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National Economic Value Assessment of Plug-In Electric Vehicles

Work performed by Lexidyne's Dana Stright was recently published in "National Economic Value Assessment of Plug-In Electric Vehicles".

The adoption of plug-in electric vehicles (PEVs) can reduce household fuel expenditures by substituting electricity for gasoline while reducing greenhouse gas emissions and petroleum imports. A scenario approach is employed to provide insights into the long-term economic value of increased PEV market growth across the United States. The analytic methods estimate fundamental costs and benefits associated with an economic allocation of PEVs across households based upon household driving patterns, projected vehicle cost and performance attributes, and simulations of a future electricity grid. To explore the full technological potential of PEVs and resulting demands on the electricity grid, very high PEV market growth projections from previous studies are relied upon to develop multiple future scenarios. The main Aggressive scenario expands the fleet to 73 million PEVs by 2035, approximating the level of market growth required to achieve deep greenhouse gas emission reductions in the light-duty vehicle sector. Variations on the Aggressive scenario include the Niche and Breakthrough scenarios with lower levels of PEV market growth (12 and 24 million PEVs by 2035, respectively), High Cost and Low Cost scenarios with higher and lower cost projections for all future light-duty vehicles, and High Oil and Low Oil scenarios with higher and lower gasoline prices by 2035. While the methodology does not assess the likelihood of different market growth scenarios, the Aggressive and Low Cost scenarios are the focus of the study, representing futures in which PEVs are widely adopted within mainstream households, reach optimistic cost reductions by achieving full economies of scale, and impose large demands on the electricity grid.

The methodology employed allows for an examination of the economic value of PEVs across nine census divisions of the continental United States. Private costs include the incremental cost of PEVs over conventional and hybrid electric vehicles, the cost of home charging equipment, and the cost of electricity used by PEVs. Private benefits are fuel savings as electricity is substituted for gasoline. The sum of these private costs and benefits is presented as the net private economic value of PEVs. Public costs are defined as including the cost of workplace and commercial charging equipment, as well as costs or benefits external to the market resulting from changes in greenhouse gas emissions and petroleum imports. Most cost input assumptions are taken from external studies, including relative future vehicle costs (standardized U.S. Department of Energy projections), charging equipment costs, gasoline prices and carbon intensity, and externality values for greenhouse gas emissions and petroleum imports. Electricity prices and carbon intensities, before and after strong PEV market growth, are determined within the study. A novel analytic contribution is the economic allocation of PEVs at the household level, which determines the miles driven per year per vehicle as different types of PEVs displace conventional gasoline vehicles. The sum of both private and public costs and benefits is presented as the total social economic value of increased PEV adoption. These economic values are determined by accounting for regional variations in miles driven per vehicle by household, variations in PEV performance due to climate, regional gasoline and electricity prices, and the future carbon intensity of electricity for different regions.

Results suggest positive total social economic value associated with increased PEV deployment, driven primarily by the private benefits of fuel savings. The net positive total social benefits for the Niche and Breakthrough scenarios are $4.7 and $9.3 billion per year by 2035, respectively. By comparison, the Aggressive and Low Cost scenarios have total social benefits estimated at $26.5 and $34.2 billion per year, respectively. Total private and social benefits vary significantly by region, mostly due to variations in the relative cost of gasoline and electricity, as well as variations in total miles driven per year by PEVs. Macroeconomic analysis suggests that the Aggressive scenario, when compared to the Baseline scenario, generates approximately 52,000 additional jobs per year (average from 2015 to 2040) and a $6.6 billion increase in average annual gross domestic product from 2015 to 2040.

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2018 System Dynamics Applications Award

Steve Peterson and a Lexidyne client team from the National Renewable Energy Laboratory (NREL) were recently awarded the 2018 System Dynamics Applications Award.
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