Economics of Battery-Powered Vehicles, Part 2

Economics of Battery-Powered Vehicles, Part 2

Part 1 explored how low the cost of a Li-Ion battery pack would have to be for a battery-powered vehicle (BEV) to be economically competitive with an internal combustion engine (ICE) vehicle.

Part 1 determined that the cost of a Li-Ion battery pack would have to be below $60 per kWh before BEVs would be competitive with ICE vehicles. See, Economics of Battery-Powered Vehicles

Ownership costs over the life of the vehicle were not considered.

This article attempts to determine whether costs over the life of the vehicle would affect whether BEVs were economically competitive with ICE vehicles.

It’s assumed that the average life of these vehicles is 11 years, which is the current average life of vehicles on the road today. 

Since gasoline costs are a major factor in lifetime ownership costs, three levels of gasoline prices are considered; $4.00 per gallon, $3.50 per gallon, and $2.60 per gallon, i.e., High, medium and low costs for gasoline.

Similarly, three levels for the cost of electricity are considered: 10.5 cents per kWh, 12.5 cents per kWh, and 40 cents per kWh. The lowest actual cost for electricity in the United States, excluding Hawaii and Alaska, is currently 10.5 cents per kWh, while 12.5 cents per kWh is the average cost. The highest cost is found in California at around 40 cents per kWh.

The first table shows the cost of ownership for an ICE vehicle over its 11 year life.

The second table shows the ownership cost for a BEV vehicle under three conditions. The first is for a Li-ion battery pack cost of $200 per kWh, then $100 per kWh, and then at $80 per kWh. See Part 1 for an explanation of why these three Li-ion battery costs were selected.

Since maintenance costs are not fully predictable, it was assumed that the total ownership costs were essentially equal if the total ownership cost of a BEV vehicle was within five percent of the estimated lifetime cost for an ICE vehicle.

Referring to the second table:

  • Lifetime ownership costs are essentially equal when the cost of the Li-Ion battery pack is $200 per kWh and the cost of electricity is below 12.5 cents per kWh. (See costs in unhighlighted areas.)
  • The cost of ownership for a BEV is never competitive with an ICE vehicle when the cost for electricity is high, such as in California. (See the costs highlighted in red.) Not shown, but determined from the spreadsheet used for this article, electricity costs must be below 20 cents per kWh before BEVs can have lifetime competitive costs.
  • The cost of ownership of a BEV is lower than the lifetime costs for an ICE vehicle when the cost of the Li-Ion battery pack is below $100 per kWh and the cost of electricity is 12.5 cents per kWh or less. (See costs highlighted in green.)

The cost of electricity varies widely around the country, and is best determined by examining monthly invoices from the local power company.

An important factor in the lifetime cost of BEVs is the replacement cost of the battery pack. It is expected that battery packs will last around eight years or 80,000 miles. The OEM markup of 31% for a replacement battery pack is based on the quoted price for a replacement battery pack for the GM Bolt.

Summary

Without subsidies paid for by taxpayers, the cost of the Li-Ion battery pack must be substantially lower before BEVs can be economically competitive, either based on first cost, or on lifetime costs.

Or stated differently, again without subsidies paid for by taxpayers:

On a first cost basis, BEVs are not competitive until battery costs get below $60 per kWh, but may be competitive on a lifetime cost basis when the cost of electricity is below 20 cents per kWh and battery costs are $100 per kWh or less.

. . .

Leave a Reply

Your email address will not be published. Required fields are marked *

*

This site uses Akismet to reduce spam. Learn how your comment data is processed.