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Plug in Hybrid – Saving Carbon and Dollars?

I am in the market for a new car. At a recent visit to a Ford dealer I was confronted with the choice between the regular hybrid-electric version of the C-Max (think standard Prius but made in the USA!) and the plug-in hybrid electric version of the same model. The only difference between the two is the plug-in, well, plugs in. You get a 7.6kWh battery under your now largely non-existent trunk, which you can charge using a supplied cable from any standard electric outlet. This lets you drive an advertised 22 miles in all electric mode and after your battery is empty you drive a regular hybrid. That is right, 22 miles, without ever burning a molecule of evil climate changing, health destroying, liquid petroleum product. My pulse quickened. I felt like I was about to lease a halo. And then the dealer said: “This car is great. It saves me so much money. I never plug it in at home. I just charge it at work!” Cold sweat started forming. I thought to myself “I wonder if this guy used to siphon gasoline out of his boss’ gas tank before he got his new wheels?”

So let’s think about this for a second. 7.6 kWh for 22 miles comes out to 0.35 kWh per mile. What the heck are kWhs? They are the units that the electricity delivered to your outlet is measured in. What do they cost? Well, that depends on who your utility is. In my case, this utility is called PG&E and I pay for my electricity using block rate pricing. Here is what the price schedule I face looks like:

table rates
What this means for those of you living in the hotter parts of Contra Costa County is that if you use your air conditioner when it’s hot, you are probably paying 32.4 cents per kWh. This means a single battery charge of the C-Max hybrid energy would cost 7.2 * 0.32445 = $2.33. While I would be cruising down the road quietly like a puma, my card carrying economic soul is crying into its pillow. Why? If I would have not plugged in the C-Max and just used the hybrid feature using some evil gasoline, I would have gotten 44+ miles per gallon. At $3.35/gallon (best price on right now), the 22 miles would have cost me $1.68. A savings of 28%.

My greener than Al Gore mother would argue that if I were more saintly in my home electricity consumption and were on tier 1, the 22 miles would have cost me $1.09, which is 35% cheaper than the hybrid mode.

So I pulled my electricity consumption record using the green button and tried to figure out what getting the plug-in would do to my electricity consumption and how the cost would compare to the regular hybrid using our past 5 years of electricity consumption as data. I added a daily charge of the car to our electricity bill and calculated out bill totals with and without the plug-in. The plugin costs about 67 dollars a month to charge at home, which comes out to 10.25 cents per mile. If I had driven in hybrid mode I would have paid 7.39 cents per mile assuming the low gas price. But even at $4 a gallon, the hybrid mode wins. Now, since I am supposed to do what is socially optimal, I have to add in the damage carbon does. Assuming the less favorable $4 gas and a $40 Social Cost of Carbon, the hybrid still wins – just barely. I would save about $90 by going hybrid.

One thought that had occurred to me is to see whether my utility offers a tariff which accommodates my new usage pattern. And it does.

estimated rates

Their estimates suggest that I will be paying $260 more than I currently pay for existing uses and a back of the envelope calculation suggests that I lose compared to the current plan with my plug-in hybrid as well.

Now here comes the kicker. Because of the federal and state subsidies, the lease price of the plugin hybrid and the regular hybrid are almost exactly the same. And at my place of work there are outlets in the parking lot. So what is the privately optimal thing to do? Buy that American made electro stallion, plug it in at work and save some money. Which is roughly what the guy trying to sell me the car did.

But this is just plain wrong.

  • I would increase the university’s electricity bill and drive up my students’ tuition! (Severin has already written about why free charging is a bad idea.)
  • I would get a free ride in the car pool lane, because I bought myself a halo and increase congestion in these lanes.
  • I would rake in thousands of dollars in taxpayer-financed subsidies for the option to charge the car when it is cheaper for me to do so (at the movies and my mother-in-law’s house). These subsidies and stickers are pushing this technology and are hoping for it to become more efficient in the long run, which is sensible. But the gap is still several thousand dollars on the lot.
  • On the marginal cost side the plug-in is almost competitive with the existing hybrid technology even in my very expensive electricity neighborhood and after accounting for the external costs from carbon emissions. But my electricity is California oh so clean! Areas with cheaper electricity mostly rely on a higher mix of cheaper dirtier coal power, which will drive up the external costs per mile. A recent paper by some alumni and friends of EI suggest that electric vehicles aren’t greener — compared to a comparable hybrid if charged with coal fired power.

I might still get the plug-in, but I am charging it at home. Because my Dean reads this blog.



Maximilian Auffhammer View All

Maximilian Auffhammer is the George Pardee Professor of International Sustainable Development at the University of California Berkeley. His fields of expertise are environmental and energy economics, with a specific focus on the impacts and regulation of climate change and air pollution.

29 thoughts on “Plug in Hybrid – Saving Carbon and Dollars? Leave a comment

  1. What is the social cost of buying a new auto versus keeping the existing auto? You don’t have to replace your auto if it still runs well. We have driven the same two cars for the last fifteen years. The neighboring families have all owned six in the same amount of time.

    • I just looked at the EV charging station at my UC San Diego parking structure. The price is apparently $0.49 per kwh! (49 cents) That might not be the actual final price, but it is surprisingly high.

  2. Max, I love your style. But please consider going all-electric, leave the evil climate changing, health destroying, liquid petroleum products behind altogether and charge at home.

  3. I pay 10 Cents/kWh in PG&E’s service area, charging from 12 am to 7 am under EV rate. That is roughly equivalent to just over $1 per gallon.

  4. this analysis shows a prime reason why electricity rates should be changed to a relatively high demand charge and a volume rate that reflects the variable cost of electricity. With the proper economic signal, we will change behavior that ends up with building power plants that are used 10% of the time and we will use relatively clean electricity when warranted. The peak demand for electricity and the delivery (fixed costs) is greater than the energy costs.

  5. Interesting post – I suggest you explore further the three possible PG&E time-of-use rates (E-6, E-9, and EV), to find the best off-peak rate option for charging the plug-in. For example, your green button comparison shows that E-6 is only $40/year more expensive than E-1 for your base electric usage, but it offers many convenient off-peak hours with a 14 c/kWh off-peak rate for charging your car at a price that would be less than gasoline.

  6. Your situation is one where solar energy at home makes a lot of economic sense. Time-of-Use + Solar + EV is a good option. Tiered + Solar + EV is privately good. BART is my EV. I have found the economics work out very nicely.

    • Always remember that BART is heavily subsidized at about twice the fare just in running cost, and somewhere between 3-4 times the fare when capital depreciation is taken into account. This works out to 10 of cents per passenger mile subsidy compared to auto subsidy which is more like 1-4 cents per passenger mile. Building very expensive rail systems like this is counterproductive to producing less carbon dioxide as most people have to drive in order to subsidize the rail systems. Unlike PV solar systems and EV BART has no real potential to become more cost effective.

      We need to start calculating the cost of each tonne of carbon dioxide produced and work effectively on methods to produce energy at low cost with very low or negligible global warming gas production.

      For modern transport this will require all automobiles to run on either electricity produced with no global warming gas production, or liquid fuels made from renewable sources such as biomass. This will have to be done at a competitive price to current fuel sources. Current EV and alternate fuel vehicles are nowhere near this efficient. Whether the subsidy is warranted on current technology for consumers, or if the subsidy would be better spent on reducing the cost of low global warming production energy is a debatable point.

  7. Lovely analysis. I would point out that UCSD cogenerates much of our electricity. And our contract for purchased power is on the order of $.1 per kwh. I am pretty sure that cogen is not on the margin in the summer, but even so it’s not automatically clear to me that charging at work is so bad.
    HOWEVER what about the daily pattern of power use? EV charging is a great example of a “storage load:” the instantaneous charge rate is irrelevant to the car owner; what matters is the total amount over 24 hours. I wonder why PG&E’s EVA rate is so expensive. It’s got to be socially optimal to charge at night, which means in practice at home.
    I expect UCSD to move to charging for its EV hookups within a few years. UCSD is effectively on real-time rates, but I doubt that the charging price will reflect that. In other words, the private incentives will still push toward charging at work.
    Finally, do I understand your analysis to say that plug-in technology is currently always socially inferior to a straight hybrid? That the cost of the battery is not compensated by sometimes using central grid electricity instead of auto generated power? Would this still be the case if you were charging at night and paying the marginal cost of generation at night, of say $.10 per kwh? If night time charging has low enough social cost, such as in Texas where system prices at night can be negative and social cost close to zero, is a storage/hybrid now socially preferable? Sounds like a good term paper for a student.

    • Arttoscience

      PG&E Residential EV rate schedule does encourage charging at off peak times. The EV rate from PG&E eliminates the Tier approach to pricing electricity and moves to a TOU rate schedule. The new EV rate schedule “includes all other household usage in one rate schedule with the EV added in”.
      Summer Winter
      Peak .382 .263
      Part .208 .162
      Off .101 .103

      I am not sure how PG&E came up with Maximilian’s estimated yearly bill for the EV rate schedule. It’s been 9 years since I used PG&E rate analysis tool (well before smart meters). Back then PG&E had to make a few assumptions on my usage/demand within any given day to come up with monthly bill cost estimates for an E7 TOU rate schedule vs an E-1 rate schedule.

      PG&E’s within day estimates were based on the system wide average daily usage patterns if memory serves me correctly. When I modeled an alternative scenario (basically changing our usage patterns to minimize usage at peak times) the savings changed from -$275 year to plus $400.00 a year with most of the economic benefit occurring during the winter months.

      We went with the TOU rate schedule around 9 years ago and added some PV a few months later to deal with (i.e. eliminate) our Tier 3 and 4 summer time usage from the grid.

      I was a bit surprised to see that changing to a Smart Rate program would increase Maximilian’s yearly costs. They aren’t going to get a lot of folks to sign up for the demand response program when it costs folks bucks to do so.

    • It turns out that our UCSD on-campus charging stations really do charge $.49 per kwh! Astonishing. Despite that, they get used during the day, for example by someone who does not have a suitable outlet in his apartment’s garage.
      The campus charging system is poorly managed in other respects as well. Bureaucratic impediments, as I should have expected.

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