Are electric cars really cheaper than gas cars?
I鈥檝e been looking through a聽聽developed by the US Department of Energy (DOE)聽to assist consumers in comparing the energy costs of driving an electric vehicle (EV), relative聽to posted gasoline prices in their state. I heard about this site at the US Energy Information Administration鈥檚 (EIA)聽聽in Washington, DC earlier this week.聽It sounded like聽a handy feature for both current EV owners and those considering buying one, but I couldn鈥檛 help thinking about it in the context of a presentation I saw at the same conference on the cost effectiveness of federal tax credits for EV purchases.聽A key question in both instances concerns just what kind of car is being replaced by that new EV.
The website uses simple math, together with the EIA鈥檚 continuously updated data on gasoline and electricity prices around the country, to come up with聽a national and state-by-state price for an 鈥渆Gallon鈥�. That imaginary construct is essentially the quantity of聽electricity that would take a typical EV as far as a gallon of gasoline would take the average new conventional car.聽As the text points out, it鈥檚 hard for consumers to do this for themselves.聽They see gasoline prices everywhere they drive but must dig through their utility bills to find their electricity price鈥搉ot always obvious鈥揳nd then might not know how to compare the two.
罢丑别听聽indicates the eGallon calculation is based on the average energy usage of five specific EVs, including the Chevrolet Volt, Nissan Leaf, and Ford Focus EV, along with the 2012聽EPA聽fleet average fuel economy for what EPA defines as small and mid-size cars. The result is side-by-side postings of the US average gasoline and eGallon prices, plus a drop-down menu to replicate that for each state.聽The site also includes聽the chart at left, comparing these two prices聽over the last decade.聽
A Big Underlying Assumption
Two facts become immediately apparent. First, electricity is generally a cheaper fuel for cars than retail gasoline. That鈥檚 true for聽a variety of reasons, including the higher end-use efficiency of electric motors compared to internal combustion engines and聽the lower cost of most of the fuels used to generate electricity in the US.聽For example, the natural gas burned in power plants聽聽for the equivalent of $ 20.40 per barrel last year, while the global benchmark for聽oil averaged聽.
And just as there鈥檚 no single gasoline price for the whole country, neither is there a single electricity price.聽Even the state averages used by the DOE to calculate eGallon prices mask a bewildering variety of regional.聽So your cost to recharge an EV might not just vary by location, but by time of year, time of day, and the specific rate plan that applies to you.聽My main concern about the site聽derives from something much simper: the big central assumption that聽EVs compete with the average cars sold in America last year.
What Do We Know About Trade-Ins for EVs?
According to the eGallon site, the average small-to-medium US car in 2012 got聽聽(mpg)聽in combined city and highway driving. Using that figure, and with residential US electricity prices averaging聽聽(kWh) in March 2013, the national eGallon price for March would have been $1.14/gal., compared to聽聽for unleaded regular gasoline.聽But what if we assumed that the cars most often compared to a new EV were not average cars, but other efficient cars, as logic and my intuition suggest? If we substituted the聽聽for聽a conventional Ford Focus or Toyota Prius hybrid, the eGallon price would jump聽to $1.26 or $2.03, respectively.
In some respects this result is fairly obvious. If you were already contemplating buying a hybrid, an EV won鈥檛 save you as much as if you were thinking of buying a conventional mid-size sedan. However, this distinction is important enough that the DOE should consider refining its eGallon calculator. EVs are much like wind and solar installations that cost more than conventional alternatives, but are expected to produce over their lifetimes economic or environmental benefits that offset those higher costs.聽The attractiveness of聽that big up-front investment is directly proportional to those benefits.
I don鈥檛 have the data that would clarify the actual comparisons EV buyers are making, but someone must, perhaps including DOE. And it turns out that this isn鈥檛 just important for calculations like eGallon, but also for assessing the cost-effectiveness of federal EV policy.
EV Subsidies May Be Too Low But Are Already High for the Benefits They Create
That brings me to the Congressional Budget Office鈥檚聽聽last fall. The report merits a posting of its own, but one nugget I gleaned from Monday鈥檚 presentation in DC was that the CBO found that the current federal credit of up to $7,500 per car was still insufficient to make most EVs cost-competitive on a full-life basis with conventional cars. Yet despite this, the effective聽cost to taxpayers of each gallon of gasoline saved by a Leaf-type EV was well over $6 when compared to conventional cars getting average fuel economy, but over $10 vs. high fuel-economy compact cars. That鈥檚 assuming they save any gas at all, because of the way the Corporate Average Fuel Economy rules have been structured聽 Implied costs for greenhouse gas emissions avoidance were even more startling, at over $400/ton of CO2 in most cases.
Conclusion: To Be Valuable For Both Consumers and Taxpayers, DOE鈥檚聽eGallon Must Reflect Realistic Vehicle Choices
The desirability of聽a tool like 鈥渆Gallon鈥� is rooted in the convoluted way we talk about transportation fuel economy and energy costs in this country. Miles per gallon聽itself is a poor metric, compared to something like gallons per聽100 miles. It obscures聽the high value of modest improvements in聽high-consumption vehicles, while exaggerating the value of shifting from very efficient to ultra-efficient cars. It鈥檚 also聽more useful for policy makers than聽consumers, who are ultimately concerned about outcomes in dollars per mile or dollars per trip.
Recognizing the impracticality of training 300 million consumers to think about this subject differently, eGallon might prove useful, but only as long as it is grounded in the best information we have about the vehicle choices that potential EV buyers are actually considering.聽Since current EV聽incentives apparently聽provide a poor return to taxpayers, an overly simplistic tool that drives consumers too far in that direction might be worse than not having such a tool at all.
