Electric-car costs can outweigh cheap fuel

James R. Healey | USA TODAY

The government said this week that the fuel cost for an electric vehicle is only about one-third of the cost to fuel a gasoline vehicle for the same distance, but that Energy Department formula leaves out some key financial and environmental factors in the overall cost of owning an electric vehicle.

The government said Tuesday that electric car owners spend only $1.14, on average, to go as far as gasoline-car owners do on one gallon of gas, which averages about $3.63, according to travel consultant AAA.

The $1.14 number – the equivalent of dirt-cheap in today's fuel market -- was trumpeted by electric-car interests ranging from General Motors, which sells the mostly electric Chevrolet Volt, to a variety of clean-fuel and environmental advocacy blogs.

If anything, however, the DOE calculation blazingly illuminates a sharp conflict between clean fuel and cheap fuel.

Electric cars are so cheap to run is because of cheap electricity available to recharge their batteries. The reason electricity is cheap is because of cheap, if not always clean-burning, coal, and cheap, if not necessarily carbon-emission-free, natural gas.

Burning coal accounts for about 40% of the power generated in the U.S., according to U.S. Energy Information Administration data for the first quarter of 2013.

Natural gas was burned to generate about 26% of U.S. electricity the first quarter, EIA data show. While a cleaner-burning fuel than coal, it's still carbon-based and, thus, still emits greenhouse gases that environmental advocates blame for climate change.

Also, increasing amounts of natural gas are coming from shale gas released using a process called hydraulic fracturing, or "fracking," which critics and industry groups agree releases toxic substances. The industry says the amounts are small, the critics say any amount is too much. The Edison Electric Institute, the power industry's trade organization, says, "Concern about the environmental impacts of shale gas production has increased, potentially hampering the development and cost-effectiveness of this resource."

Coal's share of electiricity generation has ranged from a post-recession high of 47.4% the first quarter of 2010 to a low of 36.3% first quarter last year, according to EIA data. Same period, natural gas has ranged from a low of 20.5% in Q1 2010 to a high of 33.1% of all fuel used to produce electricity in Q3 last year, EIA says. All told, roughly two-thirds of the fuel burned to provide power to recharge the locally clean, electrified vehicles is carbon-based.

That has some saying that there should be greater environmental concern about power plants before there is a headlong push for electric cars.

"Gasoline vehicle efficiency is already improving by nearly 4% per year, while emissions from U.S. electric power generation are not even declining by 1% per year. "If you think that electric cars will be needed someday, you first have to greatly cut carbon emissions from power generation," says John DeCicco, a research professor at the University of Michigan Institute, and professor at the School of Natural Resources and Environment.

"The missing link for really cleaning up cars is not about the car at all," DeCicco believes. "It's about limiting net carbon impacts in the energy and natural resource sectors that supply motor fuel, whatever form that fuel may take."

Coal-burning plants are being closed and replaced with cleaner-fuel, mostly natural gas power plants throughout the industry, so the mix of coal-fired power will decline over time.

Solar and wind generation is growing fast, but has yet to matter on an industrial scale. The so-called "renewables" accounted for just 5.4% of the power generated last year, EIA says, up from 4.7% in 2011 and 4.1% in 2010.

Beyond the environmental costs, the DOE calculation also does not factor in the purely financial drawbacks of electrified vehicles that include:

• Expensive to buy: The Chevy Volt, a plug-in hybrid that goes up to 38 miles on battery power and has a gas engine to recharge the batteries if you can't find a place to plug in, starts at $39,995. Chevy currently offers a $4,000 rebate because sales have slowed, and – for those who qualify, and can afford to wait until they file their next income tax returns – the federal government kicks in another $7,500 via a tax credit subsidy.

That still leaves the cheapest Volt at $28,495. The lowest-price Chevy Cruze, on which Volt is based, and which has more room for passengers, is $8.605 less, or $19,890 with an automatic transmission, which nearly all buyers choose.

Volt has a federal fuel-economy rating of 37 mpg-equivalent in combined city/highway driving, while the gasoline Cruze models range from 27 to 31 mpg in combined use. The Cruze diesel, just introduced and starting at $25,710, is rated 33 mpg in combined driving.

It's not just Chevy. Ford's electric Focus starts at $39,995, or $30,495 after the $7,500 tax credit and a Ford rebate of $2,000. The conventional gasoline Focus with automatic starts at $18,090 and you don't give up much of the trunk storage to a battery.

Some areas, especially in California, offer additional sweeteners that can amount to several thousand dollars, helping cut the net price of electrics in those markets.

To draw reluctant buyers, automakers are offering tempting lease deals. In California, which is requiring big makers to sell or lease a set number of electrics, some are self-subsidizing lease payments as low as $199 per month to move the cars. That's less than most cheaper conventional gasoline cars. But as with any lease, once the period ends, you're left with nothing. You have to hope low-price deals still are available for a new one, or be willing to make a higher monthly payment to buy the car after the lease.

•Expensive accessories and your time: Getting and installing a 240-volt home charger for a plug-in hybrid or electric car -- pretty much a practical necessity -- runs $1,500 to $3,000. Or $0 if you use a normal 120-volt outlet, but you must be willing to wait a third to a half day for a full recharge.

For owners of gasoline and diesel cars, the corner service station already has made that investment, by paying for underground storage tanks and gasoline pumps that will fill a gas tank in no more than a few minutes.

•Expensive batteries: To replace a battery pack outside of warranty could cost from $4,000 to more than three times that much for a $70,000 Tesla luxury electric. Battery warranties are long, but not infinite -- 100,000 miles, plus or minus -- and will be a lot less reassuring to a potential second owner.

To replace a fuel system on a gasoline or diesel car would cost much less. To rebuild a gasoline four-cylinder engine, if that seems a more fair comparison, would be roughly $2,000, though could range much higher, depending on who does the work and how complicated the engine is.

•Expensive supplemental transportation: If a car's purely electric, and has to be plugged in when the batteries are low, real-world driving range is about 100 miles -- less when it's necessary to use the heater or air conditioning and the headlights and less in cold weather. So even though an electric can be a primary car for people who mainly drive in urban areas, a second car is necessary for longer trips.

If you decide your second car will be an as-needed rental, freeing you from ongoing ownership costs, you could spend $50 to $100 a day to rent, or more, depending on size, type and location.

A plug-in hybrid is more versatile, though still somewhat more expensive up front than a gasoline car. But a plug-in operates like an ordinary gasoline-electric hybrid car once the batteries are low. The range on electric only power ranges from about 11 to 38 miles, though, limiting the benefit from that $1.14 fuel cost. But the hybrid assist to the gas engine stretches how far you can go on every $3.63 gallon of gasoline.

•Uncertain depreciation: Electrified vehicles will depreciate much faster from the sticker price than the most-similar gasoline models, forecasts TrueCar.com and its ALG unit. But, if you assume the buyer got the federal subsidy and possible state aid, depreciation's similar for the gas and electrified models.

For example, a 2013 Ford Focus electric is expected to be worth 51% of it's actual transaction price after three years, while a similar gasoline model should be worth 65% of the actual transaction price -- that is, everything included, from rebates to extra-cost options.

But if you calculate the net transaction price after a $7,500 federal tax credit, then the electric's value works out to 65.3% after three years, almost identical to the gas model.

•Higher electricity rates: The $1.14 looks great, but if demand for power grows fast, from electric cars or just additional appliances and other electricity users, power rates will rise. The current system of power plants and interconnecting electric grids is struggling to keep up already.

Some utilities charge lower rates to customers willing to let the utility cut their power from time to time -- voluntary "brownouts." Others are moving toward lower rates in low-demand hours -- typically at night to spread use and prevent peaks that could cause shortages -- but higher rates at times of higher demand.

EEI, the utility industry group, asserts, "We need to invest in transmission (lines and other facilities) now." It adds that as demand grows, "the system must be expanded and upgraded," and notes that "electric companies have earmarked billions of additional dollars for investment in the coming decade."

That money will have to come from higher rates.

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