Will Current Electric Vehicle Policy Lead to Cost-Effective Electrification?

About the Project

After decades of development and false starts, electric vehicles have now become commercial. However, they still rely on strong policy support for their further development and adoption.

The project assesses the effectiveness of current electric vehicle policy in leading the technology toward self sustained market competitiveness. The multi-method approach chosen involves techno-economic, strategy and innovation systems analysis. In particular, we have developed a bottom-up electric vehicle fleet cost model in order to assess the economic implications of electric vehicle policy

Key Points

Passenger cars are responsible for a large and steadily growing share of global energy-related greenhouse gas (GHG) emissions. Electric vehicles (EVs) powered by renewable electricity have the potential to provide a substantial contribution to the decarbonization of passenger car transport. Unless carbon capture and storage technologies become cost competitive, EVs are likely to form a growing share of the personal mobility solution. But what is the lowest cost path to achieving high levels of EV penetration?

Encouraged by the falling cost of batteries, EV policy today focuses on expediting electrification, paying comparatively little attention to the cost of the particular type of EVs and charging infrastructure being deployed. This paper argues that, due to its strong influence on EV innovation paths, EV policy could be better designed if it paid more attention to future cost and technology development risk. In particular, key findings include:

EV policy with a strong bias toward long-range battery electric vehicles (BEVs) risks leading to a higher cost of electrification in the 2030 timeframe, possibly exceeding the ability of governments to sustain the necessary incentives until battery cost drops sufficiently.

Plug-in hybrid electric vehicles (PHEVs) with long electric range could allow intermediate decarbonization targets to be met while being less sensitive to the rate of development of battery technology. The BEV option could be pursued in parallel by targeting specific segments where shorter ranges are acceptable to their users.

Promoting a balanced mix of BEVs and PHEVs could set the electrification of passenger cars on a lower risk, lower cost, path that is more likely to become self-sustained before government support is withdrawn.

Examining EV policy in the U.K. and in California, we find that it is generally not incompatible with achieving balanced mixes of BEVs and PHEVs. However, this may not be sufficient and some fine tuning would enable better balancing of medium-term risks and long-term goals.