While it's unclear how many consumers are willing to pay more for plug-in electric cars, the case for fleet operators is a lot simpler to make, according to advocacy group the Electrification Coalition.
The group, made up of CEOs from the auto and electric power industries, today released a road map for fleet electrification in which it argues that corporate fleets can help make plug-in vehicles more commonplace. The document, prepared in an effort to influence policy, was released by members at a press conference in Washington, D.C.
Electrifying transportation offers the best means for reducing oil consumption, but there are significant barriers to bringing plug-in vehicles onto the road, including cost, said FedEx CEO Frederick Smith at the press conference.
Combined with fuel efficiency mandates, the U.S. could decrease its oil consumption of light-duty vehicles from about 10 million barrels of oil today to 4 million barrels of oil in the next 25 years, Smith said. With just the fuel efficiency mandates, consumption in the U.S. will go to about 16 million barrels of oil a day by 2035, one factor leading to anticipated higher oil prices and price spikes.
The cost of electrical components, notably the batteries in electric vehicles, is a very difficult barrier to overcome. But fleet operators have a few characteristics that make them more likely buyers than consumers, according to the Fleet Electrification Roadmap report, which was done in conjunction with management consulting company PRTM.
Fleet operators tend to consider the total cost of ownership, rather the upfront costs, and pay higher electricity rates than consumers. And they tend to run predictable routes and often have centralized fueling. Buying is also centralized: the top 50 fleet operators manage more than half a million cars and trucks. There were 16.3 million fleet vehicles in operation in 2009.
"Fleets (offer) a possible pathway to get early adoption of electric vehicles that will drive scale and bring down the price of batteries for everyone," said Robbie Diamond, the CEO of the Electrification Coalition. He said the policy recommendations should appeal to both political parties because they address national security as well as economic and environmental issues.
The analysis in the fleet road map document finds that EVs are cost-competitive in many fleet applications today without government subsidies. Traditional hybrids driven more than 20,000 miles per year are expected to be more cost-effective than internal combustion engines by 2012, it said. As the cost of batteries goes down in the next five to eight years, EVs become the most cost effective option, according to the report.
Still, many fleet operators will find it difficult to get a return on investment or be willing to consider a multiple year payback. Also, some could find daily charging disruptive to their operations, according to the report.
Some of the policy recommendations include tax credits for plug-in vehicles deployed in fleets and having federal agencies, such as the Postal Service, invest in electrification.
Other recommendations including research and development spending on advanced batteries and a program to guarantee the residual value of large-format batteries put into service in the next three years. Used auto batteries can be recycled or refurbished for use as grid storage, but there is no marketplace yet established for handling spent lithium ion batteries used in the latest generation of plug-in vehicles.
Last week, General Electric, which is a member of the Electrification Coalition, announced that it plans to purchase 25,000 electric cars for its sales people and to lease to its fleet management customers.