Batteries big enough to give an electric car significant range remain heavy and expensive. Many policymakers seem to be staking the electric car's future on the development of much cheaper batteries. The wishful battery future has also been the path of least regulatory and political resistance, particularly when it leads to tax breaks and direct subsidies, directed mainly at the development of technology that might end up in the cars or at the drivers who might buy them.
More capital investment in the relatively low-voltage lines, transformers, and terminal equipment that distribute power to city blocks, high-rises, and suburban neighborhoods is a direct substitute for much of the additional capital investment that must otherwise be funneled into the electric car. This "last mile" grid investment will likely play a much larger role in delivering electric miles cheaply, reliably, and conveniently.
Higher voltages in high-power battery-charging stations can cut recharging times from hours to minutes. Technological and economic considerations both favor more investment in the last mile of the grid and less in the car itself. Electric utilities have compelling reasons to make that investment, if regulators give them the freedom to do so in ways that allow them to earn profits commensurate with the risks.
Market forces have propelled the progressive electrification of factories, offices, and homes for over a century. Electric motors and associated systems that convey and control the electricity they need, powered by onboard diesel genera- tors, have likewise displaced mechanical alternatives in locomotives and monster trucks. High-power semiconductors developed in the 1980s are now being deployed inside cars to electrify water and oil pumps, radiator-cooling fans, brakes, throttles, steering systems, shock absorbers, and engine valves. These trends all point toward the last great leap, the one already taken by locomotives and monster trucks: electric drivetrains will knock out the gearbox, driveshaft, differential, and related hardware. Electric drives are much cheaper to manufacture, and they convey far more power in much smaller, lighter conduits—and they convey it far more precisely and reliably than mechanical drives that rely on shafts, gears, belts, and hydraulic fluids. As drivetrains are progressively electrified, everything shrinks, everything gets lighter, and every aspect of performance improves.
In one key respect, passenger cars present an especially attractive opportunity for going electric. Internal combustion engines run at peak efficiency when they run at a fast, steady rate—as they do, for example, when a car cruises down a highway. Efficiency plummets when the engine's speed keeps changing, as it must whenever the driver brakes or accelerates. Adding storage capacity in a battery allows an onboard generator to run more steadily and therefore more efficiently. Even a very modest amount of onboard electric storage can boost efficiencies significantly. Today, for drivers who spend a lot of time in urban traffic, the "light hybrid" architecture that simply turns off the engine and relies on battery power whenever the car stops moving is cost-effective.
How much more battery in the car makes sense hinges on a complex balance of driving patterns, fuel costs, and hardware costs. But as soon as engineers start down this road, they open the door to a dramatically new opportunity. However small or large the onboard battery may be, it can be topped off with power drawn from the grid whenever the car is parked. At the curb, the energy in the electricity drawn from the grid is much cheaper and cleaner than electricity generated on board or gasoline miles provided by a conventional engine. Car batteries also offer utilities and their customers an extraordinary opportunity to boost revenues while lowering the average cost of electricity for everyone.
Most of the cost of grid electricity is tied to capital investment in the hardware that turns cheap, raw fuel at the power plant into high-grade power at the plug. The economics of electric miles is even more capital-intensive. The amortized cost of the batteries in the electric car currently dwarfs the cost of the grid power that could be used to charge them. And as soon as they arrive in any significant numbers, plug-in electric cars will also require new investment in the grid—without it, the cars will soon start blowing network fuses and blacking out homes and neighborhoods.
But this also points to the opportunity for lowering costs and raising revenues. The grid is engineered to deal with the very highest loads it will face only once every few years—in mid-afternoon on the very hottest day in summer. On average, day and night over the course of an entire year, about half of the total generating capacity and an even larger fraction of the capacity in the wires are just waiting for a customer. The capital invested inside electric cars themselves will typically stand idle about 90 percent of the time, and—unlike capital invested in the grid—it can't be shared with others.
Batteries can, however, cheerfully tolerate interruptions in the flow of power to their charging systems. From the perspective of the private investors who might invest in grid infrastructure, car batteries are therefore extremely attractive customers. Batteries are the customers that are eager to buy the power that nobody else currently wants to buy. They offer the existing owners of an enormously valuable capital asset an opportunity to use it profitably when it would otherwise be standing idle.
From the outset, these facts tilt the economics of electric miles away from more battery and toward more investment in high-speed recharging stations in garages, parking lots, compact parking-meter-like units, and other shared spaces. By reducing the size of the battery required in the car, fast charging stations, widely deployed, further boost the car's efficiency and range by reducing its weight. However cheap it may be, the first thing a car's battery has to move is itself. Investing less in the car and more in the last mile of grid also leads naturally to schemes that embed more of the capital cost in pay-by-the-mile charges, which will surely suit many car buyers much better than paying thousands of dollars more up front.
New investment in an infrastructure needed to power electric cars will be especially risky. Without a significant stake in the upside, utilities have good reason to let buyers of electric cars take the lead before rolling out a new battery-charging grid infrastructure. But many potential buyers who could benefit from making the switch probably won't do so without a charging infrastructure in place. The stage is thus set for an "after you" waiting game played out between electric companies and car buyers, with oil companies likely to emerge as the winners.
The free-market path to getting grid electricity to our wheels hinges on giving every company that already owns, or cares to invest in, any part of the electron pipeline—electric utilities certainly included—the freedom and flexibility to invest new capital, set prices, recover costs, and earn profits commensurate with the risks, while working closely with car companies, car owners, municipalities, employers, mall owners, parking garages, individual homeowners, and others. The free-market policies that will mobilize private capital to deliver broadband electricity to our wheels will, by and large, resemble those that unleashed private capital to deliver broadband bits to our computers, PDAs, and wireless phones.