Clarifying the Facts of Electric Vehicles

Car makers have made significant investments in developing Plug-in Electric Vehicles (PEVs), but despite their efforts to promote them, the PEV market has yet to take off.

Among the key barriers are the misconceptions about PEVs – specifically, consumer concerns about PEVs’ limited range, lack of available charging infrastructure, and support from their local utility.

False impression: “You can’t go very far in an electric car.”

Fact: PEVs are perfect for city journeys.

Range anxiety should not be an issue if consumers are fully informed about PEV capabilities. Current battery technology equips PEVs perfectly for urban use: the average PEV has a range of around 50 miles, while the average round-trip in a metropolitan area is 25 to 30 miles. Some PEV owners have never charged their car outside their home because their driving patterns do not require them to use public charging on the road. Car-sharing schemes, which operate primarily in urban areas, already recognize these driving patterns. Car makers are getting into the game as well by accelerating PEV take-up within their urban car-sharing fleets, such as Daimler’s Car2Go or BMW’s DriveNow.

PEV marketers need to inform consumers about what exactly they will get with a PEV, given the current technological capabilities: not a multi-purpose vehicle for all driving patterns, but a comfortable and clean alternative for the daily commute. For longer weekend trips or occasional vacation journeys, consumers may need to own, rent or share a second automobile. That said, with promising breakthroughs in the battery and car technology, one-for-all driving patterns PEVs do not seem to be too far in the future.

False impression: “Development of public charging infrastructure has been slow”

Fact: Public charging stations points grew 130% in 2012.

The market for PEV charging stations experienced incredible growth in 2012. The number of charging stations increased almost 130% over the number of charging stations available in 2011 with an average increase of roughly 90% per year over the last five years. Looking ahead, new models of PEVs with increased range are being introduced, driving additional demand for charging station locations. Another factor contributing to the increasing number of charging stations has been regulatory incentives by federal and local governments, recognizing the positive impact of PEVs on lowering urban air pollution, and potentially lowering dependence on imported oil for transportation.

Finally, there has been a substantial decrease in the cost of charging stations. For example, the cost of convenient and reliable Level 2 PEV chargers dropped from approximately $10,000 to less than $2,000 excluding installation costs.

False impression: “Utilities are not prepared to support PEV ownership.”

Fact: Utilities are aware that the PEV use is growing, and are taking initiatives to improve the customer experience.

It is in the best interest of utilities to be aware of PEV use in order to better prepare for the possible changes in load patterns and draws, and to leverage from the shift to electricity in the transportation sector. Many utilities now offer special rates for PEV off-peak charging, and some even offer cheaper rates to encourage PEV ownership. Furthermore, some utilities also have dedicated websites to help consumers with home-installation processes. Additionally, in order to align the environmental goals of PEV support policies with the real PEV use footprint, utilities may look into developing new business models which can offer a differentiated electricity portfolio with higher penetration of renewables to those environmentally-conscious PEV owners.

Arun Mani is an energy and electric vehicles expert at PA Consulting Group. He is member of PA Consulting’s management group and an expert on business strategy and investment decisions. He specializes in assisting clients with complex “big bet” capital decisions regarding electric vehicles, new generation development, and large infrastructure decisions. Over the past 17 years, Arun has advised utilities, regulatory bodies, investment banks, and law firms regarding the risks and uncertainties associated with the technology, regulatory, financing, development or construction, and operations risks and uncertainties facing each decision. Recently, Arun was the key note speaker at an engaging event in Boston on “Electric vehicles: stuck in neutral, or speeding ahead?”