Not all the news is bad

Source: Katherine Ling, E&E reporter • Posted: Friday, April 5, 2013

Silent-running electric cars sneak up on you on street corners and parking lots.

Are they also creeping up on a U.S. car market?

Some industry analysts think so. While headlines have been blaring bad news about electric vehicles, they say, EVs have been making quiet progress. There have been strides made, they say, in battery technology, infrastructure and consumer confidence. And, they add, EVs are showing up in company fleets, and electric cars with gas-power backup — known as plug-in hybrids — are exceeding expectations.

“What wasn’t happening has been the focus, as opposed to what is happening,” said John Gartner, research director of the Smart Transportation program at Navigant Research, a market research firm. “Now we are starting to see … strong growth there month after month after month. This is independent from gas prices, which is encouraging.”

Over the next decade, he added, “we are expecting the [percentage] growth for alternative drive vehicles to far outpace the overall growth of the rest of the industry.”

Meet the EVs!

Hybrid electric vehicles (hybrids or HEVs) rely on an internal combustion engine with power for the electric motor generated from braking and stored in the battery. It’s not plugged in. Examples: Toyota Prius, Ford Escape and Fusion Hybrids, Honda Civic Hybrid, Toyota Camry Hybrid — many standard models now have hybrid options.

Plug-in hybrid electric vehicles (PHEV) have both an internal combustion engine (ICE) and electric battery. PHEVs get their primary power from the electric battery and use gasoline combustion as a backup when battery power runs low. It must be plugged in to recharge. A subcategory of the plug-in is the “extended range” electric vehicle (EREV) that uses the gas engine only to power the electric battery and not to turn the wheels directly. Examples: Ford C-Max Energi, Ford Fusion Energi, Chevrolet Volt and Toyota Prius Plug-in.

To be sure, the bad stuff can’t be ignored. There were lithium-ion batteries bursting into flames, a government-backed battery company whose employees played video games but did little else on the federal dime, Chinese entities buying companies funded by federal grants, and EV sales numbers that turned President Obama’s grand goal of putting 1 million EVs on U.S. roads by 2015 into a punch line.

And all this has cost American taxpayers some real money. The nonpartisan Congressional Budget Office estimates that taxpayers who handed over $2.8 billion in stimulus cash for EV development may end up chipping in a total of $7.5 billion to boost U.S. electric car makers over the next seven years (Greenwire, Sept. 21, 2012).

The Electric Drive Transportation Association (EDTA), the EV trade group, is urging Americans to look at the bright side of a new car market.

“The fact is that, yes, there are growing pains, but we are growing. The public investment is reinforcing substantial private investment in the industry,” said Genevieve Cullen, the association’s vice president. “To be focusing, zeroing in on one particular facility or even model and suggesting that it is predictive of the entire electrification effort — you are looking through the wrong end of the telescope.”

Swing around and peer into the other side of the telescope. Some analysts predict EV sales climbing at about 30 percent a year — a trend they expect to continue through 2020 — and the more expensive plug-in vehicles are on pace to beat hybrids in a side-by-side comparison for sales in the first 10 years, according to a recent Navigant Research report.

From close to zero about two years ago, there are about 53,000 EVs now on U.S. roads out of a total of more than 250 million cars. U.S. light-duty vehicle sales are climbing out of the recession nose dive with total new car sales reaching almost 14.5 million last year. Hybrids and EVs have captured 3 percent of that, with EVs making up about a half percent

Emission free transportation- consumers now have a range of possibilities of models and prices. Photo by Katherine Ling.

While some of the $2.8 billion federal investment in battery manufacturing failed to “pan out,” Gartner said, the $400 million stimulus investment in infrastructure is paying returns today. There are now more than 5,000 public charging stations in the United States — along with private charging stations at workplaces and residences, according to the Department of Energy. The U.S. market for supply and installation of residential charging points alone is expected to reach almost $1 billion by 2020, EDTA says.

Consumers are also getting a wider range of EVs. From the limited option of only two plug-in vehicles in 2010, there are more than a dozen 2013 models available, including compact, full-size, luxury and SUVs. There are likely to be more than two dozen choices by the 2014 model year, Cullen said.

And the enthusiasm for those cars is growing. For two years in a row, the extended-range plug-in hybrid Chevrolet Volt beat almost 250 other models for customer satisfaction, earning a “definite yes” from 93 percent of its customers in 2011 and 92 percent in 2012 when they were asked whether they would buy the car again “considering all factors (price, performance, reliability, comfort, enjoyment, etc.).”

Tesla Motors’ all-electric Model S won Motor Trend’s 2013 “Car of the Year” accolades for its speed, agility, instant response and efficiency. “It’ll sashay up to the valet at a luxury hotel like a supermodel working a Paris catwalk,” Motor Trend said.

“At its core, the Tesla Model S is simply a damned good car you happen to plug in to refuel,” the magazine added.

Alan Perriton, president and chief operating officer at VIA Motors, a privately held electric vehicle development and manufacturing company, said it’s feedback like this that will do more for EVs than anything else.

“It is word of mouth and excitement that sells a product,” Perriton said during a discussion panel at an Edison Foundation conference last month in Washington, D.C. Perriton said he’s owned a Chevy Volt for about eight months and has had four trips to the gasoline station. He said he spends about $30 a month for electricity against an average $300 per month to buy gas.

“My experience is once you drive an electric vehicle and realize the financial benefits, along with the excitement, it is almost impossible to go back to a regular vehicle,” he said.

‘It was oversold’

Even with up to $7,500 in federal tax credits and various state incentives dangling before them, American car buyers are wary of EVs.

It typically takes the auto industry three to six “learning cycles” to include major new features in vehicles. First the companies offer them as options on higher-end cars and, if successful there, they can become standard on luxury cars and an option on mid-priced styles. The cycle continues until the feature comes standard in basic models — typically, over five to 10 years.

Why so long? Companies say they must test the technology, ramp up manufacturing to improve efficiency and lower cost, and build consumer demand for and trust in that feature.

For electric vehicles, that cycle was dramatically compressed for political reasons that appeared to ignore car buyers.

“Quite a few people got too euphoric. It was oversold,” said a former high-level executive at a major auto company who asked to remain anonymous because he is still connected to the industry.

“It’s a system. It’s not as simple as I can just come up with a better battery and solve that problem,” he said. “There has to be recognition that if we are going to get the consumer motivated, we are going to have to transform the entire system, not just pieces. It is not about getting millions of vehicles quickly. No, it is about getting to a state of knowledge so we can manufacture electric vehicles that millions of people want.”

Pike Research found that between 2011 and 2012, the number of consumers who were “extremely interested” or “very interested” in EVs dropped from 40 percent to 36 percent, according to a Web-based survey of 1,001 people in a nationally representative and demographically balanced sample.

In fact, consumer interest had been declining since 2010, with the predominant issue being EV prices. More than a third of car owners believe they won’t own the car long enough to offset the more expensive price tag through gas savings.

But the survey also noted consumers are almost equally concerned about EV batteries being dangerous or getting stranded a lot because they wouldn’t be able to charge the battery in time. Those last two issues have more to do with consumer education and experience rather than technology, the study says.

A cheaper, longer-range battery would help considerably, however, not to mention one that recharged relatively quickly instead of taking hours.

Right now, the average price for an internal combustion engine is estimated to be about $200; for hybrids it is about $2,000; for plug-in electric hybrids it is about $8,000 and for all-electric it is about $15,000.

‘It’s all about the battery’

The battery costs pretty much set the electric vehicles’ high price tags.

Before tax credits, a Volt has a sticker price of about $40,000; the Ford Fusion Energi about $39,000; the Nissan Leaf about $28,000; and Tesla’s top-of-the line Model S with an 85 kilowatt-hour battery and upgraded drivetrain, interior and suspension, about $95,000.

“It’s all about the battery cell itself,” said Gil Portalatin, chief engineer of electrified programs at Ford Motor Co. “It’s been mystified, but think about it, it is just a source of energy, just like a gallon of gas is a source of energy. So the whole idea is to get more energy in that per unit size in the most cost-effective way. That is what it is really all about. The research is how to pack more energy into that cell and doing it using materials that are commonplace.”

Basically the only current commercial option for electric vehicle batteries is lithium-ion. Prices for lithium-ion batteries have already come down 50 percent in the last two years, mostly due to the build-out in global manufacturing capacity funded by the U.S. stimulus and China. Experts predict the next generation of lithium-ion batteries will be safer and will get a higher energy-to-weight ratio, also known as energy density. This will in turn cause battery prices to tumble further.

But the price break may still not be enough in the short term. Consumers want to offset costs through gasoline savings within three to five years, but at current prices the $10,000 to $16,000 price tag difference between electric and conventional models will take six to 10 years, according to a J.D. Power & Associates study released last November.

“We are still way, way too expensive,” said Sam Jaffe, senior research analyst at Navigant Research. “That is really the crux of the matter. Manufacturers do not want to sell their battery cheaply. They want to be seen as a value-added product. We are in this game of chicken where the buyers aren’t buying until it gets cheaper and the sellers aren’t selling because they want it to be a high market product.”

DOE has been working on closing that gap on the research side. Six months ago it announced a new battery “hub” located at the Argonne National Laboratory, near Chicago. Known as the Joint Center for Energy Storage Research (JCESR, pronounced J-Caesar), it is working on an ambitious target of providing batteries with five times the energy storage at one-fifth the cost within five years — or 5-5-5. The work involves materials research for both current lithium-ion batteries and different chemistry sets, as well as other battery applications, such as for the electric grid.

The lithium-ion battery is actually a family of batteries that describes the “shuttle” ion that goes back and forth between an anode and cathode, which can be made from different materials. It’s not a set chemistry like a lead-acid battery.

Meet the family of lithium-ion batteries

“Lithium-ion” refers to the ion that shuttles back and forth between two electrodes: the anode and the cathode. These electrodes can be made from many different materials. Changing materials that create the anode and cathode varies the performance of the battery in voltage (energy in watts that can be delivered by volume or by weight), capacity, energy density (kilowatt-hours stored by volume or by weight), life (number of charges) and safety. Pure lithium also is very reactive and therefore must be contained in cells to keep it away from water, which currently contributes to much of the weight in a lithium-ion battery.

Current battery technologies:

Lithium cobalt oxide — Good energy density, stable but expensive. Used in most consumer electronics.

Lithium manganese oxide — Less expensive, longer life cycles, safer but also less energy density.

Lithium iron phosphate — Safer, lower cost but lower energy density and voltage.

Lithium nickel manganese cobalt oxide — Lower energy density but longer life and safer. Advances in energy density are set to be released next year.

Next generation:

Lithium sulfur — Stable, high energy density. But sulfur can expand to three times its size, which can harm other battery materials. The sulfur could be combined with carbon to limit the size change, although it would decrease the energy density.

Lithium air/oxygen — Extremely high energy density (50 times current lithium-ion batteries) but rapid degradation of battery materials.

Solid state — More stable, higher voltage, higher energy density, compact. A lack of liquid enables them to be connected to each other without being placed in their own individual cases, which makes for more compact packaging

Jeff Chamberlain, deputy director at JCESR, said new materials to improve energy density, voltage and safety are set to come out in three to four years, so “we foresee [lithium-ion battery] performance doubling and costs cut in half in the coming three to five years.” JCESR and other researchers are also looking at different battery setups that avoid lithium and other rare earth materials that are potentially expensive and limited.

“As sub technologies of lithium-ion emerge in the commercial sphere, they still won’t be able to achieve 5-5-5, so placing all your bets on it isn’t wise. Likewise placing all your bets on advance technology at JCESR is not wise. You need both,” Chamberlain said. “The $13 billion lithium battery industry is not going to go away overnight. Even if we came up with the best thing since sliced bread, it is not going to go away overnight.”

Range anxiety

Nor is the internal combustion engine (ICE) going away.

DOE is working on advanced combustion engines that it says could improve vehicle fuel economy by up to 50 percent, although some models estimate potential improvements of up to 75 percent. A National Research Council study released last month says it would be possible to achieve a 50 percent cut in petroleum consumption by 2030 purely through ICE efficiency, although electric vehicles, biofuels and other alternative technology would be necessary to cut petroleum use and carbon emissions by 80 percent (E&ENews PM, March 18).

Because fuel economy continues to be consumers’ top consideration when purchasing a vehicle — a balance between upfront costs and longer-term fuel purchases — it is not surprising that the auto industry sees the biggest investment of its research and development dollars in ICE over the next five years, according to the 2013 KPMG Global Automotive Executive Survey.

But the auto executives also said plug-in hybrids are a very close second for the biggest investment in powertrain technology R&D their companies will make over the next five years (52 percent in plug-in versus 55 percent ICE). Suppliers, which have to be a step ahead of the manufacturers they supply, are much more optimistic overall about plug-in and all-electric technology and foresee more investment in those technologies over the next five years than manufacturers, according to KPMG.

Manufacturers previously concentrated on either hybrid or all-electric vehicles, and there have been fewer plug-in hybrid vehicle models available. But the auto companies’ interest in the “bridge” vehicle has recently risen considerably because of consumer interest.

Ford’s Portalatin said plug-in hybrids are an important part of winning consumers’ confidence on electric vehicles beyond just savings at the pump.

“It’s more about the pull from the consumer,” Portalatin said. “It’s the consumer that is saying, ‘Well I’ve got range anxiety so I am not ready for pure electric.’ But [the plug-in electric hybrid] is the steppingstone. I can have my electric range and I don’t have to worry about running out of battery, so I don’t have to change my driving pattern. I can go make that errand that I want to make without worrying about it.”

Is seeing believing?

More companies are aiming to portray and actively market electric vehicles as a normal part of everyday life, and not as a very different type of product that would give cause for concern. This is in contrast to the “Prius effect” — in which companies emphasized the “gadget” and advanced technology as lures for consumers.

Manufacturers are now emphasizing the convenience and practicality of electric vehicles, while still providing technological features like remote startup; brake coaching for more efficient driving; and smartphone apps that can monitor battery charge, find the nearest plug-in station and signal whether that outlet is occupied.

“We have certainly made the business case for the vehicle, but we should also focus on the fun of driving them,” said Debbie Korenek, division vice president of marketing and sales at Houston-based CenterPoint Energy, an industry leader in smart grid and electric transportation

“With vehicles, sometimes it is the location of the cup holder rather than what is under the hood that sells a car. … They are quiet, efficient, and people love driving them. We need to help people not see them as something different but something fun that puts pennies in their back pocket and does good for the environment,” Korenek told the Edison Foundation conference.

Electric vehicles are becoming more of an everyday sight in some places, parked outside homes and offices because the number of EVs in corporate fleets is growing. Utilities, airports, warehouses, delivery companies and other firms that need pickup trucks, bucket trucks and other vehicles for their work are finding significant benefits in purchasing electric vehicles.

Their vehicle fleets are often used in warehouses, which can be a pollution hazard and require a large amount of ventilation, and are usually subject to long periods of idling to power forklifts and other equipment. The long idling times waste expensive diesel fuel, drive up emissions and increase noise pollution, which is a safety hazard as crews try to communicate instructions and which bothers the neighbors.

Tony Earley, chairman, CEO and president of the utility Pacific Gas and Electric Co., said he was experiencing two-year payback times for the electric trucks that his utility has purchased because of the savings in diesel fuel. “These are going to be real game-changers for us,” he added.

Another bonus for fleet EVs: The electric trucks can “export power” or provide mobile generation for other electronics, a feature VIA Motors already incorporates into its trucks. Exporting electric power is something that average electric cars could feature as well, VIA Motors’ Perriton said.

And the greater road hours, testing conditions and demand created by the electric vehicles in fleets continue to lower the battery cost and provide greater certainty — and visibility — for other consumers as well.

The Obama administration is seizing on fleets to boost electric vehicles and recently rolled out the “Workplace Charging Challenge” to increase the number of charging stations at workplaces tenfold in the next five years. The announcement was part of the administration’s “EV Everywhere Grand Challenge,” which aims to make plug-in electric vehicles as affordable and convenient for the American family as gasoline-powered vehicles within the next 10 years, announced by Obama in March 2012.

Signaling investors

Despite snags with the earlier federal funding for electric vehicles, it’s important for the government to continue its long-term support and investment, even if it is in smaller ways, according to Navigant’s Gartner.

For instance, Obama’s recent announcement about funding long-term research for alternative transportation including EVs through a $2 billion Energy Security Trust would only amount to $200 million a year (E&ENews PM, March 15).

Although that is not a significant amount and its policy fate is unclear, the announcement provides an additional signal to suppliers and manufacturers to keep in the game, Gartner said.

“That the government is still interested in providing research money is encouraging to the industry that it hasn’t given up,” he said. “It is a positive sign for investors and for companies looking to participate in this market that government involvement is likely to be there.”

Similarly, the DOE battery hub’s basic research on advanced batteries aims for significant impact in five to 10 years, but any small progress it makes in the meantime improves current commercial batteries — for EVs and consumer electronics — especially because JCESR already has industry partners to help speed up the path to commercialization, JCESR’s Chamberlain said.

“Often when I talk to executives about achieving a less expensive, small battery that can go 400 to 500 miles, they say that is fantastic because then I can make a very cheap 80-mile battery,” Chamberlain said. “Because then plug-ins can compete directly with gas-powered vehicles.”