The report represents the views of the Transport Electrification Panel (TEP), a group of experts from multiple disciplines and organizations commissioned by the Indiana University School of Public and Environmental Affairs (IU SPEA). TEP’s work has been supported by a team of graduate students and faculty from IU SPEA, but the findings and recommendations in this report are strictly those of TEP.

President Obama’s dream is appealing and it may be achievable, but there are big barriers to overcome before the mass commercialization of electric vehicles will occur.

—John D. Graham, dean of the School of Public and Environmental Affairs at IU

The chairman of the IU panel, former Ford Motor Co. executive Gurminder Bedi, stressed that “a successful national program for electric vehicles will require an unusual degree of cooperation between industry and government, and a clear focus on the needs and concerns of consumers.”

The 13-member panel made 10 major findings and 8 recommendations. The findings include:

• The US PEV Industry in the Global Market. Virtually all major vehicle manufacturers and several start-up companies are offering—or are planning to offer soon—a PEV for sale in the US market. PEV offerings have also been announced throughout Europe and Asia. While US automakers are working on PEVs, the US electric vehicle industry lags behind other regions—particularly Asia—in the areas of battery manufacturing, supply chain development, and raw materials production. PEVs may never dominate the mass vehicle market, but it is possible—some experts say likely—that they will capture a significant share (5-15%) of the market over the next 15 to 20 years.

• Policy Instruments. Recent public policies in the United States and other countries have improved the prospects for initial commercialization of PEVs. These policies include generous tax credits for consumers and producers, new regulations of vehicle manufacturers, special access to high occupancy vehicle (HOV) lanes and city parking, loan guarantees and subsidies for companies in the PEV industry, grants for recharging infrastructure, and federal R&D support for more advanced battery technologies.

• National Goal of One Million Plug-In Electric Vehicles. The production intentions of automakers are currently insufficient to meet the 1-million PEV unit 2015 goal, and even the current plans for production volume may not be met. Automakers could ramp up PEV production if consumer demand proves to be larger than expected. However, consumer demand for PEVs is quite uncertain and, barring another global spike in oil prices, may be limited to a minor percentage of new vehicle purchasers (e.g., early technology adopters and relatively affluent urban consumers interested in a “green” commuter car).

• Market Drivers. Four market factors, each of which can be influenced by public policy, present the greatest potential for altering the competitive position of PEVs in the vehicle market: (1) energy prices; (2) battery characteristics (safety, reliability, and production costs); (3) the availability of convenient and affordable recharging infrastructure; and (4) the pace of progress with PEVs compared to competing technologies, such as refinements to the internal combustion engine, conventional hybrids, advanced biofuels, natural gas vehicles, and fuel cell vehicles.

• Early Adopters vs. Mainstream Car Buyers. One key reason that mass commercialization of PEVs may proceed slowly over the next decade is that mainstream retail purchasers of new vehicles differ from the relatively small number of enthusiastic “early adopters.” Mainstream car buyers are careful about investing in new technologies that are not fully understood. There are a variety of uncertainties about exactly how much money will be saved by PEVs (savings depend on uncertain forecasts of fuel and electricity prices), how reliable and safe the batteries will be, how convenient and costly it will be to recharge a PEV, how easy it will be to have the vehicle serviced, and how difficult it will be to resell the vehicle. Although proponents of PEVs are making progress in resolving these uncertainties, consumers will ask many questions before purchasing a PEV and will wait to hear from others who choose to experiment with a PEV.

• The Need for “Truth in Advertising.” Initial consumer experiences with PEVs—their real-world driving range, cost, safety, reliability, and ease of recharging and resale—will exert a significant influence over mainstream consumers’ perceptions of PEVs. If customer expectations are inflated (by automakers, dealers, power companies, environmental groups, and/or government officials) relative to what is actually experienced, the reputational damage to the technology could be significant and possibly irreparable. News stories are already describing the “hype” associated with the campaign for PEVs.

• BEVs vs. PHEVS. Battery-electric vehicles (BEVs) have some clear advantages over (plug-in hybrid electric vehicles) PHEVs: they offer greater potential for energy security benefits by eliminating the vehicle’s use of petroleum; they have no tailpipe emissions; they eliminate the complexity and cost of the internal combustion engine; and the electric drive system is relatively simple to design, produce, and service. However, the obstacles to mass commercialization of BEVs are even greater than the obstacles for PHEVs.

  Given the high cost of battery production, a BEV that approaches affordability (with generous tax credits) has a driving range of about 70-100 miles on a full charge. The battery pack takes a long time to fully recharge (usually overnight), and even using an expensive commercial recharger takes considerably longer than refilling a standard gasoline tank.

  Although typical daily travel patterns in the United States lie well within the 100-mile range, most vehicle purchasers desire a full-function vehicle that can meet their predictable peak travel demands (i.e., their longest trips, such as weekend and holiday road trips). With its battery pack complemented by a small gasoline or diesel engine, a PHEV can make use of the existing refueling infrastructure to achieve driving ranges of 300 miles by featuring conventional refueling capabilities in addition to recharging the battery. An affordable BEV cannot match this range or speed of refueling, so BEVs may not achieve mass commercialization until there are breakthroughs in battery technology, though they may succeed in niche markets such as commuter vehicles for affluent multi-vehicle households or urban pick-up and delivery vehicles.

• Recharging Infrastructure. Both PHEVs and BEVs are designed with the intention of using residential recharging as the primary refueling method, but BEVs also depend on the emergence of some recharging stations in the community. The obstacles to residential recharging are less challenging than community recharging, but more imperative to overcome. The biggest barriers to residential recharging are faced by those consumers who would otherwise find PEVs most attractive: urban dwellers with short commutes, who often lack garages or convenient access to an electrical outlet.

  Additionally, most municipal regulations and permitting processes are not yet designed with PEVs in mind and present a bureaucratic obstacle to the timely and efficient installation of residential recharging units. Workplace recharging will also be helpful and is already sponsored by some employers, but will occur less frequently than residential recharging. Retail outlets may have commercial incentives to install recharging facilities if sufficient demand develops, but the short-term need for community recharging is limited, installation remains expensive, and bureaucratic and technological obstacles persist.

• Battery Innovation. There are promising prospects for advancements in battery technology that improve performance and reduce costs, and breakthroughs in advanced battery chemistries remain a distinct possibility. Significant cost reductions in battery technology have already been achieved. Additional battery R&D may achieve even greater cost reductions, perhaps more significant than the cost reductions expected through economies of scale and “learning by doing” in the production process. While refinements of lithium-ion battery technology may prove sufficient for mass commercialization of PHEVs, a new type of energy storage will likely be required so that BEVs can satisfy the cost and range preferences of mainstream consumers.

• Environmental Impacts. A comprehensive environmental evaluation of PEVs must consider the fact that production of electricity will generate risks to the environment that will vary in nature and magnitudes depending on the source of power. The potential impacts of PEVs on climate change are of particular concern. Given the current mix of electricity sources in the United States, use of a PEV will emit far fewer greenhouse gases than the current average gasoline engine, but may not be better than HEVs that do not need to be recharged.

  As long as electricity production depends heavily on high-carbon energy sources, the net effect of PEVs on greenhouse gases will be limited and will vary by region. As electricity production shifts to lower carbon-emitting sources, the environmental promise of PEVs will be enhanced significantly.

The recommendations include:

• Technology-Neutral Policies. Policymakers should generally pursue energy security and environmental goals through technology-neutral policies, thereby allowing the marketplace for fuels and vehicles to determine which technologies are superior. The following fuel-saving policy instruments are typically considered technology-neutral: a gasoline tax; a national fuel efficiency standard that allows manufacturers to trade compliance credits; and a “feebate” incentive system for fuel efficiency, where buyers of high-mileage cars are awarded a rebate while buyers of low-mileage cars pay a fee.

  Some technology-specific policies are needed to allow emerging technologies to compete with mature technologies. If technology-neutral policies are not adopted, perhaps due to political opposition, and instead technology-specific policies are enacted, they should be designed to be as cost-effective as possible. Before any policies are enacted that might seem to promote PEVs specifically, the benefits of fleet electrification need to be compared to those from competing technologies.

  Given the technological and market unknowns, the report said, it may be wise for policymakers and businesses to invest in a mix of emerging technologies (non-PEVs and PEVs) until R&D and real-world experience establish which technologies are superior in specific applications. Any targeted public assistance for PEVs should be limited in both duration and production volumes. These programs should also be monitored and evaluated regularly to ensure accountability and effectiveness.

• National Demonstration of PEVs. A federally supported, national PEV demonstration program should be implemented to help overcome the information barriers faced by the PEV industry today. A de facto demonstration is already underway as private and governmental efforts prepare target communities for PEVs. Yet these efforts have not been combined and coordinated in a focused national program aimed at “learning by doing.” In order to resolve uncertainties about PEVs, it is crucial that the demonstrations gather data from consumers, dealers, manufacturers, utilities, retailers, and municipalities. Without key data, the opportunity to learn about the real-world experience with PEVs—successes, burdens, and mistakes—will be foregone, and unnecessary public uncertainty, confusion, and debate will continue.

• Global Leadership Position in Technology, Manufacturing, and Public Policy. The US automotive, battery, and electric power industries, in collaboration with the US government and universities, should seek to establish a global leadership position in electric mobility, especially in advanced energy storage technologies and production of batteries and related components.

• International Collaboration. Although the focus should be on advancing US leadership and competitiveness, there is also a need for some international collaboration.

• Cost-Effective Consumer Incentive Programs. For investors in emerging technologies, there can be a “valley of death” between the market acceptance of early adopters and widespread commercialization. Without some public assistance through this valley, emerging technologies with long-term promise may be discarded prematurely. In this regard, PHEVs may be closer than BEVs to overcoming the valley, since the current energy storage capabilities for BEVs are inadequate. In addition to the existing consumer incentives, the report recommends as targeted, cost-effective measures: government and commercial fleet purchases; PEV access to HOV lanes and parking in congested urban areas; battery warranty adjustments or guarantees; and targeted public information programs to dispel myths and reduce confusion.

• Support for Recharging Infrastructure. Private investments in recharging infrastructure may prove to be too small to support adequate demonstrations due to high initial costs for recharging infrastructure, few “first mover” advantages, relatively low energy prices in the United States, long payback periods, and uncertainty about the volume of future PEVs on the road.

  Significant public funding of recharging infrastructure has already been appropriated, and it is not yet clear whether more funding is necessary. As additional public cost-sharing of recharging is provided, the cost-effectiveness criterion suggests that the highest priority should be residential recharging, followed by stations at workplaces and then community stations. Excessive spending on community stations may result in severely underutilized infrastructure, which can damage public support for PEVs.

• Modernizing the Electric Power System. Even a partial shift from petroleum to electricity as a transportation fuel will have ramifications for the operation and growth of the electric power system. Detailed knowledge of the power grid is required to ensure that outages are avoided.

  To optimize the benefits of electrification, public policies should be adopted to: accelerate “smart grid” research, standards, and implementation; expand the availability of lower electricity prices during off-peak periods to enhance consumers’ willingness to charge their vehicles at night, and include continuous time-of-use pricing adjustments where acceptable; increase the availability of metering, recharging, and vehicle technologies that will enable these time-of-use adjustments to electricity prices; and encourage or require enhanced efficiency and the movement toward a cleaner power generation system in order to reduce upstream emissions associated with PEVs in the form of greenhouse gases and conventional pollutants.

• Long-Term R&D Commitments. Lithium-ion batteries may never have adequate energy density to independently power a household’s primary multi-purpose vehicle. Although there have been significant improvements in battery technology since the 1990s, policymakers should consider a large increase in federal R&D investments into innovative battery chemistries, prototyping, and manufacturing processes.

  Sustained investment in R&D, including both public and private funds, is crucial as the United States seeks to establish a leadership position in the growing global market for advanced battery technologies and related components. The potential spillover benefits in the economy from R&D and manufacturing leadership deserve serious consideration by policymakers, even though public R&D decisions will be made in a troubled federal fiscal situation.

  In order to determine the appropriate scale of R&D expansion, the expected payoffs from long-term R&D investments in energy storage techniques should be compared to the anticipated payoffs from R&D investments in other advanced fuels and propulsion systems.

Commenting on both the release of the report as well as President Obama’s 1-million unit goal for 2015, as re-iterated in the State of the Union address, Oliver Hazimeh, partner and head of the global e-Mobility practice at global management consulting firm PRTM said:

An increasing number of US consumers are now considering the purchase of an electric vehicle, a trend reflected in President Obama’s goal to have 1 million alternative energy vehicles on US roads by 2015. Thoughtful studies like that announced...by Indiana University, as well as the Electrification Coalition’s Fleet Electrification Roadmap and original Electrification Roadmap, developed in collaboration with PRTM, reinforce the need for new public and private partnerships as well as a strong consumer focus to overcome barriers to mass EV commercialization. While skeptics remain, we see first-hand the many initiatives currently underway by public and private organizations alike, which will brings costs down, enable a ramp in manufacturing, and make EVs increasingly attractive-particularly to segments like commercial fleets where business models are based on high utilization rates, predictable routes, central parking.

Through our ongoing work with OEMs and others across the transportation value chain, it’s also evident that there is a renewed focus on technology innovation that will extend the benefits of EVs well beyond environmental friendliness, making them even more attractive to the larger consumer audience. We believe that current and emerging innovations—in areas like vehicle performance, connectivity and real-time environmental monitoring, will provide an easy, fun EV driving experience, and create a cool factor that will further escalate demand among a mass consumer audience. These initiatives are optimistic reminders that 1 million EVs by 2015 is a realistic goal—one that carries with it additional benefits for the US, including high quality jobs growth as well as an opportunity to showcase technology innovation to the rest of the world.

Resources

• Plug-in Electric Vehicles: A Practical Plan for Progress. The Report of an Expert Panel