What’s Happening with EV Sales?

forecasting1With gas prices hovering just above $2 a gallon, there is less excitement and curiosity about electric vehicles (EV) as there has been in the past.  In fact, 2015 was the worst year for EV sales; total EV sale were down 5 percent in 2015 compared to 2014, with only 116,099 vehicles sold compared to 122,438.  But, there may still be hope for the EV market as 2016 is shaping up to be a banner year, with 93,197 vehicles sold through August, compared to 72,270 YTD August 2015 .

What forces drive EV sales?  Without question gasoline prices influence EV sales, with the possible exception of one particular EV model.  Presumably, consumers are not purchasing a $90,000 Tesla Model S with the goal of saving money on their annual gasoline bill.  The U.S. average price for a gallon of Regular gasoline has not been above $3.00 since October 2014 and has not been above $3.50 since July of that year.

With monthly data available on both EV sales and gas prices, it is possible to calculate a correlation between the two.  Analyzing data from January 2012 to August 2016, I found a correlation coefficient of -0.46, which is not as strong as one might want for forecasting purposes, but it is a relationship none the less.

So the question is: Do EVs make economical sense right now with gas prices as low as they are?  The answer depends on which models you compare.  Generally, there does not appear to be much incentive to trade in the gas-guzzler for an EV.  EVs are almost always more expensive than their gas counterparts, but upfront costs can be recouped with lower annual operating costs.

I attempted to compare 2 similar vehicles: the VW Golf and VW e-Golf.  For this comparison, I assumed 15,000 annual miles driven, gas price of $2.25 a gallon, and electricity rate of $0.15 kWh.  Based on these assumptions, it will cost $653/year to drive 15,000 miles in the e-Golf and $1,164 in the gas powered Golf (based on published vehicle efficiency ratings, www.fueleconomy.gov).  The e-Golf is significantly cheaper to operate, but this comes at a cost; the average e-Golf retails for $32,295 compared to $22,960 for the traditional gas powered model.  Even after factoring in a federal tax credit of $7,500, the e-Golf is still $1,800 more.  If you were to finance both vehicles over 5 years, at 3 percent, add in electric costs for the e-Golf and gasoline for the Golf, both vehicles would cost roughly the same to operate.  The story changes if gas prices increase; at $3.00/gallon, the e-Golf would save you almost $2,000 over the 5-year period.

Although the EV market is still in its infancy in most areas, EVs may in a few years have the impact that solar does today and that is why tracking the EV market is important to the electricity industry, as evidenced from Itron’s most recent survey showing more and more utilities incorporating EVs into their forecasts.

 

1“Monthly Plug-in Sales Scorecard”, Inside EVs. http://insideevs.com/monthly-plug-in-sales-scorecard/.


The Power of Prices

It’s 3 p.m. on a warm summer San Diego afternoon. My south facing windows are hot to the touch, but the building air conditioning units efficiently maintain a comfortable temperature. Nevertheless, it’s now time to stretch my legs and breathe some fresh air.

I exit the front door of the building and turn right, following the path along the building through the shade. As I reach the end of the building, once again, I turn right and see a world without prices. That’s right, an electric vehicle with a long extension cord snaking its way into the building.

I can’t speak to the moral qualities of this picture. I do not know what the electric charging arrangement is between the car and building owner. Perhaps there is an agreement or charge back mechanism that allows this person to charge the EV in this manner. Or perhaps it’s just stealing. In fact, I technically don’t know whether or not the car is plugged in beyond the locked mirrored doors.

But, I do consider the economics of this picture and wonder. For the past couple years, utilities have explored time-of-use rates, EV rates, and EV load shape impacts. In all those studies, price is assumed to change customer behavior leading to higher off-peak usages. Yet, sitting before my very eyes is a prime example of what happens in a world with incorrect price signals (whether incorrect, hidden, or ignored). Without an appropriate price signal (or maybe you just don’t care about the cost), the rational thing to do is charge your car during the peak hours just in time for the commute home. As forecasters, let’s hope they get the price signals correct.


Hybrid and Electric Cars: Implications for Electricity Usage

As of 2013, all electric vehicles are considerably more expensive than hybrid-electric vehicles, not to mention gasoline-powered cars.  However, the status quo is quickly changing as batteries are becoming cheaper and more efficient.  Range anxiety concerns are lessening as battery swapping, rapid charging stations such as the “Tesla Supercharger” and charging networks become more commonplace (currently, Estonia remains the only country with a nationwide network of charging stations).  With volatile oil prices and increasing gasoline prices, gasoline-powered cars are likely to share the road with more and more hybrid and all-electric vehicles in the future.

The changing composition of the vehicle fleet in coming decades is likely to have significant implications for the electric grid.  While Americans currently favor hybrid-electric vehicles with their long range and affordable prices, all-electric vehicles are likely to gain market share due to lower operating costs.  According to EPA estimates, fuel costs of all-electric vehicles are roughly half of average hybrids and they do not require oil changes or other routine maintenance common to hybrid-electric and gasoline-powered cars.

With the increasing share of all-electric and plug-in hybrid vehicles, electricity grids will face some challenges.  The existing grid, in particular local transformers, may not have enough capacity to handle additional power requirements.  Overloading problems may arise when several vehicles in a neighborhood are plugged in at the same time and/or at the time of summer peak loads.  Grid upgrades may be costly.

Fortunately, utilities have options.  Variable time-of-use rates can provide an incentive for charging at night to alleviate some of the overloading problems.  A number of utilities across the country are exploring vehicle-to-grid systems that would allow parked vehicles to communicate with the electric grid to either deliver electricity back to the grid or throttle their charge rates.

The challenges of all-electric and plug-in hybrid vehicles create a strong incentive to begin accounting for the number of these vehicles in a utility’s service territory.  Tracking the numbers will not only be valuable in solving the grid related issues, but also in energy, sales, and peak demand forecasts.  These forecasts feed into budgets, transmission and resource plans and rate cases.  Even though the numbers are small today, this is the best time to develop procedures for counting and identifying sources that can provide an accurate count of vehicles.  Remember, econometric models require good historical data as a foundation for a solid forecast.


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