Several reports the last few days have focused on gasoline price as the primary determiner of whether electric vehicles will be successful this time around. One source of this comes from a recent webchat posted on GM’s Fastlane blog: Bob Lutz: The Volt technology is very exciting, but costs will have to come down before it can become generalized, and US fuel prices will have to rise to world levels, meaning $5 or $6 per gallon. Another source is from Toyota where they pointed to not just gasoline cost but battery pack cost in deciding to continue using Nickel-Metal-Hydride batteries rather than adopt Lithium-Ion batteries.
In this article I want to do a bit of informed speculation over this and other factors. I’ll be drawing on comments by a Tesla Motors representative at the Bay Area EV Corridor meeting this week (see: Planning for the coming wave of electric vehicles). These three tipping point factors for electric vehicle success were: 1) Crude oil price, 2) Carbon emission regulations, 3) Battery pack cost
Gasoline price is largely determined from crude oil prices. Last year gasoline prices went very high causing a lot of concern, and leading many to search for alternatives such as fuel efficient scooters and motorcycles. Obviously higher prices causes the customers to begin to look for alternatives. That’s economics 101, right?
Carbon emission regulations is another form of price pressure. In some areas of the world carbon emissions are subjected to actual government regulations, and in the U.S. similar regulations are possible. Gasoline and diesel emissions are known to cause other problems such as asthma. The potential or actual regulations can especially cause businesses to perform the desired action of seeking alternate transportation vehicles to decrease their environmental impact.
Battery pack cost is yet another price pressure in that expensive battery packs raise the vehicle price. As battery pack prices fall the vehicle price should fall as well removing the purchase price as a consumer issue. In part the cost issue is behind Nissan’s strategic decision to make the LEAF have a similar cost to gasoline powered family sedans.
Now let’s turn back to the Bay Area EV Corridor meeting and a factoid that implies a price advantage for electric vehicles.
Namely, that at $.12 per kilowatt-hour electricity is a $.90 per gallon gasoline equivalent cost, and that at $.40 per kilowatt-hour is a $3.20 per gallon gasoline equivalent cost. In other words by spending a given amount for “fuel” one can drive further on electricity than on gasoline, depending on the varying cost of electricity or gasoline. Electricity rates in California are generally $.12/kwh but can be $.40/kwh if the customer goes beyond their electricity allowance. Electricity also has a more stable price than gasoline which may be attractive to some.
By focusing on monetary cost the environment is ignored. It is the environment around us which gives us the life we have, and if the environment is ruined such that it cannot provide us life there is no amount of money which can buy us another planet to live on. By focusing on monetary cost are we looking at this problem from the wrong angle?
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