After posting my December 6 article about EVs Economics are getting interesting I’ve received numerous comments and I’ve had discussions with utility executives and board members. Based on this input I’ve refined the economic analysis of the Leaf vs. Camry and I’ve addressed a potential regulatory Catch-22 concern that utilities might run up against if they aggressively go after the EV market.
Refinements
The more I discuss EV usage, and considering how I would use an EV, I’m increasingly convinced the 100 mile class of EV will be used like a cell phone. At the start of the day, the EV is unplugged and driven. At night, the car is parked in or near its home garage and charged up. The whole discussion about public charging, or changing out batteries, will be irrelevant. These vehicles will be short range around town cars. For drivers that go on long trips the EV won’t be used, the owner’s other, gas power car, will be. Range anxiety can be addressed when necessary with a little high cost topping off from a 120 VAC outlet at the destination.
Since the car will be charged at night this represents an opportunity for utilities to market power in a new way. Namely the utility can offer to sell electricity via a 220 VAC outlet at very low cost during the night off-peak power block period. During the rest of the day, power would be unavailable from the 220 VAC outlet and a customer would have to rely on 120 VAC charging. This avoids potential overloading of distribution transformers and aligns a cheap tariff with cheap power while placing no cost burden on other utility customers.
As part of updating the economics I double checked wholesale market outlook (thanks to www.weccterm.com) and found the outlook continues for very low off-peak prices that easily allow provision of electricity to the EV at 5 cents/kWh and allows for some utility margin:
Quarterly forecast prepared 1/18/2010, Off-peak prices
period NP15 (Northern California)
2011-1 2.9 cents/kWh
2011-2 2.5 cents/kWh
2011-3 3.6 cents/kWh
2011-4 3.7 cents/kWh
Previously I used 15,000 miles per year as the average annual mileage driven by Americans in a year. While the DOE/EPA Model Year 2011 Fuel Economy Guide bases its annual fuel costs on 15,000 mile per year, EPA’s transportation and air quality group peg the average miles driven at 12,000 miles per year. And the Federal Highway Administration shows drivers in the 20 – 54 age range averaging over 15,000 per year. Taking this all in I’ve decided to conservatively base the average analysis on 12,000 miles per year.
Some comments noted that EV will have lower maintenance costs than gas power cars. I think it’s fair to credit the EV with avoided oil changes. This isn’t a big factor but does improve the EV economics a bit.
I also used an estimated 10 cents/kWh for a nationwide average for retail electric prices. For the average charging analysis I’m now using 11.5 cents/ kWh which according to the EIA is the actual August 2010 nationwide average.
In my first analysis I included 10% losses in the charging equipment because I was in a hurry. This is probably a little high and I revised the loss figure to 5% consistent with losses in a couple of thyristors.
Previously I based my analysis on $3.50 gasoline. This still seems a fair estimate and I’ve continued to use it. Of course, if gasoline prices spike EVs will get a boost.
All these changes taken together erode the EV economics a bit but not enough to change my previous conclusion that EVs can be a hit given some creative utility rates. But at my current rates, I’ll wait on the EV, sigh.
Scenario Break-even years IRR at 96,000 miles (8 years)
1 (5 cent/kWh) 4.6 14 %
2 (11.5 cent/kWh) 5.6 9%
3 (17.6* cent/kWh) 6.9 4%
* this is what I pay today to SMUD for each incremental kWh
EV payback
The Catch-22
Many utilities, and certainly those in California, are facing Renewable Portfolio Standard (RPS) requirements. So if a utility added significant new load, say 50,000 EVs charging at 3kW at night, the utility would need to provide an additional 150 MW of power. In all likelihood this power would come from fossil sources, at least for some period of time. In the western US the marginal generating resource at night is almost always very efficient natural gas fired combined-cycle power (thank you again www.weccterm.com) . Essentially we would be running domestic natural gas through a high efficiency conversion and displacing imported crude or gasoline. But a utility may be penalized by RPS requirements for this very sensible activity – the Catch-22.
The RPS standards have been enacted in large part to address climate change resulting from burning fossil fuels. To test whether the RPS standards are counter-productive to their own purpose in the case of EV charging, I dove into carbon calculating.
I first calculated the annual pounds of CO2 the Camry would produce. Using EPA mileage, 12,000 miles per year, and the EPA’s CO2/gallon of gasoline figure, I computed the Camry would produce 9,502 lb/CO2 per year.
Next, to calculate the Leaf’s CO2 production, I adjusted the Leaf’s kWh consumption back to the generation level by adding back transmission system losses. Then I determined the amount of natural gas consumed using night time combined cycle heat rates of 7,500 Btu/kWh. Finally I applied EPA’s latest C-factors (including the 2 oxygens) for natural gas to compute the CO2 produced. The result: 4,049 lb/CO2 produced per year, less then one-half that produced by a gasoline engine.
This result makes sense: (1) combined cycle power plants, even after transmission and charging losses are really efficient, and (2) natural gas produces a lot less CO2 than an equivalent amount of gasoline.
The conclusion is straightforward, EV charging should be exempt from RPS requirements and the EPA should be gung-ho for EV charging. And at the end of the day I don’t see any way a utility will ultimately be penalized for encouraging EVs.
