Engineering News

Electric Vehicles And Their Role In Our Energy Future
September 03, 2009

The Obama administration came into office with definite views about the future course of America's energy use. Their vision is that our future energy supplies will be influenced by greater reliance on renewable fuels such as solar and wind. They also want to have cleaner air, which the Supreme Court helped along with its ruling that the Environmental Protection Agency (EPA) could regulate CO2 emissions under the 1977 Clean Air Act. The EPA, with the administration's support, has pushed the Corporate Average Fuel Efficiency (CAFE) standard to 35.5 miles per gallon (mpg) blended car fleet average in 2016. Cars are also supposed to only emit 155 grams of carbon dioxide per kilometer.

The EPA has been encouraging electric cars and plug-in vehicles as a way of meeting these more exacting fuel and environmental standards. It has been reported by Daniel Sperling, professor of civil engineering and the founder of the Institute for Transportation Studies at the University of California at Davis that at the Almaden Institute hosted by IBM (IBM-NYSE), the EPA is considering counting an electric car as the equal of three conventionally powered cars and counting its emissions as zero.

Electric and plug-in vehicles don't emit pollution at the tailpipe, but the electric power plants that will power them certainly do. Thus, the amount of environmental savings from these vehicles will depend on where they operate. In states heavily dependent on coal-fired electric power such as Ohio or diesel-powered plants such as Hawaii, the environmental savings will be small. In other states the savings will be substantially greater. The problem is that electric and plug-in vehicles may not save this country as much fuel as regulators believe.

John Petersen, a former battery company executive and director, has produced an analysis of the benefits of certain types of batteries on fuel savings and on the cost benefits of hybrid and electric vehicles versus conventionally powered vehicles. Mr. Petersen posed the question of why we should build one electric vehicle that would save its owner 400 gallons of fuel a year while using enough batteries to build ten Toyota Motor (TM-NYSE) Prius-class hybrids that could save their owners a total of 4,000 gallons of gas a year.

The highly hyped GM Volt plug-in electric vehicle that uses a gasoline engine for charging its battery is being matched by Nissan Motor's (NSANY-PK) Leaf, a pure electric car that also will rely on lithium-ion batteries. Both vehicles are supposed to cost about $40,000 each. Each GM Volt will use 16 kWh of lithium-ion batteries while the Nissan Leaf is projected to use 24 kWh of lithium-ion batteries. Each vehicle would save its owner 436 gallons of gasoline over an estimated 12,000 miles of annual driving compared to the typical American car that currently meets CAFE standards of an average 27.5 mpg and that emits about 4.4 tons of CO2. But will the electric and plug-in electric vehicles hurt the American energy industry?

According to Mr. Petersen's analysis, the Toyota Prius is the more dangerous car from the oil industry's perspective. His study used the common denominator of 48 kWh of battery power to compare the three vehicles and found, as shown in the accompanying chart, the total annual gasoline savings for every 48 kWh of battery capacity used by each manufacturer. From this table, clearly the Prius is potentially the more dangerous car for oil companies interested in selling gasoline. So are electric vehicles the answer to this country's future transportation needs?

Exhibit13'

Mr. Petersen also did an analysis of the undiscounted and discounted costs of owning various types of hybrid, plug-in and conventional vehicles over five- and ten-year periods of ownership. His baseline scenario was a conventional car costing $20,000, averaging 30 mpg, using 417 gallons of fuel a year, and being sold after five years for 35% of its purchase price or sold after 10 years with a 10% salvage value. The cost of fuel was escalated at 17.5% per year, the average rise in the price of crude oil over the past decade. The undiscounted five-year and 10-year ownership costs for this vehicle are $21,671 and $46,090, respectively.

The four models he compared to the conventional vehicle was a $21,000 micro hybrid that would improve fuel economy by 8%; a $23,000 mild hybrid that would improve fuel economy by 20%; a $26,000 full hybrid that would improve fuel economy by 40%; and a $32,500 plug-in hybrid (after tax credits) that would offer 40 miles of electric vehicle range and 30 mpg fuel economy from its internal combustion engine.

Exhibit14'

On an undiscounted basis, over five years the ICE vehicle has the second lowest ownership cost, losing out to the micro hybrid by $44. For the ten-year ownership period, the ICE vehicle is the most expensive to own due to the rising cost of gasoline.

On a discounted basis, using a 7.5% rate, the ICE vehicle was the most expensive to own and operate over the 10-year holding period while it was the least costly over the five-year period. The discounted analysis was most sensitive to the cost of gasoline, the discount rate used and the cost of batteries. The point of the study is that electric and plug-in vehicles are not big savers for consumers because they use low-cost electricity. Without government subsidies they are not competitive at all and they will be less convenient and reliable for their owners.

It appears that much remains to be achieved in the development of economical hybrid and electric vehicles before they are truly competitive. We remain optimistic that these improvements will happen, but we have no idea how long they will take.

Source: Parks, Paton, Hoepfl & Brown

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