Researchers call for major change in US policies supporting plug-ins; failure of “mainstream consumer bias”
6 January 2014
Although sales of plug-in vehicles (plug-in hybrid-electric and battery-electric vehicles, collectively PEVs) in the US climbed more than 80% in 2013 to more than 96,000 units (Tesla has not yet released its final figures) from 52,835 units in 2012 EDTA), the 2013 results still reflect a meagre new light-duty vehicle market share of ~0.6% for PEVs.
In a paper published in the journal Energy Policy, Erin Green of Green Energy Consulting; Steven Skerlos of the University of Michigan; and James Winebrake of the Rochester Institute of Technology argue that current US policies intended to promote the uptake of plug-in electric vehicles haven proven inefficient and ineffective. Suggesting that “mainstream consumer bias” is an explanation for the policy deficiencies that have resulted in slower than expected market penetration of PEVs, they propose an alternative policy agenda including the leveraging of strategic market niches, targeted R&D and incentives, and loans.
Despite extensive government programs and incentives, PEV sales in the US reached only ~53,000 in 2012 (0.3% of vehicle sales), far below levels required to meet the Obama administration’s goal of one million PEVs on the road by 2015. It is now clear that the one million vehicle threshold will not be achieved by 2015. This is because the goal was disconnected from market- and technology-constraints and, as a result, strictly dependent on how much the US government was willing to spend to achieve it.
As PEV policy costs mount—with an expectation to exceed $7 billion by 2019 (CBO 2012)—and the success of PEV policy increasingly in doubt, PEV policy strategy is also at a fork in the road. The government can continue to offer generous subsidies to prop up EV purchases within the mainstream market, or can choose to spend the money to nurture PEV niche markets, thus realizing the societal benefits of PEVS more efficiently and effectively. In this paper we reveal problems associated [with] the mainstream market bias of today’s PEV policy and discuss policy mechanisms that would result in more efficient and effective deployment of PEVs.—Green et al.
Policies to encourage PEV adoption generally fall into three categories, they note:
- Research & development (R&D);
- Investments in charging infrastructure and electric vehicle service equipment (EVSE); and
- Vehicle tax credits or rebates.
While these are intended to address the primary barriers to mainstream PEV adoption, the authors argue, each category “contains a mainstream market bias that threatens the ability of these policies to achieve the intended goals.”
The underlying assumption for justifying such investments is that PEVs must rival conventional vehicles in all respects in order to be viable market contenders. However, advancements in PEV performance to achieve mainstream penetration often fail to reduce—and may increase—costs in the short term, thereby pricing them out of reach for most consumers. More importantly, these investments crowd out other investments that would bring more basic PEV designs to market, and which ultimately may be more attractive for early adopters.—Green et al.
Further, the authors note, building up charging infrastructure is central to US policy. These large investments presuppose that a dense, elaborate network of charging stations is required to meet the needs of mainstream PEV driver—and may be based on experience with other alternative fuel vehicles.
That reasoning is flawed, they suggest, because more than half of US households already have the ability to charge PEVs at home. Given that surveys of PEV owners point to the predominance of at-home charging, low utilization of public Level 2 EVSE, and low utilization of DC Fast Chargers, investments in public PEV charging infrastructure may at this time offer marginal value in realizing the intended benefits of PEV adoption, the authors argue.
In fact is has already been shown that EVSE investments are less cost-effective than increased PEV battery range, viewed in the context of reduced petroleum consumption. So in effect, millions are being spent on public EVSE to alleviate mainstream consumers’ range anxiety, while failing to significantly increase PEV adoption.—Green et al.
Examining the tax credits for PEVs, the authors note that the Congressional Budget Office (CBO) concluded that the PEV tax credit is too small to stimulate a significant amount of new consumer demand, and that most taxpayers do not have a tax liability great enough to even use the credit.
Thus, the majority of PEV tax credits will subsidize purchases that would have happened anyway without the tax credit and will have little-to-no effect on petroleum displacement and emissions reductions.—Green et al.
More cost-efficient and effective policies for PEV adoption will eliminate this mainstream market bias and focus instead on segments of early adopters, rather than attempting to alter PEV technology prematurely to earn acceptance by mainstream consumers, the authors assert.
In their paper, the researchers introduce three strategies they suggest might be more cost-effective and conducive to moving adoption along more efficiently:
Strategic niche management (SNM). SNM aims for sustainable diffusion of technology by identifying market niches where the unique strengths and benefits of a technology are maximized, and where barriers and challenges are minimized. Examples of promising market segments for PEVs—in addition to early adopter consumers—include carsharing and US postal delivery vehicles.
Focusing research and incentives on early adopters and markets. Policy makers could focus in the short term on lowering PEV cost by identifying the performance, features and costs acceptable to early adopters and most ideal for niche markets.
Making loans and financing more accessible for PEV buyers. Although early adopters may be willing to pay more for PEVs to realize fuel savings or environmental benefits, their ability to pay can be hindered by the current financing process. Fewer people will qualify for the higher loans associated with PEVs’ greater upfront capital costs, even though the monthly fuel savings from PEVs might bring the monthly cost down to an affordable level.
By incorporating fuel costs into auto loan approval criteria, PEVs and other efficient vehicles would be more financially accessible, while large, inefficient vehicles would be less accessible.Governments might also offer efficient vehicle loans, encourage or require lenders to incorporate fuel economy into loan qualifications, or develop toolkits for lenders to use in making appropriate calculations.
Existing policy mechanisms that aim to thrust PEVS immediately into the mass market demonstrate a “mainstream market bias” and are proving to be inefficient, costly, and ineffective. Instead, policy should be refocused to concentrate on early adopters and niche markets using such approaches as strategic niche management, targeted incentives, and more accessible loans and financing. Whether policies should be focused on niche markets indefinitely remains to be seen; at some point, of course, niche markets need to establish themselves into self-sustaining markets. Any anticipated sunset date for the refocused policy strategy is also uncertain. But establishing a sunset date for such policies is premature and should be done after careful evaluation of the policy’s effectiveness in achieving its intended goals.
Through a reframed policy focusing on greater penetration of the early adopter market, complementary system effects can occur that will ultimately lead to more successful market penetration of PEVs and greater societal benefits.—Green et al.
Erin H. Green, Steven J. Skerlos, James J. Winebrake (2014) “Increasing electric vehicle policy efficiency and effectiveness by reducing mainstream market bias,” Energy Policy, Volume 65, Pages 562-566doi: 10.1016/j.enpol.2013.10.024
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