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The Case for Electric Vehicles, Part 2: EV Costs

Ed Dodge's picture
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  • Oct 15, 2014

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Electric Vehicles today are considered to be more expensive to purchase than their Internal Combustion Engine counterparts. But the purchase price of EV’s versus ICE vehicles tells an incomplete story about the comparative costs.

While none of the EV’s on the market today are cheap, they are competitively priced for their class of vehicle. The Tesla Model S is the best equipped and most expensive EV on the market, as a luxury sedan it competes with the Mercedes Benz S-Class, BMW 7 Series, and Porsche Panamera all of which are in the $70,000 – $90,000+ price range. The Chevy Volt plug in hybrid EV has an MSRP of $35,000, and the Nissan LEAF EV lists at $29,800, comparable to cars of similar size and features.

EV’s are much simpler mechanically than ICE vehicles with far fewer parts and requiring less maintenance. The perceived expense of EV’s is almost entirely in the cost of batteries and as battery prices come down with expanding production, then overall EV costs will come down as well. Electricity is much less expensive than gasoline or diesel so powering an EV is much cheaper than filling up an ICE vehicle.


Tesla Model S Chassis Rear Showing Motor and Inverter, photo by author

The Tesla Model S has remarkably few mechanical parts, while combustion vehicles have thousands of discrete parts that make up the engine, fuel system, transmission, drive train and exhaust. Tesla displays a stripped down Model S in their stores with just the mechanical parts installed, for anyone accustomed to complex mechanical aspects of cars it is a surprising contrast. Despite the sophistication of the engineering, the final package is remarkably simple and implies that costs can be reduced as manufacturing expands and matures. 

The electric motor is not much bigger than a watermelon and is matched up with the DC-AC inverter and single-speed gearbox in a very compact space between the rear wheels. This setup provides direct power to the rear wheels and also handles the regenerative braking. The battery is wide and flat and covers the entire bottom of the frame between the four wheels. The battery and inverter are liquid cooled with a reservoir and pump. Under the front side of the car are the rest of the mechanical components: vacuum pump for air suspension, ABS compressor, steering motor, AC compressor and double wishbone suspension. Along with conventional brakes and wheels, those are effectively all the parts that make the car go. There are large trunks for storage in both the front and back of the car and the interior is very roomy with comfortable seating for 5.

dodge tesla inerds

Tesla Model S Chassis Front Showing Pumps, Compressors and Liquid Coolant Reservoir, photo by author

Besides these mechanical parts there is a Linux based computer system with 17” touchscreen on the dash that controls basically everything; from the AC to the radio, windows, locks and GPS. In many ways the Tesla Model S could be described as a smartphone on wheels with a motor. Much of the maintenance required on the Model S is software based such as updates, reboots and firmware upgrades. The auto mechanic of the future will need to know as much about IT as wrenches and grease.

The single biggest cost component on the Model S and all EVs is the battery pack. Tesla does not reveal precise costs on their batteries but there is a cottage industry of analysts trying to determine what those costs are. Some estimates in the media have placed the cost around $400 per kWh, or $34,000 for the 85 kWh version while others estimate the costs are well below $200 per kWh. In an interview with Barron’s online Telsa CEO Elon Musk claimed that improvements will bring the cost of the Model S battery to $10,000-$12,000, below $200 per kWh. An interesting analysis at Green Car Reports estimated Tesla’s cost conservatively at $171 per kWh with prices collapsing.

Tesla recently announced that they will be constructing the world’s largest lithium-ion battery factory in Nevada, named the Gigafactory. Planned production at the Gigafactory of battery cells by 2020 will exceed the entire industry’s production in 2013. Tesla estimates that cost per kWh will be reduced by over 30%. The Gigafactory will also have facilities for recycling batteries.

It is known that Tesla developed their own proprietary lithium-ion battery architecture and it has proven to be far ahead of the competition in cost and performance. While most of the EV industry chose to go with large battery cells, Tesla went against the grain to use small cylindrical cells manufactured by Panasonic (their partner in the Gigafactory) for laptop computers that are cheaper, more energy dense, and safer (because they contain less energy per cell). Tesla completely redesigned the battery packaging to make it simpler and reduce manufacturing costs. A liquid cooling system was developed that helps to maintain cell life but is also an important safety feature as it helps to dissipate heat if any one cell were to catch fire and prevents the fire spreading. The smaller, safer cells allowed Tesla more flexibility in arranging the battery pack enabling them to create the large slab that covers the undercarriage rather than bulky batteries that eat into interior space.

dodge tesla battery

Tesla Chassis Showing Battery, photo by Tesla

Replacement costs for EV batteries remain somewhat murky. Most EV’s are new enough that owners have not been faced with the issue yet. Conventional wisdom is that the batteries will retain 70%-80% of their storage capacity when retired from automotive use and will still have market value for stationary applications. Batteries can also be reconditioned by replacing individual faulty cells. Battery swap services, of which Tesla advertises but has not brought to market yet, offer compelling new business model opportunities where batteries are leased or paid for via service contract and simply swapped out as needed without requiring a large outlay of cash by the vehicle owner. The Tesla Model S battery can be swapped out in 90 seconds. Ultimately the materials in lithium-ion batteries can be completely recycled and remanufactured, but the business models for battery replacements are still emerging.

One unambiguous cost is the cost to charge an EV which is a fraction of filling up a conventional car with gasoline or diesel and presents one of the most compelling arguments for consumers to switch to EV’s. The US Dept of Energy uses an eGallon to represent the electrical equivalent of one gallon of gasoline and rates an eGallon as roughly one-third the cost of gasoline. Electricity prices vary across the country and by time of day but they are far less volatile than gasoline prices which are tied to international markets and geopolitical events.

Tesla offers free charging at their Supercharger stations for all of their customers for the life of their cars which sweetens the deal, especially compared to the competition Mercedes Benz S550 which gets 19 miles to the gallon and costs roughly $1,900 in fuel to drive 10,000 miles.

Maintenance requirements on EV’s are much lower than ICE vehicles saving owners significant time and expense. Though combustion engines have become much more reliable in recent years they are still very complex machines with many fluids and moving parts that wear and eventually need maintenance. A cursory review of engine components and common ICE maintenance includes: oil changes every 3000-5000 miles, transmission fluid must be checked and changed at 100,000 miles, radiator coolant must be checked, spark plugs and wires, timing belt, muffler and exhaust system, catalytic convertors, fuel pump, alternator, clutches on manual transmissions, and of course regular trips to the gas station. EV’s eliminate all of these parts and reduce maintenance costs and time dramatically for the owners. EV’s share brakes and tires in common with ICE vehicles, but the regenerative braking saves much wear on EV brakes extending their lives. Increased computerization of EV’s means a greater reliance on software and increased potential for computer glitches bringing a new category of maintenance to EV’s and even raises the potential for them to be hacked by criminals, something to be aware of.

In the final analysis, EV’s offer a compelling cost saving argument over conventional ICE vehicles, even if all the advantages are not available today. The single biggest cost factor holding up EVs is battery costs, but these costs are projected to fall as manufacturing expands. On mileage and maintenance costs the advantages of EVs are already clear and present today. Charging infrastructure needs to and will continue to expand, but in these early days there are gaps in coverage. An industry standard for DC high-speed charging will greatly facilitate a wide expansion in convenient charging locations for all EVs.

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Clayton Handleman's picture
Clayton Handleman on Oct 15, 2014

A point of clarification.  The 30% cost reduction for the Giga factory is at production start-up.  A careful read of the Tesla literature makes it clear that the 30% is in 2017 and that it marks the beginning of cost reductions.  As production ramps expect further cost declines.

Lithium Ion batteries are like most manufactured products and are governed by an experience curve.  See here for more on Lithium Ion cost reduction.

Schalk Cloete's picture
Schalk Cloete on Oct 16, 2014

About the MRSP differences between EVs and regular vehicles, VW has recently given us the first fairly reliable estimate by actually making a pure electric version of an existing model: the e-Golf. The e-Golf costs $7500 more than the top of the range golf TDI on which is was modelled (see this comparison on Toyota’s nice car comparison site). Regarding driving experience agaist the TDI SEL, the e-Golf has essentially identical features, a 4-5 times smaller range and a 33% slower 0-60 time. Assuming that the price difference is primarily related to the battery pack, the battery cost amounts to about $300/kWh. 

As we discussed in your previous article, an EV suitable for the mass market with a 200-300 mile range would incur battery costs around $10000 at future costs around $100/kWh. Assuming that this $10000 is the premium over a similar hybrid getting 50 mpg, we can estimate the impact of fuel costs for an EV getting 100 mpg (inclusive of charging losses). Simplifying assumptions include 1) that the cost of the relatively small ICE in the hybrid is cancelled by the additional costs to accommodate the large and heavy battery in the EV and the installation of a home charging station, and 2) that the additional financing costs of the more expensive car would cancel out the lower maintenance costs.

Removing taxes, gasoline costs $3/gal ($100/barrel oil) and household electricity costs $4.30/gal ($0.13/kWh average US price). For 15000 miles/year, the cost saving of the EV over the hybrid is therefore $255/year. This implies that the EV will need 40 years to make up the cost price in fuel savings. 

Then there is also the thorny issue of depreciation which can have a substantial impact. This depends heavily on the performance of the battery and we should probably reserve judgement until we get more real world data. 

Clayton Handleman's picture
Clayton Handleman on Oct 16, 2014

$3.00 / Gallon?  That is a recent and transient phenomenon.  But I give you credit for using $100 / kwhr which is a pretty good assumption.  I would go with 200 mile range as the sweet spot for the majority of commuters with an ICE minivan for the family car.  So I think you should dial back the battery cost to something more like $7500. 

So using your methodology, 20 years is probably closer to on-target for payback if all other things were equal.  But they are not.

1) There is a growing environmental crisis so there is a desparate need to decarbonize.  It is hard to imagine that some sort of monetary response will not evolve to favor EVs.

2) As part of efforts to move from a centrally planned soviet style utility to a market based power system that monetizes far more of the inputs and outputs, reasonable efforts can, should and almost certainly will be made to move to TOU metering.  This heavily favors EVs and their night time charging profile would lead to low cost electricity at charge time.  Making the economics further favorable to EVs

3) While some suffer from range anxiety, others love the fact that EVs allow them to go out with a “Full Tank” each and every day.  (Remember, by Friday, most commuters are running on E )

4) Tesla continues to demonstrate that it is hard to do an apples to apples comparison.  You just cannot replicate the performance of an EV with an ICE without spending a LOT of money.  The Model D that just came out further destroys the ICE for price / performance.  It beats Maserati and even Ferrari Enzo up through 2004.  And while the family commuting vehicle is not going to be doing 0-60 in 3.2 seconds, it will be substantially outperforming my prius in both acceleration and handling.  And the only thing that this consumer doesn’t like about his prius is the relatively sluggish performance.  For many that improvement in performance will more than outweigh the closed gap in price.

So I think that the EV is here to stay and it will mainstream in 5 years due to collapsing price of Li-Ion batteries.  The question is how quickly it will EVs dominate.

If climate change were a non-issue I would expect 15 – 25 years.  But with climate change it is hard for me to imagine EV sales volume not exceeding that of ICE in at most 10 years – (barring an amazing oil find collapsing the price of gasoline).  At which point, all bets are off for EVs and climate.



Ed Dodge's picture
Ed Dodge on Oct 16, 2014

Schalk, you present good numbers, though I don’t agree on our estimate for EV fuel cost savings. The data I referenced on eGallons from DOE are coming in at a third of the cost of gasoline, and I thought those numbers were conservative. Anecdotal stories have claimed electricity at 1/4 of 1/5 the cost of gasoline. But that is only one factor in the growth of EV’s. Dramatically reduced maintenance on EV’s is also important.

Even more though, I would say that it is the improved driving performance plus zero emissions that really will push EV’s into the mainstream. Driving the Tesla was a real eye opener for me. My impression of EV’s had always been that of oversized golf carts with sluggish performance, but now I see that you can do things with an EV’s that simply cannot be done with ICE vehicles. It is not unrealistic to imagine 4 separate motors on each wheel, all computer controlled, enabling maneuvers and acceleration that are impossible in a conventional vehicle.  You mentioned in another post about F1 and Le Mans races, I have no doubt now that EV race cars in a few years will completely wipe out the ICE competition head to head, and at that point there will be no going back.

Zero emissions, leave the carbon discussion aside which gets mired in complex assumptions and modeling and just look at objective health issues from air pollution. Zero emission EV’s will save lives and that alone is worth public investment in charging infrastructure.

Battery depreciation can be addressed in a couple of different ways. Batteries are easily swappable, 90 seconds in the Tesla, and will have long term value in stationary applications beyond their lives in vehicles. Maintenance contracts, battery swap deals, leases, there are numerous potential business models that would allow consumers to avoid large cash outlays for replacement batteries. It is even conceivable that battery swap services become common and consumers don’t even worry about owning the battteries. Wireless companies figured out how to make expensive smart phones affordable through subsidies and long term contracts, creative financing can help solve battery cost issues.

Roger Arnold's picture
Roger Arnold on Oct 17, 2014

Rate arbitrage is the lowest value and most challenging application for battery storage. There’s no shortage of vastly higher value applications. Non-interruptable power supply for industrial applications that can’t tolerate even a brief power glitch. Buffer storage for solar power in remote locations. Ancillary services for voltage and frequency support. Contingency reserves. Avoidance of congestion on heavily stressed T&D links…

The EV market has enormous room to grow before finding a market for used EV batteries will be a problem.

Schalk Cloete's picture
Schalk Cloete on Oct 17, 2014

About the eGallon, I could not find the mpg of the reference car for gasoline, but I expect it to be around 25 mpg standard US car. EVs bought for environmental purposes and fuel savings should be compared to 50 mpg hybrids. This would change the eGallon from 1/3 to 2/3 of a regular gallon. Then there is also the (relatively smaller) issue of taxation on gasoline and not on electricity. 

It would be nice to hear a bit more about your thinking behind the claim that EVs will soon drive circles around regular cars and hybrids. EVs have good torque, but, when it comes to performance class vehicles, torque is not a problem. The primary issue is weight which is a big negative for EVs, especially when it comes to performance where a very big battery pack will be required. The lighter the car, the greater the relative impact of the battery. More marginal improvements such as computer controlled adjustable suspension and drive on each wheel can also be achieved with regular vehicles with small further improvements available through hybridization.

I asked a question about air pollution in an earlier comment, but don’t think I got an answer yet. Do you have any recent sources on the magintude of the impacts of modern hybrids (more than double city fuel efficiency and additional emissions reduction technology) on local air pollution? I could not find any good numbers thus far. 

About the batteries, regardless of how you package it, about $10000 will need to be added to the lifecycle cost of the car if it needs a battery replacement. Utilization for stationary storage will incur substantial BOS costs to get the batteries from the EV to the stationary application and these batteries are also likely to have an annoyingly short useful operational lifetime. See this previous article for estimates on the very low costs required for batteries to be economic for high-volume price arbitrage applications. 

Clayton Handleman's picture
Clayton Handleman on Oct 17, 2014

“It would be nice to hear a bit more about your thinking behind the claim that EVs will soon drive circles around regular cars and hybrids. EVs have good torque, but, when it comes to performance class vehicles, torque is not a problem.”

It is VERY difficult to find an ICE that can beat Tesla’s 3.2 seconds 0-60 as can be seen here.  Among other things, physics dictates that to get that kind of performance you have to send power to all four wheels, much easier with an EV than an ICE.  You have to look hard on that list to find a Ferrari or Maserati that can compare to Tesla in off the line performance.  I doubt that they do as well on the corners.  So it is only at speeds greater than 100mph that they begin to have an advantage.

If you want to say that hybrids have all the performance people are looking for then you need to up your price assumptions for ICE vehicles.  As I said in a previous post, I have personal experience with high performance vehicles including Tesla and BMW and the most popular hybrid on the road, a Prius.  The prius does not have anything close to the performance I would like.  You are exaggerating the issues with the battery weight as Model S has shown.  And with bottom mounted batteries you get lower center of gravity and the resulting incredible stability and handling.  There is a reason Consumer reports has only once given a car as high a rating as they gave Tesla. 

And with longer range on the batteries comes longer lifetimes because charge discharge cycles are reduced.  So battery replacement will probably be at the point that most people would be buying a new car.  That makes the battery replacement economics different. 

Ed Dodge's picture
Ed Dodge on Oct 17, 2014

I would agree with Clayton below, the new Tesla Model D is taking on the McLaren F1 for 0-60 performance. 3.2 seconds can’t be ignored and will get better. And battery swap is faster than filling a tank of liquids, so in a race scenario with battery swap allowed it would be an unfair advantage for the EV versus an ICE.

I don’t see battery pack weights being a problem, in the Tesla the battery mounted on the underside of the frame lowers the center of gravity and improves the handling. Plus so many heavy components have been removed, engine, transmission, radiator, exhaust system, etc. So I think the weight issue is a wash.

The relevant calculation for comparing fuel costs is to compare vehicles of like size and weight and see what it costs to move them, I think that is basically what the eGallon does. Using fleet averages or assumptions about vehicle choice makes for apples and oranges.

For air pollution, I don’t explicit numbers either, but not all vehicles have modern engines or are in good maintenance. I am a big proponent of natural gas for heavy duty vehicles since a big part of reducing pollution is to have cleaner fuels, synfuels are good in this regard as well. But even natural gas has some emissions, particularly when the engine is out of tune and it doesn’t take a lot of data to see that zero emissions will result in big improvements in air quality.

Jeffrey Miller's picture
Jeffrey Miller on Oct 17, 2014


I’ve owned a Prius, a Volt, and since Feb 2013 aTesla Model S.  I’ve also owned a bunch of ICEs. So I have some personal experience hybrids and EVs. I’ll say straight out I’ll never buy an ICE or hybrid again if I have a choice. After driving a Tesla, I have no desire to go back to what feels like an archaic technology and no desire to ever have to stop again at a gas station. Many people who have driven this car feel the same way and a lot of them are not traditional environmentalists. 

Fuel efficient hybrids like the Prius are fine cars. I owned mine for eight years and had no complaints. It got me where I wanted to go and could haul a lot of stuff for its size. If everyone were to buy a 50 mpg hybrid, we would, at least in the US, halve our carbon emissions from light transport and also save a lot of money. But in reality, that’s not happening. Most people in the U.S are still buying much less fuel efficient vehicles – the average is less than 25 mpg even now, in 2014. So it is clear that people value things in their vehicles other than fuel efficiency, like size, comfort, safety, performance. I’m not passing judgement, just observing that this is what the market very clearly tells us about what people value. 

Therefore we should not be comparing the Model S – or the much less expensive sedan that Tesla is planning to produce in the next few years – with the Prius but the Model S with the car that people would otherwise have bought – that is we should compare it with a much less fuel efficient vehicle than the Prius. In this regard, EVs like the Tesla win hands down. You get all the other stuff that people want (other than fast fueling) and your fuel costs are much less. Of course you pay upfront a huge amount for the battery, but if Elon Musk is right and he can get the costs of a battery down to $100 per kwh, I think mass produced EVs will over their lifecycle be less expensive than a comparable hybrid. I initially bought my Tesla in part because I wanted to support Musk’s efforts, but as I mentioned, after owning the car, I would not go back. 

You mentioned in the comments of your Norway article you were concerned about the infrastructure costs of EVs. I have a different take which is that we already have most of the infrastructure we need for EVs – the electrical grid. For example, a ‘home charging station’ for the Model S consists of an ordinary 240V outlet. That’s it. This is not expensive to install – it takes an electrician a few hours to run a line from your electrical box. Likewise many commercial parking lots now have EV charging stations and these are not very expensive to install. So I just don’t see this as a huge hurdle.  

The only real drawback of EVs is that they are not currently nearly as convenient for road trips. Tesla’s superchargers are changing that in the US, but even with superchargers, this is an area where ICE’s beat EVs . That said, most people don’t do a lot of road trips – most driving is relatively short distance. To get around this, two car households (the vast majority in the US) could own a hybrid for road trips and an EV for in town. 

Finally, the biggest advantage to EVs in my view is not their convenience, their performance, their simplicity, their low operating costs, their quietness, their safety; it’s that they offer us a clear way to eliminate carbon emissions from light vehicle transport. This requires decarbonizing the grid, which is not easy, but it is doable if we have the political will. By contrast, even the most fuel efficient hybrids like the Prius emit a lot of CO2. In your 15,000 mile per year example, a Prius would emit 2.7 metric tons of CO2 (the Model S emits maybe ~20% more on the current average US grid, but far less than a comparable ICE). This is a real problem, especially as more and more people around the world become wealthy enough to afford a car. By electifying transport, we reduce two hard problems – decarbonizing transport and decarbonizing the grid – to one hard, but solvable, problem – decarbonizing the grid. By contrast, I don’t see a clear way to decarbonize transport going down the hybrid route. Hybrids surely reduce CO2 emissions relative to regular cars, but they are very far from eliminating them, and latter is what we must do.

Spec Lawyer's picture
Spec Lawyer on Oct 18, 2014

Shalk . . . a lot of your numbers are wrong.

$10000 battery costs for a 200 to 300 mile range EV at $100/KHW?  You are saying a 100KWH is needed for such an EV.  But the 85KWH Tesla has 265 EPA rated range.  The 60KWH range gets 208 EPA range range.  And the Model S is a big car.  A smaller car could get away with 50KWH . . . thus at $100/KWH it would be a mere $5K.   Or at a $200/KWH price (which is close to achievable now, at least by Tesla) it would cost $10000.  

The only hybrid that around 50MPG is the Prius .  . Electric cars that small get better than 100MPGe.  

And the gas price . . . why do you get to cancel out the tax on gasoline?  And worse . . . why do you assume that gasoline prices will remain constant for the NEXT 40 years!  That is laughable.  Gasoline prices are going to rise in the coming years.  Electricity will rise too but at a much slower rate.   Gasoline can ONLY be made from oil.  A very hard to find and extract resource.  And don’t let the current lull in prices fool you, the prices will head back up.  Electricity can be made from onshore wind, solar PV, nuclear, natural gas, offshore wind, geothermal, hydropower, tidal power, concentrated solar PV, etc.  Electricity prices will only go up slowly.  And if you don’t believe it then just install a solar PV system and lock in cheap electricity for the next 25+ years.  


As time passes, you’ll eventually see the light . . . it takes some people longer than others to figure it out.

Spec Lawyer's picture
Spec Lawyer on Oct 18, 2014

There is no tax on electricity?  Where do you get this stuff?!?!?  


EVs should be compared to a Prius because . . . you say so.  Oh, OK.  


And why are you adding in a charging loss factor in?  That charging loss factor is already factored into the numbers on EVs.  They measure from the wall socket, not from the battery.  You just seem to give gas cars every possible advantage and whittle everything down from EVs.  (Except for the $100/KWH bit . . . I don’t see $100/KWH as likely any time soon . . . but if that does happen, EVs will just completely wipe out gas cars.)  

Spec Lawyer's picture
Spec Lawyer on Oct 18, 2014

There is no tax on electricity?  Where do you get this stuff?!?!?  


EVs should be compared to a Prius because . . . you say so.  Oh, OK.  


And why are you adding in a charging loss factor in?  That charging loss factor is already factored into the numbers on EVs.  They measure from the wall socket, not from the battery.  You just seem to give gas cars every possible advantage and whittle everything down from EVs.  (Except for the $100/KWH bit . . . I don’t see $100/KWH as likely any time soon . . . but if that does happen, EVs will just completely wipe out gas cars.)  

Clayton Handleman's picture
Clayton Handleman on Oct 19, 2014

$100 / kwhr in 10 years or less looks like where we are going.  See Here and here

Schalk Cloete's picture
Schalk Cloete on Oct 19, 2014

The range above is an estimate for a rather heavy family car (100 kWh battery pack is a big and heavy thing) at 5-10 year lifetime (average age of vehicles on the road today is about 11 years) in winter time (when range can reduce substantially). These are the range conditions at which I estimate EVs will become attractive to the mass consumer (also in the used car market which is about triple the size of the new car market).

Currently, plug-ins in the US amount to 0.71% of total sales (half of those are PHEVs) even though subsidies effectively cancel out the added battery costs relative to conventional vehicles. The cumulative growth curve also looks close to turning linear. This implies that EV range will have to increase greatly before becoming mainstream.  

About fuel prices, it should be noted that oil prices above $100/barrel will 1) slow economic growth, 2) incentivise efficiency and 3) stimulate unconventional oil production. All of these factors will limit future oil price increases (as we are having a first hand demonstration of at present with oil prices back to $80/barrel). It should also be noted that the vast majority of global oil can still be produced at $30/barrel. 

About electricity, US prices are quite low due to a grid with lots of old paid-off infrastructure, a large percentage of fossil fuel consumption and cheap gas from fracking. Prices are likely to rise substantially over coming years as old plants are retired, more clean capacity is installed and T&D infrastructure upgrades are made. For perspective, the household electricity prices (tax and non-tax components) of different OECD nations can be viewed on the second figure of this article

Taxes (and subsidies) should be removed in any analysis where the overall economic efficiency of different technologies is compared.

Clayton Handleman's picture
Clayton Handleman on Oct 19, 2014

“Taxes (and subsidies) should be removed in any analysis where the overall economic efficiency of different technologies is compared.”

Yes, of course.  Since there is no inherant cost of climate change, or watershed destruction from coal, society should make our policy decisions based upon a sanitized economic model.  But, if you must do it that way then you must put a sanitized model in for electricity costs.  EVs charge at night and, in the world you are creating, which is an economists fantasy textbook world, electricity is much less expensive at night.  If for no other reason, this is so because there is a vast amount of wind power available at night.  And therefore, the cost to charge EVs will likely drop rather than rise as the freeloaders who waste electricity like noon time lawn waterers do with water, will finally pay for the privilidge.  And those who use the resource at times of higher availability will be rewarded for changing their habits.



Clayton Handleman's picture
Clayton Handleman on Oct 19, 2014

I think it is important to differentiate between ‘mainstream’ and ‘dominant’.  These are two very important and very different milestones. 

Mainstream: Is when the product is a ‘normal’ member of the potential basket of consumer goods rather than something of the ordinary.  Camery, Accord, Prius, Fusion are examples of mainstream.  Camery, for example is in the 350k to 400k us sales range.  Tesla would not count as mainstream except if compared to the luxury market.  

Dominant: Is when the category, or the model within a category, has a high percentage of the market or defines the market.  So for EVs I would not say they could wear the ‘Dominant’ moniker until they are over 50% of the auto market.

Your >100kwhr battery is a reasonable analysis for EVs to reach a Dominant position.  However I think that Spec Lawyer is correct that 50kwhr will be sufficient for a mainstream commuter vehicle and / or second family car.  And once EVs mainstream, their volumes will drive down Li-ion battery prices quickly.  I would be surprised if $100 / kwhr represents a floor.  Even 5 years ago $0.60 / W for PV modules was unthinkable to most.  Now it is looking like a ceiling rather than a floor.  It is very hard for people to wrap their minds around the disruptive rate of growth as a new product category hits the steep part of the hockey stick. 

In any event, we will know in a few years.  Leaf is about to introduce a new model with twice the range.  If sales grow linearly then you may be right.  But if sales take off then that supports the disruption model.

Bob Bingham's picture
Bob Bingham on Oct 20, 2014

To my mind the biggest problem is that oil is a fantasticly powerful and portable fuel and very cheap. Its cheaper than CocaCola and gives huges benefits. If it was four times as expensive it would still be good value and as it runs short we will have to get used to that. This is another view on the same subject.

Spec Lawyer's picture
Spec Lawyer on Oct 22, 2014

I want to believe but straight line projections just don’t always pan out.   They can still whittle out some costs with better mass-manufacturing (Go Gigafactory!) but it is starting to get down to the material costs.  Perhaps a chemistry break-through could allow such cheaper batteries.

Spec Lawyer's picture
Spec Lawyer on Oct 22, 2014

That is an extremely misleading example.  

1) That is a diesel car.  Diesel costs more than gasoline.

2) That is on the ridiculous NEDC cycle which never is close to reality.  

3) You’ve never heard of loans?

4) The price of gasoline/diesel will go up much faster than the price of electricity.  This is something that so many people can’t seem to accept.  

Roger Arnold's picture
Roger Arnold on Oct 22, 2014

“The” material costs? A manufactured product can’t be produced for less than the manufacturer pays for materials, but who says that material costs are carved in stone? Particularly specialty materisls, of the type that dominate in the cost of batteries? They are as subject to technological innovation and “experience curve” as manufactured objects.

A good example is the cost of polysilicon for PV cells. Take a look at its history if you think that material costs never change.

Spec Lawyer's picture
Spec Lawyer on Oct 22, 2014

Just 3 cents per mile difference?  No, that is wrong.  You are just making up numbers.    I can make up numbers too but that doesn’t prove anything except make me look bad the way your fake numbers make you look bad.  

Clayton Handleman's picture
Clayton Handleman on Oct 22, 2014

Exactly Roger.  Experience curves have been found to apply in the case of most manufactured products.  From Aircraft to LCD displays to video casset players.  PV is a great example because people have been saying that they would hit the wall for years.  Then they figured out how to slice wafers thinner, make the silicon cheaper etc.

In the case of Li-ion batteries, McKinsey did in depth research and found no barriers until $160/kwhr.  However, as the Li-ion industry grows it would be naive to think that, with all the engineering horsepower being thrown their way, that they won’t discover things that McKinsey guys didn’t think of.  Elon Musk is probably the most knowledgeable about it and he has pretty much said he is sure of $100 / Watt in less than 10 years.  So I consider that a pretty safe number.

Jeffrey Miller's picture
Jeffrey Miller on Oct 22, 2014


If you could point me to a gas car that is similar in size and performance to the Model S (seats 5 adults, 2 kids; tons of storage in trunk and front trunk; roomy interior) that gets 45 mpg, I’d be really interested. Hell, I might even buy one for my wife. They don’t exist. I’ve looked. A car that is comparable to the Tesla won’t get much more than 20 mpg. But assume they get the average for new light vehicles, 25 mpg. 

I’d also like to know where you’ve been buying your gas for the last two years. Average US prices in 2013 and 2014 were around 3.50 a gallon. 

I pay 11 cents a kwh for electricty, not 13 cents, but let’s go with your figure, the US average. 

Let’s also make EVs look a little worse – assume charging losses are 20%. Then you get 400wh/mile. This is a conservative estimate. 

100 miles would be 40kwh, or 40*.13 = $5.20. 

The average new US light vehicle at 25 mpg  requires 4 gallons to go 100 miles, 4*3.5 = $14.

Difference is $8.80, or about  9 cents a mile, not 3 cents. 


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