Why plug-in vehicles with "small" battery packs should be subsidized in a big way

Are plug-in vehicle incentives distributed correctly?

Apparently not. A study conducted by Carnegie Mellon University (PDF) suggests that by subsidizing vehicles with big battery packs (that is, bigger than 16 kWh), the return on investment (in terms of reducing gas/diesel consumption and lowering emissions) is less than if the $7,500 tax credit subsidized vehicles with meager battery packs (i.e. the Toyota Prius Plug-in Hybrid).

How's that possible, you ask? The logic behind the study is actually rather simple and makes some cents sense. Massive batteries are expensive, require significant energy to manufacture and take ages to recharge. And because they're so damn costly, few consumers can afford to buy vehicles fitted with them. That's why subsidies are essential, right?

But even with the $7,500 tax credit factored in, the Chevy Volt is still fairly expensive, meaning that consumers aren't yet lined up 'round the corner to buy one. And because the subsidy is huge ($7,500 a unit), the U.S. government is unlikely to extend its incentive program once the cap of 200,000 qualifying vehicles per manufacturer is met. This means that there's a chance that fewer total vehicles will be subsidized via the program. Additionally, budget cuts in Washington could someday abruptly end the incentive program, perhaps well before that 200,000-unit cap is hit. But, if $7,500 were slashed off the price of the significantly cheaper Prius Plug-in (base MSRP $32,000), it would become a raging bargain and almost guarantee immediate sales at massive levels. And that would reduce petroleum use in a big way.

Carnegie Mellon University's Jeremy J. Michalek, concludes:

Given the major spending cuts under debate in Washington, it is important that we get the most benefits out of spending designed to improve the environment and energy security. In the near term, HEVs and plug-in vehicles with small battery packs offer more cost-effective benefits. More research on batteries – especially lowering cost – and a transition to a cleaner electricity grid are needed to pursue a future where large battery packs may also be able to help address climate change, air pollution and oil dependency at competitive costs.

Like most all studies, Carnegie Mellon's should be taken with a bit of caution. And since there are a lot of assumptions at work here, it's difficult to accurately evaluate the University's results. What's your take on Carnegie Mellon's evaluation of plug-in subsidies?



Source: Autoblog Green