Making Plug-In Hybrid Batteries Affordable

[RAN]

This article from Green Car.com has an interesting approach towards making PHEV's affordable in their early struggle for market share:

http://www.greencar.com/features/making-plug-in-hybrid-batteries-affordable/

[Derwin]

I think ANYTHING that they can do to make PHEV's available to the "working man" would be a plus, but I have a concern about this quote from the article:


To accelerate widespread introduction, a ratebase approach could be the answer to offsetting the added costs and risks of PHEV batteries. The core idea is that the utilities would own the batteries of PHEVs sold in their area and treat them as their own asset. They would lease the battery “free” to the car owner (offsetting the incremental battery cost to the car owner) and utilities would recover this added cost through utility rates.


I love the idea of the local utility company owning the batteries, but what scares me is the idea that they would "recover this added cost through utility rates." Does this mean that the cost for our electric will now shoot through the roof? If so, I would be against this idea. But if it would be a minor bump in rates, than that's fine. I don't know.....I'm not completely sold on this idea just yet.

Derwin

[Baja_Traveler]

I don't think that costs would skyrocket on the individual electric bill. Figure that in a large city only a fraction of the population would own a vehicle utilizing utility owned batteries - all those people that do not own would be subsidising those that do. When you figure that electric companies usually serve areas of thousands of square miles (at least here on the west coast), the individual bill might go up a few cents.

[waboom]

The way the article's written, it seems to imply that the proposed surcharge, though small, would be applied to every customer of the utility, regardless of whether or not the customer has a PHEV car - not very fair, IMHO. I would imagine that the utility could recoup costs without a need for a surcharge.
(Warning, math ahead.)
My current electric rate is 8.89 cents/Kilowatthour. The GreenCar.com article assumes a cost of $3,600 per battery (it doesn't mention a size, but let's assume for argument's sake that it is greater than 14kWh.) It also says that assuming a 12-year life span, the annual carrying cost for the utility is $475.

If every night, I came home and plugged in my V1, and it charged for about 10 hours, approximately 14kWh would be back in the battery. At my electric rates, that would translate into $1.24/day, $37.32/month, or $454.12/year. And there's nothing the electrical company would have to install; this is just pulling power off the grid through a normal electrical outlet (at nighttime, no less, when demands on the grid are lower anyways.) And of course the electric company would prefer I get my power for my vehicle from them, instead of from Big Oil. So if they made me, the owner of the PHEV, pay them some amount like $100-$150/year for leasing the battery, they've recouped their annual carrying cost for the battery AND covered their electrical wholesale charges (and made a small bit of coin as well, I think.) A lot better than sticking the cost of the battery on everyone in their electrical district, IMHO.

[RAN]

Derwin, read below the pic and you'll see:


This program would be in effect while PHEV sales are in their infancy and discontinue once sales reach commercial levels. If each battery costs about $3,600 and lasts for 12 years, the annual carrying cost for the utility would be about $475 per battery. If PHEV sales were to follow the trajectory of hybrid electric vehicle sales, there would be a 0.05% fleet penetration of about 130,000 vehicles (just over 0.1% of households with PHEVs) within the first six years of sales. At this point battery cost recovery would increase the average residential customer bill by just 4¢ per month, or 49¢ per year.
By the time PHEVs reach a half million in cumulative sales (about 0.2% of the light-duty vehicle fleet), PHEV battery technology will have achieved commercial production levels and the vehicles could compete on a level playing field. Even where the subsidies are largest, the impact on the average residential electricity bill would be only 15¢ per month, or about $1.80 per year.Of course, if you entered into and agreement like this, it would behoove you to pay your electric bill on time. =D

[RAN]

The way the article's written, it seems to imply that the proposed surcharge, though small, would be applied to every customer of the utility, regardless of whether or not the customer has a PHEV car - not very fair, IMHO. I would imagine that the utility could recoup costs without a need for a surcharge.

waboom, that's true, but the idea here is to make PHEVs more affordable so more people will buy them and lower pollution levels and the use of gas. I don't think raising everyone's rates by $1/year is going to put anyone in the poorhouse. The extra $$ the electric companies make on the electricity itself is "what's in it for them" to get them to take on the burden of "owning" the batteries.
This concept is used in insurance every day. I pay a high rate for car insurance here, even though I've been ticket-and-accident-free for many years and I usually drive less than 2500 miles/yr. Personally, I think that bad drivers should pay $20,000/yr for their coverage, and if they can't afford it, Too Bad. But in this case, this small subsidy could help PHEVs get into more garages more quickly, which would benefit all of us in the long run.

[Derwin]

Hmmm. I must have misread the article. So, what they are saying is that the expense would be passed-on as a rate increase on EVERYBODY, not just the indivudual households that own a PHEV? Well, I still don't think I like it! It just does not sound fair to me, having other people pay higher electric bills just because a "few" people decide to own PHEV's. But, if this is what MUST be done to get new technologies going, I guess it's one of those necessary evils.

As far as insurance goes, the INDIVIDUAL does indeed get penalized for a bad driving record....you know that. Heck, back when I was driving around 16 or so hours a day, I got MANY tickets for speeding. Well, it showed up in my insurance rate! I was paying anywhere from $3,000 to $4,500 a year for insurance, and that was NOT full coverage! But I get your point. Insurance companies do spread that across all of the policies, even though they still charge more to the high risk clients.

Derwin

[RAN]

What they're saying is, depending on the area you live in (some parts of the country will have more early adopters than others), it will cost customers between 49 cents and $1.80 per year to subsidize the high initial battery cost until production numbers bring prices down enough to make PHEV's competitive in the marketplace, so more people that are tired of deciding between gas and going out to a movie can afford to buy one and start saving their money too.

Gas is currently @ $3.50/gallon. Anyone want to guess what the cost of the Iraq war is in dollars, and what our "fair share" of that is? Who's gonna argue over an average hike of $1.15 per year? Especially when it will make more economical to operate cars affordable to them sooner? That's like the guy who spends 3 hours of his life trying to find a 3 cent discrepancy in his checkbook.

[Derwin]

Ran, We need the war to protect the oil! ;)

I thought it would cost each of us $20 or $30 more per month on our electric bill! I guess I was mistaken. :confused:

Actually, if it would only cost each one of us around a buck a year to subsidize this technology, than what are we waiting for? That is really a small price to pay to have the freedom that the PHEV techology will bring us.

Heck, I'm all for it. =y:

Derwin

[waboom]

waboom, that's true, but the idea here is to make PHEVs more affordable so more people will buy them and lower pollution levels and the use of gas. I don't think raising everyone's rates by $1/year is going to put anyone in the poorhouse. The extra $$ the electric companies make on the electricity itself is "what's in it for them" to get them to take on the burden of "owning" the batteries.

Ran, I'm in complete agreement with you here. I'm just concerned about the ruckus that will be raised by the guy who DOES spend 3 hours trying to find the 3 cent discrepancy in his checkbook. He'll go to the local news station and give them a sound byte like this:
"All this is doing is making poor people pay more for their electricity so that rich people can get their 'electric toys' cheaper!"
Then the 6 o'clock news will run that sound byte over pictures of the Tesla with it's 100k price tag prominently pasted over the top. And that will be the end of it. It won't matter if this is in New York's Westchester County, and that the only people who bought PHEVs are members of Meals On Wheels For Disabled Elderly Veterans Who Rescue Kittens In Their Free Time. It will be positioned as a "rich making the poor pay for stuff", and no politician, public servant, or utility regulator is going to try to butt heads with that one.

I was basing my initial idea off the cell phone industry. The wireless carriers all subsidize the price of the actual cell phone to the end user, in exchange for signing a contract for a certain term of service. To the wireless carrier, adding a customer bears a very small fixed cost; all the wireless towers & other infrastructure are already in place, so really the biggest cost associated with the new customer is mailing out the bill every month and the $150 subsidy they got on the new phone. With the monthly charges, the carriers will make back that subsidy within the first 4 months - the rest, as they say, is gravy.

That's how I was figuring it would work with the utility. They subsidize the cost of the battery to me 100%. In exchange, I agree to buy the electricity for charging that battery from them. Difficult to do, since you'd have to track the battery somehow? Perhaps not. In my previous post, I estimated that if I charged the V1 every night, I'd end up paying $37.32/month for that. You could either:

Have a second meter installed at the house used exclusively for charging the V1, with an agreement that the bill on that meter will be $40 for the first 420 kWh, and normal rates for each kWh after that, or
You would stick with the current meter on your home, but have to have a power plan of, say, $90 for the first 1,000 kWh of electricity, normal electric rates for anything above that.

Either way, your electric bill would start to look a whole lot like your cell phone bill.
The reason for making you pay for a block of electricity (even if you don't use it all) is so the utility could recoup it's carrying cost of the battery, whether you end up plugging it in every night or not. This way, the utility isn't burdening anyone else with the cost for your batteries, buy they'll still be able to recoup their costs. You might end up paying slightly more one month or two (like when you leave home for 3 weeks to go Fly The Roads throughout the US in search of The Perfect Road), but your electric bills shouldn't be ridiculously high. And, if you end up selling the vehicle, your contract with the utility ends & you're back to your old meter rate & power bill.

Hey, it works for cell phones, why not batteries?

[RAN]

waboom, I hear what you're saying, but I refuse to live my life by the stupidity of others. Fortunately, I can afford to buy the damned batteries anyway. Those other people won't have time to worry about that 3 cents when gas hits $5+/gal. :Beer:

[Baja_Traveler]

Then I can just see the utilities putting an imbedded circuit in the battery that, unless it gets the correct pulse sent over the electric line from that utility - will not charge. Just as cell phone companies modify or disable cell phone software to keep you locked into their service area. I hate it when I'm staring at a cell phone tower, yet I get zero bars :mad:

[waboom]

Granted, my Utility Company -> Wireless Carrier analogy has holes in it big enough to drive a tanker truck through. However, the point of the article was, "How can we get creative and make PHEV battery prices drop faster than normal market forces would let them?" I think the author was going down the right track - Power Companies are the ones who would benefit if there were more batteries out there. However, I just didn't think his plan was the best way to go. The cell phone analogy was the best one I could come up with at the time, but I have 2 other creative ways the price of the batteries could be offset:

Power Company rebates. Most utility companies offer their customers rebates of a few hundred dollers if they purchase Energy Star appliances (dishwasher, washer, dryer) and submit the sales reciept to the utility. Usually the rebate is for a few hundred $$. The utility could offer a rebate for the purchase of a PHEV vehicle (new off the dealer lot) for, say $500. Won't cover the cost of the battery, but it's a really good offset.
Get the Government to offer a tax incentive for purchasing a PHEV vehicle, similar to what they did for hybrid vehicles the past few years: purchase a hybrid, note it on your tax return, and get a reduced AGI (leading to a reduced federal tax bill.)


If I had to pick between the two, #1 would get my vote. Buy the car, submit the rebate to the utility, get a check in a month or two. Easy-cheesy. If you choose door #2, you buy the car, then wait for January (or April) to roll around to do your taxes, only to find out that any tax discount you might have enjoyed was cut off by some obscure loophole....

Just my creative thoughts.

[AZEqualizer]

This according to an article on Reuters (http://www.reuters.com/article/GCA-GreenBusiness/idUSN2944827320080829?sp=true)
http://www.blogsmithmedia.com/www.autobloggreen.com/media/2008/09/enerdel-prius-hood-logo-1.jpg

Ener1, who already make batteries for plug-in Priuses and have a $70 million supply deal with Th!nk, are pressing to reach this kind of output and are chatting up 24 (!) different auto makers. Of these, two may soon ink development contracts which could, because of the size of these companies, lead to Ener1 actually becoming cash flow positive in 2010. If they can achieve their cost-reduction goals, the pay-back period for all-electric cars may be reached in as little as two years instead of the current 7 or 8 if the price of oil stays around $100 a barrel.