Plug-In Hybrids Won't Have Much Impact Before 2030

Last week, I wrote about an overly optimistic view about the future growth of the electric car market. It purported that plug-in vehicles would account for 25% of the new auto market by 2020. I thought this projection seemed a tad unrealistic. Today, New York Times' Green Inc. blog reports on a new study by the National Research Council that paints a far more pessimistic picture. I suspect it's a far more likely one, however.

Although the entire report isn't available for public consumption without paying up, you can view the executive summary (.pdf) if you want some detail. Green Inc. provides the broad strokes:

The report found that plug-in electric cars could number 40 million by 2030 -- provided that rapid progress is made in battery technology and that the government provided hundreds of billions of dollars in subsidies and incentives. However, the study suggested that a "more realistic" scenario is closer to 13 million cars. That would represent 4 percent of the estimated 300 million cars that would be on the road by then.

Even with that 40 million car best-case scenario, a little bit of math shows that this would only represent about 13% market penetration by 2030, far fewer than the hopeful estimate mentioned in my post last week sought. 13 million plug-in cars by 2030 at just 4% market share would be an incredibly slow start. Why does the report estimate that electric vehicle adoption would be so slow?

The main reason behind this slow rollout relates to the cost of the batteries. Building a plug-in hybrid that can run for 40 miles on electricity costs $18,000 more than a similar conventional car, the report stated. While a mile driven on electricity costs less than one driven on gasoline, "it is likely to be several decades before lifetime fuel savings start to balance the higher first cost of the vehicles," the report said.

So the cost of the electronic vehicles won't be easily made up by energy cost savings. That sounds familiar. The report concludes that plug-ins won't have a significant impact on oil consumption or carbon emissions before 2030. According to the executive summary, substantial reductions won't occur much before 2050.

Green Inc. notes that the study was financed in part by the Department of Energy. I can imagine it having one of two reactions. Either this news will disappoint the DOE and influence it not to aggressively seek additional electronic vehicle subsidies, since the returns aren't likely to be very great for decades. Or these results could lead it to push even harder, as this evidence suggests that hundreds of billions of dollars are necessary to have even a minimal effect.

Update: Apparently a top Audi Executive agrees.

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Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.

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