A Free-Market Energy Blog

An Electrifying Irony (False hopes and promises in the transportation market)

By Kenneth P. Green -- April 3, 2009

To those who have a memory that transcends more than a few weeks, recent events in the auto sector must induce a great feeling of irony.

Back in August of 2008, then-candidate Obama called for 1 million plug-in hybrid vehicles to be on the road by 2015.

To that end, then-candidate Obama called for:

*$4 billion in tax credits to American automakers to retool plants for the production of plug-in hybrid cars capable of 150 miles to the gallon;

*A $7,000 tax credit for consumers who bought early model plug-in vehicles; and

*Candidate Obama vowed that half of all cars purchased by the federal government would be plug-in hybrids or all-electric by 2012.

As both candidate and president, Obama has repeatedly raised plug-in hybrids as a vital technology for greening Detroit.

Fast forward to a recent item in the Wall Street Journal, which tells us that “In a five-page analysis of GM’s viability, the [Obama car] team critiqued GM’s marquee next-generation project, the electric-powered Chevy Volt, as “too expensive to be commercially successful in the short-term.”

Ah, the irony is palpable. And it’s not as if we hadn’t told them so because we did in a post at The American, “Stop the Green Carjacking”:

Consider the Chevy Volt. When it was first announced, the price estimate from General Motors (GM) was $30,000. That soon jumped to $35,000. Now GM’s president says that the actual price could be closer to $40,000, and that GM will still lose money on the sale. As for fuel cells, GM’s prototype fuel-cell car runs on hydrogen and emits nothing but water vapor. It’s hard to get greener than that—but it’s also hard to find a more expensive car: the prototypes cost $1.5 million to produce.

 And add to this insurance costs:

Hybrids are also more expensive to insure. Online insurance broker Insure.com shows that it costs $1,374 to insure a Honda Civic but $1,427 to insure a Honda Civic Hybrid. Similarly, it costs $1,304 to insure a Toyota Camry but $1,628 to insure a Toyota Camry Hybrid.

What explains the higher rates? According to State Farm, hybrids cost more to insure because their parts are more expensive and repairing them requires specialized labor, thus boosting the after-accident payout. Even conventional small cars are more expensive to insure than larger vehicles, because the former are involved in more accidents that produce extensive injuries. According to a recent article in The Wall Street Journal, the same driver would pay $412 more to insure a Honda Civic compact that gets 36 mpg on the highway than he would to insure a Honda CR-V (Honda’s mini-SUV) that gets 27 mpg.

Trying to make the uneconomic economic is not good public policy.

One Comment for “An Electrifying Irony (False hopes and promises in the transportation market)”

  1. E.M.Smith  

    Why do governments and politicians think they can repeal the laws of economics by fiat? They seem to think that it is an art, like literature, and you can re-write the story at will. It isn’t. It may not be as precise a science as engineering, but it’s laws are quite firm. One of them is Adam Smith’s Invisible Hand.

    They need to learn to let companies run their own businesses and to let markets choose winners. Governments and politicians are terrible at both. (There is room for some countervailing force when faced with a monopoly, monopsony, or oligopoly / oligopsony distorting market forces, but this ought to be the minimal possible to restore a competitive market.)

    Hybrids and e-cars have a place, but at present it is a small one and it ought to be determined by market pressures. BTW, the costs of prototypes are often far higher than production costs in quantity. The major problem for electric cars is that the total ‘mine to wheels’ is not very efficient. The record holding Diesel engine gets over 50% efficiency. An e-car must compete with this.

    From: http://en.wikipedia.org/wiki/Diesel_engine

    Power and fuel economy
    The MAN S80ME-C7 low speed diesel engines use 155 gram fuel per kWh for an overall energy conversion efficiency of 54.4%, which is the highest conversion of fuel into power by any internal or external combustion engine.[9] Diesel engines are more efficient than gasoline (petrol) engines of the same power, resulting in lower fuel consumption. A common margin is 40% more miles per gallon for an efficient turbodiesel.

    So to the extent that you wish to use a fuel to power the car, you can do it directly at 50% efficiency, or you can run that 50% through a generator, transformer, transmission losses (7.2% per wiki), step down transformer, charger (about 10% loss or more), then take the chemical losses of charge / discharge in the battery (that are typically about 10 to 30% but can be higher), standby self discharge losses (10-20% per month), and motor losses. In the end about 1/2 is lost (or more).

    IFF you wish to put a nuke or a solar panel in your tank, an e-car has a benefit, but if you wish to use fuels, the most efficient solution is direct combustion in a Diesel engine. And that is why Diesels dominate the power plants of ships, trains, army vehicles, trucking, and European cars. The only significant exception being jet turbines, that get almost the same efficiency as the Diesel but in a lighter (if more expensive) package suited to aircraft and light watercraft.

    Basically, a hybrid electric vehicle is a great idea as an energy recapturing braking system; but not so great as a prime mover. Wether the cost of that braking system is worth it ought to be determined by the market place.


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