Common Concerns about Electric Vehicle Policy and Electric Vehicles

This companion brief contains common concerns regarding public involvement with electric vehicles as well as the vehicles themselves. For information about the public benefits and risks of public involvement with PEVs, please see Companion Brief: Public Benefits of PEVsand Companion Brief: Common Concerns About electric vehicle policy and Electric Vehicles.

Public Policy and Electric Vehicles

Is the government picking winners among vehicle technologies? Is public policy supporting natural gas vehicles, fuel cell vehicles, and other alternative fuels?

There are many different public policies and programs for alternative fuel vehicles across federal, state, and local governments. All alternative fuel vehicles are receiving support from the federal government to some extent. For example, a number of alternative fuel vehicles are eligible for tax credits to lower their upfront cost. Any inherently low emission vehicle including natural gas vehicles and fuel cell vehicles are eligible for HOV lane exemptions. In addition, Congestion Mitigation and Air Quality funds have been spent on natural gas refueling infrastructure and natural gas vehicles.

However, electric vehicles have received a great deal of attention from policymakers recently for a number of reasons. To date, private investments in electric vehicles have helped jumpstart the market, far outweighing investments by government. For instance, General Motors committed to introducing an electric vehicle before there were government incentives to do so. Although public policy has spurred some automakers to introduce electric vehicles before they would otherwise, private manufacturers and consumers – not government – have been the primary driver behind electric vehicles. Almost every major automaker will have electric vehicles on the market within a year or two. Moreover, mass-produced electric vehicles are already widely available nationwide. Ultimately, consumers will determine what vehicle technology is successful. Many public policies and programs are not choosing a winner, but instead are aimed at leveling the playing field.

Numerous examples exist for government to help to enable the adoption of all alternative fuel vehicles, but the opportunity that electric vehicles offer, such as zero tailpipe emissions and the potential for significant oil savings, have made them more attractive to support than the others at present. Moreover, electric vehicles are more widely available than other alternative fuel technologies such as hydrogen fuel cell and natural gas vehicles.

Do electric vehicle incentives prioritize the transportation of a wealthy, tech-savvy minority over the vast majority of the public?

These incentives are part of a long-term strategy towards a more sustainable transportation system. Even as electric vehicles remain expensive today, everyone benefits as more of these vehicles hit the road. Encouraging electric vehicle adoption improves public health and air quality, reduces greenhouse gas emissions causing climate change, and stimulates our economy by allowing consumers to keep (and spend) more money locally. These public benefits will accrue as electric vehicle adoption grows (see Companion Brief: Public Benefits of PEVsfor more information).

Electric and other alternative fuel vehicles can eventually vehicles that are suitable for consumer needs. Given time, electric vehicle manufacturers can learn how to achieve the cost-cutting measures associated with more efficient manufacturing processes while improving vehicle quality and electric driving range. Delivering an electric vehicles that are appropriate for all also depends on fostering an environment that will enable technological breakthroughs in battery and other vehicle technology. Many of the advances that electric vehicles achieve will be applied to conventional and other electric drive vehicles, so investments in advanced vehicles can even help all consumers in the near term.

The early stages of the electric vehicle industry will rely on wealthier-than-average and tech-savvy consumers. However, as the industry grows, more consumers will be able to purchase these vehicles while public benefits accrue.

Should we be supporting a vehicle that has such low adoption rates?

Support for advanced vehicles like electric vehicles is warranted because they present a transformative opportunity for the transportation sector. Electric vehicles, in their first year of mass market availability, surpassed year one sales of hybrid electric vehicle by a large margin. For example, the Chevrolet Volt outsold the Toyota Prius in its first year on the U.S. market by more than 30 percent, or 2,000 cars. In 2012, electric vehicle sales will more than double 2011 sales. Much of the negativity in the media around electric vehicles is because of high expectations set by  both manufacturers and government that in retrospect were unachievable. However, ambitious near-term goals helped spur investment in the industry that may not have occurred otherwise.

More importantly, electric vehicles are a long-term value proposition that will take decades to fully materialize. Year-to-year sales may vary greatly, and electric vehicles will remain a very small part of the overall vehicle market for years to come. However, electric vehicles present a rare opportunity to address critical energy and environmental issues.

Do electric vehicles pay their fair share of highway and road maintenance?

In fact, no vehicles currently pay their fair share. The Highway Trust Fund has deteriorated primarily due to inflation since federal gas taxes have not been raised since 1993. At present, nearly all states receive as much or more funding from the federal government for highway programs than they contribute from the federal motor fuels tax. A report by the Congressional Budget Office estimated that revenue to the Federal Highway Trust Fund, which helps fund many state transportation departments, would have a cumulative shortfall of $147 billion between 2012 and 2022 due to inflation and federal fuel economy standards.

Moreover, in 2007, user fees such as state and federal fuel taxes, vehicle registration fees, and tolls paid for only 51 percent of the $193 billion authorized to the federal-aid highway program. In contrast, forty years ago, user fees accounted for 71 percent of the amount spent on roads. The rest of highway funding comes from non-user fee sources, including income, sales, and local property taxes as well as debt financing from bond issues.[i]

As such, electric vehicles drivers contribute to highway and road maintenance because drivers often pay income, property, and vehicle sales tax, as well as tolls and vehicle license and registration fees. At the same time, no vehicle is actually contributing a “fair share” because of the diminishing role of user fees.

Because of these shortfalls, the current method to finance transportation is unsustainable. Funding shortfalls would persist even if special taxes and fees were imposed on electric vehicles, especially considering that electric vehicle market penetration is currently far below 1 percent. In sum, the highway financing shortfall existed long before electric vehicles were available, and reform efforts must be much broader than electric vehicles.

The transportation finance system is unsustainable regardless of PEV market growth, but PEVs offer an opportunity to pilot alternative mileage measurement and financing mechanisms while delivering many public benefits (see Companion Brief: Public Benefits of PEVs). For example, Oregon’s Office of Innovative Partnerships and Alternative Funding houses both electric vehicle infrastructure deployment and alternative transport finance mechanisms, which allows for the transportation finance team and the electric vehicle charging infrastructure deployment team to collaborate and keep each other informed. According to another DOT, one crucial reason to get involved with PEVs is that PEVs could be important players in the transportation system of the future.

If electricity comes from coal and natural gas, do electric vehicles actually reduce GHG emissions?

Currently, most studies show that even if electric vehicles charge completely on coal power, they still release fewer GHG emissions than the average new 30-mpg conventional vehicle. Charging on natural gas makes electric vehicles comparable or better than the best hybrid electric vehicles in terms of both GHG and air pollutant emissions according to several studies (see Companion Brief: Public Benefits of PEVs). Moreover, unlike conventional cars, the emissions profile of electric vehicles will get cleaner as they get older because the electrical grid is becoming cleaner.

In the future, new federal vehicle standards will require new light-duty vehicles to achieve up to 54.5 mpg by 2025. These standards may diminish the relative advantage electric vehicles have over conventional vehicles for GHG and air pollutant emissions. On one hand, conventional and hybrid electric vehicles will get better fuel economy and thus emit less; on the other hand, new technologies and a cleaner grid will allow electric vehicles to emit less.

Electric Vehicles

Are electric cars safe?

Electric vehicles are as safe or safer than their conventional counterparts. Electric vehicles are currently powered by lithium ion batteries, which can catch on fire in the worst circumstances similar to a conventional vehicle’s fuel tank. The media has reported on isolated instances, usually after crash tests, where electric vehicles have caught on fire. These problems have either been resolved or misrepresented.

Most notably, after one such incident, the National Highway Traffic Safety Administration conducted an in-depth study to examine the safety risks of electric vehicles. NHTSA concluded that electric vehicles do not pose a greater risk of fire than gasoline-powered vehicles, which can also catch fire. Moreover, both the Chevrolet Volt and the Nissan LEAF received five-star crash test ratings from NHTSA, which are the highest safety ratings available.

However, the safety risks of electric vehicles are different from conventional vehicles. It is important that firefighters and other emergency aid responders understand these risks; for example, water should never be used to extinguish lithium ion battery fires. The National Fire Protection Association has created a website devoted to EV safety training at EVsafetytraining.org.

Where should electric vehicles be taken for maintenance and repair?

Service on components that electric vehicles share with conventional vehicles like tires, struts, etc., can be conducted by a standard repair shop. However, NHTSA recommends an automaker-authorized repair center handle the unique electrical and battery components of electric vehicles.

Broadly speaking, electric vehicles should require less maintenance than conventional vehicles because electric drive systems contain fewer moving parts. For example, pure battery electric vehicles do not require oil changes. Plug-in hybrid electric vehicles only use gasoline sparingly, thus requiring fewer oil changes than a vehicle that runs exclusively on gasoline.

How quickly do electric vehicle batteries degrade?

Ambient temperature and the presence of thermal management systems have the greatest effect on electric vehicle battery degradation. According to DOE, a lithium ion battery in Minneapolis, Minnesota theoretically should have 10 percent more capacity at the end of ten years than a battery in Phoenix, Arizona. The presence of liquid cooling can increase battery life by 15 percent after ten years compared to a battery without a thermal management system.

Automakers conduct exhaustive tests on electric vehicle batteries to ensure adequate range over the lifetime of the vehicles. General Motors, for example, has stated that it has accumulated more than 150,000 test miles. Another electric vehicle manufacturer estimated that degradation to 80 percent of the original battery capacity would not happen for at least five years. Electric vehicles also come with warranties, usually around 100,000 miles over eight years, although these warranties come with certain charging and temperature conditions. Finally, as a hedge against uncertainty regarding the battery, electric vehicles can be leased at low costs.

Real-life use of electric vehicles may vary from laboratory testing, especially for the earliest models. So far, one electric vehicle model that did not have a thermal management system has shown degradation at a much faster rate than expected, purportedly due to high ambient temperature as well as high mileage. The manufacturer has pledged to use a new battery design for all future models.

As automakers gain more experience with electric vehicles and thermal management systems, incidents of unexpected accelerated battery degradation are likely to diminish.

What is the residual value of electric vehicles and electric vehicle batteries?

It is too early to tell what the long-term residual value of electric vehicles will be. After one year, two electric vehicle models retained at least 90 percent of their post-$7,500 federal tax credit value. Over time, the first electric vehicle models are projected to have lower residual values than the average vehicle because of a shorter historical record as well as rapidly advancing powertrain technologies in newer models. Vincentric, a data compiler for the National Automotive Dealers Association, projected that the 2011 Volt will depreciate from the post-incentive manufacturer’s suggested retail price (MSRP) by 69 percent while the LEAF will depreciate by 66 percent over the first five years. If battery capacity and electric range drop more than expected, the residual value will be even less. Future electric vehicle models are forecasted to retain more of their residual value if models do not incur issues earlier than anticipated.

If electric vehicle batteries can be reused by grid operators, the residual value of electric vehicles will increase. Specifically, batteries can retain 70 to 80 percent of their storage capacity after their useful life in vehicles is exhausted. Researchers at California Center for Sustainable Energy and UC-Davis are currently conducting experiments and estimate that proof of residual value in battery packs could reduce the cost of a Volt battery lease by as much as 20 percent; i.e., the lease payment can be lowered if the lessor can sell the car battery after the car’s useful life. Progress on vehicle-to-grid development could allow for grid use of batteries during the useful life of a vehicle, further bringing down the total cost of ownership.

What is the payback period of an electric vehicle compared to a similarly priced conventional vehicle?

The payback period for an electric vehicle depends on a variety of factors, including characteristics of the reference vehicle, financing terms, mileage, electricity rates over time, oil prices over time, and more (see Action 2.7). The U.S. DOE has a calculator that can provide a preliminary cost comparison between different vehicles. Depending on how the calculation is made, payback periods can run as low as one year to as high as 26.6 years. For example, a study by GTM research assuming a higher-priced reference vehicle to the Volt as well as a lease payment plan found that the cost of payback was less than a year. A New York Times article assuming that a Volt owner did most of his driving on the combustion engine as opposed to electric mode found that the cost of payback was 26.6 years.

Several assumptions can shorten the payback period including: comparing electric vehicles to higher-priced conventional vehicles with – for example – comparable acceleration and handling as opposed to vehicles sharing the same chassis; driving a high number of miles in mostly all-electric mode; using electricity rate plans that lower electricity prices for off-peak (nighttime) charging; and comparing leases and installment plans as opposed to upfront cash payments.

What is the risk of charging station obsolescence?

Electric vehicle charging stations face the possibility of obsolescence. For example, current DC fast-chargers use a CHAdeMO connector, and are incompatible with all U.S. and European electric vehicles, which will use the J1772 connector from the Society of Automotive Engineers. Going further back, hundreds of chargers installed in California to charge first-generation electric vehicles (i.e., General Motor’s EV1 and Toyota’s original RAV4 EV) have become “stranded assets” as they are no longer compatible with today’s vehicles; the state of California gave a grant of $1.9 million to convert old chargers so they could be made compatible with new electric vehicles. In the long term, advances in wireless charging, which are currently in very early stage development, could make existing charging stations and signage obsolete.

As such, although electric vehicles offer immense opportunities (see Companion Brief: Public Benefits of PEVs) and are gaining traction, transportation departments should be careful when spending public funds on electric vehicles. Existing incentives like the $7,500 federal tax credit and various state sales tax exemptions represent significant public incentives in electric vehicles.

With funding constraints, transportation agencies should seek out cost-effective paths to deploying electric vehicles. If a state transportation agency cannot fund its own charging stations, it can instead seek to help advertise and streamline private commitments to installing charging stations. Electric vehicle drivers mainly charge at home and studies have shown that electric vehicles charge less frequently as drivers become more experienced with electric vehicles. However, many PEV adopters may want public charging to assuage “range anxiety,”[ii] even if drivers will not use them. Thus, making public charging recognizable via standardized signage and publicizing planned charging stations may be effective ways to showcase the existence of public charging. In general, the alternative fuel vehicle market is changing rapidly, and states should consider the effectiveness of actions in encouraging electric vehicle use, the cost of each action, as and the risk of failure of the PEV market.