Overcoming Barriers to Deployment of Plug-in Electric Vehicles (2015)

Summary

The plug-in electric vehicle (PEV) has a long history. In 1900, 28 percent of the passenger cars sold in the United States were electric, and about one-third of the cars on the road in New York City, Boston, and Chicago were electric. Then, however, mass production of an inexpensive gasoline-powered vehicle, invention of the electric starter for the gasoline vehicle, a supply of affordable gasoline, and development of the national highway system, which allowed long-distance travel, led to the demise of those first PEVs. In the 1970s and 1990s, interest in PEVs resurfaced, but the vehicles simply could not compete with gasoline-powered ones. In the last few years, interest in PEVs has been reignited because of advances in battery and other technologies, new federal standards for carbon-dioxide emissions and fuel economy, state zero-emission-vehicle requirements, and the current administration’s goal of putting millions of alternative-fuel vehicles on the road. People are also beginning to recognize the advantages of PEVs over conventional vehicles, such as lower operating costs, smoother operation, and better acceleration; the ability to fuel up at home; and zero tailpipe emissions when the vehicle operates solely on its battery. There are, however, barriers to PEV deployment, including the vehicle cost, the short all-electric driving range, the long battery-charging time, uncertainties about battery life, the few choices of vehicle models, and the need for a charging infrastructure to support PEVs whether at home, at work, or in a public space. Moreover, many people are still not aware of or do not fully understand the new technology. Given those recognized barriers to PEV deployment, Congress asked the Department of Energy (DOE) to commission a study by the National Academies to address market barriers that are slowing the purchase of PEVs and hindering the deployment of supporting infrastructure.¹ Accordingly, the National Research Council (NRC), an arm of the National Academies, appointed the Committee on Overcoming Barriers to Electric-Vehicle Deployment, which prepared this report.

THE COMMITTEE’S TASK

The committee’s analysis was to be provided in two reports—a short interim report and a final comprehensive report. The committee’s interim report, released in May 2013, provided an initial discussion of infrastructure needs for PEVs, barriers to deploying the infrastructure, and possible roles for the federal government in overcoming the barriers. It did not offer any recommendations because the committee was still in the early stages of gathering data. The current report is the committee’s final comprehensive report that addresses its full statement of task, which can be found in Chapter 1.

This report focuses on light-duty vehicles (passenger cars and light-duty trucks) in the United States and restricts its discussion to PEVs, which include battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs).² The common feature of these vehicles is that they can charge their batteries by plugging into the electric grid. The distinction between them is that BEVs operate solely on electricity stored in the battery (there is no other energy source), and PHEVs have an internal-combustion engine (ICE) that can supplement the electric power train or charge the battery during a trip. PHEVs can use engines powered by various fuels, but this report focuses on those powered by gasoline because they are the ones currently available in the United States.

The premise of the committee’s task is that there is a benefit to the United States if a higher fraction of miles is fueled by electricity rather than by petroleum. Two reasons for this benefit are commonly assumed. First, a higher fraction of miles fueled by electricity would reduce the U.S. dependence on petroleum. Second, a higher fraction of miles fueled by electricity would reduce carbon dioxide and other air pollutants emitted into the atmosphere. The committee

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¹ See Consolidated Appropriations Act, 2012, P.L. 112-74, H. Rept. 112-331 (H.Rept. 112-118).

² BEVs and PHEVs need to be distinguished from conventional hybrid electric vehicles (HEVs), such as the Toyota Prius that was introduced in the late 1990s. HEVs do not plug into the electric grid but power their batteries from regenerative braking and an internal-combustion engine. They are not included in the PEV category and are not considered further in this report unless to make a comparison on some issue.

was not asked to research or evaluate the premise, but it did consider whether the premise was valid now and into the future and asked if any recent developments might call the premise into question.

First, a PEV uses no petroleum when it runs on electricity. Furthermore, the electricity that fuels the vehicle is generated using essentially no petroleum; in 2013, less than 0.7 percent of the U.S. grid electricity was produced from petroleum. Thus, PEVs advance the long-term objective of U.S. energy independence and security. Second, on average, a PEV fueled by electricity is now responsible for less greenhouse gases (GHGs) per mile than an ICE vehicle³ or a hybrid electric vehicle (HEV). PEVs will make further reductions in GHG emissions as the U.S. electric grid changes to lower carbon sources for its electricity. Therefore, the committee concludes that the premise for the task—that there is an advantage to the United States if a higher fraction of miles driven here are fueled by electricity from the U.S. electric grid—is valid now and becomes even more valid each year that the United States continues to reduce the GHGs that it produces in generating electricity. A more detailed discussion of the committee’s analysis of the near-term and long-term impacts of PEV deployment on petroleum consumption and GHG emissions is provided in Chapter 1 of this report.

Recommendation: As the United States encourages the adoption of PEVs, it should continue to pursue in parallel the production of U.S. electricity from increasingly lower carbon sources.

PLUG-IN ELECTRIC VEHICLES AND CHARGING TECHNOLOGIES

Today, there are several makes and models of PEVs on the market, and PEV sales reached about 0.76 percent of the light-duty sales in the United States by the close of 2014. Because the obstacles to consumer adoption and the charging infrastructure requirements depend on PEV type, the committee used the all-electric range (AER) of the vehicles to distinguish four PEV classes (see Table S-1). Several important points regarding the PEV classes should be highlighted. First, the Tesla Model S clearly demonstrates the possibility of producing a long-range BEV that has been recognized as a high-performing vehicle. Second, limited-range BEVs are the only type of PEV that have a substantial range limitation. Although they are not practical for trips that would require more than one fast charge given the substantial refueling time required, their ranges are more than sufficient for the average daily travel needs of the majority of U.S. drivers. Third, the range-extended PHEV has a total range that is comparable to that of a conventional vehicle because of the onboard ICE, and the typical AER is comparable to or larger than the average U.S. daily travel distance. The fraction of miles traveled by electricity depends on how willing and able a driver is to recharge the battery during a trip longer than the AER. Fourth, minimal PHEVs with AERs much shorter than the average daily driving distance in the United States are essentially HEVs.

There are three options for charging the high-energy batteries in PEVs.⁴ First, AC level 1 uses a 120 V circuit and provides about 4-5 miles of electric range per hour of

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³ For this report, ICE vehicle or conventional vehicle refers to a light-duty vehicle that obtains all of its propulsion from an internal-combustion engine.

⁴ A fourth option might be considered wireless charging, but this option is not widely used today.

TABLE S-1 Four Classes of Plug-in Electric Vehicles

^a The AERs noted are average values estimated by the U.S. Environmental Protection Agency. Total ranges are provided for PHEVs; the AER is the total range for BEVs.

NOTE: AER, all-electric range; BEV, battery electric vehicle; ICE, internal-combustion engine; PEV, plug-in electric vehicle; PHEV, plug-in hybrid electric vehicle.

charging. It is considered too slow to be the primary charging method for fully depleted batteries of PEVs that have large batteries because charging times would be longer than the time a vehicle is normally parked at home or the workplace. Second, AC level 2 uses a 240 V, split-phase ac circuit like those used by electric dryers, electric stoves or ovens, and large air conditioners; it provides about 10-20 miles of electric range per hour of charging depending on how much current the vehicle is allowed to draw. Third, DC fast charging is an option available only to BEVs today and uses high-voltage circuits to charge the battery much more rapidly. DC fast charging is generally not an option for residential charging given the high-power circuits required. In the United States, there is one standard plug for the AC level 1 and AC level 2 chargers, but there are at least three incompatible plugs and communication protocols being used for DC fast charging. Plug and protocol incompatibility is a barrier to PEV adoption insofar as it prevents all PEVs from being able to charge at any fast-charging station.

Recommendation: The federal government and proactive states should use their incentives and regulatory powers to (1) eliminate the proliferation of plugs and communication protocols for DC fast chargers and (2) ensure that all PEV drivers can charge their vehicles and pay at all public charging stations using a universally accepted payment method just as any ICE vehicle can be fueled at any gasoline station.

UNDERSTANDING THE MARKET DEVELOPMENT AND CUSTOMER PURCHASE PROCESS FOR PLUG-IN ELECTRIC VEHICLES

Developers of new technologies, such as PEVs, face challenges in developing a market and motivating consumers to purchase or use their products. Incumbent technologies—in this case, ICE vehicles—can be difficult to unseat; they have years of production and design experience, which make their production costs lower than those of emerging technologies and thus more affordable. The necessary infrastructure, including the ubiquitous presence of gasoline and service stations across the United States, is well-developed. Consumers know the attributes and features to compare to evaluate their ICE-vehicle choices, and they are accustomed to buying, driving, and fueling these vehicles. Indeed, one of the main challenges to the success of the PEV market is that people are so accustomed to ICE vehicles.

Accordingly, adoption and diffusion of PEVs is likely to be a long-term, complex process. Even modest market penetration could take many years. Furthermore, market penetration rates will likely be a function not only of the product itself but also of the entire industry ecosystem. Hence, product technologies (such as low-cost batteries), downstream infrastructure (such as dealers and repair facilities), and complementary infrastructure (such as charging stations) will need to be developed simultaneously.

One strategy for dealing with market complexity has been to identify a narrow market segment for which the new technology offers a compelling reason to buy. Offering a compelling value proposition specifically targeted to meet the needs of a narrow market segment rather than the broad mass market gives the technology a greater chance to dominate in that key market segment. Then, the momentum gained in the initial market segment can be used more efficiently and effectively to drive sales in related, adjacent segments. That approach appears reasonable for PEVs because the PEV market has been characterized by strong regional patterns that reflect such attributes as expensive gasoline; favorable demographics, values, and lifestyles; a regulatory environment favorable to PEVs; and an existing or at least readily deployable infrastructure.

The purchase of a new vehicle is typically a lengthy process that often involves substantial research and is strongly affected by consumer perceptions. In evaluating the purchase process for PEVs specifically, the committee identified several barriers—in addition to the cost differences between PEVs and ICE vehicles—that affect consumer perceptions and their decision process and ultimately (negatively) their purchase decisions. The barriers include the limited variety of PEVs available; misunderstandings concerning the range of the various PEVs; difficulties in understanding electricity consumption, calculating fuel costs, and determining charging infrastructure needs; complexities of installing home charging; difficulties in determining the greenness of the vehicle; lack of information on incentives; and lack of knowledge of unique PEV benefits. Collectively, the identified barriers indicate that consumer awareness and knowledge of PEV offerings, incentives, and features are not as great as needed to make fully informed decisions about whether to purchase a PEV. Furthermore, many factors contribute to consumer uncertainty and doubt about the viability of PEVs and create a perceptual hurdle that negatively affects PEV purchases. Together, the barriers emphasize the need for better consumer information and education that can answer all their questions. Consumers have traditionally relied on dealers to provide vehicle information; however, in spite of education efforts by some manufacturers, dealer knowledge of PEVs has been uneven and often insufficient to address consumer questions and concerns. The committee does acknowledge, however, that even well-informed consumers might not buy a PEV because it does not meet some of their basic requirements for a vehicle (that is, consumer information and education cannot overcome the absence of features desired by a consumer).

Recommendation: To provide accurate consumer information and awareness, the federal government should make use of its Ad Council program, particularly in key geographic markets, to provide accurate information about federal tax credits and other incentives, the value proposition for PEV ownership, and who could usefully own a PEV.

GOVERNMENT SUPPORT FOR DEPLOYMENT OF PLUG-IN ELECTRIC VEHICLES

The federal government can play a substantive role in encouraging PEV deployment by supporting research that has the potential to remove barriers. Specifically, investment in battery research is critical for producing lower cost, higher performing batteries. Improved battery technology will lower vehicle cost, increase the all-electric range, or both, and those improvements will likely lead to increased PEV deployment. Furthermore, research is needed to understand the relationship between charging infrastructure availability and PEV adoption and use. Specifically, research should be conducted to determine how much public infrastructure is needed and where it should be sited to induce PEV adoption and to encourage PEV owners to optimize their vehicle use. That research is especially critical if the federal government is allocating resources to fund public infrastructure deployment.

Recommendation: The federal government should continue to sponsor fundamental and applied research to facilitate and expedite the development of lower cost, higher performing vehicle batteries. Stable funding is critical and should focus on improving energy density and addressing durability and safety.

Recommendation: The federal government should fund research to understand the role of public charging infrastructure (as compared with home and workplace charging) in encouraging PEV adoption and use.

The successful deployment of PEVs will involve many entities, including federal, state, and local governments. One potential barrier for PEV adoption that is solely within government control is taxation of PEVs and, in particular, taxation for the purpose of recovering the costs of maintaining, repairing, and improving roadways. In the United States, fuel taxes have been used to finance transportation budgets. Because BEVs use no gasoline and PHEVs use much less gasoline than ICE vehicles, there is the belief that PEV owners pay nothing to support transportation infrastructure and should be taxed or charged a special fee. However, PEV owners pay taxes and fees other than fuel taxes that support transportation budgets. Furthermore, the fiscal impact at the present time and likely over the next decade of not collecting fuel taxes from PEV owners is negligible, especially compared with the impact of high-mileage vehicles that are being produced to meet fuel-economy standards.

Recommendation: Federal and state governments should adopt a PEV innovation policy where PEVs remain free from special roadway or registration surcharges for a limited time to encourage their adoption.

Some federal and state permitting processes have been ill-suited for the simple installation of some PEV charging infrastructure. As a result, unnecessary permit burdens and costs have been introduced into the installation process. Because most charging will occur at home, PEV deployment could be seriously impeded if the buyers must bear high permit and installation costs and experience delay in the activation of their home chargers. Accordingly, clarity, predictability, and speed are needed in the permitting and approval process for installation of home and public charging stations.

Recommendation: Local governments should streamline permitting and adopt building codes that require new construction to be capable of supporting future charging installations.

CHARGING INFRASTRUCTURE FOR PLUG-IN ELECTRIC VEHICLES

PEV deployment and the fraction of vehicle miles fueled by electricity (eVMT) critically depend on the charging infrastructure. For its analysis, the committee categorized the infrastructure by location (home, workplace, intracity, intercity, and interstate) and power (AC level 1, AC level 2, and DC fast charging), evaluated it from the perspective of the PEV classes defined in Table S-1, and determined which entities might have a motivation to install which category of charging infrastructure. The results of the committee’s analysis are summarized in Table S-2. The table reflects the relative importance of each infrastructure category as assessed by the committee, with home listed first (most important) and interstate listed last (least important).

Several points should be made for the various infrastructure categories. First, home charging is a virtual necessity for all PEV classes given that the vehicle is typically parked at a residence for the longest portion of the day. Accordingly, the home is (and will likely remain) the most important location for charging infrastructure, and homeowners who own PEVs have a clear incentive to install home charging. Residences that do not have access to a dedicated parking spot or one with access to electricity clearly have challenges to overcome to make PEV ownership practical for them.

Second, charging at workplaces offers an important opportunity to encourage PEV adoption and increase eVMT. Specifically, it could double the daily travel distance that is fueled by electricity if combined with home charging and could in principle make possible the use of limited-range BEVs when no home charging is available. Some businesses appear to be motivated to provide workplace charging as a means to attract and retain employees or to brand the company with a green image. However, one concern is that utilities could impose demand charges if the businesses exceed their maximum power-demand thresholds; such charges could be substantial. Another concern is the IRS requirement for businesses to assess the value of the charging and report it as imputed income.

Recommendation: Local governments should engage with and encourage workplaces to consider investments in charging infrastructure and provide information about best practices.

TABLE S-2 Effects of Charging Infrastructure by PEV Class and Entities Motivated to Install Infrastructure Categories^a

^a Assumptions for analysis are that electricity costs would be cheaper than gasoline costs, that away-from-home charging would generally cost as much as or more than home charging, that people would not plan to change their mobility needs to acquire a PEV, and that there would be no disruptive changes to current PEV performance and only incremental improvements in battery capacity over time.

^b The term intercity refers to travel over distances less than twice the range of limited-range BEVs, and the term interstate refers to travel over longer distances.

^c It is possible that these infrastructure categories could expand the market for the various types of PEVs as appropriate, but that link is more tenuous than the cases noted in the table for other infrastructure categories.

NOTE: AC, alternating current; BEV, battery electric vehicle; DC, direct current; eVMT, electric vehicle miles traveled; NA, not applicable; PEV, plug-in electric vehicle; PHEV, plug-in hybrid electric vehicle.

Third, public charging infrastructure has the potential to provide range confidence and extend the range for limited-range BEV drivers, allow long-distance travel for long-range BEV drivers, and increase eVMT and the value proposition for PHEV drivers. However, fundamental questions that need to be answered are how much and what type of public charging infrastructure is needed and where should it be located? Furthermore, although the committee has identified several entities that might be motivated to install public charging infrastructure, it could identify only two entities—BEV manufacturers and utilities—that might have an attractive business case for absorbing the full capital costs of investments in public charging infrastructure. The government might decide that providing public charging infrastructure serves a public good when others do not have a business case or incentive to do so.

Recommendation: The federal government should refrain from additional direct investment in the installation of public charging infrastructure pending an evaluation of the relationship between the availability of public charging and PEV adoption or use.

IMPLICATIONS OF PLUG-IN ELECTRIC VEHICLES FOR THE ELECTRICITY SECTOR

An important concern raised by the public and policy makers pertains to the capability of electric utilities to provide for PEV charging. At the current time, PEV charging requirements account for about 0.02 percent of the energy produced and consumed in the continental United States. Were the PEV fleet to reach as high as 20 percent of private vehicles, the estimated impact would still be only 5 percent

of today’s electric production. Accordingly, PEV deployment is not constrained by the transmission system or the generation capacity. Although some capital investment in (or upgrades to) the distribution infrastructure might be required in areas where there is high, concentrated PEV deployment, PEV charging is expected to have a negligible effect on the distribution system at the anticipated rates of PEV adoption.

Thus, the constraints on PEV adoption that could arise from the electricity sector are more likely to be economic rather than physical or technical. Potential impediments to PEV adoption include (1) high electricity costs that reduce the financial benefit of PEV ownership, (2) regional differences in electricity costs that add confusion and prevent a uniform explanation of the economic benefits of PEV ownership, (3) residential electric rate structures that provide no incentive to charge the vehicle at the optimal time for the utility, and (4) high costs for commercial and industrial customers if demand charges are incurred as noted above. The committee notes that state jurisdiction over retail electricity rates constrains the federal role in directing the electricity sector to foster PEV growth.

Recommendation: To ensure that adopters of PEVs have incentives to charge vehicles at times when the cost of supplying energy is low, the federal government should propose that state regulatory commissions offer PEV owners the option of purchasing electricity under time-of-use or real-time pricing.

INCENTIVES FOR THE DEPLOYMENT OF PLUG-IN ELECTRIC VEHICLES

One of the most important issues concerning PEV deployment is determining what, if any, incentives are needed to encourage PEV adoption. Determining the need for incentives is difficult because little is yet known about the effectiveness of PEV incentive programs. However, two factors to consider are vehicle price and cost of ownership. To examine those factors, the committee considered sales and consumer survey data and compared manufacturer suggested retail prices (MSRPs) on selected PEVs, HEVs, and ICE vehicles. The committee found that although sales data and consumer survey data are difficult to interpret, they are consistent with the view that price is a barrier to some buyers but that others might be rejecting PEVs for other reasons. Comparisons of MSRPs and cumulative ownership costs that incorporate current federal tax credits provide mixed evidence on whether price is an obstacle to PEV adoption. However, in the absence of tax credits or other subsidies, comparisons at today’s MSRPs would be unfavorable to PEVs.

Another factor to consider is the possibility of declines in production costs for PEVs so that manufacturers can price them attractively in comparison with conventional vehicles. The decline over time in PEV production costs, however, is likely to occur gradually, and existing quotas of federal tax credits could be exhausted for manufacturers of relatively popular PEVs before costs can be substantially reduced. Thus, the deployment of PEVs might be at risk unless the federal government extends manufacturer or consumer incentives, at least temporarily.

Regulatory requirements and incentives for manufacturers and consumers have been introduced over the past few years by states and the federal government to encourage PEV production and deployment. Most manufacturer incentives and mandates are contained in the federal Corporate Average Fuel Economy standards, the federal GHG emission standards, and state zero-emission-vehicle (ZEV) programs. Most consumer incentive programs have involved purchase incentives in the form of tax credits, tax rebates, or tax exemptions. However, states have also used ownership incentives (such as exemptions from or reductions in registration taxes or fees and vehicle inspections) and use incentives (such as exemptions from motor fuel taxes, reduced roadway taxes or tolls, and discounted or free PEV charging or parking). Some states have also offered nonfinancial incentives that allow access to restricted lanes, such as bus-only, high-occupancy-vehicle, and high-occupancy-toll lanes. Incentives have also been provided to install charging stations, the availability of which might also influence people’s willingness to purchase PEVs.

On the basis of the committee’s analysis, several points should be highlighted. First, existing federal and state regulatory programs for fuel-economy and emissions have been effective at stimulating manufacturers to produce some PEVs, and sale of credits from these programs between manufacturers has also provided an important incentive for PEV manufacturers to price PEVs more attractively. The committee emphasizes that the state ZEV requirements have been particularly effective at increasing PEV production and adoption. Second, the effectiveness of the federal income tax credit at motivating people to purchase PEVs would be enhanced by converting it into a rebate at the point of sale. Third, state and local governments offer a variety of financial and nonfinancial incentives, but there appears to be a lack of research to indicate which incentives might be the most effective at encouraging PEV adoption. Fourth, the many state and local incentives that differ in monetary value, restrictions, and calculation methods make it challenging to educate consumers on the incentives that are available to them and emphasize the need for a clear, up-to-date source of information for consumers. Fifth, the overall international experience appears to suggest that substantial financial incentives are effective in motivating consumers to buy PEVs.

Recommendation: Federal financial incentives to purchase PEVs should continue to be provided beyond the current production volume limit as manufacturers and consumers experiment with and learn about the new technology. The federal government should re-evaluate the case for incentives after a suitable period, such as 5 years. Its re-evaluation should consider advancements in vehicle technology and

progress in reducing production costs, total costs of ownership, and emissions of PEVs, HEVs, and ICE vehicles.

Recommendation: Given the research on effectiveness of purchase incentives, the federal government should consider converting the tax credit to a point-of-sale rebate.

Recommendation: Given the sparse research on incentives other than financial purchase incentives, research should be conducted on the variety of consumer incentives that are (or have been) offered by states and local governments to determine which, if any, have proven effective in promoting PEV deployment.

CONCLUDING REMARKS

The committee provides a number of recommendations throughout this report and highlights several of the most important in the summary. However, two points should be further emphasized. First, vehicle cost is a substantial barrier to PEV deployment. As noted above and discussed in detail in Chapter 7, without the federal financial purchase incentives, PEVs are not currently cost-competitive with ICE vehicles on the basis of either purchase price or cumulative cost of ownership. Therefore, one of the most important committee recommendations is continuing the federal financial purchase incentives and re-evaluating them after a suitable period. Second, developing lower cost, better performing batteries is essential for reducing vehicle cost because it is the high-energy batteries that are primarily responsible for the cost differential between PEVs and ICE vehicles. It is therefore important that the federal government continue to fund battery research at least at current levels. Technology development to improve and lower the cost of batteries (and electric-drive technologies) for PEVs represents a technology-push strategy that complements the market-pull strategy represented by the federal financial purchase incentives that lower the barrier to market adoption. A significant body of research, however, demonstrates that having the right technology (with a compelling value proposition) is still insufficient to achieve success in the market. That technology must be complemented with a planned strategy to create market awareness and to overcome customer fear, uncertainty, and doubt about the technology.

Equally important to recognize is a recommendation that the committee does not make. The committee does not at this point recommend additional direct federal investment in the installation of public charging infrastructure until the relationship between infrastructure availability and PEV adoption and use is assessed. That statement does not mean or should not be construed to mean that no federal investment or additional public infrastructure is needed. Other entities—including vehicle manufacturers, utilities, and other private companies—are actively deploying and planning to deploy public infrastructure and have concluded that additional public infrastructure is needed. However, the committee is recommending research to help determine the relationship between charging infrastructure availability and PEV adoption and use. Although some data have been collected through various projects, the data-collection efforts were not designed to understand that fundamental relationship, and the committee cautions against extrapolating findings on the first adopters to the mainstream market. Given the strain on federal resources, the suggested research should help to ensure that limited federal funds are spent so that they will have the greatest impact.