Posted by: bmeverett | February 8, 2013

The State of Play on Electric Cars


President Obama and all politically-correct politicians support an energy strategy encompassing all forms of energy. I addressed wind and solar in recent posts. How are we doing on electric cars, another favorite of President Obama (and President Bush as well)? I offer a four-word answer: huge disappointment, no surprise.

In January of 2011, President Obama said, “We can replace our dependence on oil with biofuels and become the first country to have a million electric vehicles on the road by 2015.” This statement is typical of the glib promises presidents have been making on energy since Richard Nixon’s Project Independence in 1974. Each promises the world, but offers no policies commensurate with the goal.

In a report on the President’s million electric car program (which you can find at http://www1.eere.energy.gov/vehiclesandfuels/pdfs/1_million_electric_vehicles_rpt.pdf), the department of Energy offered a schedule for achieving this goal. The heavy lifting (97% of the million car total) was to be done by the Chevy Volt (505,000), Nissan Leaf (300,000), Fisker Nina (195,000), Ford Focus EV (70,000), Think City EV (57,000) and Tesla Model S (55,000). The DOE expected a modest start in 2011 with 45,600 vehicles sold. Actual sales were 17,345, so the President’s program underperformed by 60% within months of its announcement. The Norwegian company Think City, one of the President’s electric car team, went bankrupt before initiating sales to the public in the US.

Sales in 2012 were expected to grow rapidly to 178,600 vehicles, but actual sales were 51,177, short by over 70%. Chevy Volts were supposed to hit 120,000 in 2012, but only 23,641 units were sold – an 80% shortfall. Nissan’s leaf did much better, hitting almost 40% of its 25,000 unit target. Fisker, another of the stalwarts of the program, went belly-up in 2012, as did A123 Systems, an electric car battery manufacturer financed and subsidized by the federal government and subsequently sold to a Chinese company for a fraction of its cost to taxpayers.

The forecast for 2013 is 264,000 units. January sales of all models were 3,375 – about 15% of the pace necessary to meet the forecast and about half the level of recent months. Perhaps poor January weather suppressed electric cars sales, but this was not true for conventional vehicles, which enjoyed strong January sales.

Overall, halfway through the President’s program, electric vehicle sales have totaled about 80,000 – 8% of the ultimately promised level. (As an aside, 8% seems to be one of President Obama’s favorite numbers, since it’s also the share of the deficit that is supposed to be eliminated by raising tax rates on the rich ($80 billion per year out of a $1 trillion annual deficit).

Why this dismal failure right out of the starting blocks? The answer is quite simple: electric cars have an unacceptably high cost and an unacceptably poor performance for the average consumer. Take the Nissan Leaf, for example. In terms of size and comfort, the Leaf is similar to the Nissan Versa. A basic Versa Model 1.8S with navigation system (to be comparable with the Leaf) has a Manufacturer’s Suggested Retail Price of $18,245. Edmunds says the fair market price is around $17,280. Nissan just announced a major price reduction for the Leaf from a base price of $35,200 to $28,800. I doubt that Nissan makes any money at this price, but they’re a private company, so they can do what they like. Edmunds says that with the destination charge, the fair market price of a 2013 Leaf is $30,790. A consumer must therefore pay an additional $13,510 or 80% more to get the all-electric equivalent of a Versa. A Chevy Volt lists for $40,000, and Edmunds says you could get one for $38,722. These are very high prices for relatively small, basic cars. You could, for example, buy a Lexus ES350 for less than a Chevy Volt. (The federal government offers a tax credit of $7,500 on electric vehicles. That doesn’t reduce their cost, but only shifts it from the buyer to other taxpayers).

So what are you getting for your money? Let’s start with the good news. Electricity is cheap relative to gasoline. According to the EPA, a Nissan Leaf will, on average, use about 340 Watt-hours of electricity to travel one mile. Assuming that about 10% of the electricity is lost in charging and storage in the battery and at the current residential average price of 12¢ per kilowatt-hour, fuel for the Leaf costs about 4½¢ per mile. Fuel for a gasoline Toyota Prius getting 50 miles per gallon would cost about 7½¢ per mile. If you travel 15,000 miles per year, you’d save about $450 a year on fuel. Unfortunately, the higher initial price of the car, even with the $7,500 federal rebate, would cost you an additional $1,500 per year in car payments, more than wiping out your fuel savings.

There may also be some intangible benefits to owning an electric car. You can certainly show off your green credentials to all your friends and neighbors, if that’s what you like. There are also a few consumers who love to have the latest gadget, people who will wait in line all night to get the first iphone-5, for example. Presumably, however, President Obama wants electric cars to appeal to the average person, not just a handful of eager rich kids. The overwhelming majority of consumers want performance for their money, and here’s where the electric cars are failing.

Range, for example, is a critical parameter for most consumers. In a gasoline vehicle, low range is a mild annoyance. I have a 1999 Lexus RX300 SUV, which is a nice car, but a major league gas guzzler. Even with a fuel tank holding 17.2 gallons, its average fuel economy of about 15 miles per gallon gives it a range of only about 260 miles. Since I never let the gas tank get too low (a phenomenon known as “range anxiety”), I tend to fill the car up every 200 miles or so. That means stopping a couple of times a week during the summer. I also have a 2011 Ford Fusion Hybrid, which has a fuel capacity of 17 gallons, but gets about 35 miles per gallon, giving it a range of nearly 600 miles. Even filling up at 500 miles means very few trips to the gas station. This issue isn’t really serious, however, since even the old Lexus can be refueled in less than 5 minutes.

The Nissan Leaf, on the other hand, has a range that is both low and unpredictable. Under “ideal conditions”, Nissan analysis indicates that the Leaf can go as far as 138 miles on a single charge. “Ideal conditions”, however, means that car travels at 38 miles per hour on a flat surface without stopping or slowing down. The faster you drive it, however, the fewer miles it goes. Turning on the air conditioner seriously reduces the range. At 55 miles per hour with the air conditioner fighting 95° heat, the range is only 70 miles. The Environmental Protection Agency tests show an average range of 73 miles on a charge based on tests of five different driving conditions.

I recently spent a couple of days on Santa Catalina Island off the coast of Southern California (nice trip by the way). With small streets and little flat land, most islanders drive golf carts, which are almost entirely powered by gasoline engines. I asked several people why they did not use electric golf carts, and was told that traveling up and down hills drains the batteries almost immediately.

Furthermore, running out of electricity doesn’t mean a 5-minute refill at a gas station. The Leaf has a battery capacity of 24,000 Watt-hours (Wh), of which 20,000 Wh can actually be used. If your house has a normal 120 Volt system with 200 amps of power (pretty standard for new single family homes today), how long would it take to charge your Leaf? Assuming that you draw 20 amps (10% of your home’s power) and that the battery loses 10% of the power in the charging process, it would take a little over 9 hours (20,000 Wh divided by (20 amps X 120 volts X 90%). If you used a 240 volt plug, like a clothes dryer, it would cut the time in half, but you would still need 4½ hours of charging time. You can further accelerate the charging by drawing more amps, but you will at some point encounter serious safety concerns as well as overtaxing your power supply and possibly tripping your circuit breakers. In any case, you better count on several hours if you are recharging your electric car at home. Recharge time will increase if you are charging outdoors in cold weather or if your garage is very cold.

The problem of recharge time can be reduced if you use a special charger drawing high amps at high voltage (say, 480 V) at a commercial installation or office building. Several of the electric car companies, including Nissan, are selling jointly a quick-charge device of this type which they claim can recharge a Leaf to 80% of its battery capacity in 30 minutes, but the device costs over $15,000 and exceeds the power supply capacity of most residences.

The major point here is that running out of power in an electric car is not the same as running out of gas in your conventional car. The latter is a slight inconvenience, while the former is a major hassle.

Those consumer concerns are all well and good, but what about the environment? Aren’t electric cars a way to reduce our carbon footprint and thus mitigate the risk of global warming? Actually, no. The EPA has (at least in my humble opinion) done a disservice to the public in the way they calculate fuel economy for electric cars. The EPA estimates the amount of electricity required to travel each mile and then values that electricity at 3,412 British Thermal Units (Btus) per kWh. The EPA estimate for the Nissan Leaf of 340 Wh per mile translates into 1,160 Btu per mile. Gasoline contains about 115,000 Btus per gallon, so the EPA estimates the Leaf’s mileage as equivalent to 99 mpg (115,000 divided by 1,160). To be fair, this approach is logically consistent with the way the EPA estimates gasoline mileage, but there’s a serious problem here.

Estimating miles per gallon this way ignores the energy that is used to produce, refine and transport the gasoline. Burning one gallon of gasoline actually requires about 1.2 gallons of crude oil. We call this “well-to-wheels” analysis. Cars emit about 9 kilograms of CO2 for every gallon of gasoline they burn. The “well-to-wheels” emissions, however, are closer to 11 kg per gallon burned in the car. That distortion is not too serious for gasoline, but it’s much worse for electricity. If we start with our 340 Wh per mile for a Nissan Leaf, then factor in the 10% charging loss, the car needs to draw 378 Wh from the power grid. With another 10% loss in transmission and distribution, the grid must generate 420 Wh from its power plants. A natural gas fired combined cycle power plant, the most efficient technology currently in service, has a “heat rate” of 6,800 Btus per kWh. In other words, the power plant burns 6,800 Btus of natural gas to generate 1 kWh. To generate 420 Wh, we must therefore burn 2,860 Btus of natural gas. To deliver 2,860 Btus of natural gas to the power plant, we must consume another 500 Btus of natural gas in production and transportation. On balance, driving the Nissan Leaf one mile requires the combustion of 3,360 Btus of natural gas, not the 1,160 in the EPA estimates. The “well-to-wheels” fuel economy of the Leaf is thus 34 mpg, not 99. If the electricity source is coal, which is a much less efficient power generation technology, the fuel economy would be even lower at 23 mpg. The 99 mpg figure makes many observers, like Thomas Friedman and Nicholas Kristoff, go positively weak in the knees with joy, but it shouldn’t. The number really doesn’t mean anything. My Ford Fusion Hybrid has a “well-to-wheels” energy efficiency of about 31½ mpg – very close to the Leaf’s.

How about carbon efficiency? My Ford Fusion emits (well-to-wheels) about 350 grams of CO2 per mile driven. The Nissan Leaf (again assuming electricity generated by natural gas), emits about 180 grams – a reduction of nearly 50%. Unfortunately, most of the difference is due not to the inherent efficiency of electric cars, but to the use of natural gas rather than gasoline as a primary fuel. If we used a simpler approach and just burned natural gas directly in the car’s engine, we’d get almost the same carbon reduction at much lower cost. Moreover, if coal is the primary power generation fuel, electric cars emit considerably more carbon dioxide than conventional cars do.

Maybe electric car technology will make a quantum leap in the next two years, vindicating the President, but I very much doubt it. The key problem for electric cars is the battery. Battery technology has gotten better in the sense that a kilogram of lithium-ion batteries can store much more energy than a kilogram of the old lead-acid type. The new generation batteries, however, are much more expensive than their predecessors, and that is the real issue. The battery for the Nissan Leaf, which still offers a totally inadequate range, costs as much as the rest of the car.

The car companies will learn something from their electric car experience, and the scale-up will reduce costs a bit. The technology, however, is fundamentally flawed in its current formulation, and forcing it into the marketplace is not going to help. All the President is doing is helping some rent-seeking companies, like Fisker and Tesla, try to make money at the taxpayer’s expense. So far, the federal government has pumped about $2½ billion into electric car and battery manufacturing plus another $600 million in subsidies for consumers to purchase these cars. A subsidy of $3.1 billion is not a lot in Washington today, but it is (so far) nearly $40,000 per vehicle for cars which have no discernible benefit for society.

None of this analysis is new; it was all well-known to everyone before the President announced his million electric car program, and the disappointing results of the effort were quite predictable. The real purpose of such programs, however, is to create an illusion of progress in the hope (and unfortunately, in the very real expectation) that nobody will really care when the program fails. After all, in Washington, the only success metric is how much money is spent, not what results are achieved. Sooner or later, we will have to stop doing this.

About these ads

Responses

  1. Prof. Everett,

    I’ve enjoyed reading your posts and while I don’t always agree with everything, they’re always well researched and structured. On the electric car topic, I agree that Presidents (and the vast majority of elected officials) make confident and strong, yet ultimately overblown and optimistic forecasts about what the technology can do. But I think that there’s a stronger chance than you believe that all-electric cars will scale to a reasonable level and not just fail abysmally or remain a very minor niche product.

    The Nissan Leaf certainly does have its downfalls, especially on the range issue. I’d say that Tesla is the most promising EV manufacturer, as their 300 mile range (granted that it is variable) starts to approach gasoline vehicle range. Also, their Supercharger network promises to mitigate the “road-trip” problem, assuming that they actually are able to install them across enough of the major U.S. highway routes. Sure, still takes an hour to charge but I think that’s approaching the convenience that consumers would accept.

    The downfall is of course, the cost – the 85Kwh version of the Model S with 300 mile range retails is $72,400, clearly out of reach for most consumers and too much of a premium over a comparable gasoline vehicle to ever recoup the fuel savings. But if Tesla can – and this is a big if – follow through with another generation or two of models at lower price points, I think consumers would be very interested.

    Also, Model S can go 0-60 in 5.4 seconds, and its more expensive brother can (Performance edition) can do it in 4.2 seconds – not too shabby. Whether Tesla can actually follow through with its plan and get into the black on a regular basis will remain to be seen, but I’m cautiously optimistic.

    Stefan

    • Some energy technologies will be successful in the future. The issue is how to maximize the probability of success. In my opinion, offering heavy subsidies to commercialize technologies impedes rather than facilitates technology development. Historically, technologies have succeeded when private investors conclude that their technology can beat competitive products. If the government allows you to make money on inferior technology, why bother to engage in risk-taking innovation. In today’s energy world, a company can make more money hiring a good lobbyist than a scientist.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

Follow

Get every new post delivered to your Inbox.

%d bloggers like this: