Everywhere you turn you see more and more electric powered autos and SUV's. Names like Tesla have gone from fringe to mainstream. Many, particularly those who fear environmental apocalypse due to global greenhouse gas emissions, believe a conversion to electric vehicles is absolutely essential.
So just how strong, and compelling, is the case for electric vehicles (EV's)? Recently, I received an email that concluded the case for electric vehicles was way overblown. I concluded that the case against electric vehicles in the email was flawed, mainly due to some bad assumptions. However, it got me thinking, maybe the email had some flaws, but that the author actually was fundamentally on the right track. Just how strong is the case for EV's, and will they produce the desired results? My conclusion is yes, the case for electric vehicles is quite compelling. They could make a huge impact on greenhouse gas emissions, but there are some important variables that need to be considered. Let's explore the case for EV's, as well as the issues that might be problematic.
My immediate conclusion is that the case for electric vehicles is pretty compelling. It comes down to the cost of driving. Let's consider the out of pocket cost of driving 100 miles in a gas powered vehicle versus an electric vehicle. A couple of basic assumptions/data points:
- The average gas powered vehicle can drive about 20 miles on a gallon of gas, which costs about $ 2.20 (actually, it ranges from about $ 2.00 to $ 3.00 around the USA at present).
- The average electric vehicle (EV) takes about 30 kilowatt hours (Kwh) of electricity to go 100 miles; and the average cost of one Kwh in the USA is about 12 cents.
That means the cost of driving 100 miles in a gas powered car is about $ 11.00, but the same 100 miles in an EV is only $ 3.60! The average driver in the USA is behind the wheel for about 12,000 miles in the course of the year, so the net savings of the EV per year is $ 888, at least in terms of fuel. Of course, the cost of buying an EV is greater, but the cost of gas is pretty significant.
Many people are skeptical that greenhouse gases are a problem, but there's a good chance they'll still be interested in EV's because of the savings on gas, and also because reduced usage of petroleum means less dependence upon potentially unstable countries in the Middle East and Venezuela.
These numbers are averages, and averages can be mis-leading. For example, while the average price of electricity is only 12 cents/Kwh, in Hawaii it's 37 cents, over triple the average! Do the economics still make sense? Yes they do, partly because the average price of gas in Hawaii is about $ 3.00/gallon. Thus, in Hawaii it costs about $ 11.10 to power the EV 100 miles, but the cost of gas for the same 100 miles is about $ 15.00, still substantially higher. Hawaii is a real outlier on electric rates. The next highest average Kwh cost is New York, at 18.8 cents, half the rate of Hawaii. Thus, in every state, the out of pocket cost of powering the average EV is a good bit less than a gas or diesel powered vehicle.
This alone should help EV's to become an increasing percentage of the vehicles on the road. That fact that battery technology continues to improve, causing the price/performance of batteries to get better, will also increase demand for EV's. At the same time, the fact that driverless vehicles are on the horizon may spur the growth of EV's. People will soon be buying driverless vehicles, so if you're buying a new vehicle because it is driverless, why not also benefit from EV technology? Because of this, you're probably going to see lots more EV's. Growth rates are pretty high.
Which raises an important question: can the nation's electrical grid/infrastructure handle the increased load? At least in certain parts of the country, this might be problematic. For example, in San Francisco, the average house draws only about 2 kilowatts of electricity at peak times, but one electric vehicle plugged in at peak times will increase that load anywhere from 6.6 kilowatts to as much as 20 kilowatts, if the vehicle is getting a "fast charge".
The US Department of Energy's Pacific Northwest National Lab has calculated that the US electrical grid could handle as many as 150 million electric vehicles, about 75% of all of the cars, pickups and SUV's on the road, so this shouldn't be a problem. But could it be? The simple answer is "yes, it could be". The reason has to do with peak demand. An electric utility must always be conscious of its peak demand, meaning the point in time during the day/week/month/year when the maximum demand is placed on the system. The peak may only last for two or three minutes, but if there isn't enough capacity available during those two or three minutes, the system will crash. The USA has had at least three major power blackouts over the past 50 years, all somehow related to this problem. So how many EV's could the system handle and not have an impact on peak demand?
The chart above, representing electricity demand for a New England utility, shows the problem, as well as the solution. The peak demand occurs in the evening, between 6 and 8 pm (18:00 and 20:00 on a 24 hour clock), especially during the winter when everyone has their heating system on max. In places like Florida, peak demand occurs in the late afternoon in the summer, when air conditioners are working overtime. If that peak period grows, the utility has to add expensive capacity, driving up costs for everyone. Every utility needs expensive standby capacity to handle these peaks. In contrast, notice that electricity demand is pretty low from midnight until 6 am, as well as from 10 pm to midnight. Not at all surprising. Imagine two possible scenarios: 1) Scenario 1 – everyone plugs in their EV to charge from 7 pm to 11 pm; and 2) Scenario 2 – the EV's are charged from 11 pm to 6 am?
If there are lots of EV's, Scenario 1 is a disaster, but Scenario 2 could be a sweet dream for everyone. If you increased electric demand to average 15 gigawatts between 11 pm and 6 am, you'd increase total demand by about 10%. It would take absolutely no additional generating capacity because the peak demand would not be affected. Michael Barnard, writing last year in Cleantechnica, estimated how big an impact there would be on California's grid if there were 3 million EV's by 2021, an estimated 10% of the total in the state by then. Barnard estimated that it would take 20 Twh to charge those 3 million EV's, about 10% of the states current 200 Twh capacity. Assuming California's load demand is similar to the New England utility cited above, that 10% could easily be found if the 3 million EV's are charged between 11 pm and 6 am. So the obvious question is, how do you get John and Jane Doe to recharge their EV between 11 pm and 6 am instead of between 7 pm and 11 pm? Most likely, John and Jane will arrive home at 6 pm or 7 pm, then plug the car in for the night. Once you plug the vehicle in, the juice starts flowing, and a disastrous Scenario 1 begins to unfold.
The good news is, there's a simple solution; the bad news is, it may not materialize. Let's consider the issue. The simple solution is smart metering and demand-based utility rates. Utilities have the technology available to load level their system. With a smart meter, John and Jane Doe can plug their vehicle in at 6 pm, then unplug it at 6 am the next morning, fully recharged. The smart meter determines the best time to draw upon the system. The vehicle may only require a charge for about two hours, so the meter should be able to figure out when to turn on the juice, then turn it off. It may be the best recharge time is between 3 am and 5 am. John and Jane Doe don't care, as they'll likely be sound asleep. All they care about is that the EV is charged and ready to go at 6 am.
The utility can help ensure that by using peak demand pricing (i.e., increasing the price during the peak hours in the early evening and dramatically reducing the price during the overnight hours). With these price differentials, the smart meter can then plan the charging schedule accordingly. An entire grid of smart meters will control usage, system wide, and avoid the peak system demand.
That should be the end of the story, but it unfortunately is not. That's because many electric utilities around the country have perverse incentives to increase their peak demand. Yes, that's right, the utility is effectively incentivized to drive up peak demand. The reason has to do with one of the perverse side effects of public utility regulation. Traditionally, electric utilities (and other utilities) have their rates set by state public utility commissions. The rates are set based upon the following simplified criteria:
- Total operating expenses of the utility (OE)
- Total capital investment (C)
- Allowable rate of return on the capital investment by the company and its shareholders (R)
- Projected hours of usage (KWH)
The hourly rate = (OE + R*C)/KWH. This formula covers all of the operating costs of the utility, plus provides a return on capital to the investors. Sounds fair, except that it creates a perverse outcome: the utility is incentivized to make capital investments because the bigger its capital stock, the more revenue it generates, and the greater is its profit. Investors like that. This is simplified, but you can see that the utility has an incentive to keep building out its capital base. Thus, it has an incentive to push up its peak demand point, so other things being equal, the utility actually has an incentive to encourage John and Jane Doe to charge their EV in the early evening!
This is a perverse outcome, but the good news is that there is a solution. Change the way utilities are regulated. Some states are beginning to do this, but incentives need to change.
So demand for electric vehicles is likely to continue to grow, except for one other problem that's been there all along – the problem of recharging the vehicle. EV's today have ranges of 200 to 250 miles, sometimes less. It shouldn't be a problem because the average person drives a little under 30 miles. Even if you forgot to "top up" your EV overnight, you should have at least 30 miles. The National Household Travel Survey looks at typical driving habits each year. During 2009 the survey looked at 748,000 individual car trips, a representative sample for the year. They found that 95% of trips are less than 30 miles and 99% are less than 70 miles. If the typical EV has a range of 200 to 250 miles, is there really a problem? Is the tail wagging the dog?
Unfortunately, it does seem that way. People are putting off buying an EV because of a fear that may materialize on only 1% of their trips. Lots of attention is being paid to setting up charging stations, as well rapid battery changing, but there isn't a quick solution in sight on this.
Well, actually, there is. It's one that's been there, in plain sight, for many years: rental cars. The simple solution for those 1% of trips where one needs to drive 150 to 300+ miles is just to rent a car. Even if you don't own an EV, or ever plan to own one, the rental car option is smart. Here's why. It's estimated that the "all in" cost of driving one mile is about 55 cents. If you take a 500 mile road trip, your real "all in" cost is about $ 275.00. You can rent a typical automobile for about $ 30/day plus the cost of gas. Assuming a one day trip of 500 miles, the real cost of driving your auto is about $ 275. You should be able to rent a car, as well as pay for gas and insurance, for about $ 100, substantially less than the real cost of driving your car. My wife and I don't own an EV yet, but we regularly do this for any road trip of 500 miles. In our case, that's a trip from the Tampa Bay area to Miami and back, all within the State of Florida.
Now apply that idea to an electric vehicle. When John and Jane Doe need to take a 500 mile trip, maybe once a year, leave the EV at home and rent a car. EV manufacturers could team up with Hertz, Avis, or some of the other rental car companies and create a convenient service for EV owners. So when the EV owner needs to take a long drive, provide a convenient way to avoid the fear of running out of juice on the trip. Many auto dealers already have rental car operations. Why not expand it and make it easy for customers to stop by and pick up a rental car for those 1% of trips when they have to make a longer drive? Get the EV re-charged, washed and serviced while you're away? Pick it up when you return?
The case for electric vehicles is pretty compelling, in my mind, and only getting more so. Yes, there are some challenges, such as the utility ratemaking one described above, but they can be solved. Even if you're someone who believes global warming is a hoax, you could personally benefit by buying an EV and enjoying what it offers.
