A late-October panel sponsored by TechKnow, a Michigan technology advancement organization, made some predictions recently about plug-in hybrid electric vehicles (PHEVs). Expect them to be expensive to buy and cheap to operate, while reducing pollutant and carbon emissions. However, do not expect their volumes to be large after they are introduced in the next couple of years. While most experts are generally favorable, it may be too soon to know how big an impact PHEVs will make.
The key enabler to PHEVs are lithium-ion batteries, which quadruple the performance over lead-acid batteries, according to David Cole of the Center for Automotive Research (CAR). “There are many chemistries to choose from and some challenges, such as heat management,” said Cole. He believes the work that remains is development not invention. How that development work in the near-future could translate into acceptance was debated by the panel.
“We at Ford are excited about [the potential for PHEVs], but we do not see a rate of adoption that would exceed what we have seen in [current] hybrids today,” said Nancy Gioia, Director of Sustainable Mobility Technologies and Hybrid Vehicle Programs for Ford. She noted that current hybrids have captured only 3% of the North American market, and it took eight to 10 years to achieve that market penetration.
“Is there too much hype over plug-ins?” she asked. “PHEV is a great way to use the extra energy we have in the grid. At Ford, we have PHEVs running on the road today, for example, as part of our Southern California Edison fleet. We are [using these fleets to] gather data and figure out how to plug in to the grid. The challenge is devising an economic model to use PHEVs. That is going to be essential.”
One company that has ratcheted up the volume on PHEVs and what it terms "extended-range" vehicles is General Motors. John Lauckner, Vice President, Global Program Management for General Motors, explained the distinction in technologies. The Saturn Vue Green Line, announced at the North American International Auto Show in January 2008 is a PHEV and travels about 10 mi (16 km) at low speeds on electric-only propulsion. The Chevy Volt, an extended-range electric vehicle, travels 40 mi (64 km) at any speed. The Vue PHEV improves fuel economy; the extended-range Volt is intended to eliminate the use of petroleum altogether, Lauckner explained.
“[The Volt] does that for the first 40 miles driven," he said. "About 80% of all U.S. drivers drive 40 miles or less on a daily basis. This means elimination of gasoline for those 80% of drivers.” He noted that many drivers in Europe also have the same driving pattern.
Explaining why initial volumes might be low, Lauckner noted that the cost of the technology in the Volt will be relatively high. High costs inevitably mean high prices, at least initially. He believes the Volt will follow the same adoption pattern seen in flat-screen TVs, MP3 players, laptop computers, and other high-technology introductions—initial high pricing recovers cost, followed by economies of scale that enable price reductions over time. These price reductions lead to higher demand and wider use.
Despite high initial prices, a key factor in a successful economic model is the cost of operation. “At current prices [in late October], driving a car costs about 12 cents per mile when using gasoline,” explained Lauckner. “With electricity, at about 10 cents per kilowatt-hour, driving that same car fueled by electricity costs about 2 cents per mile.”
Not only does it cost less to drive, but operating a vehicle on electricity may indeed cut pollution and CO2 emissions. About 60% of the U.S. electric grid is currently coal-fired, and so many question whether a car charged using coal-based power reduces pollution in the aggregate. At least one environmentalist believes it does.
“If you can substitute a gasoline mile with an electric mile, you cut CO2 emissions by about one-half,” explained John M. DeCicco, Senior Fellow for Automotive Strategies at the Environmental Defense Fund. “You often hear this misconception that you are plugging into coal,” implying that PHEVs are not so environmentally friendly when the total system is considered. While confirming their potential advantages, Dr. DeCicco does not believe that PHEVs should garner special support over other means to reduce gasoline usage.
There are practical limitations to widespread usage. For instance, apartment dwellers may not have ready access to a plug. There is also that pesky high initial cost. We live in a market economy and consumer choice is not always predictable based solely on economics.
Richard Curtin, a Director of Consumer Surveys at the Institute for Social Research, a unit of the University of Michigan, presented data that consumers think more about initial cost versus operating cost. In a recent survey, when presented with a lower operating cost tied to a higher initial cost, reluctance to purchase stood out.
“Given a higher initial price of about $2500 for a PHEV-type vehicle, our survey indicated that there was a 50% probability that a consumer would choose that technology,” explained Curtin. “For an initial price increase of $5000, there was a 30% probability, and for an initial price increase of $10,000, there was a 15% probability they would choose it.”
Given this reluctance, either the consumer will need to be better educated on the economics of PHEVs or the OEMs will need to recognize that a different business model may be needed, such as leasing. “We may need government incentives along with market solutions,” said Curtin. “This could be critical to getting PHEVs [and extended-range vehicles] into the next stage of development.”
While there are certainly advantages to PHEVs, other alternatives could also emerge to solve problems in fuel supply, pollution, and CO2 emissions. “There is not enough knowledge to pick winners and losers,” said Cole from CAR. “Different companies will evolve different strategies. The developments to watch in the near future is the integration between vehicle and infrastructure as well as integration between vehicles and electric power utilities.”
TechKnow, the sponsor of the forum and panel discussion on PHEVs, has been enhancing the technology business climate in Southeastern Michigan through high-profile events, such as this one, since 2003.