Once again, John Petersen has gone too far with his petrol-head arguments against Electric Vehicles (EVs.)
In a recent article fetchingly titled, Why The Electric Vehicle House of Cards Must Fall, he argues that because “the incremental cost of vehicle electrification [is] an up-front capital investment of $190 for each equivalent barrel of oil saved.” Since the oil price currently barely tops $100, he considers this (to put it mildly) a bad investment. He concludes:
Electric drive proponents are selling a house of cards based on fundamentally flawed assumptions and glittering generalities that have nothing to do with real world economics. Their elegant theories and justifications cannot withstand paper, pencil and a four function calculator.
He’s quite right that pro-EV arguments don’t stand up to “paper, pencil and a four function calculator.” That’s because, in order to use these crude methods, he has to make a number of simplifying assumptions which have the side-effect of understating the benefits of electrified transportation.
False Assumption: The only benefit to EVs is oil savings.
To get his $190 cost for each barrel of oil saved, he divides the barrels saved by the additional cost of an EV. But if there are other benefits to EVs, then some of that incremental cost should be allocated to the other benefits, not to reducing oil consumption. Here are a few advantages of EVs he ignores.
- No oil changes/less maintenance. This saves both direct costs, and the owner’s time.
- No trips to the gas station. How much time do we waste (and extra miles do we drive) going to the gas station (or even going a few miles out of our way to get the best price on gas)? With all the attention to range anxiety, there seems to be very little attention to the fact that your car recharges while you sleep. Do you know anyone who enjoys spending time in a gas stations? Not driving to gas stations probably saves an additional gallon per year, and the driver’s time is of course valuable, too.
- Quieter ride. Many luxury car owners are willing to pay a lot for a quieter ride, so it must have some value.
- Potential to make money selling frequency regulation to the grid. This much-talked about concept still needs regulations and market structures to make it practical, so while I think it deserves a mention, I won’t give it any value in my calculations.
- Batteries in base of car lowering center of gravity and improving handling.
- No tailpipe emissions. Since car exhaust often infiltrates into homes via connections to the garage, this should be seen as a benefit to anyone who has an attached garage and cares about their own and their family’s health.
Using Peterson’s estimated savings of 104 barrels of oil over the course of a decade, each $1040 we attribute to the above benefits of EVs should reduce the cost of a barrel of oil saved by $10. I’d say $1,040 would be a very low-end estimate of the above benefits, while $5,200 would be a high-end estimate, so the cost of saving a barrel of oil through vehicle electrification is between $140 and $180 once we take these benefits of EVs into account.
An EV buyer is essentially purchasing their fuel savings up-front, at a fixed price, partly because it costs much less per mile to drive an EV than an conventional vehicle, and partly because electricity prices are much more stable than gasoline prices.
Price stability is valuable in itself, since it allows much more effective budgeting. Many people buy oil or propane to heat their homes in advance in order to lock in a fixed price, so they must value the price stability. An EV is an opportunity to lock in most of the fuel price for the life of the vehicle. Even if that price is $140 or $180 per barrel of oil, it still will have value to some drivers.
Will the price of oil average more than $140 over the coming decade? I think the chances are high. There is even a decent chance that oil prices will average more than $180 over the next decade, in which case an EV buyer today will be quite pleased with herself five or ten years from now.
Finally, as I have discussed previously, not everyone is an average driver. Drivers with regular commutes who have the opportunity to charge their vehicles more than once per day gain significantly more benefit from plug-in vehicles than drivers who charge their vehicles less often per day.
EVs are not an economic option for everyone, or even for most drivers. Drivers who can use more than the full range of their vehicle per day by charging more than once, and drivers who place high values on the other benefits of EVs describe above, may find that electric vehicles make economic sense.
Are electric vehicles a panacea to our car culture woes? No. But it is a mistake to call vehicle electrification a house of cards based on a back-of-the-envelope calculation.
This article was originally published on AltEnergyStocks.com and was republished with permission.