Navigant Research Blog

New Efforts Address EV Affordability

— June 29, 2015

Power_Paddle_webThrough the first 5 months of 2015, according to data from Hybridcars.com, plug-in electric vehicle (PEV) sales are down in the United States by 4% from 2014. This is due, in part, to the current price of gasoline being lower than the 2014 price by $0.89 cents per gallon (per the U.S. Energy Information Administration), as well as the drop off in sales of the Chevrolet Volt in anticipation of the updated model coming out soon. In fact, if the year-over-year Volt sales are ignored, the rest of the industry is actually slightly ahead of last year’s pace.

The higher upfront cost of PEVs is clearly one of the major hurdles to greater electric vehicle (EV) sales, along with greater consumer awareness of their benefits in reduced fuel cost, performance, and drivability. The higher price tag precludes many prospective buyers from considering a PEV, although several models are below the current average new car transaction price of $33,363, according to Edmunds.com.

Making PEVs more affordable would bring in EV buyers from a broader audience, as data from a recent Navigant Research survey of consumers in the United States indicates that the interest in PEVs is not limited to high-income families. Of the survey respondents who reported having an income between $25,000 and $50,000 annually, 15% said that they preferred their next vehicle purchase to be a PEV, which was higher than those with income of $50,000 to $150,000 annually (9%).

Incentives and Research

California is trying to make PEVs more appealing to lower-income families in areas where air quality is a concern. New programs for people living in the San Joaquin Valley Air Pollution Control District or South Coast Air Quality Management District provided incentives of up to $9,500 on a PEV purchase depending on the individual’s income level. While it won’t prompt a spike in nationwide sales, a successful program could encourage other regions to similarly target getting more PEVs into lower-income households.

The European Commission is also targeting lowering the cost of PEVs through three research projects. As reported by Automotive Fleet, the 3Ccar project is focusing on reducing the cost of the electronic components, which, along with the battery pack, are the primary contributors to the additional cost of PEVs. Greater volumes of PEV sales will lead to more competition in electronics, which will lower the cost and result in more sales.

Utilities are stepping up by creating programs to make EVs cheaper to operate and to make recharging easier. On June 8, the Edison Electric Institute signed a memorandum of understanding with the U.S. Department of Energy (DOE) that will make utilities more active participants in reducing the cost of electric transportation and to build on the DOE’s goal of making EVs as affordable as a gasoline car by 2022. Greater utility involvement is critical to reducing EVs’ operational costs as well as providing the baseline charging infrastructure for consumer confidence that EVs can be recharged wherever drivers need to go in urban areas.

 

California’s Investments Pay Off in PEVs

— June 3, 2015

Analysis of the penetration of plug-in electric vehicles (PEVs) per capita reveals that, to the surprise of no one, California is far ahead of the rest of the United States. Based on data from Navigant Research’s recently published Electric Vehicle Geographic Forecasts report, 7 of the 20 areas with the most PEVs on the road in 2015 are in the state.

As show in the below table, California’s seven metropolitan statistical areas are near the top of the list for PEVs sold per 100,000 residents. California’s route to success has included substantial investments in PEVs and EV charging infrastructure through incentives, project grants from the California Energy Commission and other state institutions, and by providing PEV access to HOV lanes. However, the coveted HOV stickers are nearly gone, so it would not be surprising if PEV sales in the Golden State slow unless new stickers are made available.

PEVs on the Road per 100,000 Residents

John blog table, june 2(Sources: Navigant Research, U.S. Census Bureau)

The regions on this list have many things in common that make owning a PEV favorable, including demographics like age and higher average incomes that lean toward PEV ownership. All of the states wherein these regions lie have some form of incentive for buying or driving an EV or for purchasing a charging station, often in the form of tax credits or the ability to drive in HOV lanes. Also, nearly all of the areas on the list were recipients of charging infrastructure funded by the Department of Energy’s EV Project and ChargePoint America projects, which deployed thousands of Level 1-2 and direct current (DC) fast charging stations between 2010 and 2013. The exceptions that were able to also create demand in PEVs are Honolulu, Denver, and Miami, although each area has received some federal funding for EV programs.

Investments in public EV charging infrastructure by federal or state agencies (or increasingly utilities) have resulted in greater PEV awareness by the general public, as well as increased PEV sales as potential buyers feel greater confidence knowing that they can charge at familiar spots around town. Conversely, states without investments in EV charging infrastructure have seen much less PEV penetration.

 

 

Oregon Boldly Enters the Road Tax Debate

— May 21, 2015

 The decaying road infrastructure in the United States is obvious to everyone, yet state and federal legislators have done nothing for decades. Despite the constant threat of injury due to failing roads and bridges, hiking the federal gas tax is viewed as a death sentence for politicians, who have not raised the levy since 1993. Back then the gas tax represented 17.1 % of the total retail price of gas; in 2014, it constituted only 5.3%.

Gas tax revenue has not kept up with inflation, which has resulted in tax revenue for the federal Highway Trust Fund to be taken from other revenue sources to remain solvent. The Fund, which is $52 billion in the red over the past decade, will run out of money at the end of May unless Congress acts to reauthorize funding.

The lack of federal funds is squeezing states to do more on their own to repair their infrastructure, and Oregon is one of at least 10 states that are attempting to raise revenue. In July, Oregon will test moving from a fixed per-gallon tax to a per-mile-driven fee. The challenge with testing the program with 5,000 volunteers is that the self-selecting audience is likely to save money since drivers with low fuel economy vehicles are unlikely to join, knowing that they would pay more by participating. However, if those who do participate react positively, then Oregon is more likely to move to implement the plan for all drivers.

Fee Hikes

The move to a per-mile fee is in response to decreasing use of fuel (and therefore tax revenue) per mile driven due to increasing fuel economy and the arrival of plug-in electric vehicles (PEVs). Some states have considered adding an annual registration fee for PEVs, which don’t pay road taxes on the electricity that powers the vehicles.
While this would raise revenue, it could reduce sales of PEVs if the overall fuel savings were then reduced. A more equitable solution would be to combine a per-mile-driven tax with annual registration fees that consider another negative impact of driving—greenhouse gas emissions. Having more costly registration fees for vehicles with higher emissions (i.e., low fuel economy) could keep the overall cost of driving a PEV, hybrid, or other fuel efficient vehicle sufficiently cheaper to encourage their purchase.

Other states considering changes to gas and road taxes to increase revenue include Illinois and Nebraska. The Nebraska legislature on May 14 overrode the governor’s veto of a law that would raise the gas tax.

Bridges Out Ahead

“Once again, the Legislature has chosen to prioritize tax hikes over tax relief measures that Nebraskan need and deserve,” Nebraska governor Pete Ricketts said, as quoted by the Associated Press.

On the federal level, Rep. Peter DeFazio, a Democrat who is also from Oregon, has proposed redirecting funds from the estate tax to the Highway Trust Fund rather than repealing it. This initiative, like most other bills related to infrastructure funding, has little chance of passing despite the considerable benefits, including creating 13,000 jobs per $1 billion spent.

Sadly, it will likely take a series of bridge collapses such as what happened recently in Jacksonville, Florida or other such calamities for the public to pressure state and federal legislators to take serious action on infrastructure.

 

Social Ridesharing Looks to Avoid Legal Issues

— May 13, 2015

Ridesharing companies like Uber and Lyft have grown quickly despite resistance from some local governments over their legality of operation. To avoid the legal morass, new services, such as BlueNet-Ride, are leveraging social networks and avoiding directly competing with taxi and limousine services.

BlueNet-Ride

Based in Taipei, Taiwan, BlueNet-Ride uses Facebook to connect people interested in attending events. Attendees can carpool or group together to rent a taxi as a means of reducing the cost and emissions of traveling to concerts, sporting, or other events. Created by National Taipei University of Technology Associate Professor of Electronic Engineering Shih-Chia Huang and his students, the service connects Facebook users with friends or friends of friends as a safer alternative to traveling with unknown drivers.

Searching for Riders and Drivers

During an interview in Shenzhen, China, Huang said the backend to the mobile application is an algorithm that searches for people who plan to attend events and maps the distance between driver and passengers, as well as distance to the location. Cab companies participate and offer to drive the groups of acquaintances, or people can offer to drive for free, which avoids the legality of operating an unlicensed taxi service. Ride sharers can volunteer to chip in for gas, and the app has a chat feature so that people can discuss when and where to meet.

Through the free app, commercial drivers can opt to maximize their revenue or drive the shortest distance to be able to serve more customers. A fee of $0.10 is charged by BlueNet-Ride to passengers when they find a ride via a taxi service, and they pay the normal tax fees. Huang received a patent in the United States in 2014 for the ridesharing idea. He has received more than 30 patents in the United States, Europe, Taiwan, and China for a variety of technologies, including mobile applications for gesture recognition, image processing, and liquid crystal display (LCD) modules.

Regulation Woes

The onslaught of ridesharing services such as Uber and Lyft has many state regulators and legislators scrambling on how to regulate the new services. For example, pending bills in Wisconsin and Tennessee would establish rules for companies to pay license fees, as well as background checks for drivers or setting a minimum for liability insurance to be held.

Huang isn’t the only entrepreneur making the friends-to-rides connection. Hitch A Ride is a similar application that connects passengers with drivers via social networks in Australia.

 

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