05/17/2010DRAFT – DO NOT CITE OR QUOTE

For NPC Study Discussion Only11

National Petroleum CouncilFuture Transportation Fuels Study

Electricity SubgroupBase Case Assessment and Commentary

SITG MeetingNovember 9, 2010

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Summary of Top Findings

• Overall, given the limited offerings of PHEVs and EVs and the very high price of the EVs ($100K) throughout the projection period)in the model, projected sales of PHEVs and EVs are very likely to be higher than in the Reference Case.

• Early adopter dynamics are not well represented/reflected in the model.

• In spite of the limited sales projections due to an unrealistically high price, the model also included assumptions that would positively impact sales, such as the battery lasting the lifetime of the vehicle, the assumption of 100% home recharging ability, and the relaxed payback period in order to meet CAFE requirements. These are likely overwhelmed by the first bullet.

• The projected cost of batteries is the single greatest factor impacting vehicle cost, and there is currently a wide range of costs projected by other studies.

• Other than cost, the model does not incorporate different battery assumptions for PHEVs in different operating modes vs. EVs.

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Summary of Top Findings, continued

• Current choice models value an EV as a limited ICE. (This may not be true.)

• Because the Reference Case only assumes existing regulations, the electricity sector emissions are most likely overstated, given pending and likely regulations.

• There are several “wildcards” regarding grid-enabled vehicles that could change the total cost of ownership, but these are difficult to project, and even more difficult to articulate the full value chain, identify the necessary technology and infrastructure, and the costs associated with the T&I. Examples include: secondary battery use and V2G.

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Vehicle

The AEO2010 assumes a limited selection of EV and PHEV offerings, and the price of the two EVs included in the Reference Case was in excess of $100,000.

• Based on vehicle OEM launch announcements, EV and PHEV offerings will be much greater, not only in terms of vehicle size and body style, but also price.• Greater customer choice of vehicle types, sizes and prices will most likely lead to

larger sales volumes than projected in the AEO2010.• PHEV and EV sales volume forecasts in other studies are significantly higher than the

Base Case projections. [Deutsche Bank, Pike, CET UC Berkeley, JDPA]

The model discounts EV ranges due to 1) Lack of availability of workplace/public charging (50% discount/reduction of Stated Range and 2) Real-world vs. Stated driving range (20%).

• The need for workplace/public charging for PHEVs is not as significant a factor. Thus, the discount factor for PHEVs would be less, and perhaps zero.

• The build-out of charging infrastructure over time will decrease the significant discount due to lack of workplace/public charging, which will increase consumer adoption vs. that in the Reference Case.

• These barriers are appropriate/applicable when looking at the mass market, but in the early years most likely do not apply to the early adopters.

•

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Vehicle , continued

The customer choice model values an EV as an ICE with limited range. • At this point in time – i.e. before vehicles are introduced to the mass market –

customer motivations for purchasing an EV are not well understood. Thus, the “limited-range ICE” comparison may not be accurate.

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Infrastructure

The Reference Case assumes that 100% of EV/PHEV purchasers have the ability to charge their vehicle at home, and that there is no cost to enable this.

• While PHEV buyers will most likely charge using a standard 110V outlet, due to the smaller battery size of PHEVs, this does not mean that 100% of PHEV buyers will be able to charge their vehicle at home.• Nationwide, only 63 % of homes have attached garages or carports. (AHS)

• EV buyers will most likely want to charge using a 240V receptacle, due to the larger battery size of EVs and the desire to add a full day’s worth of driving energy to the battery each night.• There are costs to enable charging at 240V.

• At a minimum, the purchase of the charging unit, which could range from a few hundred dollars to a couple thousand dollars, plus the installation costs.• In some cases, 240V charging would require an upgrade to the

existing panel, which could range from a few to several thousands of dollars.

• Charging in Multiple Dwelling Units, such as an apartment complex, can pose significant installation and cost challenges, as well as accessibility issues for the driver.

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Infrastructure, continued

The Reference Case also assumes that workplace/public charging will not be available.

• The availability of workplace/public charging would be a positive factor in consumer adoption. [INL 2008]

• The cost of installing workplace/public charging units would need to be incorporated into the model.

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Battery Development & Cost

The battery costs used in the model, as well as the rate of cost reduction over time, represent the single greatest contributor to the cost of vehicle, and thus, consumer adoption.

• A comprehensive literature search of available battery cost studies found wide disparity in current and projected costs [Cheah and Heywood] as well as how costs are evaluated (e.g. cell vs. pack, cost to OEM vs. consumer)• It is important to evaluate vehicle adoption using a range of assumptions for

battery costs.• In studies where the evaluation method is harmonized, the variability is

much smaller. [need reference]

The model is based on battery costs that are the weighted-average of NiMH and Li-Ion costs, until such time as the costs are equivalent, at which point the costs are based on Li-Ion

• Given that most vehicle OEMs will use Li-ion batteries for PHEVs and EVs, this methodology would underestimate vehicle costs in the early years.

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Battery Development & Cost , continued

The Reference Case does not incorporate battery life, which effectively means that the model assumes that the battery will last the life of the vehicle – approx. 15 years for new vehicles.

• Battery life is a key uncertainty. • The need to replace the battery within the vehicle lifetime would increase

total cost of ownership, which would have a negative impact on consumer demand.

• This needs to be evaluated over time.• The vehicle architecture (blended operation vs. all-electric operation) will

significantly affect the lifetime of the battery.• A “one-size-fits-all” approach for battery life needs to be examined, and

perhaps modeled using different assumptions for different vehicle types.

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Electricity Sector & Legislation

The AEO2010 Reference case assumes existing regulations, thus it does not include the effect of likely future regulations affecting the utility industry, such as further caps in criteria emissions, reductions in GHGs, and increased requirements for renewable generation.

• The projected electricity sector emissions are therefore very likely to be lower than predicted in the Reference Case.

• These regulations will likely increase the average cost of electricity more than the projected increase in the Reference Case (total of 5% by 2035).

Given our comment in the Vehicle section that the PHEV and EV volume forecasts in other studies are significantly higher than the Base Case projections, the use of electricity in the Transportation Sector is likely to be higher than projected. 

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Other Areas Not Addressed That Could Be Significant as the Use of Electricity as a Transportation Fuel Is Expanded

• Battery Recycling• The supply of rare earth elements.• The potential for vehicle batteries to serve as distributed energy resources.

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References

AHS = U.S. Census Bureau, Current Housing Reports, Series H150/07, American Housing Survey for the United States; 2007

Anderman = The Plug-in Hybrid and Electric Vehicle Opportunity Report; Advanced Automotive Batteries; May 2010

Axsen and Kurani 2008 = The Early U.S. Market for PHEVs: Anticipating Consumer Awareness, Recharge Potential, Design Priorities and Energy Impact;, J. Axsen and K. Kurani; August 2008

CET UC Berkeley = Electric Vehicles in the United States; Center for Entrepreneurship and Technology, University of California, Berkeley; Aug’09

Cheah and Heywood = The Cost of Vehicle Electrification: A Literature Review; L.Cheah and J. Heywood; Sloan Automotive Laboratory; MIT; April 2010

Deutsche Bank = Electric Cars: Plugged In 2; Deutsche Bank, Nov'09

EPRI/SCE = Characterizing Consumers' Interest in and Infrastructure Expectations for Electric Vehicles: Research Design and Survey Results; Electric Power Research Institute and Southern California Edison; May 2010

JDPA =

INL 2008 = Plug-in Hybrid Electric Vehicle Charging Infrastructure Review; Idaho National Laboratory; November 2008

Kromer and Heywood = Electric Powertrains: Opportunities and Challenges in the U.S. Light-Duty Vehicle Fleet; M. Kromer and J. Heywood; May 2007

Lux = Unplugging the Hype around Electric Vehicles; Lux Research; September 2009

NRC = Transitions to Alternative Transportation Technologies—Plug-in Hybrid Electric Vehicles; National Research Council; month year

Pike = Plug-in Electric Vehicles; Pike Research; 3Q'10