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Page added on September 24, 2012
CBO on Electric Cars – Don’t Buy Them!
The Congressional Budget Office (CBO) did a good job of shredding the electric car industry and the government’s role in its evolution with this report (Link):
I’m not knocking electric cars, I’m knocking DC’s role in this industry. Washington has provided the loot necessary for research on battery design, it has committed to up to $25Bn of soft loans to the auto industry and it is subsidizing every electric car that is sold. Without the massive support from our “rich” Uncle Sam there would be no electric car industry in the USA. The question is, “Is this money well spent?”
The government’s role with electric cars goes back to the 2009 emergency spending program ARRA (American Recovery and Reinvestment Act):
ARRA provided $2 billion in funding to the Department of Energy (DOE) for grants under that program. Of that amount, $1.5 billion was awarded to battery producers, intermediate suppliers for those producers, and recyclers of vehicle batteries; the other $500 million was awarded to manufacturers of components for electric vehicles and intermediate suppliers of that manufacturing.
DOE’s Transportation Electrification Initiative has made commitments for $400 million in grants for demonstration, deployment, and education projects involving electric vehicles. (Party Time!)
I think it’s important to note that the original objective of supporting electric car production was that it was a plain old economic stimulus. This was dropping money from a helicopter in the hope that it (and all the other money) would stabilize a rapidly declining economy. Another motivation for the federal investment/subsidy was that it created a back-door support package for the auto industry that was falling off a cliff back then.
Washington also agreed to provide $25Bn in cheap loans to the companies who make electric cars. So far, $8.4Bn has been committed. The rest of the money will be doled out before 2019. The money is being lent by the Federal Financing Bank (FFB). Because the loans are guaranteed by DOE, there is no risk of repayment to FFB. As a result, the loans are excluded from the calculation of the debt limit. The 25 ‘large’ is all “off balance sheet”. A very neat trick indeed!
Who is getting the billions of soft loans? What are the terms for these advances? From the FFB (Link):
The CBO has concluded that electric cars are not a “smart” choice for consumers. From the report:
Because of differences in vehicle design and technology, electric vehicles cost thousands of dollars more to purchase than conventional vehicles of comparable size and performance.
Okay, the cars cost too much. What does the government do? It subsidizes the inefficiency. It pays a cash incentive for each vehicle sold. The subsidy is based on the size of the battery; it ranges from $2,500 to $7,500. But the subsidy is still not enough to make electric cars competitive:
Given current prices for vehicles and fuel, in most cases the existing tax credits do not fully offset the higher lifetime costs of an electric vehicle compared with those of an equivalent conventional vehicle or traditional hybrid.
CBO concluded:
The tax credits would still need to be about 50 percent higher than they are now to fully offset the higher lifetime costs of an all-electric vehicle.
I know that someone is thinking that gas prices are going up, and when they do, electric cars will prove to be a smart thing. I’m not so sure. The CBO provided a breakeven on this line of thinking. If gas prices go north of $6, electric starts to make sense. When gas goes to $10, all of the vehicles break even to conventional autos. The problem I have with this line of reasoning is that if gas were to go to $8, the US economy (and the rest of the world) would come to an economic halt. In that environment a fellow would be grinning if he had an electric car, but he would probably be out of work, and most of the stores he would want to drive to would be closed. What good does the electric car create for him if things go very bad? Not much.
There is a final argument that could be put forward in support for the mega investment the taxpayers are making in electric vehicles. The environment. Electric cars are “good” for the environment because they don’t produce CO2 gases, right? Actually, that’s wrong. The conclusion from the CBO:
- In the short term, the tax credits are likely to have little or no impact on total gasoline consumption and greenhouse gas emissions.
- In the long term, the credits might decrease gasoline use and emissions, but how cost-effectively they would do so is unknown.
A larger tax credit is needed to make electric vehicles cost-competitive with higher-fuel-economy conventional vehicles.
20 Comments on "CBO on Electric Cars – Don’t Buy Them!"
Gale Whitaker on Mon, 24th Sep 2012 1:23 am
According to James Howard Kunstler “the happy motoring fiesta is over”. Maybe the U.S. should raise taxes on gasoline and use the money to build and subsidize public transportation. That sounds like the most sensible thing to do. The tea party guys will never allow that because it smacks of the “nanny state”. Of course the most successful country in the world is Singapore which is run by the government, not the private sector.
Beery on Mon, 24th Sep 2012 2:31 am
Gasoline will get to $8/gallon, but when it does, hardly anyone one will be using it to fuel cars (or much of anything else) anymore. That means it won’t destroy the economy and electric cars will become cost effective.
But the problem with electric cars is that they run primarily on coal. Anyone who thinks electric cars are going to be good for the environment is living in a fantasy world.
Plantagenet on Mon, 24th Sep 2012 2:35 am
Obama’s failure to prepare the US for peak oil is a disgrace. The last thing the US needs is overpriced EVs that only the rich can afford. We need MASS TRANSIT. We need LIGHT RAIL. We need INTERCITY TRAINS. But the benighted Obama is instead wasting tens of billions of dollars on GM and the VOLT so he can funnel money to his cronies in the UAW.
BillT on Mon, 24th Sep 2012 3:34 am
Beery, anyone who thinks electric cars are ever going to be more than toys for the few are dreaming. $40K new and batteries that will cost many thousands to replace in a few years is way out of the declining incomes of Americans. Not to mention where the money will come from for the infrastructure upgrades, etc. Look for electric costs to skyrocket if they ever become more than 1 % of the overall car fleet.
Face the fact that the days of personal vehicles is coming to an end. If you bought a new one this year, you may never need another.
But $8 gas means everything else that you buy has also doubled in price. Think food, shelter, medical expenses, etc. No, the American way of life is also becoming history.
PrestonSturges on Mon, 24th Sep 2012 3:52 am
It also depends on your electric rate whether the car is economical at $6 or $8. If you calculate based on peak hour rates in SF, yeah, it’s $8.
PrestonSturges on Mon, 24th Sep 2012 3:53 am
>>We need MASS TRANSIT. We need LIGHT RAIL. We need INTERCITY TRAINS.
Vote for the GOP. You won’t trains (or even bridges), but maybe you’ll get a magical flying pony.
Plantagenet on Mon, 24th Sep 2012 5:04 am
Obama spent almost a trillion dollars of stimulus money—-where is the high speed rail?
For that much money we could have had tens of thousands of high paying jobs building high speed rail. Instead we got……Solyndra.
Benny on Mon, 24th Sep 2012 5:10 am
If gasoline were as high as $8, is our world could ever support 7bn people? Is our economy will shrink to a reasonable size and some people will die and for those still alive will keep using expensive oil so as to push oil price to $200 or $400 per barrel?
Or we will have a future as the writer said we would be not too happy to have a electric car if gasoline were above $8, because the economy will grind to a halt, may be we just don’t need a car anymore.
It really confuse me when the day comes, will the oil price goes up because everybody fight for it or it will goes down because everybody go back to stone age just don’t bother to use it anymore!
PrestonSturges on Mon, 24th Sep 2012 6:11 am
I think prices will swing quite a bit as demand destruction causes prices to fall but less oil will be pumped because there will be no marginal profits for new wells, then as soon as demand climbs prices will pop back up. It’ll be pretty brutal for the economy.
MarkR on Mon, 24th Sep 2012 6:15 am
I am into photography, and I remember when the first digital SLR cameras hit the market they were like $30,000 dollars and about 2-3 megapixels.
Obviously the breakeven for a film camera was very high and the image quality of film was much better, so only repetitively few were produced for niche markets. people then were saying digital would never replace film, it was just too expensive up front and the image quality was not nearly as good. Now it is difficult to find rolls of film and many people have not used film to shoot with for years.
My point is technology doesn’t stay the same, it becomes cheaper with economies of scale, and gets better over time. Batteries that are twice as efficient and cheaper are already past the R&D phase and set to enter the market in 2-3 years time you will see them in electric cars.
BillT on Mon, 24th Sep 2012 6:32 am
Tech does not change the laws of physics. What worked during the age of cheap plentiful energy will not work in the age of expensive scarce energy. The limits of battery tech have been maxed out, especially for the type of storage/release needed to power a car. Batteries will never be cheap.
Have you bought a simple AA battery lately? I have. They are multiples of what they cost just a few years ago. Where is the ‘economy of scale’? Why haven’t there been a new battery designed by the techies, if it is possible, that would last for years and cost a fraction of current prices? Maybe because it is not possible?
We are hitting the limits in many areas and affordable tech is one of them.
Benny on Mon, 24th Sep 2012 7:28 am
Totally agreed with BillT, iPhone 5 may be twice as fast as iPhone 4s but it still need to be charged at the end of each day. I always tell my friend that if one day the iPhone can last for a week or a month per charge, we may start to take a look at the electric car.
If the day comes, and assume hale of the world’s vehicle turned to electric, what will happen our grid, we can’t break the laws of physics, one energy input equal to one energy output. Where is the extra electricity come from, coal, nuclear or NG?
Still, dead end!
Kenz300 on Mon, 24th Sep 2012 3:04 pm
As the price of oil keeps going up alternatives will continue to look better and better every year. Electric vehicle technology will continue to improve and the price will go down as economies of scale kick in. Every auto manufacturer in the world is coming out with an electric vehicle this year or next.
Walking, bicycling and increased use of mass transit will be the best options for some. For others these options may not be available or feasible.
The transition has begun. Some will lead the way. Others will come along reluctantly as the price of oil continues to rise.
` on Mon, 24th Sep 2012 5:33 pm
The price of oil will not keep going up if the oil industry is able to develop, in an orderly fashion, the resources that Americans own. Fortunately we have been able to develop huge gas fields, North Dakota, Wyoming and Utah oil and in Texas working around the federal government in energy friendly states.
Gasoline will never go to $8 unless politics pushes it up to $8.
This article makes sense when considering the point that the electric car is not a reasonable alternative. They are so inefficient there wouldnt be one of them built if government didnt make it worthwhile.
There is no economy of scale in alternative energy sources or electric cars. These technologies are inherently less efficient than the widely used real alternatives. These inefficiencies wont go away with an economy of scale. Only a better, more profitiable product benefits from economy of scale.
MarkR on Mon, 24th Sep 2012 6:29 pm
You guys really need to keep up with the times. Here are some examples of better battery technology for cars- http://green.autoblog.com/2012/02/27/gm-backed-envia-claims-huge-advance-in-cheaper-better-batteries/
Here is another battery tech that is not quite there yet but has made impressive strides this summer, and it is looking much more promising at the moment than lithium air batteries. If made practical it could more than quadruple the range of current EV’s-
http://en.wikipedia.org/wiki/Lithium%E2%80%93sulfur_battery
And here is another startup that looks interesting-
http://www.xconomy.com/detroit/2012/06/08/sakti3-founder-sastry-to-step-down-from-u-m/
Why would this woman be stepping down from her comfortable tenured position at the university if she wasn’t super confident that her new battery tech will be a success?
And on the battery charging front, there are some interesting new techs as well that will make it almost as easy as filling up your gas tank when on a long road trip-
http://green.autoblog.com/2011/11/17/nissans-9-900-quick-charger-a-game-changer/
http://www.egmcartech.com/2010/09/16/700-quick-charge-option-on-nissan-leaf-allows-80-charge-in-30-mins/
http://www.technewsdaily.com/6169-wireless-power-change-world.html
So how are you going to power all of this? See article above on solar and wind being vastly underestimated. Throw in advanced nuclear tech like Liquid Thorium reactors or even possibly Fusion. If failing that, use same superior battery technology for grid storage.
PrestonSturges on Mon, 24th Sep 2012 6:32 pm
The performance of batteries has improved several fold in the last ten years. If it doubles again, these cars are completely practical.
PrestonSturges on Mon, 24th Sep 2012 9:01 pm
“>…….Tech does not change the laws of physics. What worked during the age of cheap plentiful energy will not work in the age of expensive scarce energy. The limits of battery tech have been maxed out, especially for the type of storage/release needed to power a car…..”
Evidence of that? Battery performance has continued to make dramatic improvements, and the limitations are more like the physical stability of the cathode and anodes rather than any immutable law of nature. There is plenty of room for improved performance even for familiar battery designs.
DC on Mon, 24th Sep 2012 11:08 pm
I would like to know, if, someone can tell me, where does one obtain all these wonderful batteries being made in the lab? Weve been hearing this song and dance for literally decades now. Yet for all that, all I can buy are the same old cheap disposable designed to fail batteries that I have for decades. The price hasnt fallen, much, and performance is more or less same as when I was kid, that is to say awful. Batteries are still being thrown away by the billions every year, after a very short life-cycle, and constitute(another) ticking environmental time bomb. I used rechargeable, yet, but even those suffer from noticeable performance degradation relatively quickly.
Is is so hard to admit batteries are designed to fail? That the industrial cartels that produce them are not interested in long-lived or durable batteries, except for very specialized useages which the public never sees? Battery makers are no more interested in making useful batteries available to the wider public than the auto-oil cartel is interested in promoting mass-transit or biking.
All those ‘advanced’ batteries have been in a permanent state of development hell for decades, and there going to stay there. Tiny incremental improvements will may be doled out from time to time, but the idea is mostly to keep ‘researching’ batteries to death, but thats about it. It took Edison 10 years of hard work, without all the high-tech crappola we have today to prefect the NiFE battery, interestingly, intended for use in EVs’. Yet that battery chemistry, that produced a battery with a life-span measured in decades, has remained essentially moribund ever since. None of the majors make Ni-Fe batteries period.
Or if you prefer a more recent example, Chevrons patent encumbrance of the NiMH battery pack
http://en.wikipedia.org/wiki/Patent_encumbrance_of_large_automotive_NiMH_batteries
No, a magic battery is not in the offing, but even battery ‘good enough’ have been kept off the market. What we have is garbage, just like we have garbage cars, garbage electronics and garbage food. Accept that fact, and youll stop wondering why all the magical breakthroughs you keep reading about, never materialize in your hands in a product you can actually use and keep useing for a long time.
PrestonSturges on Tue, 25th Sep 2012 3:19 am
For example, the original Sonicare toothbrushes lasted less than a year with light use before the rechargable batteries crapped out. Since then, the price has dropped 50% and now they last at least two years.
Keith_McClary on Tue, 25th Sep 2012 3:40 am
Preston, are the Sonicares still NiCad ?