US Accountability Office: Plug-in Car Economics Are Uncertain
When former President Bush signed Executive Order 13423 in January 2007, he required federal fleet managers to buy plug-in vehicles as soon as possible. The exact language of the directive was as soon as plug-in cars “become commercially available and can be purchased at a cost reasonably comparable to conventional vehicles based on life-cycle costs.” But getting clarity on that cost comparison has proven to be tricky business.
In an effort to better understand how to implement the order, the US Government Accountability Office conducted a yearlong analysis of the challenges concerning Executive Order 13423—and released the results last week. The GAO determined that uncertainties regarding the relative high cost of batteries and low-cost of gasoline could indefinitely delay federal purchase of plug-in cars.
The same cost factors—expensive batteries and cheap gas—could stymie the adoption of plug-in cars by individual consumers. While consumers interested in purchasing a plug-in car may be motivated by different reasons—and generally are less rational than fleet buyers—the economics of buying and fueling plug-in vehicles will certainly be one important factor.
The GOA’s review of current battery costs indicated that lithium ion batteries suitable for plug-in vehicles currently cost about $1,000 to $1,300 per kilowatt hour—a cost which drives up the per vehicle cost of plug-in hybrids and electric cars by several thousand dollars or more. These upfront costs could be offset over time, according to the GOA, but for this to occur, “the price of gasoline must be high relative to the cost of electricity to charge the vehicles.” While the cost of batteries is expected to come down, nobody knows exactly when that will be. And the price of gasoline—which has greatly fluctuated in recent years—is even more uncertain.
Making a determination about full life-cycle costs—the key to unlock federal purchases of plug-in cars—is difficult when the ownership costs remain a mystery.
“First, the fuel economy of planned plug-in hybrids has not been announced and will vary greatly depending on how agencies plan to use them. For example, plug-in hybrids used only within the all-electric range will use no gasoline at all, while plug-in hybrids used for long-distance driving may not offer fuel economy much better than a conventional hybrid or highly fuel-efficient gasoline-powered vehicle. Secondly, their maintenance costs could be significantly more or less than conventional technology. For example, failure of vehicle batteries––which will likely be the vehicles’ most expensive component––after warranties expire could entail significant costs for agencies.”
The current lack of availability of plug-ins means that federal funds already allocated to purchase fuel-efficient vehicles will not be used to buy plug-ins—except for a few low-speed hundred neighborhood electric vehicles. Cars that connect to grid, while expected in the next year or two, will not become available before the deadline for using allocated funds.
Even when plug-in cars first hit the market, availability will be limited during the first few years—and therefore fleet managers will not be able to negotiate with auto manufacturers for the discounted prices they usually receive. These higher purchase prices could further undermine the potential economic benefits of plug-in cars for fleets. In addition, there are uncertainties about maintenance and reliability of the vehicles, a lack of understanding about charging infrastructure, and a lack of measurement and guidance regarding the make-up of electricity to be used as fuel. As a result, fleet buyers face a dilemma in determining when the “cost [of plug-in cars] is reasonably comparable to conventional vehicles.”
The GOA recommends that the Secretary of Energy develop a full set of guidelines for resolving these uncertainties. The office also recommends that the Administrator of the General Services Administration consider providing information to agencies regarding total cost of ownership or life-cycle cost for plug-in vehicles compared to conventional cars in the same class. This information could also prove helpful to consumers in evaluating the purchase of a plug-in car.