Why have economic policy tools failed to adequately develop the electric vehicle market in the United States? During today's OnPoint, Clifton Yin, clean energy policy analyst at the Information Technology & Innovation Foundation, discusses a new report focused on revamping subsidies for battery technology in order to spur innovation and growth in the EV market. He explains how the ideal policy prescription could help make electric vehicles competitive with conventional gas vehicles.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi, and joining me today is Clifton Yin, clean energy policy analyst at the Information Technology and Innovation Foundation. Clifton, it's nice to have you on the show.
Clifton Yin: Thanks for having me.
Monica Trauzzi: You've just released a new report on the economic policy tools that have been used to develop and grow the electric vehicle sector industry in the US. Why have vehicle subsidies and carbon taxes failed as economic drivers in this sector?
Clifton Yin: Well, there are several obstacles holding back electric vehicles from widespread adoption. And it's not just a matter of cost. A lot of the conventional policy mechanisms that we use, subsidies and carbon taxes, only tinker with the cost of electric vehicles. But there's also a performance disparity between electric vehicles and gas cars. Our report focuses on battery electric vehicles, which have no internal combustion engine, you just plug them in. They have a limited range and high recharge time that compares them negatively with regular cars.
Monica Trauzzi: So break it down. Are you saying that we should not be subsidizing, the federal government should not be subsidizing the industry?
Clifton Yin: We take a different approach. We think that the focus should be on actually improving the technology of these cars, and specifically improving batteries of electric cars. The problem is that subsidies, again, they try to affect cost, but for example, in the US there's a federal tax subsidy of $7,500, federal tax credit, that can go toward the purchase of new electric vehicles. The problem is, there's a recent study last month from the Congressional Budget Office that says that the bare minimum that's required is $12,000 to make it competitive with gas cars over their lifetime when considering operating costs. But the problem is, even with costs being competitive with gas cars, that still doesn't deal with the fundamental issue that electric vehicles don't compete with gas cars when it comes to performance. So our approach would be to spend more money on research and development and innovation to actually develop better batteries and therefore better cars that can compete with regular cars.
Monica Trauzzi: Tesla Motors recently announced it would sell millions of its shares of stock to try to raise cash, and it's also forecasted that the company may not meet the terms of its DOE loan. Are we certain that there's even a market for EVs in the United States, and how do you get past some of those consumer issues?
Clifton Yin: Right. I think that's a perfectly valid question. The thing is, as of now, people aren't biting. When considering all electric vehicle sales in the US last year, it was only two percent of the market. But again, if we get cars that actually perform to the level of regular cars, if they have a range, for example, regular cars can go 300 miles on a single tank of gas. Current electric vehicles, all electric vehicles, can only go less than 100 miles on a single charge. But if we were to increase that range, and if we were to lower their recharge time, to fuel up a regular tank of gas on a car takes five minutes at the gas station, to recharge an electric vehicle can take anywhere between 8 hours to 20 hours depending on the technology available. But if we can get that down to a comparable number to regular cars, I think there will be a market for electric vehicles.
Monica Trauzzi: And are you confident that the United States will be the country to innovate and get us to that point?
Clifton Yin: That's the hope. The thing is, we have the capability. There are a variety of government agencies that do the support, research and development for breakthrough technologies. So as part of our report we actually recommend increasing spending and increasing funding for some of these agencies that are doing good work in the area. This is part of the clean energy race globally, and we want the manufacturing, we want the innovation to be here in the United States.
Monica Trauzzi: What impact do low natural gas prices have on the future of this industry and sort of the willingness to invest in this type of technology?
Clifton Yin: Well, you know, the recent natural gas boom is not always recognized, but it's actually been at least in part thanks to decades of government support, innovation and new technologies. For years the government invested in developing new fracking technologies that are used today. So it goes to show that the government has a role to play in developing new technologies. And from an environmental perspective, electric vehicles are very desirable because they have zero tailpipe emissions. So if we want to significantly cut emissions from the transportation sector, which accounts for I think 20 percent of all US greenhouse gas emissions, if we want to cut that back we really need more and more people to adopt battery electric vehicles.
Monica Trauzzi: And the Obama administration recently announced its fuel economy standards, what impact do those some would say aggressive standards have on the EV industry?
Clifton Yin: Well, it's certainly a market signal, and that's good. But that alone is not enough to encourage the innovation that we need. So our report lays out three recommendations. The first is to increase spending for several government agencies that we've highlighted that have done good work so far in developing better technology. But also to really focus government efforts. There's a report from a couple of months ago by the GAO that identified I think 39 different government programs across 6 different government agencies that actually have some hand in battery R&D. And there's not necessarily duplication because there's different kinds of batteries. There's personal batteries, for vehicles, for boats. But there can be I think more coordination and more focus among the government agencies to kind of pool efforts and collaborate on our research. So that follows a couple of other recommendations in the report.
Monica Trauzzi: Can't let you go without asking a politics question.
Clifton Yin: Sure, absolutely.
Monica Trauzzi: Where do you think the politics on EV stands right now and is there enough attention from Washington?
Clifton Yin: Well, you know, it's an election year, so I think it's tough to get attention on any issue. There have been some highlights of batteries exploding and whatnot, but these are very isolated incidents. I think electric vehicles have a lot of potential for the future and there's got to be a little more focus on it, definitely.
Monica Trauzzi: All right, we'll end it there. Thank you for coming on the show, nice to see you.
Clifton Yin: Thanks for having me.
Monica Trauzzi: And thanks for watching, we'll see you back here tomorrow.
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