Electric Vehicle Economics
About a year ago we bought a new Nissan Leaf. I'm thrilled with it. Almost every time the topic of this car has come up in conversation, someone has asked me about the economics associated with it. So I thought I would do the math and post it here for everyone to see. Before I provide the results, I need to point out all the variables that go into the calculation, so here goes...
1. Comparison - Obviously one cannot determine the financial benefit of owning such a car without comparing it to an alternative. Obviously it is going to be worth an enormous amount more when compared to a gas-guzzler than compared to a hybrid. So we need to specify the fuel efficiency of what we are comparing it to.
2. Price of gas - The importance of this variable is obvious.
3. Miles driven - I'm looking for a savings per year figure, so one needs to factor-in the number of miles driven in a year.
4. Price of electricity - It's funny, about half the people I talk to forget that charging a car at home will cost more on the electric bill, and the other half think the electric bill will skyrocket to undo all of the gas savings. Neither is true, but this variable is tricky to put a finger on, and can vary wildly from one family to the next.
5. Leaf fuel efficiency - One needs to know what kind of mileage the Leaf gets in order to do the calculation. Mileage in this case is measured in miles per kilowatt-hour, rather than mpg, but that is not all there is to this variable. It turns out that the Leaf's mileage can vary pretty dramatically, depending upon a few things:
a. How one drives it - Unlike gas cars, electric cars do better on efficiency in stop-and go traffic. The reason is that cars convert mechanical energy to heat in three ways: through friction from wind resistance (which is greater the faster you go), loss of engine efficiency from fast accelerations, and through the breaking system. If not for the loss in braking, the fuel efficiency of every type of car for the most part would be a simple function of how fast it is driven (and accelerated) on average. Electric cars recapture some of the breaking energy, so wind resistance and quick accelerations are the primary sources of efficiency loss, and that is not as bad in stop-and-go traffic where the average speed is low. Gas cars lose more to breaking, so their efficiency is better on the highway than in the city. The Leaf has two optional drive modes, "D" and "Eco". The former allows for more power and faster acceleration (very fun), while the latter is more efficient.
b. The accessories you use. On days of extreme temperatures when you have to use the AC or the heater, the battery energy is being used for things other than driving. Lights, windshield wipers, and stereo are also draws, but are not nearly as great as the climate control. One nice feature of the car is that you can use a phone app to turn on the climate control remotely, to make it comfortable for when you get in. This obviously will cut greatly into fuel efficiency (but I use it a lot anyway).
Okay, so on with the calculation. We will calculate the two costs separately, and take the difference:
cost(gas car) = (miles driven)/(mileage per gallon)*(price per gallon)
cost(electric car) = (miles driven)/(mileage per kilowatt-hour)*(price per kilowatt-hour)
savings = cost(gas car)-cost(electric car)
Putting it together:
savings = (miles driven)*[($ per gal)/(mileage per gal)-($ per kW-hr)/(mileage per KW-hr)]
Okay, now for some hard numbers. I will not put in a number for miles driven - the reader can estimate that from their own driving demands. For reference, I will say that we will have driven about 10,000 miles in the first year that we owned the car, even though all the trips have been local.
According to the onboard computer for the car, we have gotten mileage equal to 3.8 miles/kW-hr. We charge our car at off-peak hours and are on "time of use" billing, which averages to no more than $0.11/Kw-hr over the course of a year. [Note: For people that commute to work 5 days a week into a city (like San Francisco or Sacramento) where there are lots of free charging stations, this number can come down dramatically.] For people who will be adding to their electricity costs in the higher tiers of a tiered system of billing, the electric costs will be greater. As we will see below, every increase of $0.11 in the cost of electricity results in a loss of about $2.90 per 100 miles, or $290/year for my driving load. This is a sizable (percentage) loss for some comparisons, and fairly meaningless for others (see below).
Putting in these numbers gives:
savings per mile = ($ per gal)/(mileage per gal)-$0.029
Now the last two numbers vary greatly, so I will form a table for easy look-up. The number in the table is the dollar savings per 100 miles. Multiply that number by your 1% of your expected annual driving distance (in my case, 1% of 10,000 = 100) for your annual savings. The numbers going across the top are gas mileages, and the numbers going down the left side are gas prices.
_________55_____50_____45_____40_____35_____30_____25_____20_____15_____10_____
3.00___$ 2.56__$ 3.11__$ 3.77__$ 4.61__$ 5.68__$ 7.11__$ 9.11__$12.11__$17.11__$27.11
3.25___$ 3.01__$ 3.61__$ 4.33__$ 5.23__$ 6.39__$ 7.94__$10.11__$13.36__$18.77__$29.61
3.50___$ 3.47__$ 4.11__$ 4.88__$ 5.86__$ 7.11__$ 8.77__$11.11__$14.61__$20.44__$32.11
3.75___$ 3.92__$ 4.61__$ 5.44__$ 6.48__$ 7.82__$ 9.61__$12.11__$15.86__$22.11__$34.61
4.00___$ 4.38__$ 5.11__$ 5.99__$ 7.11__$ 8.53__$10.44__$13.11__$17.11__$23.77__$37.11
4.25___$ 4.83__$ 5.61__$ 6.55__$ 7.73__$ 9.25__$11.27__$14.11__$18.36__$25.44__$39.61
4.50___$ 5.29__$ 6.11__$ 7.11__$ 8.36__$ 9.96__$12.11__$15.11__$19.61__$27.11__$42.11
4.75___$ 5.74__$ 6.61__$ 7.66__$ 8.98__$10.68__$12.94__$16.11__$20.86__$28.77__$44.61
5.00___$ 6.20__$ 7.11__$ 8.22__$ 9.61__$11.39__$13.77__$17.11__$22.11__$30.44__$47.11
Okay, so let's look at a few examples. If I compare to driving a Prius back when gas was cheaper than it is now, I'd only save somewhere around $300/year. On the other extreme, comparing it with an old Chevy Suburban with somewhat higher gas prices, the savings is around a whopping $4,700/year. A more reasonable comparison would be between, say, our gas car which gets about 30mpg, using current gas prices, around $4.25/gal: over $1,100/year.
There is one other potential financial benefit to such a car, though it is difficult for me to quantify. Maintenance costs would appear to be somewhat lower. There are no oil changes, no smog checks, no replacing oil, air or fuel filters, less wear on brake pads (because much of the braking is regenerative), no wear and tear on starters, pistons, radiators, mufflers, etc.
On the other side of the coin, if there is a problem, the free market does not currently help keep repair costs down - you pretty much have only the dealership to deal with. For example, our windshield developed a crack within two weeks of our acquiring the car, and replacing it is impossible through third-party glass replacement shops - new glass can only be ordered from the factory, at great cost (we are living with the crack for now). This will of course change over time, and typically it will take time for those problems to develop anyway.
And everyone asks me about the battery lifetime. There are not a lot of statistics on this, but indications are that the battery will degrade slowly over time (depending on how you treat it), but should remain quite reasonable for at least 10 years. My hope is that in that time battery technology will advance to a point where we will end up with a BETTER car when we need to replace the battery, inasmuch as it will have longer range with the new battery technology. When the day does arrive to replace the battery, I suspect there will not be nearly as much pain involved as people think.
My guess is that these three things are imminent:
1. Cost of production (and therefore sales) of electric cars will come down dramatically,
2. Gas prices will vary greatly, but will remain elevated,
3. People will begin to realize that their household has always owned two cars, and they only need one for longer trips.
... and sales of electric cars will soar in the not-too-distant future. As economists are constantly pointing out, populations respond to incentives.
1. Comparison - Obviously one cannot determine the financial benefit of owning such a car without comparing it to an alternative. Obviously it is going to be worth an enormous amount more when compared to a gas-guzzler than compared to a hybrid. So we need to specify the fuel efficiency of what we are comparing it to.
2. Price of gas - The importance of this variable is obvious.
3. Miles driven - I'm looking for a savings per year figure, so one needs to factor-in the number of miles driven in a year.
4. Price of electricity - It's funny, about half the people I talk to forget that charging a car at home will cost more on the electric bill, and the other half think the electric bill will skyrocket to undo all of the gas savings. Neither is true, but this variable is tricky to put a finger on, and can vary wildly from one family to the next.
5. Leaf fuel efficiency - One needs to know what kind of mileage the Leaf gets in order to do the calculation. Mileage in this case is measured in miles per kilowatt-hour, rather than mpg, but that is not all there is to this variable. It turns out that the Leaf's mileage can vary pretty dramatically, depending upon a few things:
a. How one drives it - Unlike gas cars, electric cars do better on efficiency in stop-and go traffic. The reason is that cars convert mechanical energy to heat in three ways: through friction from wind resistance (which is greater the faster you go), loss of engine efficiency from fast accelerations, and through the breaking system. If not for the loss in braking, the fuel efficiency of every type of car for the most part would be a simple function of how fast it is driven (and accelerated) on average. Electric cars recapture some of the breaking energy, so wind resistance and quick accelerations are the primary sources of efficiency loss, and that is not as bad in stop-and-go traffic where the average speed is low. Gas cars lose more to breaking, so their efficiency is better on the highway than in the city. The Leaf has two optional drive modes, "D" and "Eco". The former allows for more power and faster acceleration (very fun), while the latter is more efficient.
b. The accessories you use. On days of extreme temperatures when you have to use the AC or the heater, the battery energy is being used for things other than driving. Lights, windshield wipers, and stereo are also draws, but are not nearly as great as the climate control. One nice feature of the car is that you can use a phone app to turn on the climate control remotely, to make it comfortable for when you get in. This obviously will cut greatly into fuel efficiency (but I use it a lot anyway).
Okay, so on with the calculation. We will calculate the two costs separately, and take the difference:
cost(gas car) = (miles driven)/(mileage per gallon)*(price per gallon)
cost(electric car) = (miles driven)/(mileage per kilowatt-hour)*(price per kilowatt-hour)
savings = cost(gas car)-cost(electric car)
Putting it together:
savings = (miles driven)*[($ per gal)/(mileage per gal)-($ per kW-hr)/(mileage per KW-hr)]
Okay, now for some hard numbers. I will not put in a number for miles driven - the reader can estimate that from their own driving demands. For reference, I will say that we will have driven about 10,000 miles in the first year that we owned the car, even though all the trips have been local.
According to the onboard computer for the car, we have gotten mileage equal to 3.8 miles/kW-hr. We charge our car at off-peak hours and are on "time of use" billing, which averages to no more than $0.11/Kw-hr over the course of a year. [Note: For people that commute to work 5 days a week into a city (like San Francisco or Sacramento) where there are lots of free charging stations, this number can come down dramatically.] For people who will be adding to their electricity costs in the higher tiers of a tiered system of billing, the electric costs will be greater. As we will see below, every increase of $0.11 in the cost of electricity results in a loss of about $2.90 per 100 miles, or $290/year for my driving load. This is a sizable (percentage) loss for some comparisons, and fairly meaningless for others (see below).
Putting in these numbers gives:
savings per mile = ($ per gal)/(mileage per gal)-$0.029
Now the last two numbers vary greatly, so I will form a table for easy look-up. The number in the table is the dollar savings per 100 miles. Multiply that number by your 1% of your expected annual driving distance (in my case, 1% of 10,000 = 100) for your annual savings. The numbers going across the top are gas mileages, and the numbers going down the left side are gas prices.
_________55_____50_____45_____40_____35_____30_____25_____20_____15_____10_____
3.00___$ 2.56__$ 3.11__$ 3.77__$ 4.61__$ 5.68__$ 7.11__$ 9.11__$12.11__$17.11__$27.11
3.25___$ 3.01__$ 3.61__$ 4.33__$ 5.23__$ 6.39__$ 7.94__$10.11__$13.36__$18.77__$29.61
3.50___$ 3.47__$ 4.11__$ 4.88__$ 5.86__$ 7.11__$ 8.77__$11.11__$14.61__$20.44__$32.11
3.75___$ 3.92__$ 4.61__$ 5.44__$ 6.48__$ 7.82__$ 9.61__$12.11__$15.86__$22.11__$34.61
4.00___$ 4.38__$ 5.11__$ 5.99__$ 7.11__$ 8.53__$10.44__$13.11__$17.11__$23.77__$37.11
4.25___$ 4.83__$ 5.61__$ 6.55__$ 7.73__$ 9.25__$11.27__$14.11__$18.36__$25.44__$39.61
4.50___$ 5.29__$ 6.11__$ 7.11__$ 8.36__$ 9.96__$12.11__$15.11__$19.61__$27.11__$42.11
4.75___$ 5.74__$ 6.61__$ 7.66__$ 8.98__$10.68__$12.94__$16.11__$20.86__$28.77__$44.61
5.00___$ 6.20__$ 7.11__$ 8.22__$ 9.61__$11.39__$13.77__$17.11__$22.11__$30.44__$47.11
Okay, so let's look at a few examples. If I compare to driving a Prius back when gas was cheaper than it is now, I'd only save somewhere around $300/year. On the other extreme, comparing it with an old Chevy Suburban with somewhat higher gas prices, the savings is around a whopping $4,700/year. A more reasonable comparison would be between, say, our gas car which gets about 30mpg, using current gas prices, around $4.25/gal: over $1,100/year.
There is one other potential financial benefit to such a car, though it is difficult for me to quantify. Maintenance costs would appear to be somewhat lower. There are no oil changes, no smog checks, no replacing oil, air or fuel filters, less wear on brake pads (because much of the braking is regenerative), no wear and tear on starters, pistons, radiators, mufflers, etc.
On the other side of the coin, if there is a problem, the free market does not currently help keep repair costs down - you pretty much have only the dealership to deal with. For example, our windshield developed a crack within two weeks of our acquiring the car, and replacing it is impossible through third-party glass replacement shops - new glass can only be ordered from the factory, at great cost (we are living with the crack for now). This will of course change over time, and typically it will take time for those problems to develop anyway.
And everyone asks me about the battery lifetime. There are not a lot of statistics on this, but indications are that the battery will degrade slowly over time (depending on how you treat it), but should remain quite reasonable for at least 10 years. My hope is that in that time battery technology will advance to a point where we will end up with a BETTER car when we need to replace the battery, inasmuch as it will have longer range with the new battery technology. When the day does arrive to replace the battery, I suspect there will not be nearly as much pain involved as people think.
My guess is that these three things are imminent:
1. Cost of production (and therefore sales) of electric cars will come down dramatically,
2. Gas prices will vary greatly, but will remain elevated,
3. People will begin to realize that their household has always owned two cars, and they only need one for longer trips.
... and sales of electric cars will soar in the not-too-distant future. As economists are constantly pointing out, populations respond to incentives.