Industry pushes for federal incentives
NEW YORK (MarketWatch) - Get your sockets ready -- plug-in electric cars are coming soon to a garage near you, according to car makers and power company officials who met in the nation's capitol last week to discuss the technology's future.
Backers point out that electricity is significantly cheaper than oil right now and that a surge in electric-powered cars could reduce national oil consumption by millions of barrels a day while curbing tailpipe emissions of greenhouse gases.
"GM firmly believes the long-term future involves a march" toward electric-powered vehicles, said Troy Clarke, president of General Motors-North America
But the "bottom line question," in determining whether electric cars make real headway is a policy one, namely what will Washington do to help make plug-ins a reality, according to industry executives.
A major federal commitment to advance the development of the battery technology that will power these cars is needed for plug-ins to take off, say analysts and industry representatives. The first generation of plug-in hybrids is expected to rely on lithium ion batteries.
Plug-ins will not become commercially viable in the near term "without support from Washington," Mark Fields, president of Ford-North America said at last week's conference sponsored by the Brookings Institution and Google.org. The conference pulled together lawmakers, auto makers, battery makers, and environmental advocates.
For auto makers 2010 has become the goal for getting plug-in hybrid vehicles into consumers' hands. General Motors said recently it plans to have its plug-in model -- the Volt -- for sale by the end of 2010. just announced plans to start making lithium-ion batteries in 2009 with the goal of hitting commercial production in 2010. Ford has partnered with the California utility Southern California Edison to bring plug-in hybrids to the market and is road testing an Escape plug-in hybrid model.
"We are going to see an explosion of plug-in hybrid cars between 2010 and 2012," said Felix Kramer, founder of the California Cars Initiative, a nonprofit that promotes plug-in hybrid electric vehicles that can get more than 100 miles per gallon.
U.S. executives have a long list of incentives and programs they say are pivotal to bringing electric-powered cars to the U.S. market including funding the development of battery technology, tax breaks for consumers that purchase plug-in cars, helping American automakers retool existing manufacturing plants for the production of plug-in vehicles, a cap on carbon emissions, a federal battery guarantee program and the purchase of electric vehicles for government fleets.
But the biggest funding boost is needed in the development of batteries. Battery suppliers will need to develop a robust battery that can last 150,000 miles or at least 10 years, said Mary Ann Wright, chief executive officer of Johnson Controls-Saft Advanced Power Solutions.
"Bold and dramatic incentives" are specifically needed for the development of high-power batteries, which today are largely being developed in Asia, Fields said. "We must ensure that we have a domestic battery supply." Ford is looking for a "substantial government partnership" if America is to take the lead, Fields said.
The other hope is that an aggressive domestic push into battery development could boost American manufacturing and the auto industry.
But the excitement generated by fans of plug-in vehicles must also be tempered by certain realities. U.S. car makers are talking up plug-in cars years before they arrive on dealer lots in the hopes of generating early interest among consumers. Battery makers have plenty of issues to work out before the technology is consumer ready. The first batch of plug-ins are aiming to go 40 miles without recharging -- a modest but practical one, considering most Americans travel less than 40 miles a day.
"Cars are not iphones," they are complicated vehicles, said Mark Duvall, Program Manager for Electric Transportation at the Electric Power Research Institute. General Motors' Clark described the intricacies of developing not just batteries but redesigning an entire car to be compatible with plug-in technology. He described efforts to build a radio for plug-ins that won't eat up energy and reduce the miles the car can travel on a single charge.
The power grid will also need work to sustain the additional demand for electricity plug-ins will generate. The utility sector isn't ready for every American to start pulling power off the grid to recharge their cars, said Peter Darbee, chief executive officer of California-based power company PSEG. But the utility is already investing billions of dollars in its power grid "which will enable plug-in hybrid vehicles," he added.
Efforts to get the grid ready will take between five and 10 years, Darbee predicted. In the meantime, Darbee thinks tax credits and federal mandates for utilities to produce a portion of their generation from renewable energy sources will help advance plug-ins.
Shifting Washington's focus
Washington's energy portfolio has largely been focused on hydrogen and ethanol production in recent years, with little attention going to batteries and electric vehicles.
"We were all hydrogen, all the time," said Andy Karsner, Assistant Secretary, U.S. Department of Energy. But Karsner said he sees a preference starting to move towards electron-based technology due to the potential to scale up production and store electricity.
"I inherited a budget with almost zero for plug-ins. Now it is up to $100 million," said Karsner. The Energy Independence and Security Act of 2007 created some initial incentives for plug-in cars, such as a loan guarantee program for advanced battery development, grant programs for plug-in hybrid vehicles, and incentives for purchasing heavy-duty hybrid vehicles. But most of these programs are dependent on rulemaking and appropriations.
Enthusiasm seems to be building within Washington. "I don't have to tell you how sexy the Volt is," Karsner said. "The Japanese and Chinese never could have put out something like that."
Last Thursday the Department of Energy announced it would give $30 million over the next three years to help fund plug-in projects undertaken by Chrysler, General Motors, and Ford. Rep. Jay Inslee, D-Wash., said he hopes Congress can pass legislation next year to help move development of electric cars along