Study: More Fed Aid (Or High Gas Prices) Needed To Acomplish Obama's EV "Moonshot"

Edward Niedermeyer
by Edward Niedermeyer

Surprised? Don’t be. President Obama’s goal of getting a million EVs on the road by 2015 is headed nowhere without some serious changes, as the OEM EVs are stuck with high prices in the short term and capacity ramp-ups in the middle term. Making progress on either the price point or the production numbers (both of which are necessary to punch EVs into the mainstream) isn’t going to happen unless gas prices skyrocket or, as Nissan CEO Carlos Ghosn puts it, government “jump starts” the market. Now, Automotive News [sub] reports that an Indiana University study argues that Obama’s million-EV goal might not be accomplished by 202 without further government assistance. On the other hand,

With increased government intervention and perhaps a global surge in oil prices, electric vehicles could capture as much as 15 percent of the U.S. market by 2025-30

By which point, the CAFE standard could well be 62 MPG combined (unadjusted)… making the argument for EVs even tougher. But now we’re getting ahead of ourselves…

The report [in PDF format here] has ten findings and eight recommendations. The findings have some worthwhile insights, including

While U.S. automakers are working on PEVs, the U.S. electric vehicle industry lags behind other regions—particularly Asia—in the areas of battery manufacturing, supply chain development, and raw materials production. PEVs may never dominate the mass vehicle market, but it is possible—some experts say likely— that they will capture a significant share (5-15%) of the market over the next 15 to 20 years.

Recent public policies in the United States and other countries have improved the prospects for initial commercialization of PEVs. These policies include generous tax credits for consumers and producers, new regulations of vehicle manufacturers, special access to high occupancy vehicle (HOV) lanes and city parking, loan guarantees and subsidies for companies in the PEV industry, grants for recharging infrastructure, and federal R&D support for more advanced battery technologies.

Automakers could ramp up PEV production if consumer demand proves to be larger than expected. However, consumer demand for PEVs is quite uncertain and, barring another global spike in oil prices, may be limited to a minor percentage of new vehicle purchasers (e.g., early technology adopters and relatively affluent urban consumers interested in a “green” commuter car).

One key reason that mass commercialization of PEVs may proceed slowly over the next decade is that mainstream retail purchasers of new vehicles differ from the relatively small number of enthusiastic “early adopters.

If customer expectations are inflated (by automakers, dealers, power companies, environmental groups, and/or government officials) relative to what is actually experienced, the reputational damage to the technology could be significant and possibly irreparable.

With its battery pack complemented by a small gasoline or diesel engine, a PHEV can make use of the existing refueling infrastructure to achieve driving ranges of 300 miles by featuring conventional refueling capabilities in addition to recharging the battery. An affordable BEV cannot match this range or speed of refueling, so BEVs may not achieve mass commercialization until there are breakthroughs in battery technology, though they may succeed in niche markets such as commuter vehicles for affluent multi-vehicle households or urban pick-up and delivery vehicles.

Both PHEVs and BEVs are designed with the intention of using residential recharging as the primary refueling method, but BEVs also depend on the emergence of some recharging stations in the community.

While refinements of lithium-ion battery technology may prove sufficient for mass commercialization of PHEVs, a new type of energy storage will likely be required so that BEVs can satisfy the cost and range preferences of mainstream consumers.

As long as electricity production depends heavily on high-carbon energy sources, the net effect of PEVs on greenhouse gases will be limited and will vary by region.

Got all that? On to the recommendations!

Policymakers should generally pursue energy security and environmental goals through technology-neutral policies, thereby allowing the marketplace for fuels and vehicles to determine which technologies are superior. The following fuel-saving policy instruments are typically considered technology-neutral: a gasoline tax; a national fuel efficiency standard that allows manufacturers to trade compliance credits; and a “feebate” incentive system for fuel efficiency, where buyers of high-mileage cars are awarded a rebate while buyers of low-mileage cars pay a fee.

A federally supported, national PEV demonstration program should be implemented to help overcome the information barriers faced by the PEV industry today.

The U.S. automotive, battery, and electric power industries, in collaboration with the U.S. government and universities, should seek to establish a global leadership position in electric mobility, especially in advanced energy storage technologies and production of batteries and related components.

Although the focus should be on advancing U.S. leadership and competitiveness in this dynamic field, there is also a need for some international collaboration.

For investors in emerging technologies, there can be a “valley of death” between the market acceptance of early adopters and widespread commercialization… the following targeted, cost-effective measures to boost consumer demand for PEVs are worthy of consideration:

  • government and commercial fleet purchases;
  • PEV access to HOV lanes and parking in congested urban areas;
  • battery warranty adjustments or guarantees; and
  • targeted public information programs to dispel myths and reduce confusion.

Significant public funding of recharging infrastructure has already been appropriated, and it is not yet clear whether more funding is necessary. . As additional public cost-sharing of recharging is provided, the cost-effectiveness criterion suggests that the highest priority should be residential recharging, followed by stations at workplaces and then community stations. Excessive spending on community stations may result in severely underutilized infrastructure, which can damage public support for PEVs.

To optimize the benefits of electrification, public policies should be adopted to:

  • accelerate “smart grid” research, standards, and implementation;
  • expand the availability of lower electricity prices during off-peak periods to enhance consumers’ willingness to charge their vehicles at night, and include continuous time-of-use pricing adjustments where acceptable;
  • increase the availability of metering, recharging, and vehicle technologies that will enable these time-of-use adjustments to electricity prices; and
  • encourage or require enhanced efficiency and the movement toward a cleaner power generation system inorder to reduce upstream emissions associated with PEVs in the form of greenhouse gases and conventional pollutants.

Although there have been significant improvements in battery technology since the 1990s, policymakers should consider a large increase in federal R&D investments into innovative battery chemistries, prototyping, and manufacturing processes.

That’s a whole lot of common sense! Unfortunately, the panel doesn’t put a pricetag on its recommendations, so it’s difficult to put all this into a pure policy discussion. Still, the panel has the guts to admit that, even with more government assistance, EV market penetration is far more dependent on energy prices, technology development and consumer acceptance than anything else. If the government must intervene in the market on behalf of plug-in vehicles, that’s probably the best perspective to bring to the task. This report is required reading for all EV public-policy wonks.

Edward Niedermeyer
Edward Niedermeyer

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3 of 13 comments
  • Bertel Schmitt Bertel Schmitt on Feb 03, 2011

    That chart proves that higher gas prices do NOT foster growth of EVs.

    Gas across the EU has always been double the price of the U.S. or thereabouts. At the same time, Europe is pretty much EV hostile. Even hybrids have not made a big dent into EU sales. Drive down the Autobahn at 200 km/h and see what that does to your wallet. No matter, they do it.

  • GS650G GS650G on Feb 03, 2011

    We need a different president in 2012, simple as that.

    • Vbofw Vbofw on Feb 03, 2011

      Nice conclusion. Since a completely unimportant politician goal won't be accomplished due to market forces....get him outta there!

  • James Hendricks The depreciation on the Turbo S is going to be epic!
  • VoGhost Key phrase: "The EV market has grown." Yup, EV sales are up yet again, contrary to what nearly every article on the topic has been claiming. It's almost as if the press gets 30% of ad revenues from oil companies and legacy ICE OEMs.
  • Leonard Ostrander Daniel J, you are making the assertion. It's up to you to produce the evidence.
  • VoGhost I remember all those years when the brilliant TTAC commenters told me over and over how easy it was for legacy automakers to switch to making EVs, and that Tesla was due to be crushed by them in just a few months.
  • D "smaller vehicles" - sorry, that's way too much common sense! Americans won't go along because clever marketing convinced us our egos need big@ss trucks, which give auto manufacturers the profit margin they want, and everybody feels vulnerable now unless they too have a huge vehicle. Lower speed limits could help, but no politician wants to push that losing policy. We'll just go on building more lanes and driving faster and faster behind our vehicle's tinted privacy glass. Visions of Slim Pickens riding a big black jacked up truck out of a B-52.