This Week in How EVs will Save You Money - Drive Electric Northern Colorado

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This Week in How EVs will Save You Money

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Even as manufacturing capacity continues to grow and battery technology continues to improve, the up-front costs of electric vehicles continue to deter some consumers from buying one. Thankfully, federal and state incentives with longer-term energy security considerations in mind take some pressure off of purchase prices, while committed automobile manufacturers are offering competitive leases and purchase prices to help market a technology which—unfortunately—remains confusing to many Americans.

Two tools which grabbed our attention this week are shedding more light on where most American will find the true value of electric vehicles: in the vehicles’ total cost of ownership, specifically in refueling costs. At the Electric Drive Transportation Association’s annual conference this year, the Department of Energy announced the new eGallon tool, which helpfully frames costs of electricity as a fuel in a context that everyone can understand. The table below offers a smattering of states with more and less competitive gasoline/electric price spreads:

Regular Gasoline Electric “Gallon”
United States Average 3.65 1.14
Washington State 3.87 .84
Idaho 3.73 .84
North Dakota 3.84 .83
New Jersey 3.54 1.51
Alaska 3.74 1.75
Hawaii 3.74 3.69

The average American will save roughly $2.50 per gallon by driving electric—likely to be a significant source of savings, particularly for those with aggressive driving habits. Lucky motorists in states such as Washington, Idaho, North Dakota, and a number of other states can save up to $3 per “gallon.”   Hawaiian electricity prices are a clear outlier, and state residents fare the worst with regard to fuel savings.  The island’s power generation is largely driven by (you guessed it) petroleum, which is significantly more expensive than the coal, natural gas, and renewable sources utilized in the continental U.S.. Ironically, despite significantly lower fuel savings, Hawaiian residents are enthusiastic consumers of electric vehicles—while the state ranks roughly 40th nationwide for all new car registrations, they rank tenth in electric vehicle registrations, and represent 3 percent of overall American EV sales. Prices in Washington State and Idaho are remarkably low thanks to the share of hydroelectric power generation used in those regions. For more details, check out the eGallon methodology here. EIA also has a handy breakdown of state-by-state electricity costs here.

Fuel savings are obviously an important factor, but the more important consideration is the total cost of ownership. A new study from the Electric Power Research Institute (EPRI) contributes to a growing body of literature which clearly shows that although up-front costs may intimidate in some cases, costs is the long-term should break even or even represent savings. The study identified the following:

Following are key results of the analysis:

  • With current incentives and prices, financial factors should not be a deterrent to a PEV purchase for most buyers.
  • The LEAF is less expensive than competing gas-powered options on average, but has a wide variation in value for different drivers, suggesting that battery electric vehicles will require more careful consideration when making a purchase decision.
  • The sensitivities suggest that increases and decreases in gasoline prices will have a significant impact on the relative costs of PEVs, but that state incentives or rebates and equivalent vehicle price changes will have an even larger impact on cost tradeoffs.

Note: tradeoffs skew heavily in favor of the consumer when additional state tax credits factor into account. Residents of Colorado, for example, which offers a $6,000 tax credit for plug-in hybrid and electric vehicles, will enjoy greater overall savings—which reflects the important role local and state governments can play in improving energy security.

GreenTech Media has broken down the cost estimates of the study, which shows that Volt owners pay roughly the same as internal combustion engine (ICE) owners over the lives of their vehicles, while owners of the Nissan Leaf stand to gain significant cost savings. Those charts are below. Importantly, EPRI flags gas prices as a prime factor in the cost-effectiveness of EVs, and as EIA flagged earlier the week in the Short Term Energy Outlook, gas prices are likely to decline very marginally over the next few years, falling to as low as a $3.37 average by 2014. This is just a prediction (and an optimistic one at that given the stubbornness of oil prices and continued refinery issues as the nation’s infrastructure adapts to the domestic production boom). However, to keep—and ideally, improve—the cost/benefit equation of electric over internal combustion vehicles, costs will need to continue falling. Given projected improvements in battery technology/costs, and continued automaker investment in large-capacity,state-of-the-art production facilities, it strikes us as a safe bet.