May 17
Trading the Electric Economy
The automotive world is steadily shifting towards electric vehicles. Analysts write about whether Tesla or one of the other major automakers will lead the way to profits. What gets missed in these discussions are the rapid technological advances that make cars more efficient and companies more profitable. A recent article in the science section of The New York Times is instructive in this regard both to help spot who will lead in making cars and profits and where new technologies will provide trading opportunities. This brings to mind trading the electric economy as it evolves.
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Tesla’s Secret Weapon With the Model 3
The Model 3 is the best selling electric vehicle in the world. One of the features that make the model popular is its impressive acceleration. For an electric vehicle to achieve this it needs to deliver an impressive power surge. The Tesla “secret” is in a part called the traction converter. These parts typically use silicon in converting battery power to drive train power. Tesla uses traction converters containing silicon carbide which delivers more power, takes up less weight and requires less space. The space and weigh saved allowed for a more efficient design for the Model 3 as well. When trading the electric economy in years to come silicon carbide will become the standard in so-called “power electronics” and then likely will be eclipsed by even newer technologies.
Wolfspeed and Wide Band Gap Semiconductors
Formerly known as Cree Inc., Wolfspeed is a North Carolina company that makes wide band gap semiconductors and just opened a plant in Upstate New York making silicon carbide semiconductors for General Motors and others. The power electronics market for wide band gap semiconductors is currently about $20 billion a year of which silicon carbide now counts for $1 billion. The market will grow along with the electric vehicle market and projections are for silicon carbide to make up a fourth of that market in 5 years. It would appear that scientific advancements will drive this sector so that companies that can adapt their manufacturing processes to keep up will be the most successful.
Wide Band Gap Semiconductors
The band gap is a property of a transistor. It is the energy range between when the transistor conducts electricity and when it does not. A high band gap allows a material to function at higher temperatures and with more voltage and electric energy. The military has applications for which high band gap materials are essential. The US Department of Energy conducts research into the use of wide band with semiconductors to maximize storage and delivery of electric power to more-efficiently match energy production to load demands across power grids from coast to coast. As research progresses experts expect more materials and system to emerge. As of now the substances with wider band gaps than silicon carbide include gallium nitride and diamond. Diamond would be the best for this application if someone could reduce the cost of mass producing industrial diamonds.
Production, Storage, and Delivery of Electricity
As more and more wind farms, solar collectors, and biomass energy generators are added to the power grid the need for storage capacity increases. Wind power is great when the wind is blowing and solar panels are great when the sun shines. Electricity generated by these systems needs to be stored for use when the system is not generating power. A similar problem is one of matching power generation to peak usage hours. The answer is more efficient storage and that includes technologies like high band width semiconductors. Research in this niche progresses by fits and starts. The lead time needed to apply practical uses like the Tesla traction converter varies from years to months. Trading with folks like the squadrons of Top Gun Options will help you keep up with important events in this niche and help guide successful options trading.
