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CMU study finds small battery PHEVs and gasoline hybrids the least-cost policy solution to reducing gasoline consumption

Michalek
Comparison of current federal subsidy to base case assumptions showing lifetime fuel savings (HomeEve charging scenario). An EPA estimate based on the Chevy Volt’s reported efficiency is also included for comparison. The federal subsidy significantly favors larger battery packs to a stronger degree than their potential for additional gasoline savings. Peterson and Michalek 2012. Click to enlarge.

In an new study analyzing the cost-effectiveness of policies subsidizing electric-drive vehicle battery capacity and charging infrastructure installation to reduce gasoline consumption in the US, Scott Peterson and Jeremy Michalek of Carnegie Mellon University found that, under a wide range of scenarios, the least-cost solution is for more drivers to switch to low-capacity plug-in hybrid electric vehicles (PHEVs) or gasoline-powered hybrid electric vehicles (HEVs).

Comparing the subsidy necessary to achieve lifetime cost parity with the least-cost option for each vehicle class in the base case, they found that the maximum cost per gallon saved for increased all electric range (AER) is 5%–40% less than the minimum cost per gallon saved when installing charging infrastructure, depending on vehicle class. Looking forward as battery prices decrease and the AER resulting in maximum life-time cost savings increases, the relative value of plugging in multiple times throughout the day will also decline, they suggest. Their paper is available online in the journal Energy Policy.

(A 2011 paper by Michalek and colleagues found that strategies to promote adoption of HEVs and PHEVs with small battery packs offer more social benefits (i.e., air emissions and oil displacement benefits) in the near term per dollar spent than PHEVs and battery-electric vehicles (BEVs) with large battery packs providing longer electric range. Earlier post.)

Non-domestic charging infrastructure is generally not necessary for operation of PHEVs, and substantial gasoline displacement can be achieved solely with home charging. In contrast, the limited range of BEVs make non-domestic charging infrastructure more critical if the vehicles are to be used as primary vehicles. But public investment in either large-battery vehicles or charging infrastructure generally produces fewer benefits per dollar spent than investment in small-battery PHEVs (Michalek et al., 2011), suggesting that subsidizing sales of BEVs and installation of charging infrastructure are not the most efficient use of limited public funds.

If the purpose of existing federal PHEV subsidies is to reduce gasoline consumption, this implies that the policy subsidizes 4 kWh battery PHEVs at ~$1.25 per gallon saved while subsidizing 16 kWh battery PHEVs at roughly $4.50 per gallon saved, ignoring indirect effects. It is clear that federal subsidies are not currently aligned with the goal of decreased gasoline consumption in a consistent and efficient manner. Other relevant policy objectives, including reduction of emissions externalities, encouragement of technology development, and job creation do not show clear benefits of favoring large battery packs over small battery packs.

—Peterson and Michalek, 2012

Current Federal subsidies
The American Recovery and Reinvestment Act of 2009 (ARRA) provides a tax credit of $2,500 per PHEV sold (minimum 4kWh capacity) and an additional $417 for each additional kWh of battery capacity in excess of 4 kWh. This is capped at $7,500 for vehicles with a gross vehicle weight less than 14,000 lb.
This subsidy for a specific OEM’s vehicles declines to 50% then 25% in a phase-out period, which begins in the second calendar quarter after that manufacturer has sold 200,000 vehicles and lasts four calendar quarters.
The US Department of Energy (DOE) also granted $37 million for installing 4,600 charge points in specific markets around the US (>$8,000 per charge point) and granted $99.8 million to fund the EVProject, which is installing 14,000 Level 2 (208–240 V) chargers and a variety of other infrastructure and monitoring equipment.

To estimate the costs and gasoline savings of each approach, they calculated gasoline and electricity use by PHEVs of varying battery capacity under a range of charging scenarios. They then estimated the necessary charging infrastructure to enable each charging scenario, and then used the estimates of cost and gasoline displacement to compare across options.

In all cases, HEVs and PHEVs save gasoline over conventional vehicles. HEVs and some PHEVs can save both gasoline and total lifetime costs over conventional vehicles both at normative and observed implicit discount rates. They also found that the additional cost per gallon saved of alternatives—other than the least-cost option in each case—is higher than oil premium estimates, and charging infrastructure is orders of magnitude more expensive per gallon saved, even with optimistic assumptions for charging infrastructure. Peterson and Michalek deemed the findings robust across a wide range of sensitivity scenarios (available in the the supplemental information of the paper).

The authors suggest that redesigned policy should consider:

  • Subsidize usable capacity, rather than total capacity. The Chevy Volt, for example, uses only about 65% of its 16 kWh capacity in order to improve safety and battery life. However, current federal subsidies are tied to total battery capacity rather than usable battery capacity or AER—i.e., it incentivizes the use of larger battery packs.

    Subsidizing usable capacity would remove the disincentive for automakers to figure out how to use a larger portion of the battery. Alternatively, subsidizing based on AER (as measured in a standardized test) would also encourage automakers to make vehicles more efficient, and removing the exclusion for lower-capacity lower-range vehicles would be more consistent with potential benefits.

  • Subsidize estimated gasoline savings rather than battery capacity or AER. PHEVs have diminishing returns in gasoline savings as battery capacity increases. Subsidies intended to generate gasoline savings would be better if tied to estimated gasoline savings rather than battery capacity or AER, the authors suggest, and subsidies that are tied to battery capacity or AER should avoid a fixed rate per kWh or per mile and instead reflect the structure of diminishing returns.

    However, they add, methods for estimating gasoline savings may be controversial, and depending on what reference point is used, subsidies tied to gasoline savings could have unintended consequences, such as the potential for separate reference points in each vehicle class encouraging consumers to purchase larger vehicle classes.

  • Consider temporary larger subsidies. The current subsidy of $2,500 for 4 kWh (~$1.25/gal saved) and $7,500 for 16kWh (~$4.50/gal saved) pays prices substantially higher than US oil premium estimates of $0.37/gal ($0.08–$0.96/gal). Subsidies intended to generate gasoline savings would preferably be comparable to the social value of gasoline savings (and the value of other social benefits). To the extent that larger subsidies are able to kick-start adoption and sustainable market acceptance of plug-in technologies that would not otherwise be adopted, temporary larger subsidies may be warranted. But the magnitude or duration of this dynamic effect remains highly uncertain.

  • Target the goal, not the technology. More efficient policies generally target the policy goal, such as gasoline displacement, directly rather than a proxy, such as battery size.

    On economic efficiency grounds, subsidies are justified insofar as they correct for positive externalities, such as innovation knowledge spillover, and research funding is an alternative to subsidizing sales for achieving this effect.

    A more efficient way to address negative externalities is to apply Pigovian taxes (e.g., a carbon tax), which would increase the price of gasoline and make plug-in vehicles more competitive in the marketplace while encouraging the most efficient responses to reducing externalities, including not only alternative powertrains but also efficiency improvements and incentives to drive less and purchase smaller vehicles (as well as to make changes in other sectors of the economy). They authors acknowledged the political challenge of increasing or creating a tax.

  • CAFE. Considering the presence of binding CAFE standards, the authors raised the question of whether EV subsidies will provide any net gasoline savings for the foreseeable future

Ignoring interactions with CAFE policy, HEVs and PHEVs with low AER and only home charging generally provide the largest direct gasoline savings per dollar spent, offering both lower costs and lower gasoline consumption than CVs, depending on the consumer’s discount rate. It is therefore possible that incentivizing a larger number of consumers to purchase HEVs or low-AER PHEVs would save more gasoline under a fixed policy budget than incentivizing a relatively smaller number of consumers to purchase high-AER PHEVs. However, given a fixed market of electrified vehicle adopters, if more gasoline savings is needed than what can be achieved with HEVs and low-AER PHEVs, additional savings can be achieved more efficiently by paying for additional AER than by paying for extra charging infrastructure.

—Peterson and Michalek, 2012

Resources

  • Peterson, S.B., Michalek, J.J. (2012) Cost-effectiveness of plug-in hybrid electric vehicle battery capacity and charging infrastructure investment for reducing US gasoline consumption. Energy Policy doi: 10.1016/j.enpol.2012.09.059

Comments

HarveyD

This is exactly what Toyota has been doing. Does this make Toyota starter than others?

Darius

Chevrolet Volt battery is not so bulky as well providing good cycle life. I think optimum is somwhere between 20 and 40 miles AER depending on daily commute pattern.

SJC

"Target the goal, not the technology."

Davemart

PHEVs carry the cost of the system no matter what the size of the battery, so in terms of total costs rather than subsidy a rather larger battery may make sense to the purchaser, as the only additional payment is for the extra batteries.
IMO the sweet spot for EV range may be about 20 miles or so.

It is also of note that in fact drivers of the Volt are plugging in more often outside the home than Leaf drivers, 1.5 charges per day as against 1.1 times in the Leaf.

frankbank

Despite the fact that these cars are no longer hypothetical, this study fails to recognize the relationship between battery energy and battery power. The fact that small energy batteries lack the power to drive on all-electric power, hence their "AER" is a non-sequitor and a flimsy and inaccurate measure of what small capacity PHEVs do in the real world. When the power demanded exceeds what the little battery can do, the gallons of gas are not saved, they are burned. So the study exaggerates the utility of a small battery PHEV.

This glaring error has been sitting in the middle of the CMU work for the past three years. All extrapolations into policy etc are technically unfounded. Their work also fails to recognize the durability consequence of overusing batteries (usable vs total energy) and wearing them out prematurely (Nissan Leaf, anyone?) The CMU author's inability or reluctance to model these simple real-world consequences of actual cars with actual batteries before moving on to making bold policy declarations calls into question the motivation for their work.

cujet

I've often thought the plug in advantage should simply be to reduce engine load, and therefore improve MPG. Maybe the batteries should be sized to fully charge with a solar hood, roof and trunk, while parked outside during a normal work day. The additional weight would be minimal, vs. a conventional hybrid. And there could be worthwhile improvement in MPG's.

Roger Pham

@frankbank,
Some LiFePO4 batteries that are commercially available are now capable of 20C continous and 40C burst power,and are sold for ~$400/kWh. A 8kWh pack of 40C burst power can deliver 320 kW of acceleration power, and would be good for a super-duper sport car or high-performance luxury sedan PHEV's that can be priced above $50,000. The lack of a geared transmission and a much down-sized ICE would make up for the cost of the batteries and the electric drive train, hence no increase in cost in comparison to a 8-12-cylinder super-duper engine with 8-speed transmission and all kind of gitzmo to make'em smooth.

If auto MFG would target these high-end segment of the market first before trying to appease the more frugal buyers, then there would be no need for government subsidy for PHEV's. BTW, this is the same approach for launching novel electronic appliances like flat-panel TV's and Smart phones. Target the rich first, and then the lesser-rich will follow due to the irresistible hip and cool and fashionable factors. Sure glad that the gov. did not subsidize the flat-panel TV's for energy saving, nor the Smart phones, due to uh...whatever!

Engineer-Poet

frankbank, you forget that there are battery chemistries and cell constructions perfectly capable of providing high specific power.  They're not the same ones you'd use for an EV with a long range, of course.

If 20 miles of AER is the sweet spot, it looks like the Ford CMAX and Fusion Energi models are aimed right at it.

usbseawolf2000

My new Prius PHV is able to displace short trip gasoline (including cold start) usage of my old 2006 Prius. I am able to go all electric for our household chore, which are short, local and frequent trips. The 50hp PHV battery provides plenty of power to keep up with the city traffic. I normally use about half the power unless I have to accelerate uphill.

That leaves the 50 MPG gas engine for highway drivings. Since I am weeding out the short trips, gas engine is able to stay at peak efficiency longer. The synergy created by this strategy became obvious, just in the first week of ownership.

I have not depleted the battery with just the city driving. I used up the extra on the highway nearing home. The car estimated I would get about 13 miles from a charge. That is exceeding my needs so far.

I am very happy with the purchase, especially at $25k with the current incentives.

kelly

".. the least-cost policy solution to reducing gasoline consumption" may be the battery improvements and larger scale production needed to reduce costs.

If the ~monthly/weekly reported battery breakthroughs of the last four years were actually put on the road - 200 mile range/lower cost Leaf/BEV autos could sell well and economically reduce gasoline use.

usbseawolf2000

@frankbank - The battery doesn't need to displace 100mph driving. That's the gasoline territory with superior energy density and refueling speed.

EVs shine at slow city driving where 13 miles drive can last an hour or 2 miles round trip to the 7-11, etc. Slower city EV driving doesn't require a huge battery pack or a full size electric motor.

I have "tasted" the synergy between EV city and HV highway. It is very exciting for me to control when and where to use them. It requires some planning and if I don't, the car will blend the two fuel sources automatically.

usbseawolf2000

This study does not include emission (tailpipe + upstream). Per EPA's Beyond Tailpipe Emission site, Prius PHV is rated 210 g/mi CO2 while Volt is rated 260 g/mi.

The benchmark for the emission social benefit is the regular 50 MPG Prius which is rated 222 g/mi.

In order to move forward, we need a plug in that reduces emission and displaces gasoline without giving up interior volume. I think Prius PHV hits all those goals while keeping the recharge time short.

Brotherkenny4

Why is a "study" needed to state the obvious? This has been known for decades. If you have a brain that functions, it takes only small amount of effort to see that this is common sense.

That said, our goal is not to reduce gasoline consumption. Our goal is to make money, to become rich, and many people see gasoline and more specifically investment in oil companies as a very profitable part of the plan to achieve that goal.

If we want to do something we will, and if we don't we won't. Since we don't reduce gasoline consumption it means "we" don't want to. So all the complaints about gasoline prices are simply the easily manipulated or the manipulators. It is not really our intent to change it either.

Engineer-Poet

"Common sense is not so common." — Voltaire

usbseawolf2000

Common sense would say the bigger battery would save more gas.

However, if you put cost into the equation, $4.5 per gallon saved by 16kWh plugin hybrid is not saving at all.

By keeping the plugin battery small and maintain 50 MPG gas engine, every gallon saved cost just $1.25.

The effect of the bang for the buck is counterintuitive.

HarveyD

Current advantages and disadvantages of battery size is based on today's very low energy density and very high cost per kWh and relatively low liquid fuel price. Those factors will change rapidly during the next 8 years or by 2020 and make the above results almost meaningless or only pertinent for a very short time.

To be more relevant, batteries energy density of 2X to 10X; reduced cost of 60% to 80+%; fuel price of $3/gal to $10/gal; 50% improvement in control systems; 40% to 50% reduction in car body weight and many other factors would have to be fully considered.

Kit P

“My new Prius PHV is able to displace short trip gasoline (including cold start) usage of my old 2006 Prius. ”

That is $25k, not counting the contribution of from us tax payers, for a second car to make trips around town. I paid $1200 for a second car more than 10 years ago that serves the same function. Why is the Pious old and not serving the function of a car that gets good mileage in the city?

“Since I am weeding out the short trips, ”

I maintain driving less is a lot cheaper way to reduce fuel consumption than hauling batteries around.

So far every post about 'my EV' is from the self-indigent entitlement class who would not be caught dead in an old Geo Metro. Feel free to look down your noes at me in my old pick up but if green is buying less gasoline, I am a lot greener.

It is just common sense.

Roger Pham

@KP,
Short trips with cold start cause more engine wear and emit more air pollution due to poor combustion and poor catalytic converter function until it warms up, as well as poor fuel efficiency.

That said, the Prius is less polluting and less wasteful fuel-wise with short trips than a comparable ICEV because the Prius stores hot coolant in a thermos bottle inside when the engine is shut off and pump out this hot coolant at engine start to warm up the engine much faster than a typical ICEV and consumes much less fuel.

The Prius 3rd generation is even one notch better, in that the coolant further has an ability to recuperate exhaust heat to warm up even faster, and the difference is noticeable better in cold-weather fuel efficiency in comparison to older generation Prius or to any other ICEV's. The ability to recuperate and store exhaust heat means that winter driving does not require the engine to idle nearly as often as before when cabin heat is required.

Your old pick up truck is probably among the worse polluters and a gas hog, especially for the short trips that you are driving! EPA allows pick-up trucks and SUV's to pollute more than cars, even though they serve the same purpose for most of the time!

Not everyone is as blessed as you are, in that you have job security and is able to move closer to your place of work, and I presume that your wife does not have to work, and that your children have move out of your house and hence they, too, can move closer to the place of work.
The reality nowadays is that jobs are much less secure, and people change jobs often, and has to drive to work 20-30 mi one way anywhere in the large metroplex to keep employed. Can't afford to move every few months. Households with many job holders often cannot avoid long-distance commutes daily, since jobs are scattered and they cannot all move closer to work place.

So, KP, enjoy your blessing, and please pray for everyone else, and try to do something to help humanity for better job security, availability, and better environment to minimize the consequences of climate change, which has been wreaking havocs on America in the last several years...FEMA is running out of cash! Watch home insurance rate to rise significantly.

usbseawolf2000

@Kit P - I used to have a long commute and put 30k miles a year (for 5.5 years). 2006 Prius has 164,000 miles and my brother bought it from me to replace his truck.

Now, majority of my trips are very short. A regular Prius doesn't get great mileage due to the initial warmup. Plugin Prius addressed it by allowing me to drive those frequent trips in EV.

When I make long distance trips in the weekend, the gas engine is still rated at 50 MPG despite the 150 lbs extra weight.

So, using electricity for short frequent trips and the most efficient gas engine for long trips, I am able to get the best of both worlds.

Yes, I am using $2,500 tax payer money but every $1.25 will save the nation a gallon of gas (per the paper above). Pretty good bang for the buck.

I have 416 miles on it now. 30% on EV and 70% on HV (gas). The car is reporting 80 MPG with 25 kWh of electricity used.

Per EPA, I have lowered my emission from 222 gram of CO2 per mile to 190 g/mi. The Prius PHV drives better and the gas engine shutdowns are so smooth. It is an upgrade I am extremely satisfy of.

I understand your criticism and I think it should be directed toward Volt. It uses $7,500 tax payer money and every $4.5 saves a gallon. It is also heavier than the Equinox SUV.

Kit P

@Roger

You seem to lack common sense so I will keep it simple. Take fewer trips and combine trips.
I have no problem with those who always running someplace but I have to think that they are not serious about reducing oil use. Three days a week, I do not drive at all and I carry a lunch to work

Second, 'less polluting' only matters if pollution is a problem and it is not where I live. Furthermore, 'old pick up truck' does not mean it is polluting nor does it mean it is a gas hog. For my city driving it gets 25-30 mpg. If you do not drive very far, you do not have to drive fast to save time. Anything built after '89 meeting California standards and maintained in good running order, is not very polluting. We are not talking about a '70 ¾ ton 4wd with points, plugs, and a carburetor.

If I burn a ½ gallon of gas a day in my 'old' PU and Roger burns a gallon a day in his Pious, Roger is polluting more.

“20-30 mi one way anywhere in the large metroplex ”

This I do not understand. The rat race is a choice. A long time ago, we made life style choices. We bought houses that only required one income and the kids could walk to school. If you are only spending a few minutes driving to work, who needs a new fancy car?

Another common sense thing is car pooling. Done a lot of that over the years and highly recommend it when circumstances causes you to live more than 10 miles from work.

“climate change ”

Well the climate has not actually changed much yet. I have owned houses where the water was in the front or back yard every so often. That just what happens when the wind is blowing hard and there is a full moon.

Anyone who thinks spending a lot of money on a car will help humanity or affect climate is seriously deluded.

Kit P

@usbseawolf2000

“2006 Prius has 164,000 miles ”

My wife make frequent long distant trips because to the health of her mother and I am betting your Prius does not do much better on the highway. Unless there is a side by side driving test, I am skeptical of comparisons. The only one I have seen was won by the VW diesel and not a Pious.

“Pretty good bang for the buck ”

Not for my buck! How about you sending me money for driving less.

Funny story in a dark sort of way. I was at a renewable energy conference as a co-author of a paper and a owner of a hybrid had a display. He had taken a thousand mile trip to document his great mileage. Since I was there in a professional capacity I kept my trap shut and did not ask how much fuel he could have saved by taking a walk to the park. There was also a VW running on biodiesel. The park service also learned that running truck used french fry oil attracted bears in a biblical sort of way (will that what they said and I believe my government).

“I understand your criticism ..”

I was in the navy for 10 years so I recognize BS. In any case, hang in there because debate is good.

usbseawolf2000

@Kit P - In my old commute (mostly highway), 2006 Prius served me well with average 53 MPG. It still has the original brake pads and the original traction battery required no maintence.

I think you and I are on the same page, together with the author. The incentive needs to aim at the goal and not a specific technology (battery size). Diesel and regular hybrid also save gas and there are no incentive. Yet we are spending $4.5 per gallon in a compact 4 seater Volt.

Check my posts on priuschat to understand my position better.

usbseawolf2000

@Kit P - Regarding your other comment... Combining trips and living closer are common sense and people do that if the choice is available. There are other things to consider in the entire quality of life equation.

Emission is a global issue so it does not matter where you live. 25-30 MPG in city driving is unacceptable by my standard. My Prius PHV can drive 190 miles with a gallon of diesel equivalent electricity. On the highway, I use the gas engine and have been getting 55 MPG.

Using the fuels that is superior in different driving conditions is what the hybrid synergy drive is all about.

usbseawolf2000

@Kit P - In case you are not aware, modern diesel cars void warranty if you use 100% biodiesel. VW limits to B15 under warranty. These modern diesel emission system also need regular maintenance.

Having said that, any technology that saves petroleum and reduce emission should get its own fair share of incentive.

Henry Gibson

Driving fast takes more power and energy for the distance traveled. Volkswagen tries to hide this. The Artemis hydraulic hybrid can give better performance with smaller more efficient engines, but they only demonstrated half the fuel consumption for the same large engine in city driving and better performance. Artemis has gone onto making transmissions for the largest of windmills leaving Bosch to hide their technology that could cut fuel consumption at far less cost than batteries and electric motors. Cheap Lead batteries can be used in a plug in Prius as demonstrated by Calcar's Ron Gremban in several ways, and one of the last ways left the original battery in place which would give the lead battery more life and range. A small ZEBRA battery, with the same energy as lithium, would work well in this mode, since if you let the battery off charge to long the car would still function until the battery heated up. GE is promoting the identical chemistry DURATHON and FZSONICK now owns ZEBRA who has a new package for passenger railcar lights.

The ZEBRA battery now makes third rail systems with even gaps of miles possible, but there is still no reason to not have a few kW generator on board for limping into a station or to an active rail section. ZEBRA battery passenger railcars could go all the way through New York drained tunnels with their damaged dead power rails.

This last bit is very important for Prius owners who find themselves without power. The Prius can charge its 12 volt battery from the traction battery, and the engine can charge the large battery whilst the vehicle is stationary (and outside). Any size inverter as sold in many shops can run quite a few CFLs.

The traction battery can also power CFLs directly. In JapDriving fast takes more power and energy for the distance traveled. Volkswagen tries to hide this. The Artemis hydraulic hybrid can give better performance with smaller more efficient engines, but they only demonstrated half the fuel consumption for the same large engine in city driving and better performance. Artemis has gone onto making transmissions for the largest of windmills leaving Bosch to hide their technology that could cut fuel consumption at far less cost than batteries and electric motors. Cheap Lead batteries can be used in a plug in Prius as demonstrated by Calcar's Ron Gremban in several ways, and one of the last ways left the original battery in place which would give the lead battery more life and range. A small ZEBRA battery, with the same energy as lithium, would work well in this mode, since if you let the battery off charge to long the car would still function until the battery heated up. GE is promoting the identical chemistry DURATHON and FZSONICK now owns ZEBRA who has a new package for passenger railcar lights.

The ZEBRA battery now makes third rail systems with even gaps of miles possible, but there is still no reason to not have a few kW generator on board for limping into a station or to an active rail section. ZEBRA battery passenger railcars could go all the way through New York drained tunnels with their damaged dead power rails.

This last bit is very important for Prius owners who find themselves without power. The Prius can charge its 12 volt battery from the traction battery, and the engine can charge the large battery whilst the vehicle is stationary (and outside). Any size inverter as sold in many shops can run quite a few CFLs.

The traction battery can also power CFLs directly. In Japan and in the US two standard CFLs can be used directly off the battery in series with the CFLs midpoint voltage established by two tungsten lamps for many pairs of the CFLs; similar to the old Edison DC three wire system.

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