Category: Electric/Hybrid Cars

Electric Vehicles: More Harm than Good?

A recent study by Stephen P. Holland from the University of North Carolina- Greensboro and other economics and business professors has found the environmental benefits and harms of electric cars vary state by state. The federal government currently awards a subsidy of $7500 for each electric vehicle bought, with some states adding their own subsidies to such purchases. Such subsidies reflect current movements towards green policies.

Electric vehicles, however, are clearly not “zero emission vehicles.” First of all, the components of those vehicles are made in factories most likely powered by fossil fuels. Second, the electricity used for the vehicles themselves comes from power plants across the United States, where around 70 percent of power plants operate on natural gas or coal. In most areas around the country, driving an electric vehicle means choosing to burn coal and natural gas rather than burning oil.

Due to differences in energy production by states, using electric vehicles may be better in some states while continuing to drive gas-powered cars in others may be best. In California, for example, the electric grid is relatively clean while gasoline vehicles produce more environmental damages. In North Dakota, the opposite is true as the electric grid uses more coal.

The report found that on average electric cars are about half-a-cent worse per mile for the environment than gas-powered cars. However, gas-powered cars are worse in congested urban areas while electric cars are worse outside of metropolitan areas. A one-size-fits-all policy regarding electric cars therefore does not make sense. The federal subsidy should be eliminated, leaving only state subsidies for electric vehicles where they already exist.


Hydrogen-fueled Cars?

Toyota is developing the first hydrogen fueled car to hit the market. Competing with other alternative fueled vehicles, the Toyota Mirai will be the first of its kind that will be mass marketed to the public. A direct rival/competitor to the electric cars, the hydrogen car compares to electric cars by price, range before refueling, refueling time and fueling stations around the United States.

2015 Toyota Mirai’s hydrogen fuel cell car, without the subsidies:

  • $57,500 a car.
  • 300 mile range.
  • Refuels in 5 minutes.
  • 12 hydrogen fuel stations around the U.S.

Electric cars, without the subsidies:

  • A $29,000 car would take 16 hours to recharge/refuel with a range of 84 miles.
  • The Tesla car costs $75,000 and take 5 hours to recharge/refuel and a range of 240 miles.
  • 9,533 electric recharge/refuel stations in the U.S.

Who will win, the hydrogen or the electric car, as the top choice of alternative fueled cars?

Tesla Becomes The Harbinger Of Doom For Utilities

It’s rare to see a new product which could fundamentally change the way average Americans live, today is certainly not that day. However, upon announcing the Powerwall  and Powerback, Tesla innovators shined the media’s light on the 800 pound gorilla which has been staring American utility companies squarely in the face: batteries. Tesla is by no means alone or a first-mover in the battery market, with the construction of similar manufacturing facilities underway by mega-giants such as BMW, Ford, Chrysler, Nissan, BYD in China and Bosch in Germany.

Tesla’s electrical storage system falls short of being accessible to middle-class Americans, with the standalone cost of a single 10kWh Powerwall being quoted by the company as being $3,500 while SolarCity — Tesla’s manufacturing partner — declared the amount to be the wholesale cost, giving revised estimates of up to $7,000 per system. SolarCity also estimates that two systems will be necessary to disconnect completely from the electrical grid, raising the sticker price to $14,000 for complete energy independence — solar panels not included! The Powerwall may be scalable to the point where it becomes more economic than using the electrical grid, but the vast majority of consumers will never be able to shell out that kind of money for it.

So why was this announcement important for utilities?

Customers. First and most apparent, utilities are losing customers. Tesla Energy already has over 38,000 pre-ordered Powerwall systems, and has said itself that it has an inability to satiate market demand even given its pending factory. With the fixed costs of acquiring renewable energy instruments still high, it is likely that all sources of energy generation, renewables included, will see their long-term profitability fall as customers hoard their energy and use it more efficiently.

Arbitrage. The most ethereal yet costly threat utility companies may face is that of increasingly user-friendly and transmissible energy storage devices. Creating energy storage devices for entire homes which are as easily tradable and mobile as the average alkaline battery is not the technology of today, but the very real possibility of tomorrow. The ability for consumers to buy and completely cut-out utility companies by selling or trading energy locally is becoming more material with each improvement in these storage systems.

Speculators. The Energy Information Administration (EIA) sites that natural gas prices can fluctuate over the course of a day, with normal price volatility that can range from just a few cents to over twenty cents per million British Thermal Units (Btu) over 24 hours. Prices are typically highest at peak hours of the night, when most people are still awake. Suddenly, with the arrival of innovations such as the Powerwall, significant amounts of energy can be gathered from the grid during low-cost periods and sold back during peak hours. Every single system suddenly becomes an investment vehicle for minimizing household costs or even making money off of electricity producers. Excellent news for Americans with expensive Powerwall systems, and yet, damning to the many poor and middle-class consumers who will likely see gas prices rise because of it.

To survive, electrical production companies need a way to outcompete battery manufacturers while updating much of America’s aged and unreliable transmission infrastructure… without this, or a significant decrease in the cost of batteries, the grid may become an expensive necessity only the poor and middle-income are relegated to.

Powerwall or Powerdream?

Elon Musk recently introduced Tesla Motor’s new battery power product for the home. The Powerwall is a lithium-ion battery that is four feet tall, three feet wide and seven inches deep. The goal of the new battery is to offer superior solar powered energy independence. Musk even said that he had Africa in mind when he developed this new home energy source.

  • One lithium-ion battery Powerwall costs $3,000.
  • The 220 pound Powerwall uses solar energy or builds up reserve energy for later consumption.
  • Daily-cycling Powerwall provides 7 kilowatt-hour capacity, 70 times to 100 times the power of a typical laptop battery.
  • Up to nine Powerwalls can be used in one home at one time to combine the power capacity, up to 63 kilowatt-hour.

While the new battery could prove to be a superior to alternative solar power batteries that are currently in use, it still is a product that is priced out of the market. The average energy consumption in the United States is about 30 kilowatt-hour. One Powerwall would provide less than a third of that energy demand, where the remaining demand must come from another energy source or sources. The average energy utility bill in the U.S. is $107 a month. If a third of that bill is about $36 and is covered by the Powerwall, it would take over 7 years before the savings would cover the cost of the Powerwall. With so many factors up in the air (the $5 billion Gigafactory and expansion, future home energy prices, solar cost and energy demand, other energy sources), the Powerwall looks more like a dream of Elon Musk.

Wrongly Justifying Electric Car Tax Breaks

Math errors. Exaggerations. Phony metrics. Trickle-down economics. The recent e-mail from JJ McCoy of the Seattle Electric Vehicle Association to the legislature has it all.

Electric car advocates in Washington State are again asking for a sales tax break on top of the existing federal tax credit they receive of $7,500. Their sales tax break costs the state about $10 million a year. To put that in context, that is about one-quarter of the Washington State Salmon Recovery Funding Board’s annual funding.

Put simply, when McCoy’s math is corrected, the environmental value of the $39 million tax break is only $2.6 million — a waste of $36.4 million — not the $18 million benefit he wrongly claimed.

As we’ve pointed out, these tax breaks go predominantly to the wealthiest 10 percent — people who are not price sensitive and would have likely purchased an electric car anyway.

Even worse, much of the argument in favor of extending the sales tax breaks is not only wrong, it contradicts other claims electric car lobbyists make.

Case in point is the e-mail sent by JJ McCoy, lobbyist for the Seattle Electric Vehicle Association and Northwest Energy Coalition. It demonstrates how far those lobbying for these wasteful and ineffective subsidies have to go to assemble an argument.

Here are the claims made by McCoy and the Seattle Electric Vehicle Association, and the reality.

Claim: If the sales tax exemption is allowed to expire, Washington’s market share for plug-in vehicles will drop 63% — that, according to a study by the Keybridge Economic Group, led by former Clinton Council of Economic Advisors Robert Westcott, PhD.

Reality: Actually, the Westcott study does not prove sales would fall this much — it simply assumes it. They write “sales in Washington are assumed to drop from 1.2 percent of total vehicle sales to just 0.5 percent of sales” [emphasis mine]. They get the 0.5 percent figure by using the Oregon level of 0.8 percent and then adjusting downward. Why? The study authors don’t explain. They simply say, “several state-specific factors have created a particularly conducive environment” in Oregon, but don’t explain what the factors are.

McCoy uses this phony math to claim the tax breaks increase sales by 2,100 cars a year. If we use the actual Oregon level as a baseline, the number is 1,111. Even this number is exaggerated. Washington’s median income is about 15 percent higher than Oregon’s, offering a much better environment for buyers with disposable income to buy expensive, luxury cars.

Even with McCoy’s completely unsupported assumption, however, his math does not add up.

Claim: Each of those 2,100 extra cars, powered by Washington’s very clean grid, will avoid nearly 5 tons of carbon emissions annually compared to the average 25 mpg gas car.

Reality: This math is completely inaccurate. Who says so? The Seattle Electric Vehicle Association itself. Its own “EVangelism” flier says electric vehicles would avoid 4.2 tons of CO2 emissions compared to a 23.6 MPG car, or 3.8 tons compared to a 25 MPG car — about 25 percent lower than what McCoy told legislators.

Claim: That’s nearly 75 tons over the 15-year life of the car, and may even be more…

Reality: The Westcott study, the one McCoy cites just two paragraphs earlier, says the average lifespan of an electric vehicle is 12 years, not 15 years. Again, McCoy contradicts his own source studies to exaggerate the benefits of an EV by another 20 percent.

Using McCoy’s own calculations of 3.8 tons per year and a 12-year lifespan, the actual amount of CO2 avoided would be 45.6 tons per year (assuming the grid is 100 percent clean, which it is not). That is 40 percent less than McCoy’s exaggerated e-mail claimed.

Claim: Those avoided emissions are worth $57 million using OFM/Commerce standard methodology for valuing the Social Cost of Carbon (currently about $65 per ton).

Reality: McCoy makes numerous mistakes here.

First, the Social Cost of Carbon is not $65 per ton, it is $65 per metric ton — which reduces the cost by about ten percent (even that number is about five times higher than the EPA calculates). The cost of carbon is universally calculated in metric tons. He doesn’t seem to know the basics of carbon economics.

Second, his own math doesn’t add up to $57 million. He claims, wrongly, that the benefit would increase EV sales by 2,100 cars per year for four years — 8,400 cars. He claims, wrongly, that each car would reduce CO2 emissions by 75 tons over its lifetime. And he claims, wrongly, that each ton is valued at $65. So, the four year total should be 8,400 x 75 x $65, which equals $40,950,000, not $57 million. He’s off by another 22 percent.

But, as we’ve seen, even $40,950,000 is a significant exaggeration. Using the accurate numbers, the total is 4,444 x 45.6 x $59, which equals about $12 million — about one-fifth the amount McCoy claimed.

Again, that calculation uses McCoy’s own numbers cited elsewhere. Using his numbers, he is off by 79 percent.

But it gets much worse.

The key is not the social cost of carbon, but the amount it costs to reduce a metric ton of carbon using other approaches. For example, investing in efforts to reduce methane emissions from landfills costs about $13 per metric ton on the open market and can go down as low as $3. McCoy wants the state of Washington to spend $65 to get what it can receive for $13. If climate change is really as threatening as he and others claim, why would he be willing to waste 80 percent of the money spent to reduce carbon emissions?

Using the market price of carbon reduction, the actual carbon-reduction value of the EV sales tax break is a paltry $2.6 million over four years.

Claim: This is a surplus value of $18 million over the $39 million that HB 2087 will reduce state and local revenue by over its 4-year duration.

Reality: Using the correct calculation, it is actually a loss of $36.4 million to subsidize wealthy electric car buyers. Put another way, for every dollar the state provides subsidizing electric cars to reduce carbon, more than 93 cents is wasted. Nobody who is serious about cutting carbon emissions would advocate such a wasteful environmental policy.

A similar version of this blog post appeared at the Washington Policy Center.

Georgia Subsidizes 90 Percent of Nissan Leaf

A government’s decision to subsidize one electric vehicle model over all other vehicles is a problem. It distorts the economy picking winners and losers regardless of the environmental benefits. But when such also increases greenhouse gases it is even worse. Yet, this is the situation playing out in Georgia.

Metro Atlanta is the second largest market in the U.S. after San Francisco for electric vehicle sales. And many of these sales are due to one vehicle model: the Nissan Leaf. Atlanta has been the Leaf’s largest market over the past year, in large part because Georgia offers Leaf buyers a $5,000 tax credit. Coincidentally, Nissan played a significant role in the tax credit’s passage. Yet other electric and hybrid vehicles do not receive the same tax incentive. In cases where vehicles are sold directly by manufacturers, only the first 150 are eligible for the tax $5,000 tax credit. This provision seems designed to prohibit Tesla buyers from receiving this subsidy, since Tesla is the only major vehicle not sold through dealers. The subsidy also does not apply to gas-electric hybrids such as the Ford Fusion or Toyota Prius.

But the Nissan Leaf cannot even claim it helps the environment. Much of the fuel used to generate power in Georgia is coal. As a result, when the Nissan Leaf charges its battery with electricity, it relies primarily on coal, one of the most polluting power sources on the planet. Yet when the unsubsidized Toyota Prius charges its battery, it uses its oil-powered engine. As a result the Prius is responsible for fewer greenhouse gas emissions than the Leaf. In fact the Nissan Leaf produces almost as much greenhouse gas as a conventionally powered vehicle with good fuel efficiency such as the Honda Fit.

The retail price for the Nissan Leaf is approximately $30,000. Yet after factoring in gasoline savings and state incentives of $5,000, drivers can lease a Leaf for free. The monthly payment for a 24-month lease is $235 per month for a total of $5,640. Add in the $5,000 state tax credit and lessees come close to breaking even. In addition, gasoline savings of savings of approximately $100 a month ($2,400 total) provide lessees with nearly $2,000 in yearly profit. Georgia spent close to $2 million on tax credits for electric vehicle owners in 2013. It is time to retire a tax credit that distorts the economy and increases greenhouse gas emissions.

Vying for Tesla

In 1978 every person knew that Detroit was the motor capitol of the world, and for good reason as they employed more than 250,000 people. Automobiles began in the North and with it came Ford, General Motors, and Dodge building their world headquarters.

2014 looks vastly different as factories are now automated, most of those workers are now unemployed, and the city shrunk from 1.8 million to a mere 700,000. As the world began to globalize there became a push for financially viable alternatives and now even environmental alternatives. Machine labor replaced human labor, and forced unions out as the remaining worker salaries were far too high compared to the alternatives to the union absent South. The South began an automobile revolution taking in Toyota, Mercedes, and Volkswagen to name a few. However, a new company has risen, and northern states are nowhere on their list of possible destinations.

The first Tesla was sold in 2008 and has since made steady advances to become a household name in the United States. The company has had numerous political problems with their approach to selling vehicles without the need for a dealership license. Tesla has a unique, and somewhat illegal, sales model that sells cars directly to consumers without the need for dealerships. As can be expected, current auto manufacturers and dealers are furious and are spending millions on banning Tesla in their states. While many states such as New Jersey, Arizona, and Texas have banned it, there are four that are biting at the bit to get Tesla to build a factory in their states. With 5 billion dollars, and 6,500 jobs at stake there is a lot to be excited about.

New Mexico. The dark horse in the list of possible locations, New Mexico was originally a candidate for a factory in 2007. However, their incentive package was beaten by California’s at the last minute causing Tesla to pull out of Albuquerque. There were numerous advantages in 2007, but 7 years is a huge difference and other states have climbed to be better potential suitors.

Texas. Currently Texas has banned the sale of Tesla vehicles but it has the second most populated state in the United States. If Tesla wants to move product it must gain Texas as a place where it can sell vehicles. The building of the plant may create the leverage needed to allow the sale of vehicles. Even Governor Rick Perry is an advocate, expressing his support for the opportunity that the plant represents.

Arizona. In the same situation as Texas, Arizona has a ban on the direct sales model created by Tesla and therefore no cars can be sold in the state. Tesla attempted to overturn this policy but it was quickly struck down and no further plans to allow sales are even possible until 2015. Tesla will be looking at the long-term though, as the factory will not even be manufacturing until 2017.

Nevada. Considered the frontrunner in locations for Tesla, Reno, Nevada has immediate access to not only rail systems but a large amount of land and local tech companies ready for positions at the new facility.

A similar situation happened in Alabama when many southern states were fighting for Mercedes. In the end, Alabama offered a huge incentive package utilizing tax breaks and taxpayers dollars to attract the auto giant. Near identical events are unfolding in these states as backroom deals are occurring daily in order to win the bid. While the system is controversial, it outlines the bigger problem. None of these deals would have to happen if barriers of entry were not so tough. Alliance, Texas has seen huge success with their free trade area. Now if only the rest of Texas could get on board.

Electric Car Subsidies Distort Market, Without Reducing Pollution

Many states still rely on coal-burning power plants to generate over half of their electricity; electric cars are actually responsible for more greenhouse gas emissions per mile driven than hybrid cars, and are no better for the environment than comparable traditional vehicles. The hybrid Toyota Prius produces less carbon dioxide than the plug-in Nissan Leaf. The highly subsidized Chevrolet Volt in electric mode produces just as much carbon dioxide as it does when it operates in gas mode.

Lithium, the material in electric car batteries, can be resource intensive to mine. Since supplies of Lithium are limited, prices are expected to increase. Further lithium batteries need Copper and Aluminum to work correctly. Mining these elements requires significant chemicals, energy, and water.

Meanwhile conventional vehicles are becoming more fuel-efficient. For the 2013 model year, new cars averaged 23.5 miles per gallon. Cars averaged only 16.0 miles per gallon in 1980. With higher gasoline prices, manufacturers are scrambling to create even more fuel vehicles in the future.

Further, consumers are hardly demanding electric cars. Despite a $7,500 federal subsidy for buyers (and numerous state incentives), Chevrolet sold only 23,000 electric-powered Volts in 2012. The automaker sold more than 10 times as many Chevrolet Cruzes, the company’s gas-powered sister vehicle. By contrast, Ford sells 58,000 F-Series trucks a month.

Further, these programs fail to increase total car sales. Instead, they incentivize buyers to purchase a particular type of car — a Volt instead of a Cruz. Since consumers would buy a car anyway, this subsidy is a waste of precious resources.

Local municipalities like electric vehicle programs since much the subsidies come from federal and state sources. But this is not a federal freebie; it is a waste of taxpayers’ hard-earned money — money that instead could be spent or actual programs that improve transportation of the environment or better yet refunded to taxpayers.