US Accountability Office: Plug-in Car Economics Are Uncertain

June 29, 2009

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.”

US General Accountability Office, June 2009

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.


Posted in Fleets, Incentives and Laws, News, Plug-In Hybrids
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  • Samie

    That picture is worth a million words! Hydrogen Hybrid/Plug-in w/ George & Dick. Who says they aren’t smart cookies they knew this program could not materialize, sham on some media types for not spelling that out back then. Looking at the picture I know why they all were laughing, I would to if I were them…..

    Anyways agree w/ the report how can the government buy plug-ins when there is no market yet for them? The auto industry is either playing games w/ the America Public or do not fully know what direction to take in terms of what technologies are going to work in the short-term future. Serial hybrids, EV’s, traditional full hybrids, 2-mode? Heck even at GM they are competing against themselves w/ the upgrade 2mode & the serial hybrid. So whats going on here? Not sure how the market will play out, in my opinion the automakers are playing a wait and see approach instead of trying to lead the industry into the next generation of vehicles but I may be wrong.

    The government should look at technologies now that could help like using hybrid cars eg. Prius/Insight/Fusion for fleet vehicles and as the market opens up start buying the best EV or hybrid options for the price. The government should wait until all the short term pricing, tech.(battery), and real competition develops in the market before converting large numbers of fleet vehicles.

  • usd777

    Samie: Can YOU develop and produce cheap and reliable car battery? Or THEY (George & Dick) somehow prevented you to achieve that? and also those japanese,chinese,korean,etc companies, fevereshly working towards car electrification? Don’t think so.

  • Chip Daigle

    I love to catch you Greenie Weenie overstating, understating, outright lying about an issue. The cost of a Chevy Volt will be $40K. A Toyota Corolla cost $20K. There is a huge difference there. Americans are not stupid. They will not put up with your line of bull. The car companies could have had Plug-In with NiMH Batteries 5 Years ago. This would have added 5 Miles to the MPG or 10 if you could charge your car at work for only $250 more per car. The stupid Detroit idiots can still do this. Instead of getting 100 MPG you only get 60 but you only pay $20K for the car. The Greens and Obama wanted to show this crap down out throats and I cant wait to see the Greens and Obama fail on this point.

    What the hell do you mean when you say, “ “the price of gasoline must be high relative to the cost of electricity to charge the vehicles.” Are you going to cap and trade the price of gasoline to $10/Gallon? You need to take a hint from your Fuehrer, Obama and learn how to be transparent.

    You Greenie Weenies have done everything you can to stop domestic drilling for Oil and Gas and then you have the nerve to say, “And the price of gasoline—which has greatly fluctuated in recent years—is even more uncertain.” You got a controlling streak in your language that is becoming more apparent every day. Watch out in 2010!

  • Samie

    Not sure what your point is usd777

    Blocking any real CAFE legislation and giving silly deductions for large SUV’s did not encourage much push to start working towards plug-ins or say EV’s nor letting California have tougher environmental regulations. Or no real long-term energy plan for the U.S.

    Can I make a cheap reliable battery???? What kind of question is that, if so I would be employed as an engineer not somebody that writes comments on a site like this. So not sure what you are saying. It takes time in r&d also real competition in the market along w/ strong government incentives for consumers and producers.

    I feel like others we may have lost a few years in terms of progress in at least offering in the long term a good alternative to petroleum products that is at price where most Americans could afford. How is it that we can compete domestically in any battery market or EV vehicles when a prez sent mixed messages about supporting such a movement? Do you really think that developing electrification of vehicles does not involve massive capital and government incentives to do so???? Most of those foreign car companies you mention are being supported by their governments though long-term funding. But do Bush policies matter in the long-run, that is not putting a damper on where we need to go, I hope you are right but silly comments like the one below you may help again slow down any real move if enough people feel the same way, w/c in 3 yrs you will see a reduction in policies towards electrification & an increase in dumb drilling policies, hydrogen, & E85 junk.

  • Dan L

    Good News!

    It is no surprise that expensive batteries ruin the economics of plugin hybrids. Battery prices have to come down before PHEVs will make economic sense. But, for ordinary people there is no way of knowing what the price of batteries is. There are no published prices. Each automaker cuts its own deal. The most credible number that I had previously heard for Lithium Ion car batteries was $2000/kwh. So when the government does the research and indicates that the current price is $1000 to $1300 per kwh, that is good news.

    Let me just run the new numbers:

    Consider the case where you have a PHEV, charge it once a day, and fully discharge it every day. You drive it 360 days a year for 10 years, for a total of 3600 battery discharge cycles. At $1000/kwh for the battery, and 6 miles/kwh efficiency, the battery cost is $0.046/mile . If you recharge at work, and so can get 7200 cycles out of the battery, the battery cost goes down to $0.023/mile.

    Assume that gas costs $3/gallon, electricity costs $0.12/kwh and the vehicle gets 50mpg for gas operation. Gas operation costs $0.060/mile. Electric operation costs $0.066/mile (3600 battery cycles) or $0.043/mile (7200 battery cycles) when you include both energy and battery costs.

    Electric operation is actually now price comparable to gas! Or at least it is in my contrived example where I found a way to get more than 3600 discharge cycles out of the battery and ignored the opportunity cost of the up front battery purchase. Still, that’s real progress compared to $2000/kwh batteries. They never make economic sense in any scenario.

  • Robcares

    Hey Chip, what are you doing hear? did the cable go down in your double wide? Go back to the T.V., turn on the Fox, so called news channel, grab the bear bong and a brew-sky out of the frig. Go back to cleaning your assault rifles so you can defend yourself when the Fed’s come to take them away.

  • Tony

    “Blocking any real CAFE legislation and giving silly deductions for large SUV’s did not encourage much push to start working towards plug-ins or say EV’s nor letting California have tougher environmental regulations.”

    Who blocked CAFE legislation? It was Bush who PUSHED for CAFE legislation. The left felt that the president should simply ignore the constitutional separation of powers — you know, the principle that makes it illegal for the president to simply declare higher fuel efficiency standards on his own without legislation.

    “Or no real long-term energy plan for the U.S.”

    You’re thinking of the Clinton administration. The Bush administration advanced a plan in 2001 which, had it been enacted, would have resulted in the current retail availability of at least the second generation of something akin to the Chevy Volt, along with several competing offerings from competitors.

    I understand that you have a political point of view. That’s a big part of what this site is about. But you have to give at least some consideration to the real facts.

  • Lost Prius to wife

    Chip Daigle, what are you trying to do? Sell the United States and our future generation of children to all the foreign countries including the Arabs? We can drill and drill and drill and pull all our oil out of the ground and then what? Who will we be beholding to for “our” oil? And do you think that all the other countries want to run out of oil before us and be beholding to the United States for “their” oil?

    Oil dependency is a very delicate dance between all countries fraught with enormous amount political intrigue and fears of running out too soon. And this with an increasing world population with no real energy alternative yet in sight for an oil powered world economy. Do you think it might be possible that World War III could start as a result of no more fuel for the masses to live by? And what is your definition for a “Greenie Weenie”? Is it someone that is not will to make every single dollar they can today so their future generations of children will actually have a future tomorrow? And you question the “Greenie Weenies” as to their motivation? I would really question your motivation.

    You question Samie’s motivation. Sometimes I think he is right, sometimes I think he is wrong. Most of the times I think his thoughts are mostly right or a mix of right and wrong, but he is always supplying food for thought for me (and others) along with as many facts that he can find. And he is not the only contributor that does so.

    Samie’s thoughts and ideas at least show that he is not willing to “rob Peter” now knowing that it just means that he has to “pay Paul” later. Samie knows that oil will not last forever. When are you going to leave your “drill, drill, drill” attitude and realize that too?

  • Henry Keultjes

    Chip:

    For someone like my wife, who drives about ten blocks to work then leaves the car sitting there rusting for eight hours, drives it back and leaves it sitting in the garage rusting and depreciating, I figure the ecconomic value of a car is no more than $7,500. So, last year, when it was apparent that the GM Mansfield Metal Center would close, I suggested the facility be used to build all the components and assemble a $7,500 commuter type plug in. My friend Eddy Dwyer drives a CitiCar, a BEV, with plain lead-acid batteries for a commute that is about five times as much as my wife’s. That car was built in 1973 and obviously it it not the most modern vehicle in the world but it gets him around for less than the cost of a scooter and it keeps him out of the rain. The reason we don’t have any cars like that yet is that the overhead of the typical car companies is just too high and even non-typical companies like ZENN get away with charging $15,000 because the market will bear it right now. However, when people realize that the economic balloon is gone forever, the market for a $7,500 commuter car will be at least a million units which leaves the rest of the manufacturers to fight for an annual eight million passenger vehicle market at best. Why? Simply because that’s all people can afford to buy and if we go back to our excesses of buying more cars and more houses than we can afford the DOW will probably go down to 4000 instead of 5000. Just reckon that the people who buy such a $7,500 car instead of a $40,000 Chevy Volt won’t have to work nearly so hard and can be just as happy and probably sleep better.

    So am I speculating or blowing smoke about that $7,500 price? I have been in manufacturing for quite some time getting into ergonomic chair manufacturing in a very unconventional way enabled by developing my own uunique software that gave our company very high productivity. Making a car like the ZENN will require a similar approach, thinking outside the box, and I believe it can be done. But it has to be done on a shoestring with private investors and a plan to never go public because that by itself makes such a plan impossible because venture capitalist require returns that are even higher than what the big car companies need. Don’t get me wrong, this will definitely be a capitalist venture but it will be a Main Street capitalist venture, rather than a Wall Street capitalist venture.

    Henry Keultjes
    Mansfield Ohio USA

  • Samie

    Tony when you accuse someone of not adding facts to their comments that’s fine but when you don’t offer any facts of your own that is just silly. How can I respond if you don’t provide “real facts”

    So here I’ll give you some highlights, I would be glad to debate this if you like….
    http://en.wikipedia.org/wiki/Corporate_Average_Fuel_Economy

    2004 Bush Administration wanted to overhaul CAFE regulations by having vehicles in weight classes instead of fleet-wide efficiency targets. That would have been funny just add a few pounds to each car to get around requirements

    2006 Light Truck requirements set by the Administration an increase of 1.2 increase

    2007 Bush did not propose any mandatory CAFE regulations

    Bush signs CAFE regulation but does not create criteria on how it will be regulated. 03/26/09 Obama sets requirements for NHTSA rules.

    So here is your challenge explain how reducing gasoline consumption was improved beyond what appears to be marginal improvements in ICE efficiency under the Administration, you need to remove renewables like E85 out of your argument. Also explain how tax deductions for large SUV’s helped reduce consumer and producer behavior for larger less fuel efficient vehicles…..

    I don’t have to explain the California legislation you can easily read stories from this site and how the Bush Administration blocked/ignored Co2 enforcement even w/ the Supreme Court saying the EPA could regulate CO2.

    Did the Administration come up with energy plans yes but look at what the main highlights were: Nuclear, Offshore Drilling, and a lobbying favorite Clean Coal. If you would like I can argue about this subject, w/ facts. Again don’t complain about facts unless you actually post some, so we can have an intelligent conversation.

    I’m not a Greenie or lefty at all I find it funny when I hear that. If you read what I post you will see that I will go after Demos also and I’m not a big fan of some alternative energies that many traditional people support in the Green movement.

    Thanks Lost Prius to wife for your comments. I just write my own opinions & never expect others to completely agree w/ me, by reading other peoples comments like Lost Prius to wife I have learned a great deal about a wide range of topics from stories that are posted to this site.

  • Steve R

    It’s GAO, not GOA! Who’s editing this?

  • Lost Prius to wife

    Steve R, if I did not run almost everything I write to this site through Word, the laughter from my failed editing could probably be heard from coast to coast. Everyone posting to this site is responsible for their own editing and content. I sometimes wish for some people to do a little more editing. But most of the time I can figure out what they really are trying to say. So far, I have only found one person that posted an irrelevant and very offensive comment – and the site owners agreed and removed it. Everything else on this site is free speech, facts, and opinions (misspellings and all).

  • Energy Expert

    Electricty is NOT clean energy

    It amazes me that what the report failed to mention is:
    1) About half of all US electricty comes from coal
    2) Our Electrical generation, transmission and distribution is about 32% efficient on average

    When you add those up: A plug-in electric car IS a dirty coal burning car; Which offers no real energy reduction, or environmental benefit over a gasoline car. Never mind that fact that our generation and infrastructure can’t keep up with mulitple computers per house, and big screen televisions let alone trying to double the electric demand by putting cars on the grid.

    People are falling for this hook, line and sinker; Just like they fell for the “live better electrically” campaign and installed electric heat and electric hot water in their homes so the utilities could sell them more electricty. [resistive electric heat uses about 3 times as much energy as heating with natural gas and triples your carbon footprint]

    And to anyone who would consider rebutting about using renewable energy for the cars. Great idea, but why bother with the car pice right now. It will be 50+ years before we are anywhere near displacing our existing dirty electricty consumption with any form of clean energy – and that doesn’t include enough excess generation to make more clean energy generators (think EROI – energy return on investment). Once all our conventional electric demands are satisifed with renewables then we can take on the electric car transformation.

  • Samie

    I will keep this brief I completely disagree w/ Energy Expert how is it renewables offers a better option, than say electricity. Renewables take-up land resources can destroy protected wildlife areas and adds another layer of processing energy through harvesting, pesticides, & turning it into fuel. The largest problem w/ most renewables is that its a fuel that we stay dependent on w/ annoying interest groups that make sure it does not go away eg corn ethanol. We don’t offer a good alternative to petroleum products and maybe new countries besides Venezuela and Iran give us problems w/ supply and energy stability eg. Russia w/ its natural gas in the form of CNG. As I said it keeps us dependent on a fuel source where as electricity can fuel our cars through multiple ways including grid-free home energy stations. Yes coal is bad but unlike petroleum we can find different ways to “fuel our cars” so the more we think in terms of ideas from the 1990′s the less investments will go towards advancing batteries and other components for EV’s also less market choices & higher prices.