Market tepid for electric vehicles
Jun 2 - Andrew Maykuth The Philadelphia Inquirer
Eighteen months ago, Philadelphia entrepreneur Norman P.
Zarwin opened an electric-vehicle charging kiosk at a gas
station he owns on Columbus Boulevard. If he built it, he
figured, electric vehicles would come.
They haven't.
"There's not a lot of use on it because there's not a lot of
vehicles," Zarwin said.
Despite the enthusiasm for electric vehicles, the marketplace
has not exactly caught on fire. PhillyCarShare received a
$140,000 state grant in late 2010 to build 20 vehicle charging
stations, but it only deployed its Chevy Volts in recent months.
It will have 20 of the hybrid electric sedans in the field by
the end of June.
"It's kind of an early educational period where customers are
learning to drive the things," said Ned Maniscalco, a spokesman
for Enterprise Holdings Inc., which owns PhillyCarShare.
News reports have tended to focus on the negatives. General
Motors did not meet its 2011 sales targets for Chevy Volts and
shut down its production line for five weeks to work off surplus
inventory. Nissan, after selling 1,708 Leaf sedans last June,
has experienced a sales decline -- it sold just 370 of the
all-electric vehicles in April, down from 579 units in March and
478 in February.
The reasons for the tepid sales are well-known. Even with a
$7,500 federal tax credit, the vehicles are expensive -- about
$40,000 -- and have a limited range. Outside the home, where 80
percent of EV owners charge their cars, there are few public
places to recharge.
But electric vehicle advocates say they are still bullish on
the future. Though Nissan has sold a total of only 12,000 Leafs
since the vehicle was launched in 2010, the Japanese automaker
this year will open a plant in Smyrna, Tenn., capable of
producing 150,000 cars a year, along with 200,000 lithium-ion
battery packs.
"This is something that Nissan as a manufacturer is all in
on," Tracy Woodard, director of government affairs for Nissan
North America Inc., told a Pennsylvania Public Utility
Commission forum at Drexel University on Thursday.
If electric vehicles are to make it in the mass market,
rather than as a city vehicle for the rich, experts say, the
industry needs to reduce its cost, which is largely driven up by
the lithium-ion batteries each car requires.
The batteries have a short life and need to be replaced, so
the value of the EVs depreciates quickly and reduces the
potential resale market. The batteries also decrease quickly in
value because the technology and capacity are improving with
each generation.
"Lousy resale value means goodbye to the mainstream market,"
said Ron Adner, professor of strategy at Dartmouth University's
Tuck School of Business, who devoted a chapter to electric
vehicles in his recent book, The Wide Lens: A New Strategy for
Innovation.
Adner, who received his doctorate at Penn's Wharton School,
says that EV manufacturers need to decouple the ownership of the
car from the ownership of the battery. He cited the business
model of a company called Better Place L.L.C., which has worked
with European auto makers to develop a replaceable battery
system that is essentially leased to the car owner.
"They own the battery, what they sell you is miles," he said.
"They take the depreciation issue off the customer's books."
But just solving the battery issue will not cure the electric
vehicle market. If EV sales suddenly take off, experts say,
conventional electric distribution systems could be quickly
overloaded with vehicle owners plugging their cars into the
grid, overloading wires and transformers.
"If you have a great grid in place but you haven't solved the
economics problem with the car, it doesn't matter," said Adner.
"If you've solved the economics problem with the car, but you
haven't solved the grid issues, then you'll have blackouts so
you can't reach the mass market there, either. You need both
together."
Pennsylvania officials say they're already building the
foundation of a smart-grid system that would allow the grid
operators to choreograph the charging of millions of electric
vehicles on the distribution system without causing it to crash.
Pennsylvania is requiring distribution systems like Peco
Energy Co. to install smart meters, which allow utilities and
customers -- or customers' appliances -- to talk to each other.
Smart meters also allow utilities to offer time-of-use rates,
which vary hourly and encourage customers to shift big loads
like vehicle charging to off-peak hours.
Woodard, the Nissan executive, told the PUC Forum at Drexel
University that Leaf owners are already charging their vehicles
at night, when the grid has surplus generation capacity.
"They plug in when they get home at 7 o'clock, but don't tell
their car to turn on until after 11 o'clock or after midnight,"
she said. The car also can be instructed to be fully charged by
a certain hour, and can stagger the charging times with other
vehicles.
In future models, manufacturers expect that more intelligent
vehicles will communicate with the utilities to charge at the
optimal time to take advantage of low rates. "The technology is
coming," she said.
A company building a network of EV charging stations believes
that the infrastructure will adapt quickly to the marketplace,
and that there's more danger in overregulating the business and
stifling growth.
NRG EV Services, using the brand name eVgo, is marketing home
vehicle charging machines as well as public stations it plans to
install where motorists can charge their cars while they shop at
a drugstore, a restaurant or a mall. Customers would essentially
become subscribers for a flat monthly fee, and they could charge
their vehicles at home or at public stations.
"We don't really think there's a whole lot of regulatory
responsibility for the commission in this effort," Michael
Krauthamer, the mid-Atlantic director of eVgo, told the PUC
panel.
Krauthamer said that the electrical distribution system was
able to accommodate previous changes in consumer behavior, such
as the massive introduction of home air-conditioning systems.
"Air conditioners certainly were rolled out very quickly --
more quickly, I'm afraid, than electric vehicle chargers are
being rolled out now," he said. "And we made it through that, no
problem."
Contact Andrew Maykuth at 215-854-2947 or
amaykuth@phillynews.com or follow on Twitter @Maykuth.