Electric Vehicles: No House of Cards
Once again, John Petersen has gone too far with his petrol-head arguments against Electric Vehicles (EVs.)
In a recent article fetchingly titled, Why The Electric Vehicle House of Cards Must Fall, he argues that because "the incremental cost of vehicle electrification [is] an up-front capital investment of $190 for each equivalent barrel of oil saved." Since the oil price currently barely tops $100, he considers this (to put it mildly) a bad investment. He concludes,
Electric drive proponents are selling a house of cards based on fundamentally flawed assumptions and glittering generalities that have nothing to do with real world economics. Their elegant theories and justifications cannot withstand paper, pencil and a four function calculator.He's quite right that pro-EV arguments don't stand up to "paper, pencil and a four function calculator." That's because, in order to use these crude methods, he has to make a number of simplifying assumptions which have the side-effect of understating the benefits of electrified transportation.
False Assumption: The only benefit to EVs is oil savings.
To get his $190 cost for each barrel of oil saved, he divides the barrels saved by the additional cost of an EV. But if there are other benefits to EVs, then some of that incremental cost should be allocated to the other benefits, not to reducing oil consumption. Here are a few advantages of EVs he ignores.
- No oil changes/ less maintenance. This saves both direct
costs, and the owner's time.
- No trips to the gas station. How much time do we waste
(and extra miles do we drive) going to the gas station (or even
going a few miles out of our way to get the best price on
gas)? With all the attention to range anxiety, there seems
to be very little attention to the fact that your car recharges
while you sleep. Do you know anyone who enjoys spending
time in a gas stations? Not driving to gas stations
probably saves an additional gallon per year, and the driver's
time is of course valuable, too.
- Quieter ride. Many luxury car owners are willing to pay
a lot for a quieter ride, so it must have some value.
- Potential to make money selling frequency regulation to the grid. This much-talked about concept still needs regulations and market structures to make it practical, so while I think it deserves a mention, I won't give it any value in my calculations.
- Batteries in base of car lowering center of gravity and improving handling.
- No tailpipe emissions. Since car
exhaust often infiltrates into homes via connections to the
garage, this should be seen as a benefit to anyone who has
an attached garage and cares about their own and their family's
Using Peterson's estimated savings of 104 barrels of oil over the
course of a decade, each $1040 we attribute to the above benefits
of EVs should reduce the cost of a barrel of oil saved by
$10. I'd say $1040 would be a very low-end estimate of the
above benefits, while $5200 would be a high-end estimate, so the
cost of saving a barrel of oil through vehicle electrification is
between $140 and $180 once we take these benefits of EVs into
An EV buyer is essentially purchasing her fuel savings up-front,
at a fixed price, partly because it costs much less per mile to
drive an EV than an conventional vehicle, and partly because
electricity prices are much more stable than gasoline prices.
Price stability is valuable in itself, since it allows much more
effective budgeting. Many people buy oil or propane to heat
their homes in advance in order to lock in a fixed price, so they
must value the price stability. An EV is an opportunity to
lock in most of the fuel price for the life of the vehicle.
Even if that price is $140 or $180 per barrel of oil, it still
will have value to some drivers.
Will the price of oil average more than $140 over the coming
decade? I think the chances are high. There is even a
decent chance that oil prices will average more than $180 over the
next decade, in which case an EV buyer today will be quite pleased
with herself five or ten years from now.
Finally, as I have discussed
previously, not everyone is an average driver. Drivers
with regular commutes who have the opportunity to charge their
vehicles more than once per day gain significantly more benefit
from plug-in vehicles than drivers who charge their vehicles less
often per day.
EVs are not an economic option for everyone, or even for most
drivers. Drivers who can use more than the full range of
their vehicle per day by charging more than once, and drivers who
place high values on the other benefits of EVs describe above, may
find that electric vehicles make economic sense.
Are electric vehicles a panacea to our car culture woes?
No. But it is a mistake to call vehicle electrification a
house of cards based on a back-of-the-envelope calculation.