Hybrid Electric Vehicles, Plug-In Hybrid Electric Vehicles, And All-Electric Vehicles
ByThe auto industry’s biggest challenge is the transition away from petroleum (traditional gasoline and diesel) as vehicles’ primary power source to two different forms of energy: electricity and biofuels. “Hybrid electric vehicles usually outperform their conventional counterparts, which a lot of people find hard to believe,” says Bill Rankin, president and CEO of UQM Technologies, a vehicle electric motor supplier in Frederick, Colorado. “In terms of energy delivered to the vehicle, gasoline engines are only twenty-seven percent efficient, and diesels, thirty-three percent, because most energy is wasted as heat. By contrast, electric motors deliver ninety-four percent efficiency to the vehicle.”
Electric power is not the only path to a cleaner, more efficient vehicle, but we believe that it encompasses most of the key growth and investment opportunities for clean vehicles in the near- to mid-term. Electric vehicles also include the long-hyped and much-debunked hydrogen fuel-cell vehicle (FCV), because a fuel cell essentially produces electric power from its fuel source. Briefly, these are the four categories of vehicles we’ll examine in more depth below:
- HEVs. On the market for several years now and rapidly gaining mainstream acceptance, hybrid electric vehicles (HEVs) have helped Toyota and (more recently) Honda boost market share and market capitalization value. They’re one of the great clean-tech business success stories to date and an immediate market opportunity for current players who are ramping up production and rolling out new models. “Hybrid models will eventually become the new automotive standard,” wrote global investment giant AllianceBernstein in a June 2006 report titled The Emergence of Hybrid Vehicles: A Game-Changing Technology with Big Implications. But we view them, to an extent, as a precursor to even more efficient, lower-emissions vehicles in the other two electric-vehicle categories.
- PHEVs. Plug-in hybrid electric vehicles (PHEVs) are on the verge of a transition from the domain of “Prius hackers” reengineering hybrids into plug-in models in their garages to the production lines of global automakers. That opens up compelling growth opportunities for entrepreneurs (and their investors) to work with the big companies on battery technologies and other key components. GM surprised many industry observers by being the first automaker to announce PHEV production plans, unveiling a plug-in version of the Saturn VUE hybrid SUV at the Los Angeles Auto Show in November 2006. “There finally seems to be momentum among the big car companies for the plug-in concept,” says veteran clean-vehicle observer Jim Motavalli, editor of E, the Environmental Magazine and author of Forward Drive: The Race to Build “Clean” Cars for the Future (Sierra Club Books, 2001). Toyota disclosed its long-awaited PHEV plans in January 2008, promising commercial models for the global market by 2010—matching GM’s PHEV target.
- EVs. “Who killed the electric car?” asked the title of an acclaimed 2006 documentary film about U.S. automakers’ pulling the plug on their electric vehicles (EVs) in the early 2000s. Now the car’s response might be a line from another movie, of the Monty Python variety: “I’m not dead yet!” New entrepreneurial developments at both the high and low end of the market, from Silicon Valley to Norway to India (and even in Detroit), suggest exciting new potential for the EV.
- FCVs. The saga of the much-hyped “hydrogen economy,” based on cars powered by hydrogen fuel cells, could fill an entire book – and has, more than once. Our assessment of the near-term growth and investment opportunities in fuel-cell vehicles (FCVs) is fairly skeptical, but we recognize it’s a “wild card” sector where big breakthroughs are certainly possible. Honda’s sleek hydrogen-fueled FCX Concept, rolled out at the 2006 Los Angeles Auto Show, brings the long-promised technology closer to wide-scale commercial reality. But reaching affordable price points and building a widely accessible hydrogen-fueling infrastructure remain huge challenges.
EVs and PHEVs that draw power from a charging station or standard wall socket have raised the question: Is that really clean energy? Sure, emissions and fossil-fuel consumption are dramatically reduced on the road, say skeptics, but what if the electrons charging your battery overnight are coming from a dirty coal plant? Is that really cleaner than burning the equivalent gasoline? In a word, yes. Studies by a number of agencies, including the Electric Power Research Institute (EPRI), Argonne National Laboratory, and the California Air Resources Board have all concluded that running cars on electricity from today’s U.S. power grid (which is about 50% coal-fired), instead of gas or diesel, reduces overall GHG emissions anywhere from 22% to 61%. A big reason why: most battery-charging takes place overnight, when power demand drops dramatically and utilities have excess generating capacity, an effect known as “valley filling.” A December 2006 study by the U.S. Department of Energy’s Pacific Northwest National Laboratory (PNNL) concluded that such off-peak utility generation and transmission could power 84% of the 220 million vehicles in the United States if they were PHEVs.
If you live in a region where more wind or hydroelectric generates the juice—or it’s coming from your own rooftop solar panels—your electric-car advantage is even better. With the market share of clean energy rising around the world, the advantages of grid power versus petroleum will continue to improve. “PHEVs and EVs are the only cars that get cleaner as they get older,” says CalCars founder Felix Kramer, “because the grid gets cleaner every decade.” And you can’t beat the cost savings. At an average utility rate of 10 cents per kilowatt-hour, you’re paying the equivalent of about 60 cents a gallon to run on electricity.
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