure to innovate.

I’m proud of the risks taken by the Big Three of PHEVs, but I am concerned about how they’ll fare, once they lose the tax credit and have to compete with competitors who have prices thousands of dollars lower than what they can successfully provide.

Disclaimer: I have had five Chevy Volts in my household. I love the Volt & Bolt EV (and Spark EV, Cadillac ELR, Tesla Model S, etc) so much, I changed careers to promote them. Part of my concern is definitely self-serving: How will I be able to sell, once the playing field is so badly tilted against me?

Using the right tool and the 1% car

The Right Tool

The Right Tool

My office phone at the dealership rolls over to my iPhone, after two rings. In commissioned sales, a missed call is missed income and a tragedy at bill-paying time!

This morning, as I was getting ready to jump in the shower, my phone rang. The caller said she wasn’t sure why she’d been transferred to me, but she was interested in the Volt. Just to make sure I understood, I said, “Is the first letter of the car bravo or victor?” I always want to make sure we’re discussing the same vehicle. She affirmed that is was victor for Volt.

She said she had one question, “If I get a Volt, does the dealership have a charger, on site, I can use to recharge my car?”

I responded, “Yes, we do, but you won’t want to use it.”

“Why is that?” she asked.

I explained by asking, “Do you want to stay at a Chevy dealership 4-1/2 hours every day?” I explained how far you can go, on a single charge, and the time it takes to refill a depleted battery pack. I added that the Volt comes with its own charger that can be plugged in at your home for exactly that purpose. She asked, “Can it be plugged into any ‘normal’ outlet?” I explained that it plugs into a 110V outlet, just like an iPhone. The circuit would have to meet a minimum amperage, but basically, yes. She seemed very surprised. I went on to say that most Volt owners only recharge at work or at home, due to the time it takes to charge. I explained that there are apps for smartphones that locate public chargers, and some chargers are free to use, but that the Volt’s backup gasoline engine allows owners a degree of freedom that purely electric vehicles do not have.

At this point, she said she is an apartment dweller and doesn’t have an outlet near her parking spot. She asked if she could run an extension cord from her apartment to her car. I explained why that isn’t a good idea. I also mentioned that the Bolt EV is a better choice for apartment dwellers, because the average driver would only have to charge one a week or so. The Bolt EV also supports DC Fast Charging, which means the weekly “fill up” would take only about 2-1/2 hours. She was aware of the Bolt EV, but said her budget was only $14K, so she was looking for a used Volt.

I passed along something one of my managers once told me, “You don’t ever have to plug the Volt in. It can be run, exclusively, on the gasoline engine and would result in about 37 MPG. Then I told her that in her situation, I would recommend a “normal” hybrid, like the Malibu, Prius, etc. Since those vehicles don’t get plugged in, but get impressive gas mileage, they are also a good choice for an apartment resident and can be acquired, on the used market, within her budget. She thanked me and ended the conversation.

It amazes me, after 79 months of Volt availability, that people are unaware of basic things like charge time or that the Volt comes with its own charge cord, just like a smartphone. THIS is a failing I put at GM’s doorstep.

The 1% Car

I’ve been thinking about writing this for a while and the previous narrative seemed to make this time appropriate.

I’ve spoken with people who LOVED the Volt test drive. They needed the efficiency and could live with the limited seating capacity. However, they started asking about three-row crossovers, like the Traverse or SUVs, like the Tahoe. When I asked why, their response usually went something like this:

“Once a year, we have family come down to visit us and we need a vehicle that has the capacity to handle that.”

I am floored by this approach to car buying! The customer is deciding on the best vehicle, based on how it will be used 1% or 2% of the time! My response is usually along these lines:

  • You (the client) loved the silence and the acceleration of the Volt and know you’ll be giving this up, in the crossovers and SUVs, right?
  • Let’s look at the economics: The Traverse and Volt are in the same price range, but only the Volt gives you the $7,500 tax credit.
  • The Crossover/SUV gets 19 miles per gallon but the Volt gets the dollar equivalent of at least 80 MPG (conservatively)
  • Driving the crossover 15K miles per year, results in a fuel cost of $1,776 per year. (15,000 miles ÷ 19 MPG X $2.25 per gallon)
  • The Volt would have a fuel cost (electricity) of $640 per year, to travel the same distance. Assumptions: 11¢ per kWh, 20% charging loss, 0.31 kWh per mile, 41.1 miles per day: a VERY conservative estimate. (15,000 miles X 0.31 kWh ÷ 80% X 11¢)Rental rates
  • The resulting savings, of driving the Volt year round, just in fuel/electricity is $1,136 per year. This figure does not include at least three oil changes for the crossover/SUV per year or the convenience of refueling at home.
  • The image, to the right, was just pulled today, for rentals the week of Christmas 2017, in the Dallas/Fort Worth area. Just the fuel savings would rent one or two SUVs for the week!
  • Why not rent a really nice SUV, for the one week per year that the family visits, and thoroughly enjoy the driving experience the rest of the time?

Plug-in vehicle depreciation and the case for leasing

I often hear, as a potential objection to getting a plug-in vehicle, that they depreciate too quickly, when compared to gasoline-powered vehicles. I’ve been scanning used car prices, for the Chevy Volt, in Texas to try to evaluate this.

Of course, I built a spreadsheet, as I am a former manufacturing engineer and am a confirmed EV nerd. I pulled every invoice I could, by using the used Volts’ vehicle identification number, or VIN, to access the original invoice. Of course, I do not know what the original buyer paid for the Volt, so I used MSRP. I also do not know what a buyer will offer on the used car purchase, so I used the advertised price for the current value.

The original invoice, in some cases, could not be located. The newer the model, the better the chance I could locate the invoice. Also, I was only able to locate 34 pre-owned Volts, within 250 miles of my location, so the sample is fairly small. That being said, the percentage of MSRP that the asking price represents was pretty consistent in my sampling.

What I’ve found, is that when you take into account the Federal Income Tax Credit at its full value of $7,500, the depreciation appears to be very close to other vehicles. It is true that not everyone qualifies for the full $7,500, and those who lease do not get the credit. In the case of leasing, the leasing company gets the tax credit. However, leasing incentives put most of the tax credit back into the lease, to lower the monthly payment. For instance, this month, the leasing incentives start at $5,025.

Here’s the spreadsheet:Volt DepreciationI noticed that the 2014 vehicles, now three years old, have only depreciated 43%, whereas I expect most vehicles to depreciate 50% over three years, once the tax credit is taken into account. This may be optimistic asking prices or because this sampling seems to have low mileage per year. In any case, I am not trying to say Volts depreciate at a slower rate than other vehicles, just that they don’t depreciate faster than traditional vehicles. One interesting note: There was a $5,000 price drop on Volts, going into the 2013 model year. This should have had a disastrous effect on depreciation of the earlier model years. Based on the scanty evidence I could find, this did not seem to be the case.

As the disclaimer goes: “Past performance is not a guarantee of future performance.” The Bolt EV may have an impact on Volt resale values, going forward. Only time will tell. For that reason, I recommend my Volt clients lease instead of purchase their Volt. There are actually several reasons why I do this:

  • New, long range EVs (like Bolt) may hurt resale value.
  • Those who do not qualify for the entire tax credit, due to low tax burden (retirees and young buyers), will get better value by leasing and the leasing incentives.
  • Advancements in battery technology and faster charging will make today’s plug-in vehicles seem like antiques, for those of us who’ve been driving them for a few years. By leasing, we a future-proofing our EV experience by being able to move into the next generation of plug-ins more quickly.
  • The return of lease vehicles creates a market for preowned plug-in vehicles. This helps lower income buyers join in the transportation revolution. Although those of us with EV experience may want the latest and greatest, those new to these wonderful vehicles will still feel like they’ve stepped into a brighter future because, even a three year old plug-in vehicle seems like such an advancement over internal combustion engine (ICE) technology.

Of all of these reasons, it’s the last one that is most important to me. Once someone gets their first plug-in vehicle and enjoys the silence of electric drive, the exhilarating acceleration and the convenience of refueling at home or parked at work, the odds they’ll return to an ICE vehicle is negligible. This effect is called “butts in seats.” Until one experiences these things first-hand, they just don’t get it. In my day job as an EVangelist, I insist the EV curious go on a test drive. I tell them right up front, “No matter what I tell you, you won’t really understand, until you drive an EV.”

That’s what will accelerate the move forward, toward the future of electric transportation.

Solar Panel Generation: 150 day report

Solar Volt

My 2017 Chevy Volt (The Silver Surfer) being charged by the sun! This shows only one of the four groupings of panels on The Duck (what I call our house).

If you would like to contact our solar panel provider, click here to email them.

It has been 150 days, since our solar panel system went on line. We started generating electricity from solar energy, on December 21st. The 150 days ended on today. Our solar panels generated a total of 5,387 kWh or, in other words, almost 5.4 megawatts. These 150 days are not the most conducive to energy production, since they began with December 21st, exactly on the Winter Solstice of 2016. As you may know, the Winter Solstice is known as “the shortest day of the year.” It’s really the day with the shortest period of sunlight. You may also think that means the day of the least solar energy generation. That, it is not, as overcast longer days can result in lower energy generation. With this in mind, if we just divide the total amount of energy generated so far, by 150 days and multiply by 365 days (to get an estimate of annual production), we would arrive at a figure of 13.11 mWh per year. Since these 150 days are not average, over the year, we can expect our total annual production to be more than that. Our solar panel provider estimated that our annual production would be close to 16 mWh. I am not sure it will get that high, but if we average both these figures, a compromise estimate of 14.55 mWh is produced. More on this later…

Our highest single day of energy generation so far, was May 4th. On that day, our solar panels generated 60.41 kWh, which is just slightly more than the Chevy Bolt EV‘s battery capacity. The least energy generated in a single day, so far, was 4.4 kWh on December 23rd. Another low production day was March 5th, when 5.66 kWh were generated. As you can see, daily production can vary greatly, as is illustrated in the upper chart below.150 day solar energy production chartsAs you start to look at larger blocks of time, the pattern smoothes out. In the lower chart, by looking at weekly system output, you can see the trend toward higher energy generation. Weeks 21, 51 & 53, were obviously not a full seven days.

To see the pattern a little better, we can look at it by calendar month (below). The current month only shows the first 19 days, resulting in 1,090 kWh. Using the daily average generated in the month, I expect May’s result to be the highest on the chart at approximately 1,778 kWh, a total so high, as to be off this chart.Monthly kWh

How was last month’s bill affected by the solar panels? I’m glad you asked! We used 1,676 kWh total. Our average usage for this month, over the last 3 years has been 1,492 kWh, but this month has been warmer than usual. Of this amount, 433 kWh came from our electricity provider, Green Mountain Energy and 1,243 kWh came from the solar panels. We generated 74% of the electricity we used. Our Green Mountain Energy bill was $20.57. The payment on the solar panel system is $154.54. So, our total electric cost was $175.11 last month. If we didn’t have the solar panels, our bill would have been $133.96, so we overpaid by $41.15 last month. (this will vary, so more on that later)

Green Mountain Energy, currently 😉 charges us 11.6¢ per kWh, the “solar rate” we got, when we switched providers. They buy any overproduction at the same, retail rate in monthly (billing cycle blocks). Before we got on the “Solar Buy-Back Plan,” our rate was 8.5¢ per kWh. This means they are actually buying back at somewhat less than retail, since the rate was lower when we were on a normal energy rate plane. However, when I created a spreadsheet, to check the financial soundness of getting solar panels, we still came out ahead, when compared to a company that charged the lower rate but bought back overage at wholesale, instead of retail. It’s jumping through math like this that discourages people from getting solar panels, because they just can’t tell if it makes economic sense or not.

As you may know, I love making spreadsheets and performing analyses, so…yay!

Our solar panels (38 in all) cost $33,480, including permits and installation. The federal government’s tax incentive for solar panels is 30%, or in our case $10,044, leaving us with a cost of $23,436 in out-of-pocket expenses. One really cool feature of our solar financing plan, is that the first payment is due one year after the panels are installed and operational. This gives the buyer time to realize the tax credit and pay it into the loan, resulting is a monthly payment, based on the system price, after the tax credit is applied. We financed the panels over 20 years, resulting in a monthly payment of $154.54.

So, the big question is: Are we paying more for electricity + solar panels per month that we were for electricity alone? We still don’t know definitively, and won’t until we’ve analyzed a full year of data. However we can now start to make an educated guess.

If the solar panel company is correct, and our solar panel system generates 16 mWh of electricity over the full year (and that is still a distinct possibility), the total cost we’ll pay per month for electricity + solar panels, would be 13¢ less, than just buying electricity from our provider at the higher rate they’re charging now. However, if we compare the total amount we were paying on the previous plan, we could pay as much as $61 per month more, on average, than we were, which is about a 36% increase. We expected to pay more, during the first few years and reap the benefit of lower overall cost, as energy prices go up, over time. Again, only time will tell. The rate we’re paying now per kWh is approximately the same as the U.S. national average rate per kWh.

Here’s what we feel we are getting for this:

  • We generate ZERO pollution, for the energy we use during the day, because we generate it from the sun. Even though Green Mountain Energy provides “100% renewable energy,” during times of low winds or low solar generation, Green Mountain Energy has to buy energy from non-renewable sources, to keep the lights on, which do generate pollution. To make the claim that they’re 100% renewable, Green Mountain will purchase energy from other renewable energy companies, to offset the dirty energy they had to purchase during these shortages.
  • If we add a battery backup to the system, these benefits would continue after sunset, when the batteries would continue to provide electricity, after sunset, or during a blackout or brownout.
  • THIS IS PROBABLY THE BIGGEST FACTOR: On average, in Texas, solar panels add $15K of value to the home, when it comes time to sell. Once this is taken into account, the solar panels really only cost us $8,436, that $61 per month is eliminated. Our system is larger than the average residential system installed in Texas, so the actual cost may be even lower than that! This means that we’re really at break even now, with additional savings as energy prices rise, over time.

In late December, I will have a full year’s worth of data and will revisit this, but at this point I think we made a very good financial (and ecological) decision.

If you would like to contact our solar panel provider, click here to email them.