Encouraging electric vehicle sales

In 2011, a national priority was declared, putting 1 million electric vehicles on the road by 2015. Since then, sales of plug-in vehicles have risen and continue to rise, but they pale compared to conventional vehicles.

Statistics from Argonne National Laboratory show U.S. car dealers sold 97,101 electric vehicles in 2013 and 118,882 in 2014. Meanwhile, U.S. car dealers sold more than 14 million light vehicles in 2014 and more than 17.5 million in 2015.

All told, U.S. car dealers have sold a little more than 250,000 electric vehicles since they were introduced in 2010. This sets the background for an analysis of factors that impact the spread and overall consumer adoption of electric vehicles.

Among those are indirect network effects, factors that impact the sale of electric vehicles beyond point-of-sale transactions. Consumer reluctance to purchase electric vehicles may influence investor decisions to invest in the electric vehicle market and vice versa. According to the U.S. Department of Energy (DOE), the high-purchase price gets part of the blame for consumer hesitancy to buy electric vehicles.

“While the market is growing quickly, additional cost reduction of electric vehicle technology is required to directly compete on a cost basis with conventional vehicles,” says DOE’s Deputy Assistant Secretary for Transportation Rueben Sarkar.

It’s well known that many electric cars are more expensive than their fossil-fuel powered counterparts. Electric vehicles range in price from about $15,000 to more than $70,000. The cost can be prohibitive, even though, in the long run, electric vehicles can be inexpensive to operate.

Sakar also points to another reason – consumers are not well acquainted with the technology, saying “Plug-in electric vehicles are a relatively new market coming on the scene a little more than four years ago.”

Meanwhile, Lang Tong and Shanjun Li, researchers at Cornell University in Ithaca, New York, point to another indirect network effect. Consumers may be less willing to buy because of a lack of public charging stations, and investors are less willing to build charging stations when there are so few electric vehicles on the road.

More charging options, more sales?

Tong and Li, whose research is part of a National Science Foundation (NSF)-funded project, contend limited infrastructure to support electric vehicles presents a major roadblock for greater acceptance.

The relatively small number of large-scale, public, vehicle-charging stations often makes recharging electric vehicles inconvenient, if not impossible. Their analysis suggests that more charging stations are needed in parking garages in urban centers, parking lots in shopping malls, and parking facilities in apartment complexes and business sites to accommodate consumer demand for convenient electric vehicle refueling.

Using a data set of quarterly electric vehicle sales in 353 metro areas from 2011 to 2013, the researchers found cities with more charging stations also have more electric cars. A 10% increase in the number of charging stations per million people in a city would result in a 10.8% increase in the market share of electric vehicles.

Tong, Cornell’s Irwin and Joan Jacobs Professor in Engineering, says, “As one might expect, there is a strong dependency between the growth of electric vehicle market share and the available charging options.”

Charging station challenges

However, making more charging stations is not as simple as simply opening more stations. There are different options for electric fueling; any one vehicle can be charged in more than one way, and different manufacturers may require different charging methods. Additionally, an electric charge depends on – and impacts – the regional electric grid.

One major goal of Tong’s and Li’s project is to engineer transformative technologies for large-scale charging of electric vehicles that can work with existing electric grids in a cost-effective way.

“Ultimately, the bigger question is the economic one,” Tong says. “The connection between economic questions and engineering questions comes down to cost. If you have better technology, you will provide more charging services and be able to lower the cost for consumers to charge their vehicles.”

Currently, most owners plug their electric vehicles into a standard 120V, home outlet and charge them overnight to get the energy they need for a daily commute. Others pay to install a 240V charging station at home, cutting charging times roughly in half. A third alternative is to purchase an electric vehicle equipped with electrical connections for high, direct-current charging. This can recharge an electric vehicle 4x to 6x faster than an alternating current charger; however the cost for this choice typically runs $15,000 to $25,000.

The researchers believe more efficient charging options that make electricity costs more palatable to consumers could speed up electric vehicle adoption.

“This project focuses on efficient ways of providing low-cost charging,” Tong says.

For example, he and Li are investigating vehicle charging with solar panels on garages, examining local energy storage, and studying how to better use price differentials in the electricity market.

Also, the researchers are working to develop efficient, large-scale charging facilities that provide an alternative to normal home vehicle charging. They have developed an Intelligent Energy Management System (IEMS) that optimizes the cost of vehicle charging at shopping malls or large parking garages where a number of cars could simultaneously draw energy from the power grid. The IEMS reduces costs and reduces strain on the grid by determining which cars to charge at a given time.

“Typically, consumers leave the car at the facility and expect charging to be completed at a later time, which makes charging a deferrable demand,” Tong says. “A completed charge can be postponed until a later time when it most benefits the consumer. It also gives an operator the opportunity to choose which car to charge first and at what price. So, in optimizing which car to charge, you lower the cost of charging and lower the cost to the service provider.”

Charging policy boost

The convenience and cost of recharging are not the only factors that influence the purchase of electric vehicles.

“The $7,500 tax credit policy for which electric vehicle buyers are eligible contributed to about 48.5% of electric vehicle sales from 2011 to 2013,” says Li, who is an environmental and energy economics assistant professor at Cornell. “It is important to note that indirect network effects explained 42% of that sales increase.”

By contributing to sales of nearly half the electric vehicles sold, some would consider the tax policy a success. Tong and Li maintain the money, which amounted to $1.05 billion in subsidies, could have been used to build more than 60,000 charging stations instead of giving it to consumers. That number of potential charging stations represents about half the total number of gasoline stations in the United States.

Moreover, based on their analysis, Tong, Li, and their research colleagues say 60,000 new charging stations could have led to 5x more electric vehicles sold.

However, they report the tax subsidies had a net positive effect, providing about $200 million in long-term environmental benefits between 2011 and 2013.

Energy independence

Tong and Li find that allowing supply and demand to determine market outcomes without government involvement may not be the best approach for electric vehicle sales. The economically efficient solution would use government intervention to help consumers, firms, and the environment.

“The goal of this project is to study the diffusion process,” Tong says. “In particular, the necessary charging station infrastructure that supports EV diffusion.”

The research team aims to identify engineering, economic, and policy issues impacting growth of electric vehicle use.

National Science Foundation

www.nsf.gov