A second administration of President Barack Obama will be forced to revisit the issue of subsidies for renewable energy and, with it, those for electric vehicles. Despite the millions of dollars spent on government incentives, marketing and promotion, sales of fully electric cars are well below projected targets. Investment in vehicle charging infrastructure also has fallen victim to budget cutbacks, limited usage and concern over the return on money spent.
Indeed, only last month, a leading automotive battery manufacturer, A123 Systems, was forced to declare bankruptcy. And the founder and CEO of Better Place, Shai Agassi, whose company (in which I was employed) promotes all-electric vehicles with batteries that can be both charged and replaced, was himself replaced due to low sales figures and high capital expenses arising from the deployment of battery-switching stations.
As a result, the question is now being raised: Are we again bearing witness to the death of the electric car?
Any such conclusion over the longer term may be premature. With declining costs and gradually improving technologies that can extend battery range beyond its current limitations, the electric car continues to hold promise. Rising gasoline prices and potential disruptions in oil supply favor alternative sources of energy.
To achieve mass market adoption, however, cars running on electricity — or any other alternative energy source — must satisfy the three “C’s”: cost, convenience and connectivity.
Few buyers are able or willing to pay more for a car running on clean energy unless the upfront cost of the car roughly equals or is below its carbon-powered alternative. Advertised savings over time in powering a car using alternative “fuels” so far have failed to persuade the average driver to buy. And while government subsidies play a role in reducing initial costs to consumers, such incentives so far have not been sufficient to attract large numbers of drivers to switch to electric vehicles.
Cars driven solely or partially by electricity or other alternative energies also must be at least as convenient as those powered exclusively by internal combustion engines. Drivers appear unwilling to sacrifice the expected hundreds of miles in driving range between refuelings. Likewise, drivers demand refueling times equal to what they are accustomed — about five minutes at the gasoline station.
Further, there must be adequate infrastructure in place to enable large numbers of drivers to connect to an alternative energy source before that source can be widely adopted. While a scattering of drivers simultaneously connecting to a power grid may not have much impact, large numbers of drivers doing so can cause major power outages that escalate absent the real-time balancing of energy loads across the network. Moreover, the environmental impact of the connected cycle between car and infrastructure, often referred to as the “well-to-wheel” balance, has to result in less pollution overall for alternative energy vehicles to achieve significant market traction.
Until the fully electric car can satisfy all three C’s, any assessment of projected vehicle sales must reflect a variety of energy sourcing options, both traditional and alternative, all competing for market share.
Gasoline and diesel likely will remain the predominant source of energy in the foreseeable future for new car buyers, with hybrid vehicles that run on both petroleum and alternative energy sources taking an increasingly larger share of the market. Although more costly than pure gasoline-driven cars, hybrids do offer a more environmentally friendly solution and provide the driving range demanded by car buyers.
While hybrids typically are associated with electric batteries acting in a supporting role, other cleaner-burning energy sources can feed or work in parallel with gasoline-powered engines. Natural gas (in either compressed or liquid form) is one alternative. As new underground gas supplies reduce prices, additional investment may be made in a wider distribution network for delivering natural gas to vehicles. Biofuels derived from biomass or crops, while contributing to higher global food prices, offer another option.
Hydrogen fuel cells provide a third alternative energy source for hybrid vehicles. These fuel cells act as a storage medium similar to a battery. If the hydrogen is produced from renewable sources, the use of hydrogen fuel cells causes the least environmental impact. While currently expensive to produce, store, and distribute — requiring significant investment in new infrastructure — such costs are trending downward as energy players and automakers seek to commercialize this clean technology.
Fortunately for automakers and related service providers, global vehicle sales are expected to increase dramatically, with the current estimate of about 800 million cars on the roads doubling in the next 20 to 25 years. Most of this increase will occur in developing countries that cannot afford the higher pollution levels caused by the burning of traditional fuels for transport. As these new car buyers come to market, alternative energy vehicles will face greater opportunities to overcome the current bumps on the road toward higher sales.
In time, the electric car may break free from the carbon-based pack.
Scott Mortman is former director of global business development at the electric vehicle services company Better Place. He is now a shareholder with Miami-based Greenberg and Traurig, in the law firm’s Tel Aviv office. The views are strictly his own.
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