There is a growing consensus that America’s dependence on oil constitutes a triple threat to its national security, its economic vitality, and its environmental health. But agreement breaks down on the question of how, exactly, the country can best achieve dramatic, near-term reductions in oil consumption. We believe that the greatest potential for transformative change may lie in the emerging technology of plug-in hybrid-electric vehicles (PHEVs), which could become widely available in the United States in five to 10 years if government takes a few smart steps to help spur their commercialization.
Like conventional hybrid-electric vehicles, plug-in hybrids save fuel by using small internal combustion engines in combination with electric motors. But while conventional hybrids charge their batteries with kinetic energy and power generated by their own internal combustion engines, plug-in hybrids, as the name suggests, have cords that can be plugged into standard, 120-volt electrical outlets.
That design — constituting a partial merger of the transportation and electricity sectors — can produce dramatic reductions in gasoline consumption. Equipped with more powerful battery packs than conventional hybrids, plug-in hybrids can travel the first 20 miles or more on battery power alone, without ever firing up their internal combustion engines. That is farther than the average round-trip commute. After that, they can switch to a conventional hybrid-electric operating mode. In all-around driving, plug-ins could thus get between 80 m.p.g. and 160 m.p.g., compared to about 45 m.p.g. for today’s Toyota Prius. The gasoline savings could be even greater if plug-ins were designed to run on biofuels; they could travel 500 miles on a gallon of gasoline blended with five gallons of ethanol.
Even beyond the possible reductions in oil consumption, plug-ins also offer a compounded benefit in their ability to sharply reduce carbon dioxide emissions and thus slow global warming. The beauty is in the increased reliance on the electricity grid, which can concentrate the environmental impact of driving upstream in a few thousand electrical power plants instead of downstream in a hundred million motor vehicles. That puts the environmental policy focus squarely on reducing greenhouse gas emissions from the power sector, where there is the greatest opportunity to make high-volume progress.
In reality, it is unlikely that the current U.S. vehicle fleet could ever be entirely replaced by PHEVs, for the simple reason that it would be impractical for some drivers to plug in with any regularity — people who live in urban or dense, inner-suburban areas and have no access to off-street parking, for example. For them, it might make more sense to have a conventional hybrid, or a “flex-fuel” car that can run on biofuel. But PHEVs can certainly work for enough people to make a substantial dent in America’s gasoline needs.
At the moment, the market for plug-in hybrids is still in its infancy. The first commercial model, the Mercedes-Benz Hybrid Sprinter van, is available in Europe. In the United States, there are only after-market conversion kits available to turn conventional hybrids like the Toyota Prius and the Ford Escape into plug-ins (voiding their warranties). But the future looks brighter. Toyota, already the leader in gasoline-electric hybrid technology, announced in July 2006 that it would begin developing plug-in hybrids. Shortly thereafter, Google’s new philanthropic arm, Google.org, announced plans to back development of an ultra-fuel-efficient plug-in hybrid car engine that runs on ethanol, electricity, and gasoline. More recently, GM pledged to build a plug-in hybrid. Several lingering challenges must be overcome before the oil- and climate-saving potential of plug-in technology can be realized. The larger and more complicated batteries in plug-ins make them considerably more expensive than conventional hybrids. In addition, their ability to help reduce greenhouse gas emissions depends entirely on the power sources that feed the electricity grid. If the electricity used to power plug-ins comes from relatively CO2-free sources such as wind, solar, or nuclear power, then plug-ins can be considerably cleaner than conventional hybrids. But if the electricity comes from traditional coal-fired power plants, then plug-in hybrids are no cleaner from a climate perspective than today’s conventional hybrids.
Given the tremendous promise of plug-in hybrid technology, there is a strong policy case to be made for accelerating its development. But there is an equally strong case to be made that government should refrain from picking technological winners. (Plug-in hybrids may look more promising than any other technology right now, but that could obviously change.) So what is the right role for government? The answer is that it should focus its regulatory authority on achieving the broad policy outcomes that are unquestionably in the public interest–that is, reducing carbon dioxide emissions and oil consumption– but let markets determine which technologies are best able to deliver results. Government can certainly play a catalytic role in spurring the development of specific technologies, as long as it maintains a technologically-neutral posture by keeping its efforts diversified. Indeed, that is its current approach. There are existing programs to promote plug-in hybrid-electric vehicles, along with tax credits for consumer purchases of conventional hybrid-electric vehicles, subsidies for homegrown biofuels, and federally funded research projects to develop hydrogen fuel cells, among other things.
With those principles in mind, PPI proposes a three-part policy agenda that will effectively spur the development of plug-in hybrids, along with other new transportation technologies:
- Establish a mandatory national cap on carbon dioxide and other greenhouse gas emissions;
- Reform federal fuel economy standards to increase pressure on carmakers to produce high-mileage, low-emission vehicles of all types; and
- Partner with the private sector to leap technological barriers related to such things as battery cost and performance.