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When will plug-in cars pay off?

Automakers are promising that affordable plug-in hybrid electric vehicles will be available in the next couple of years, but a new report contends that it will be decades before the fuel savings and lower emissions make up for the high cost of batteries.
Image: Toyota Motor Corp. staff demonstrates how to recharge \"Prius Plug-in Hybrid\" car at its showroom in Tokyo
A special electric plug is used to recharge Toyota's Prius plug-in hybrid in a Tokyo showroom. Toyota says it will market an \"affordable\" plug-in car in 2011, upping the ante on General Motors and Nissan.Issei Kato / X90003

Automakers are promising that affordable plug-in hybrid electric vehicles will be available in the next couple of years, but a new report contends that it will be decades before the fuel savings and lower emissions make up for the high cost of batteries.

The National Research Council issued its reality check on the prospects for plug-ins on Monday, the same day that Toyota announced it would field an "affordable" plug-in version of its Prius hybrid in the United States in 2011. The Japanese automaker said the car would be capable of traveling 14.5 miles on electricity alone, and achieve levels of fuel economy equivalent to 134 miles per gallon.

Toyota is just one of the companies in the race to get plug-ins to the marketplace. General Motors and Nissan are expected to roll out their entrants — the Chevy Volt hybrid and the Nissan Leaf all-electric car, respectively — by the end of next year.

The per-mile cost of running an electric vehicle has been estimated at about a quarter of the equivalent cost for gasoline, which has led some experts and consumers to see plug-in hybrid electric vehicles, or PHEVs, as the cure for what ails America's energy economy. The research council's report, however, estimates that it could be 2028 or later before the fuel savings outweigh the additional up-front cost for plug-in vehicles.

When it comes to reducing greenhouse-gas emissions, the report said regular hybrid vehicles such as the present-day Prius might well be more environmentally friendly — unless power companies start phasing out the use of coal and other fossil fuels for electricity generation.

"If it was a choice between two regular hybrids and a plug-in, you'd do better with two hybrids," said Alan Crane, study director for the plug-in report. "The regular hybrids came out looking very good in that report."

The report said the biggest reason for the higher up-front cost of a plug-in is the battery. The battery pack for a car capable of going all-electric for 10 miles, like the plug-in Prius, would add about $3,300 to the cost, the authors estimated. They said the battery pack for a car that can go 40 miles without using gas, like the Volt, would add about $14,000 to the car's cost.

"How much can that come down over time?" asked James Katzer, a former ExxonMobile executive who was a member of the study panel. "That's what we've been discussing."

Affordability is relative
Members of the panel consulted with experts in the battery industry, the auto industry and other fields to flesh out a variety of scenarios for future plug-in production. The break-even point for up-front costs vs. fuel savings was 2028 for PHEV-10 (Prius-style) vehicles, and later than 2040 for PHEV-40 (Volt-style) vehicles.

Both Katzer and Crane saw Toyota's announcement as a small step rather than a giant leap into the marketplace. "It's not a huge jump-in for them," Crane said. "They're talking about 10,000 of them, or 12,000. ... It's a reasonable step, but I don't think it's much more than a toe-dip."

Just how affordable will those plug-ins be? Toyota hasn't said what its future plug-in Prius will cost, but it's likely to carry a premium ranging somewhere between $3,000 and $10,000. The higher figure is roughly how much it costs to convert a present-day Prius into a plug-in.

"'Affordable' is open to some interesting questions," Katzer said. "You've got big subsidies already on the books for these vehicles, and that brings the 'delta' [cost difference] you see in that report down significantly."

The report assumed that government support for plug-in cars would continue at their current level or higher in the decades ahead.

Looking at the bigger picture, the panel estimated that plug-ins would have little impact on total U.S. oil consumption before 2030. That's because it will take a long time for plug-ins to replace a significant proportion of the 200 million vehicles now in operation in the United States, Katzer said.

Batteries are key
Crane said the future cost of batteries represents the "greatest uncertainty" surrounding the report. The panel assumed that there would be incremental improvements in lithium-ion batteries, and some researchers are working on more promising technologies, such as lithium-air or lithium-polymer batteries. Battery breakthroughs would accelerate the transition toward plug-ins, the report said.

"A carefully laid-out R&D program that tries to address some of these questions is clearly warranted," Katzer said. "The key is the battery, because of the cost."

So what's a consumer to do? "That's for each individual consumer to decide," Katzer said. Some Web sites already offer online calculators that figure out how the benefits and costs add up for various plug-ins — and as more vehicles go on the market, there'll likely be more reality checks as well.

In the meantime, the rest of the automotive marketplace won't be standing still. Katzer pointed out that many of the past gains in vehicle efficiency went toward making cars bigger, more powerful and more comfortable. "If those improvements in the internal combustion engine and the drive train had gone to fuel efficiency instead, vehicles would be much more efficient than they are today," he said. "There's still quite a bit there that can be gained."