The automotive industry and the environmental community are giddy with excitement over the new electric and plug-in vehicles now offered by GM, Nissan and Ford. The Chevrolet Volt, Motor Trend’s 2011 “Car of the Year” and Green Car Journal’s 2011 “Green Car of the Year” is supposed to be GM’s future and vindicate the $80 billion of taxpayer money given to the ailing automaker.
The EPA has recently tested the fuel efficiency of the new offerings using a simple test: drive the car 100 miles and see how much electricity it draws from the battery. The answer for the Leaf was 34 kilowatt-hours (kWh). Using a conversion factor of 33.7 kWh of electricity per gallon of gasoline, the LEAF gets 99 miles per gallon. The same test rates the Chevy Volt at 94 mpg in all-electric operation. These results allow the EPA to rate these vehicles at zero carbon emissions in all-electric mode and 10 out of 10 in terms of other air pollutants. But what do these tests actually mean?
If a consumer cares only about how much electricity he will need and how much stuff his car is emitting, the EPA estimates are probably OK. On other hand, if he’d like to know what these vehicles can do for society, the EPA calculation is inadequate. Physics presents us with an interesting dilemma in the automotive world. Electric motors, in addition to being clean and quiet, are extremely efficient. A kWh of electricity drawn from the battery will lose less than 10% of its energy in turning the wheels of the car. Mechanical systems, however, including pistons, a crankshaft, a transmission and other mechanical components, will lose roughly 80% of their energy to friction, with only about 20% left over to turn the wheels. Hence the century old attraction of electric cars. What’s not to like?
The problem lies outside the car. The system of producing crude oil, transporting it to a refinery, manufacturing gasoline and distributing the gasoline to consumers is very efficient, losing less than 20% of its energy along the way. Natural gas is similar, since it loses more energy in transportation, but does not need to be refined. Electricity, on the other hand, is an extremely inefficient system. Even the most advanced combined-cycle natural gas power plants lose half the energy of the natural gas used to generate electricity. An additional 7-10% is lost in electricity transmission and distribution. Even more is lost from charging the car battery and power “leakage” when the car is not being used. Overall, the entire electricity supply system is at best less than 40% efficient, compared to over 80% for oil and gas.
If we want to understand the impact of electric cars on the environment, we need to look at the entire system, not just what happens on board the vehicle itself. An average small car, say a Toyota Corolla with the 1.8 liter engine, gets about 29 miles per gallon. If we include the losses in the oil supply system, the real mileage is about 24 mpg with carbon dioxide emissions of about 5.7 metric tonnes per year. Assuming that all electricity is produced by advanced natural gas power plants, a Chevy Volt driving 60% of its miles in all-electric mode would get the equivalent of about 39 miles per gallon and emit about 2 metric tonnes of carbon dioxide annually. Not 99 mpg, but still pretty efficient.
The question is how much we are willing to pay for this improved efficiency. Let’s assume that your car lasts ten years, and you can finance it with a 10-year car loan at 5%. The Chevy Volt is on the market for $42,000. Chevy likes to remind its customers that they are entitled to a $7,500 federal subsidy, which is certainly an enticement. Subsidies, however, reduce the price, not the cost. We as a society are still paying $42,000 for this car: $34,500 from the buyer and $7,500 from his friends and neighbors. A 10-year $42,000 car loan at 5% interest would run you about $5,500 per year. Let’s ignore for the moment insurance, maintenance, taxes, registration and fees. You could buy a basic Toyota Corolla, which is comparable in size and performance to the Volt, for about $15,000. The Corolla payments would be only about $2,000 per year – $3,500 less than the Volt. In return, the Volt would only save you only about $1,000 a year on fuel. Not a very good deal from a cost standpoint.
A hybrid Prius II would cost about $22,000 with annual payments of about $2,800 and fuel economy (including losses) of around 42 mpg, saving around $900 per year on fuel compared to a Corolla. A Prius II is close to break-even with a Corolla.
How about carbon savings? The real argument about reducing carbon emissions is the cost. Advocates of “cap-and-trade” and other approaches to carbon reduction argue that a great deal of carbon can be saved at a low cost. For example, the price of carbon on the European climate exchange is currently less than $20 per metric tonne. The price for the Regional Greenhouse Gas Initiative (RGGI) among the northeastern states of the US is around $5 per tonne. John Kerry’s Cap-and-Trade bill would have set a maximum price of $25 per tonne, increasing gradually to $50 per tonne. The Volt would reduce carbon dioxide emissions by about 3.7 metric tonnes per year for an additional cost of $2,900 or about $800 per tonne of carbon dioxide per year. This seems like an exorbitant price for carbon.
Here’s another way of looking at the problem. US carbon dioxide emissions are roughly 6 billion tonnes per year. A 20% reduction at $800 per tonne, would cost roughly $1 trillion per year.
Overall, the new electric cars look more like gadgets than serious tools for reducing either costs or environmental impacts. The average consumer would never pay $34,500 let alone $42,000 for a small car. If you really want to be green, a Prius is a far more cost-effective choice. Electric and plug-in vehicles will be purchased, partly at taxpayer expense, mainly by upper middle class technophiles anxious to have the latest toys on the market. If that’s the future of GM, I think I’d rather have my $80 billion back.