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The Key Reason Electric Vehicles Matter

Jan. 16, 2011 12:11 AM ETAONEQ, GM, HEV, TSLA, NSANY1 Comment
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While most of a recent Seeking Alpha article titled 'Plug-in Vehicles and Their Dirty Little Secret' with 444 comments and counting is correct, there's a lot more to the electric vehicle story than the author's focus on emissions would lead the reader to believe.

EV Emissions and the Present and Future Grid

From an emissions perspective, running your car on electricity is about 25% cleaner than a standard car that gets about 25 mpg. But compared to a hybrid that gets more like 45-50 mpg, electric cars produce more emissions (e.g., carbon).

It's also true that more charging will likely occur at night, when the power produced is more heavily coal-weighted. However, while charging at night is worse from an emissions perspective it is much better from a grid stability and grid transmission perspective.

It's also worth noting that the mix of generation sources that provide power to the grid is changing - it is getting cleaner. Coal's share of the gird (in the U.S.) has gone from ~55% in the late 1980s to ~45% today. This trend will continue, especially as the U.S. continues to retire many of its older coal plants and replaces them with natural gas power plants, and more wind/solar.

The Environmental Protection Agency continues to tighten emissions regulations on power plants, so even newer coal plants (the few that will get built) are much cleaner and more efficient than the current ones. So using today's grid mix in assessing EVs ignores the improvement in emissions we'll be seeing in the future as the grid becomes cleaner.

How Much Do Electric Cars Really Cost?

There is one misleading remark the author makes on cost: in many cases running your car on electricity is actually cheaper than gasoline. $3.00/gal gasoline for a car that gets 30 mpg = $0.10/mile. If that car ran on electricity, it would get about 3 miles / kWh, and so for an electricity cost of $0.12/kWh (the US average), that works out to only $0.04/mile, or 60% less.

But this is only one example. Californians pay a lot for electricity, so it could be more expensive to run the car on electricity. Note: PG&E is working on rate structures that make it cheaper to charge at night, thus helping improve the economics for electric cars.

However, the cost of battery packs is expensive, so if you amortize the cost of the battery pack over the lifetime mileage of the pack, then that cost/mile obviously goes up for EVs. But is it really fair to do that? Do we similarly amortize the cost of a gasoline engine, fuel system, tank, etc? No. But without question, these battery packs are expensive, so the costs of the cars will be higher.

Why Electric Vehicles Truly Matter

So what's really behind all this fuss about rechargeable cars? If it's not about saving money, and not about reducing emissions, then what's left?

Energy security.

The biggest challenge our worldwide energy system faces is the near complete monopoly that oil has on the transportation sector. We heat our homes using a variety of energy sources. We make electricity using a variety of energy sources. But when it comes to the 3rd category of energy consumption (transportation) it is essentially all oil.

And making things worse is the fact that the U.S. imports about 2/3 of its oil, and 40% of those imports come from OPEC. This is not a very encouraging situation for whole host of reasons and warrants a separate article.

Hybrids help reduce oil consumption, which is obviously good for reducing emissions, fuel costs, and it helps reduce dependence on oil imports. But it does little to break oil's monopoly on the auto and overall transportation sector.

We need to find alternatives to oil, and the longer we wait the more painful it will become.

(Note: for more information on electric vehicles check out MIT's EV team page here and this recent report from the MIT Energy Initiative.)


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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