Plug-In Hybrids: an Environmental and Economic Performance Outlook

James Kliesch and Therese Langer

September 2006

Executive Summary

Plug-in hybrid-electric vehicles (“plug-ins”) could offer a number of important advantages over the cleanest of today’s passenger vehicles. Their ability to run on electricity from the grid will reduce both their fuel consumption and their emissions of various pollutants relative to current vehicles, including non-plug-in hybrid-electric vehicles (“hybrids”). Consumption- and emissions-related benefits of plug-ins will vary substantially, however, depending upon the fuel mix from which the electricity is generated and the vehicle’s “electric-only range,” operational logic, and drive cycle characteristics. 

Quantifying the fuel savings of a plug-in requires proper characterization of plug-in design. Performance and cost requirements will likely dictate that the internal combustion engine engage regularly in a plug-in, even during trips far shorter than the nominal electric-only range of the vehicle.  Assuming average driving patterns, a plug-in with an electric-only range of 20 miles could be expected to reduce fuel use by about one-third relative to a current hybrid. These potential savings are highly significant, but are less than the savings commonly proffered for plug-ins in the popular media.  A plug-in with a 60-mile range could cut gasoline consumption by about two-thirds, though battery cost would be nearly three times that of the 20-mile plug-in.

With regard to greenhouse gas emissions, the advantage of plug-ins over hybrids is large in areas where electricity is generated with low-carbon fuels, and much more modest elsewhere.  In California, where electricity is comparatively low-carbon, a plug-in with a 40-mile range could cut carbon dioxide (CO2) emissions about one-third relative to a hybrid; in regions with coal-heavy electricity generation, the plug-in would not reduce CO2 emissions at all. Under the average U.S. power generation mix, the CO2 reduction of the plug-in relative to a hybrid would be about 15%.  In most locations, achieving a major CO2 advantage from plug-ins will require greatly reducing power sector carbon emissions.
 
From a public health perspective, the benefits of plug-ins are again highly dependent upon electricity generation mix. Charging on the grid today, a plug-in would emit 5% to 40% less oxides of nitrogen (NOx) than a hybrid, depending on geographic region. Emissions of oxides of sulfur (SOx) associated with a plug-in would be much higher than for a hybrid, except in areas with the cleanest generation mixes. Power plant emissions of mercury also continue to be a concern.  According to federal agency projections, however, full implementation of the Clean Air Interstate and Clean Air Mercury Rules will greatly reduce power plants’ emissions of all three pollutants by 2020.  

Battery cost is a major hurdle to the commercialization of plug-ins with extensive electric-only range.  The cost of a plug-in battery exceeds $10,000 today but could drop to a few thousand dollars in the long term.  Such a cost reduction may be achievable largely through economies of scale in the case of nickel-metal hydride batteries, though issues of performance, size and weight remain.  Smaller, lighter lithium-ion batteries are considered more promising for plug-ins, but these batteries will still require major advances in durability and cost before they are ready for this application.

Assuming that current low-end battery cost projections can be met in the future, a plug-in should be able to recover its incremental cost through fuel savings in well under the life of the vehicle.  Plug-ins with more than modest electric-only range will have difficulty passing the often-cited “three-year payback” test, however, even under such a favorable battery cost scenario and with $3 per gallon gasoline. A further increase in fuel prices or a shift in consumer priorities could nonetheless create a sizable market for plug-ins.

Emerging electric-drive technologies should not be allowed to fall prey to the cart-before-the-horse phenomenon that has proven counterproductive to new technologies in the past. Overselling plug-ins to policymakers or to the general public today is likely to result in disenchantment and a corresponding loss of support before the technology has even had a chance to reach the market.

Plug-ins are likely to emerge through gradual increases in the electric-only range of hybrids and can therefore be regarded as one of several elements in the evolution of the hybrid, albeit one with enormous potential to lessen the vehicles’ environmental impact. Work to lower battery costs and resolve other issues central to plug-in development should proceed vigorously, but this work must not divert attention from readily available measures to lessen the oil dependence and greenhouse gas emissions of the transportation sector. Indeed, a major and sustained commitment to improving average fuel economy would be among the most effective steps toward accelerating the arrival of plug-ins.

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20 pp., 2006, $16.00, T061