Electric Cars Still Show Little Promise

Published January 3, 2011

A new paper examining the viability of electric cars concludes, “Without subsidies and political pressure, it is doubtful that there would be much demand, except by the wealthy early adopters who want to make an environmental statement.”

In “Electric Cars: Not Ready for Prime Time,”¬†George C. Marshall Institute CEO William O’Keefe points out government subsidies and market intrusion have a poor record of teasing commercial viability out of their adherents’ preferred technologies.

Misguided Motives
O’Keefe’s paper notes government support for electric vehicles of all kinds is based largely on the threat of climate change and energy independence concerns. O’Keefe demonstrates, however, that achieving CO2 reductions through programs such electric car subsidies and mandates is economically destructive.

O’Keefe also establishes that attempting to achieve independence from foreign oil is a delusion , first because the world economy relies more on oil imports than the United States does, and second, because our Strategic Oil Reserve helps protect against a sudden disruption of oil supplies. In addition, the friendly nations of Canada and Mexico are the two that supply the most oil imports to the United States.

Importantly, O’Keefe uses an array of facts, with supporting documentation, to validate his summation of the climate change and oil independence issues.

Economic Losers
Tackling economic issues, O’Keefe presents an interesting analogy to demonstrate promoting electric vehicles will not create “green” jobs and, more importantly, does not result in the creation of the most productive jobs with the highest economic value. O’Keefe notes paying people to plant trees with a tablespoon would create jobs, but it would be far better to use machinery to do the planting.

Similarly, he observes, promoting electric vehicles may indeed create some “green” jobs in the electric car industry, but their economic and job-creation impact is as stunted as a government program to plant trees with tablespoons would be.

Hybrids More Promising
After explaining the economics, O’Keefe provides detailed information on electric vehicle specifications. This section can be a little confusing in places and could benefit from some data updates. For example, the paper intermingles plug-in electric vehicles (PHEVs) with electric vehicles (EVs). O’Keefe’s treatment of the issue can be excused, however, because many research firms also intermingle various types of electric vehicles, which makes it difficult to determine which categories are being included in sales forecasts.

PHEVs use a battery to power the vehicle for approximately 40 miles (depending on the type of PHEV) and then rely on an internal combustion engine to power the vehicle for greater distances, either directly or by recharging the battery. An EV relies entirely on a battery to power the vehicle, with the Nissan Leaf, for example, limited to only 100 miles before running out of power.

Hybrids such as the Toyota Prius, by contrast, rely on an internal combustion engine as the primary source for powering the vehicle. The battery is used to improve overall efficiency but is not the primary source of power for the vehicle.

Sales forecasts that group hybrids and PHEVs together don’t establish how many PHEVs are in the forecast. That can suggest large numbers of PHEVs will be sold when in fact their market potential is severely limited. O’Keefe correctly establishes PHEVs and EVs will remain a niche product. The total number of these vehicles in 2020 will remain a pathetically small percentage of the total fleet of light vehicles, even if all the wild sales projections are realized.

Upfront and Hidden Costs
Whatever the percentage of upcoming PHEVs and EVs, O’Keefe quantifies the very high costs for purchasing, operating, and maintaining the vehicles.

Data from the National Academy of Sciences (NAS) establish the battery pack for the Volt (a PHEV) will cost $18,000. GM has subsequently stated the battery pack will be rated at 16 kWh at a cost of $650 per kWh, for a cost of around $10,000. Whether the battery costs $18,000 or $10,000, PHEVs will cost much more than a standard internal combustion vehicle, even after fuel savings are factored in. The battery pack on an EV will be even more expensive.

O’Keefe then notes the large additional infrastructure costs, such as for charging stations and for building new power plants to provide the electricity needed for charging batteries. He does not, however, mention the hidden cost of replacing distribution and substation transformers as they become overloaded, which will add even more to the social costs of PHEVs and EVs. (Four articles, beginning November 15, 2010, on Power America at http://dddusmma.wordpress.com/ establish the hidden cost of PHEVs and EVs.)

O’Keefe concludes by pointing out using tax dollars to push PHEVs and EVs is a misallocation of resources. Without government subsidies, it is questionable many people would buy a PHEV or EV, especially when they can purchase a comparably sized internal combustion vehicle that doesn’t include the hassle of recharging the battery every day, for at least $10,000 less.

Another important point O’Keefe makes: Government has a poor track record picking winning technologies. And picking the wrong technology in this case could be the greatest government blunder of all, because other technologies may otherwise emerge that are superior to PHEVs and EVs.

Donn Dears ([email protected]), a former General Electric executive, is president of TSAugust and administrator of the Power America Web site, http://dddusmma.wordpress.com.