Last week, GTM Research report authors Dominic Hofstetter and Travis Bradford held a live webinar on their new market report, Electric Vehicles 2011: Technology, Economics, and Market. Below are a selection of audience questions from that webinar, which at the time went unanswered due to time constraints. To watch the complete archived webinar, click here.
Q: Does your report cover commercial fleets? What is your view on the fleet market?
Commercial fleets are a recurring theme throughout all parts of the report. Fleets are seen by many as the low-hanging fruit in the EV market because of a number of characteristics that make them particularly suitable for electrification. Among those characteristics are route predictability; the ability of central charging (and hence higher utilization of expensive Level III charging equipment); and sophisticated buyers to whom total cost of ownership is more important than any upfront cost differential. In practice, however, selling to fleets may not be that easy. Organizational inertia and capital availability are important inhibitors (energy efficiency projects tend to receive much less management attention than core business opportunities), as is the resale risk involved in buying a new technology (fleets have a relatively high turnover rate and require visibility on the resale value).
Irrespective of the inherent pros and cons of EVs to fleet managers, the fleet market remains relatively small compared to the consumer car market, with roughly 1.8 million passenger cars and Class 1-5 trucks sold in the U.S. each year (compared to a historical average of 13 million passenger cars in the consumer segment). In the near term, fleets can be an interesting place for early adoption, but for the industry to achieve the much needed economies of scale in the long term, OEMs must succeed in conquering the mass market.
Q: What are the infrastructure upgrades required in the EV ecosystem?
Generally, EVs represent a disruptive technology, and hence all parts of the transportation ecosystem must evolve to accommodate a growing EV fleet. This will require hardware and software upgrades on many levels, the most obvious of which are the transformers sitting between the last stretch of the transmission grid and the local distribution grid. But other components are required as well, including charging equipment, software for charging and billing, and interoperability standards. We treat all of these aspects in the report.
Q: How large is the market of early adopters, and what are the characteristics of this group of people?
While it is extremely hard to quantify early adopters, it is relatively easy to characterize them. Generally speaking, early adopters place less emphasis on the aspects that EVs lack relative to ICEs and more emphasis on those aspects where EVs excel. One of the most important aspects is range, so early adopters are those who consider buying an EV as a second car. Closely related to this characteristic is income, because the more a person earns, the less importance this person assigns to the potentially higher upfront cost. The income constraint is partially alleviated by subsidies, so you can look for early adopters in jurisdictions with generous subsidy schemes. Finally, early adopters are those people who care about the environment or consider an EV for the green image. Interestingly, many of these variables are correlated, which becomes particularly apparent in California, where many people have above-average incomes, benefit from a state-level incentive program, and are generally more eco-minded than elsewhere.
Q: The Nissan LEAF and Mitsubishi iMiEV use batteries of 24 and 16 kilowatt-hours, respectively. What is the right size of a battery in an all-electric vehicle?
One attempt to answer this question is to look at the distance an average person drives between charges. According to the National Household Travel Survey (NHTS), the average driver takes three trips a day for a total of 30 miles. The optimal gross battery size is given by:
Battery Size (optimal, gross)= [(distance between charges)/(miles per kWh)] × [1/(depth of discharge)]
Assuming an average distance between charges of 30 miles, a fuel economy of 5 miles per kilowatt-hour, and a depth-of-discharge of 80 percent, the optimal battery size equals 7.5 kilowatt-hours. The Toyota Prius Plug-In comes with a 5.2 kilowatt-hour battery for an estimated all-electric range of 13 miles. The Chevy Volt, on the other hand, is equipped with a 16 kilowatt-hour battery, for an all-electric range of 35 miles. What is the source of this rather large difference? One possibility is that Toyota believes the average driver will actually drive less between charges than what the NHTS would suggest. As a result, a smaller battery reduces the incremental cost versus a comparable ICE and the relative cost to a comparable EV with a larger battery. Another possibility is that General Motors deliberately chooses a larger battery, either because the company has less confidence in its technology and does not want to underdeliver on its range promise, or because it seeks to increase the battery’s life through shallower depth-of-discharge. Finally, General Motors might simply be seeking to take advantage of the structure of the federal subsidy; under the subsidy program, the optimal battery size is 16 kilowatt-hours (the first 4 kilowatt-hours of capacity reap a subsidy of $2,500 and each incremental kilowatt-hour of capacity above 4 kilowatt-hours is subsidized with $417 until the cap of $7,500 is reached at 16 kilowatt-hours).
Ultimately, consumers will decide how much driving range they demand and what they are willing to pay for it. What is clear, however, is that a fixed price subsidy based on battery size works in favor of BEVs rather than PHEVs, since the former typically come with a larger battery.
Q: How important is public charging for the adoption of EVs?
Public charging is generally seen as an important pillar in alleviating range anxiety and hence plays some role in spurring EV adoption. However, PHEVs -- which we believe to be the superior technology platform in the near term -- rely much less on public charging infrastructure than BEVs because of the range-extending internal combustion engine. In addition, 89 percent of all trips are shorter than 20 miles and can be satisfied with a 4 kilowatt-hour to 5 kilowatt-hour battery. So range anxiety is more likely to be a psychological rather than practical problem. In other words, people will find it important that public charging is available, yet they might not end up using it.
Q: In your report, have you factored in health-related costs due to emissions into the total costs?
One of the biggest benefits to society of the widespread electrification of transportation is the lower emissions of EVs relative to gasoline-powered cars, which have been shown to release not only CO2 but also carbon monoxide, particulate matter, and volatile organic compounds. Most of these costs are externalities for which consumers do not have to pay, and they only play a role to the extent that people factor environmental considerations into their buying decisions. Emissions benefits are only captured through a total cost of ownership analysis to the extent that they raise the cost of the vehicle, e.g., through mandated on-board catalysts.
Q: What is the importance of green charging stations, e.g., solar-powered public chargers?
The power requirements for a Level II charging equipment far exceed the capabilities of commensurately sized PV panels, so don’t expect any of these to emerge. Ever.
Q: Will there be integration of renewable energy sources and EVs?
There might be a role for EVs to play in grid balancing (hence the buzz around V2G), but our hunch is that most regulation services will be provided by utility-scale technologies. The key uncertainty is in the marginal value of having a grid-balancing asset that is distributed rather than centralized, and the incremental value such an asset can demand and capture through contractual relationships.
Q: What about NiMH batteries for EVs?
NiMH batteries are mainly used for power applications in hybrid-electric vehicles (HEVs) such as the Toyota Prius. Because of their low energy density, they are inferior to lithium-ion batteries in automotive applications and very unlikely to be deployed. Also, Li-ion production capacity has massively increased in the past, leading to price declines. If this trend continues, Li-ion will be superior to NiMH in automotive applications in almost all aspects.
To learn more about GTM Research's Electric Vehicles 2011: Technology, Economics, and Market, visit the report's web page at www.gtmresearch.com/report/electric-vehicles-2011-technology-economics-and-market.