Pull the Plug on Electric Car SubsidiesMarch 25, 2011
Friday, 25 March 2011 12:58 Margo Thorning, The Wall Street Journal
If after 180 years, electric cars are still not a commercial success, it’s time to put the brakes on taxpayer subsidies and get on the road toward policies that protect the environment in economically responsible ways.
There are a lot of attractive things about plug-in electric vehicles. They’re clean. Much of the assembly and many of the parts are made in the USA. And then there’s the cool factor, provided by the futuristic look.
But before even more taxpayer dollars flow into subsidies for these PEVs, we should look under the hood to see if continued support is warranted.
Electric vehicles have been with us for almost 180 years. The first, an electric carriage created by an inventor named Robert Anderson, made its appearance in Scotland in 1832. By 1907 the American company Cutler-Hammer was advertising electric vehicles and the first electric charging station. Since that time Americans have seen tremendous innovations is everything from air travel to microwaves, yet there has been little progress converting consumers from gasoline-powered cars to vehicles powered by rechargeable batteries.
One hundred years after the Cutler-Hammer electric car, today’s plug-in electric vehicles receive failing grades from consumers and consumer advocates.
Consumer Reports doesn’t have good early reviews for Chevrolet’s flagship entry into electric vehicles. A top editor from the publication said the Chevy Volt, which has both a plug-in battery and a gasoline engine “isn’t particularly efficient as an electric vehicle and it’s not particularly good as a gas vehicle either in terms of fuel economy.” He concluded that it just “doesn’t make an awful lot of sense.”
He’s right when you consider the cost and performance of PEVs, starting with the batteries, which require major breakthroughs before they will be ready for prime time. A battery for a small vehicle like the Nissan Leaf can cost about $20,000 and still only put out a range of 80 miles on a good day (range is affected by hot and cold weather) before requiring a recharge that takes eight to 10 hours. Even then, those batteries may only last six to eight years, leaving consumers with a vehicle that has little resale value.
Home installation of a recharging unit costs between $900 and $2,100. And don’t forget workplace and retail recharging stations, which will be necessary.
Slick TV ads boast PEVs’ supposed environmental benefits, but what they don’t tell you is that a substantial increase in the numbers of them on the road will require upgrading the nation’s electricity infrastructure. Since half of all U.S. electricity is generated by coal, which produces greenhouse emissions, PEVs may not be any better than hybrid electric vehicles that do not need to be plugged in. Meanwhile, new technology for gasoline-powered vehicles has substantially increased miles per gallon, to as much as 35-50 mpg for several smaller vehicles.
If you’re looking for a car that makes good economic sense in these tough times, PEVs simply don’t make the grade. Unless crude oil prices rise close to $300 per barrel and battery costs fall by 75%, a PEV is more expensive than a gasoline-powered vehicle.
Despite these significant flaws, the government is determined to jump-start sales for plug-ins by putting taxpayers on the hook. The $7,500 federal tax credit per PEV is nothing more than a federal subsidy that will add to the deficit. There are also federal tax credits for installing charging stations in homes and businesses and for building battery factories and upgrading the electric grid. The administration’s goal—one million PEVs on the road by 2015— could cost taxpayers $7.5 billion. Outlays for recharging infrastructure will add billions more.
We all support the idea of protecting the environment—and PEVs may very well be a solution when battery technology improves and cost declines. But for now, hybrid electric vehicles, which combine a gasoline engine with a battery recharged during operation, are much more practical than PEVs.
If after 180 years, PEVs are still not a commercial success, it’s time to put the brakes on taxpayer subsidies and get on the road toward policies that protect the environment in economically responsible ways.
Ms. Thorning is the executive vice president and chief economist at the American Council for Capital Formation.
The Wall Street Journal, 25 March 2011