## Researchers call for major change in US policies supporting plug-ins; failure of “mainstream consumer bias”

##### 06 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. Resources • 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 ### Comments Could the use of EVs as taxis be suggested? Taxies generally make 7x more annual miles than family cars, and present an unique opportunity for general public to experience EV ride on the cheap. Take for instance Tesla-S. An 8000 cycles times 300 mi battery equals 2.4 million possible miles -- with the battery going flat after 8y due to degradation. No way even taxi could use it up more than 20-30%! In terms of emissions and economy each taxi is worth a bunch of private cars. The percentage of electric miles is vastly more important than the share of electric cars on the roads. The problem is weather. Electric and plug-in cars are selling fairly well in markets with year-round mild weather, and almost not at all in the rest of the country. The assumption was always that the rest of the US would "catch up" to coastal California, just like they always do, but it won't happen for EVs. One look at this week's weather will explain the problem: current EVs will let you down in cold and snow and associated traffic delays. Batteries are less efficient in this weather, extra electric power is needed to deal with lighting (short days), frost/ice on windows and cabin heating. That makes them toys and not transportation. This doesn't mean that EVs are inherently bad. They work fine in some geographies, and they may eventually store enough power to make them viable elsewhere. The Tesla Model S (and Model X, when available) would certainly make a great taxi vehicle for cities like New York. Superchargers at taxi stands would give them effectively unlimited on-duty time. That would be about 13,000 EVs in just one city. The rarity of EVSE certainly does reduce the appeal of PHEVs, especially in cold weather when battery-only range shrinks. The lack of foresight of mfgrs, such as no electric heating or front-defrosting elements and failing to allow for block heaters and other measures to reduce or eliminate fuel consumption in cold weather, forces drivers to use more fuel than they otherwise could. These are small things which could have big impacts. It's disappointing that they've been overlooked. The BDY e6 is getting quite a bit of use as taxis. They've been in use in China long enough now to prove them out as good vehicles for taxi service. Other countries are starting to import them. The e6s in China often stay in operation 24 hours a day and are rapid-recharged during driver meal breaks. Batteries are holding up very well with one taxi passing the 160k mile mark some months back. It could be that there will need to be 'extremely cold climate' packages for EVs. People who live in places such as International Falls or Fargo already set up their ICEVs for the extremely cold days. They use block heaters to keep their engines warm enough to crank and use remote starters so that they can pre-warm their cars before going out. Warming your EV off grid power and pre-warming it are very doable. If necessary manufacturers could offer an ethanol heater like Volvo installed in their C-30. A few gallons of ethanol a year could take care of the really cold days. These things are fixable. post following Green et al have it mostly right but a bit short in how to fix. There in no mention about the probability of auto industry and oil industry influence as surely there is. The most efficient PHEV will reduce fuel consumption by 80% and an engine running in its sweet spot 95% of the time will have a life of 1 to 3 million miles. The life of an electric motor is in the 30 year range. Awaiting auto industry 'innovation' and more research is nonsense as the 'fix' is known---within the grasp of change--witness Volvo V60 PHEV and Golf TDI PHEV---not yet in USA. Is there not some innovative American out there who can take a used half ton and add a motor and high efficiency engine or even a car/SUV/Van? There are 250+ million vehicles registered and new vehicles at 15 million per year---what a market!! EV’s do not have the range, battery is expensive and will not run when power grid is out. PHEV’s address all those short comings plus more.. One of each in each garage gets us down to 90% fuel reductions and we do not have to change our lifestyle! Goal ---TEN YEARS! There is more—a lot more: ---Gasoline reduction from 9 million barrels per day to 2mb/d with cars included. ---Valued---$955 million per day @ $3,25/gal ---Major change to individual and business discretionary spending/savings($955 million/day).
---NO foreign oil imports, bio-diesel main source
---Major consolidation of Oil Companies
---Major change to fuel distribution networks
---Major consolidation of Auto Companies
---Major decrease in tax revenue
---Increase in power consumption
---Each vehicle is an emergency generator, V2B—vehicle to building. Also aux power.
---and more--.

racbear

A bit of a negative slant, but yeah, in retrospect you could always have done better.

The big problem with their suggestion to focus on the niches is the definition of those niches and outrage over some niches being included and some not and the subjective judgments involved in defining the niches.

The elegance of the current 7500 tax credit is its simplicity. KISS.

7500 tax credit for 100,000 vehicles is max $750 million (not everyone qualifies). Pocket change for a country the size of the US. "the 2013 results still reflect a meagre new light-duty vehicle market share of ~0.6% for PEVs" Yet more people who do not understand exponential growth. EV sales have grown 100% both in 2012 and 2013. I'm wondering if that could have been much faster, since the automotive industry is slow to change by nature. What did they expect? 0 to 5% in 2 years? Norway sort-of did it, but they have cheap electricity and already very expensive petrol. There are high taxes on new automobiles too, so that offers more options to make EV's attractive without the impopular measure of increasing taxes. In all, I'm thinking the EV market is doing fine and the 1 million by 2015 was too optimistic anyway, so that shouldn't be taken like the benchmark for success or failure. Bob, Cold-weather problems are indeed fixable, and we shouldn't expect significant EV market shares until those fixes make it to market. As this week's news demonstrates, you don't need to live in Fargo to be impacted by extreme temperatures, and almost nobody can afford to skip work for a few weeks while the weather clears. That's what makes current EVs toys, just like motorcycles and ground-hugging sports cars: they are great on a beautiful spring/fall day, but won't make it out of the driveway on days when bus routes are cancelled. Plug-ins and hybrids have potential, but still suffer from the same issues they ever did: high initial cost, low probability of break-even, lower carrying capacity due to packaging issues, no significant mileage advantage outside of the city, high post-warranty repair costs. That's OK for taxis, but not for the average US motorist. Bernard, not that many people live where it's really cold. This cold snap is a 1 in 20 year event. And every EV is going to start. Lots of ICEVs won't. The range of an EV that starts is infinitely greater than the range of an ICEV that won't. Those people who have "100 mile" EVs and something less than a 60 mile RT commute will be toasty and fine. The LEAF has a 62 mile range in stop and go traffic with the heater on. Actually, EVs pay for themselves well within the lifetime of the vehicle. Maintenance costs are very low. And battery price are dropping rapidly. If you are actually someone who drives long distances very frequently you'd probably find that a Tesla S would pay for itself with fuel savings. Right now manufacturers are building for the bulk of the market. People who need supplemental heaters and 4wd are a niche to be served later. Bob, All well-maintained modern cars will readily start at -40. That stopped being an issue a generation ago (at least). As for your Tesla maths, one could imagine a situation where someone consistently drive 200 miles to a supercharger and back with four passengers. I doubt that Tesla is selling many units to that overly-specific market. I think that most of their customers are not cost-constrained in that way. The auto club said that there were LOTS of jump starts in this cold weather. I see Tesla as a commuter car, when you look at a lease, two people could car pool and save a bundle. Can I interest you in a SouthWind combustion heater for your "cold weather" Tesla? Bernard, Ok, range suffers in winter, but as long as your commute isn't pushing the boundaries, what is the problem? I can hardly imagine anyone running into problems on their daily commute in a Model S, unless you have a really long commute. There is at least one big advantage EV's have in cold weather: the possibility to pre-heat the car and thus clear the windows while it is still plugged in. Scraping ice from my windows is sooooo ICE age ;) SJC, I specifically wrote "well-maintained." Lead-acid batteries usually fail from excessive heat, although that failure may not get noticed until cold temperatures come around. A once-a-year battery test will prevent that call to AAA. There is no reason to suspect that people who can't be bothered to have their car serviced once a year will treat an electric car any better. Remember, a flat battery is a major service call for a Tesla (and could in fact be terminal), and some owners report a double-digit phantom loss overnight. Arne, Here's the issue. If your commute isn't pushing the range boundary, then you don't spend much on gas to begin with, and an electric car is just a fashion accessory (nothing wrong with that, BTW). If it does push the range boundary, then it will exceed it when the weather turns. The solution of course is to offer more range, which is what Tesla does. Every other electric runs around 100 miles EPA, which is 60 real-world, and maybe half that at 0 deg F. That's not much of a comfort zone when heading-out into a winter storm. EV apostles will bundle-up and face the elements (and blog about how close they came to running out of range), but everybody else is waiting for the technology to improve. Bernard, What improvement do you expect from Chevy Volt? May be 5-th seat is issue for you?$ 35 000 without incentives and $27 000 after incentives is completely acceptable. Cold whether is not an issue at all. No noticebale battery degrading over three years. In case you are not long distance driver no gasoline usage. Darius, The Volt is a Hybrid. We were discussing EVs. I'm sure that the Volt is a good car. Not convinced that it's as good as a$15,000 cheaper Cruze Eco. It takes a lot of miles to make-up a $15k difference: the EPA estimates that the Cruze only costs$1500 per year in fuel, so payoff is beyond 10 years (at least) for the average American. If you drive mostly on the highway, there is no payoff: the Cruze gets better highway mileage.

You need to be in some magic quadrant to realize an economic benefit: high mileage, all of it in the city, with no more than 30 miles between full charges and electricity that is nearly free (and who is paying for it if that's the case?). You and I can imagine such a scenario, but it's quite unlikely that many people match the profile.

Compared to gasoline, electricity IS nearly free.  At retail I'm paying about 2.6¢/mi, about a quarter to a fifth of what gasoline would cost me with the standard drivetrain.

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