Is 1 million plug-ins by 2015 the key to ‘winning the future’?

Plug-ins powered with American batteries could help the US win the future

President Obama sticks to his electric plan

To help reduce foreign oil dependence and to create new jobs the Obama Administration is keeping its focus on being the first country to produce 1 million electric cars – a number the administration hopes to achieve by 2015. With a number of new policies to be proposed in the White House’s upcoming budget, the administration believes the US can produce 40 percent of the world’s batteries, while reducing battery costs by 50 percent, in just the next few years.

Is this the key to winning the automotive future?

Overall, the Administration’s plan focuses on three key areas: First, turn the $7500 tax credit into a point of sale rebate. Second, increase R&D investments into electric drives, batteries, and energy storage technologies. Third, help communities build out electric vehicle charging infrastructure by offering up to $10 million apiece for 30 communities.

Overall, it seems a worthy goal, but it also seems to be built on a good chunk of hope. Additionally, my biggest concern is, is this program comprehensive enough, or even too focused on plug-ins?

So, let’s start with hope. In 2009 the US produced about 2 percent of the world’s electric car battery packs. With the administration’s proposals, the White House estimates that the US will produce 40 percent of the world’s electric vehicle batteries. That’s a big jump and achieving such production numbers would be very noteworthy. However, the US is going up against an established battery industry. Consequently, there is no guarantee that our products will be cost-competitive, for instance, especially considering countries like China can use domestic supplies of lithium for their already established factories.

More important, will this battery production include cell production?

Many current battery efforts in the US have so far focused on cell assembly using cells manufactured outside the US. Since cell production accounts for a big chunk of the profit margins in batteries, this seems critical. Likewise, already countries like Bolivia have stated their intention to require cell and battery manufacturing facilities built in country in exchange for lithium access. So the lack of domestic lithium supplies could hamper this plan.

Nonetheless, despite the fact that this plan might be based on some overly optimistic forecasts, an uptick in battery-related investments is definitely worthy, but is it the most efficient and effective path to winning the future?

Recently, for example, an Accenture study regarding advanced vehicle technologies didn’t find that electric cars were the key to the US auto industry winning the future, particularly because of the lack of domestic lithium and Asia’s head start in manufacturing. Indeed, plug-ins are a part of the formula, but biotechnologies and advanced engine technologies were also critical, and perhaps even more game-changing in the interim to next generation batteries.

Besides the ultimate goal isn’t just battery technologies, it’s reducing oil consumption, right?

Based on the President’s plan, the US will be able to produce 500,000 plug-in vehicles per year by 2015. Say that doubles to 1 million vehicles per year by 2020. That’s still less than 10 percent of yearly car sales, which means a lot of foreign oil consumption is being left on the table. According to the White House this plan for 1 million plug-ins by 2015 will reduce foreign oil consumption by 750 million barrels of oil by 2030.

In contrast, a new study on the costs of congestion found that the US wastes 4.4 billion barrels of oil every year stuck in traffic. Could, start/stop or microhybridization across the entire fleet resolve this problem? If accomplished by 2020, that would save more than 40 billion barrels of oil by 2030. How much would that be worth?

Anyway, obviously there is no easy way to fight foreign oil dependence, and the President’s focus on trying to kick start the EV battery manufacturing industry is noble. Coupled with significantly increased CAFE proposals by 2025, this is the most aggressive ‘plan’ for kicking foreign oil dependence ever, but it won’t end foreign oil dependence any time soon, not even by 2030. And, Congress might squash it anyway.

Consequently, 1 million plug-ins by 2015 is a step towards winning the future and the President deserves kudos for keeping foreign oil dependence a key national issue, particularly since Republicans have not offered ANY real plans for dealing with foreign oil dependence. And that just might be the most important takeaway. Until Republicans get serious about foreign oil independence we can pretty much be assured that foreign oil dependence will be around many more decades into the future.