Previously, I suggested that our country should implement a gas tax. Several other blogs picked this up and the commentary was fairly vitriolic. The gist of the nasty stuff was the notion that raising the gas tax was an attack on families struggling to survive in this recession. I respect this point of view, if not the unseemly way many express it. The point I was making, and continue to make, is that the current economic situation will make it increasingly difficult to maintain the momentum we have built to address the longer term issues we face as a society. The progress on this front has been very positive and it will take extraordinary leadership to sustain it given the short term economic challenges and the powerful forces of populism. We need to do something radically different to re-orient our hyper-consumerist society into one that is sustainable in the long run. We cannot continue the slash and burn type of development that the industrial revolution brought. A major piece of the puzzle is the shift of automotive transport from petroleum to electrical power. The technology is maturing and we are in the midst of a real shift to practical electric transportation. Nearly every large automobile manufacturer has announced plans for plug-in hybrids or pure electric cars. The shift is taking place. It is inevitable. The only questions that remain are how far and how fast. The answer lies in the relation of two things -- the cost of petroleum and the cost of batteries. For the sake of simplicity, lets say the price of a gallon of gas and the price of a kilowatt hour of energy storage. Today, the costs of automotive battery storage (expressed in $/kWh) have improved relative to just 10 years ago, but they are still too high to be economical for mainstream automobile buyers. With today's gas prices, no EV manufacturer can credibly say that purchasing an EV will save you money over the typical life of a car purchase. They may point out the savings in gas costs, but if you account for the initial cost of batteries, and potentially the required replacement costs of the battery, the numbers don't pencil. In the absence of any incentives, the market for EVs today would be for technology and/or environmental enthusiasts who are willing to pay a healthy premium for cool technology or for reduced CO2 emissions. The good news is that this is a healthy, attractive market. The bad news is that it is a niche market relative to the enormous automotive market (incidentally, a "niche" business in the automobile business can be a billion dollar business, but it won't move the dial from an environmental perspective at that scale.) For electric vehicles to become mainstream, either battery costs must come down significantly or gas prices must rise significantly. Over time, fossil fuels will become scarcer and therefore more expensive. It can also be assumed that over time, technological innovation will bring battery costs down. This is why I say the shift is inevitable. But if you want to accelerate this shift, you must either make gas artificially more expensive (via a tax) or make batteries artificially cheaper (via an incentive.) So while I have criticized the political courage of our leaders in not confronting the issue of increasing the gas tax, I must acknowledge the significant battery subsidies that were passed last fall and have just become effective January 1st 2009. If you aren't aware, the current tax credits on the books start with $2,500 for a car with a small, 4kWh battery (assume 10 miles usable electric range) and max out at $7,500 for a car with a 16kWh battery (assume 40 miles usable electric range in a PHEV configuration, or about 70 miles in an EV configuration) Those aren't small numbers. At $468 to $625/kWh in subsidy (depending on the size of the battery, up to 16kWh), you are looking at a tax credit that offsets more than half the total cost of the battery. But I would argue that it isn't enough. Specifically, the cap of 16kWh effectively maximizes the benefit for plug-in hybrids like the Chevy Volt (this is not a coincidence!) but the per kWh subsidy decreases as batteries get larger, as you might commonly see in pure EV applications. What this means is that under the current incentive scheme pure EV sedans, which are more efficient and emit less CO2, are price-disadvantaged to plug-in hybrid models and to their pure gasoline competitors. By maintaining the current formula but eliminating the cap of 16kWh, EV manufacturers would have a level playing field with plug-in hybrids and would approach cost-competitiveness with their gasoline competitors. With such a subsidy, an electric family sedan with substantial range could start to be cost competitive with it's gas-only competitors. Over time, the subsidies could be phased out as the natural forces drive energy costs up and battery costs down. Perhaps this approach could accomplish the same result for accelerating the electrification of the automobile without inspiring the public outrage that a gas tax seems to bring. Daryl Siry is the former chief marketing officer for Tesla Motors. He now consults on marketing and the automotive industry. You can read more here: http://darrylsiry.blogspot.com.