- Electric cars are generating an enormous amount of hype which attracts a lot of direct and subsidized investment
- But an optimistic estimate of the potential value of broadly deployed electric cars is less than $400/car/year
- This is about one third of the cost disadvantage of a future electric car with an 80 kWh battery pack costing $100/kWh
- Several more practical pathways to electric car advantages exist
In this article, the term “electric car” will refer to a 100% electric battery-powered car. Hybrids, plug-in hybrids and small electric vehicles (all of which I think have more potential than electric cars) as well as fuel cell vehicles (still to early to call) are not included.
My general concern with electric cars is that they will end up with a very low value to hype ratio compared to other pathways towards a sustainable future. Cars have always been able to stir emotions and electric cars can further augment this natural emotional response with all the emotion involved in the green movement. The result is an enormous amount of hype which attracts a lot of attention, initiative and investment. Given our massive 21st century sustainability challenge of quadrupling the size of the global economy without killing our planet, we simply cannot afford misplaced hype on such a large scale.
For further clarity, this article will assess the advantages of electric cars, estimate the value of these advantages and discuss alternative pathways to achieve these advantages.
Direct advantages of electric cars
Compared to gasoline-powered cars, the only unquestionable direct advantages of electric cars are a reduced dependence on oil and lower (non-CO2) tailpipe emissions in cities. It is often stated that electric cars are cheaper to fuel and emit fewer greenhouse gasses than regular cars, but this is not generally true.
As calculated in this article, the actual fuel costs of future technologically mature electric cars will be similar to that of gasoline cars. The article also pointed out that the electricity mix of the largest car markets is such that efficient gasoline cars emit similar or less CO2 than electric cars. For example, the figure below implies that the new 55 MPG Prius would be a 2x better environmental choice than an electric car in China or India.
In the longer term, electricity carbon intensity in the largest car markets will have to reduce, but so will the fuel consumption (and associated emissions) of regular cars. The actual costs of extracting oil will also rise steadily over coming decades, but so will the cost of electricity from a greener generating fleet. It will therefore be a long time before electric cars are generally cheaper and less carbon intensive to fuel than gasoline-powered cars.
Quantification of direct advantages
Displacing a gasoline car with a 100% electric car will prevent uneconomical wealth transfers from oil importers to oil exporters during oil price spikes. Of course, if all oil exporters invested these windfall profits efficiently (e.g. the Norwegian petroleum fund), the global effect of oil price spikes would be limited or even positive. Unfortunately, this is generally not the case and such large oil profits often finance wasteful extravagance, especially in OPEC nations.
It should also be mentioned that electricity consumed by electric cars can also be import-dependent. Regions such as Europe and Japan with a large share of electricity from imported natural gas, coal or uranium will therefore derive limited energy security benefits from electric cars.
A conservatively high estimate of the oil price buffer effect can therefore be made by subtracting the oil price that would result from an ideal market from the actual average oil price. The difference represents the uneconomical wealth transfer from oil importers to oil exporters due to the imperfect oil market. Based on historical data (below), this difference is about $20/barrel. If we assume a new electric car will displace 10000 miles/year (typical EV mileage) of 30 MPG gasoline consumption, this value comes to $159/year.
The value of zero tailpipe emissions comes in lower ($71/year) given the $9/barrel local air pollution oil externality estimated in a recent IMF working paper. However, this assumes that the electricity consumed by the electric car is completely clean, thus also making this a conservatively high estimate. In fact, debate is now intensifying in China about whether electric cars may actually worsen air quality. Recent research also suggests that particulate matter emissions from EVs are similar to those from gasoline cars due to their higher weight and the importance of non-exhaust emissions.
Alternative pathways to direct advantages
The direct advantages of electric cars mentioned above can arguably be achieved more efficiently through different pathways. Oil dependence (sensitivity to oil price spikes) can be reduced through changes in driving habits, efficiency and a wide variety of alternative fuels. As an example, stricter efficiency standards (or increased gasoline taxes) raising average fuel economy of new vehicles from 30 to 31 MPG would lead to an 8x greater reduction in oil consumption than current US sales of electric cars (below).
Local emissions can be reduced by the same factors and by implementing tolls or even car-free zones in selected areas. Such measures to reduce traffic volume would also address important external costs such as traffic accidents, congestion, road damages and non-tailpipe emissions which, in combination, are substantially more damaging than tailpipe emissions.
In the longer term, several pathways towards carbon neutral synthetic fuels exist. These fuels can be produced from excess electricity, various kinds of biomass, fossil fuel processing with CCS, or synergistic combinations of these fuels. They also offer cleaner combustion than conventional fuels and are much better suited for international trade than electricity. Efficient internal combustion engines (including hybrids) and fuel cells (if they can be made cheaply enough) can then power a carbon neutral transportation system across all transportation networks.
Battery electrics can make a great contribution in the form of small electric vehicles as discussed here, bringing a wide range of highly attractive benefits such as enhanced mobility to billions of poor people, much reduced congestion and great improvements in health. High market penetration of 100% electric cars will probably be restricted to the high-cost-low-volume luxury/performance segment where the costs of a large battery pack contributes a relatively small fraction of the total vehicle cost.
Indirect advantages of electric cars
Electric cars form an integral part of the future green energy vision where almost all energy comes from renewable sources (primarily intermittent wind and solar). Such an energy system will need a lot of energy storage and/or demand response which can then be partly done through smart charging of EVs.
People also generally associate the potential economic benefits of autonomous vehicles with electric cars. As mentioned in the earlier article, however, gasoline powered cars will derive similar, if not greater, advantages from a fully autonomous vehicle fleet.
Quantification of indirect advantages
One way to estimate the advantage of smart charging is based on savings from time-of-use charging schemes. Such schemes offer rates which are typically about 60% of the average for off-peak (night) electricity usage. Of course, on-peak rates are then higher, cancelling out some of these savings, but this will be ignored for the time being to get an optimistic estimate.
Assuming that all charging happens during off-peak hours, the average electricity price is $0.13/kWh and 10000 miles are covered per year at an efficiency of 300 Wh/mile, savings amount to $156/year.
Alternative pathways to indirect advantages
Smart charging of electric vehicles will be complex and costly when balancing wind and solar power where the electricity price is not necessarily lowest during a fixed time-window at night. Such a scenario will need very smart systems which can charge electric cars based on electricity price forecasts and vehicle usage patterns without causing any inconvenience to the driver. This will also require many additional public smart chargers to capitalize on times when electricity prices are lowest during the day when cars are not plugged in at home. Furthermore, for systems with a lot of solar PV in particular, the total system peak load will increase, thus requiring transmission and distribution upgrades.
As an alternative, the synfuel pathway described earlier can shave wind/solar peaks in a simple centralized manner. Particularly windy/sunny nations will also be able to conveniently export excess synfuels to other nations. There will be no need for complex smart charging networks and markets and also no need to build out costly additional distribution networks for distributed peak shaving through electric cars.
An optimistic estimate for the potential advantages that 100% electric cars can bring to the global economy is about $386/year per car. For perspective, this is about one third of the cost disadvantage calculated earlier for a future mass market electric car with an 80 kWh battery pack costing $100/kWh (fully installed).
It is therefore clear that, on a global scale, the potential positive impact of electric cars is marginal at best. Alternative technological pathways also exist through which this positive impact can arguably be achieved in a cheaper and much more practical manner.
The enormous hype surrounding electric cars and the associated initiative and investment it consumes are therefore quite worrying. We simply cannot afford to invest so heavily in technological pathways which are fundamentally unable to alleviate our 21st century sustainability crisis.