Energy Tourism: The Tesla Taxi in Oslo

2014-04-13 16.08.51 HDRI suspect a fair number of you know what I mean by energy tourism – sure, you’re up for sight-seeing and museums, but you also note the local gas prices, gawk as you fly over wind turbines and grill anyone who will answer about the local energy policy issues of the day.

My husband and I are both in the energy industry, so our kids have gotten used to flipping through vacation photos of solar farms or gasoline in Absolut bottles for sale in Indonesia.

On the first day of a recent trip to Norway, my daughter and I saw two Teslas on a street corner in Oslo – a rare coincidence even at home in Northern California. Over the next couple days in Oslo though, Tesla sightings became so commonplace that we stopped noting them, until we saw the Tesla taxi, pictured below.

tesla taxi

Photo credit: Sylvia Barmack

As we learned, Norway is Tesla’s second largest market after California, and with one-tenth the population of California, this is an amazing penetration of Teslas per capita. Teslas outsold ALL other models in Norway in March 2014.

One of our hosts, who drove us around in her Nissan Leaf, explained all the reasons consumers are drawn to electric vehicles (EVs) in Norway. (Tesla also lists them on their website.)

The big one is that you don’t have to pay the heavy import taxes, so it can be cheaper to buy a Tesla than a regular sedan. It looks like a typical car has to pay a 25% import tax. The exemption from import taxes is set to expire as soon as 50,000 EVs are sold, which may be soon. Anticipating the end of the subsidy, buyers scrambled to buy Teslas and other EVs in March 2015. EV owners also get a break on the annual vehicle tax, paying about $50 while non-electric vehicles pay a couple hundred dollars.

Norwegians also have relatively high gasoline prices – I saw $7/gallon – and low electricity prices, so the operating costs favor EVs more than in the US.

Another benefit of owning an EV is that you get to use the carpool lane. So many people in the well-to-do western Oslo suburb have bought Teslas that they occasionally clog the favored lanes. EV owners are also exempt from parking fees at municipal lots, can ride the ferry for free, can charge for free at certain municipal charging stations – the list goes on.

1006811-14276465406487439-Paulo-Santos

Source: Seeking Alpha.com

If I were a benevolent world planner, and if I believed that we needed a bunch of electric vehicles on the road somewhere, I would definitely drop a bunch of them in Norway. I’d probably even put more there than in California.

First, Norwegians are rich and better able to afford EVs, which, absent subsidies are still more expensive than comparable cars. The World Bank lists Norway as the second richest country in per capita terms, and it has famously flat income distribution, so the wealth is spread across more Norwegians.

There are also important differences in the environmental benefits of electric vehicles depending on where they are located. A recent working paper by Holland, Mansur, Muller and Yates (HMMY) goes through detailed calculations for the United States. As the authors point out, driving and charging a Tesla/Leaf/etc. in Ohio can lead to more CO2 emissions and more damaging local pollutant emissions than driving a comparable car running on gasoline. Ohioans get a lot of their electricity from coal, so there are a lot of GHGs, NOx, etc., emitted when they charge a Tesla.

Here’s where the Norwegians come in: their electricity system runs on over 95 percent hydro, which does not emit GHGs or local pollutants. As HMMY and others have pointed out, though, we want to think about the marginal emissions when an EV owner charges the battery, not the average emissions on a system. In other words, we want to identify which power plants would produce slightly less in a world without that particular EV.

HMMY go through careful calculations to estimate state-by-state marginal emissions from charging EVs. They then use an atmospheric model to figure out how many people the power plant emissions will impact. They use the same model to figure out who is impacted by emissions from gasoline vehicles and summarize the relative benefit of EVs in the map below. Red areas indicate that EVs are more polluting than gasoline cars in much of the Eastern US.

Screen Shot 2015-04-11 at 7.21.14 PM

Source: Figure 1 from Holland, Mansur, Muller and Yates, 2015

An HMMY-style calculation is a bit tricky on a hydro system like Norway’s. Roughly, you can think of charging an EV as draining a reservoir more quickly, so you really want to know whether the reservoir is likely to run dry – in which case, the EV might lead to emissions from a fossil fuel or nuclear plant. Norway is interconnected with Sweden, Denmark and the Netherlands, which have cleaner systems than most of the US, but more polluting than Norway. On the other hand, if new rain or snow will fill the reservoir, the EV charging is pretty much emissions free.

The thing about looking at marginal emissions is that this assumes the main benefits and costs to the EV are abating pollution now. I suspect that, to a large degree, US and Norwegian subsidies for EVs are motivated by policymakers’ desire to jump start EVs.

Those benefits are more uncertain and harder to put a number on, but they include the benefits of helping companies like Tesla down learning curves, incentivizing companies to locate more charging stations (see Max’s recent post), incentivizing more research on lightweight batteries, and making consumers feel more comfortable with EVs.

We do not yet know whether EVs will be an important part of a low-carbon future – biofuels may have a resurgence, or someone may come up with a completely new way to power personal transportation. On the other hand, EVs may be the only game in town in a matter of decades. In the meantime, Norway is the perfect place to be running the EV experiment to help us sort everything out.

About Catherine Wolfram

Catherine Wolfram is the Cora Jane Flood Professor of Business Administration at the Haas School of Business, Co-Director of the Energy Institute at Haas, and a Faculty Director of The E2e Project. Her research analyzes the impact of environmental regulation on energy markets and the effects of electricity industry privatization and restructuring around the world. She is currently implementing several randomized control trials to evaluate energy efficiency programs.
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15 Responses to Energy Tourism: The Tesla Taxi in Oslo

  1. Rick French says:

    ?? the map says “Subsidy ($)” not marginal emissions.

    • Catherine Wolfram says:

      Yes, the working paper provides more details. Briefly, the map is summarizing the difference between the marginal emissions from a gasoline-powered Ford Focus and the marginal emissions from an electric Ford Focus, converting the emissions to dollars based on their estimated impact on people who the atmospheric model predicts will be affected by the emissions. Negative numbers mean that the damages from the emissions from the electric vehicle are higher.

  2. Dave Houghton says:

    Thanks for this Catherine, very interesting. We are going to Sweden this summer and I’m planning some energy tourism for that trip, which my family is thrilled about as you can imagine. We’ll be on the lookout for Tesla taxis.

  3. Andrew Benson says:

    “Roughly, you can think of charging an EV as draining a reservoir more quickly, so you really want to know whether the reservoir is likely to run dry – in which case, the EV might lead to emissions from a fossil fuel or *nuclear plant*.”

    Pardon? What emissions? Nuclear power plants do not have smokestacks. Unlike fossil fuels, which are incinerated into gasses and particles and then liberated into the atmosphere, nuclear fuels remain securely within the reactor core for many months at time, exiting in a nearly identical form as when they entered (tiny, solid metallic cylinders, encased in zirconium cladding). Whereas the waste products of fossil fuel combustion are vented freely (or at low cost) into the atmosphere, nuclear wastes are carefully managed and protected with many layers of physical security to ensure they do not enter the environment.

    What paltry few lifecycle emissions can be attributed to the construction, operation, and fuel cycle of a nuclear power plant are so tiny as to be trivial, particularly in this analysis where we are considering the marginal emissions. Unless EV adoption is so large as to necessitate new nuclear power plant construction, the only emissions on the margin are mining, milling, enrichment, assembly, and disposal of the fuel. This is still unlikely, since nuclear power plants are rarely the marginal generator at any given hour in any grid (with the notable exception of France), and will operate at full capacity whenever possible.

    Casual association of nuclear power with fossil fuels results in bad energy policy. Their environmental impacts are not at all comparable.

  4. aramis720 says:

    We will pass one million EVs on the road by mid-year. EVs are here to stay and are growing rapidly. Time to put FCVs to bed.

  5. Mike says:

    Tesla taxis work fine in Oslo, where the taxi fares are the highest in the world. With Oslo taxi fare you could pay for the Tesla even with the duty. In 2010 I paid roughly $0.18 to go every ten meters. It cost over $70 to go to a nearby Oslo airport hotel from the airport. I hope that you didn’t have to take a taxi in Oslo. Your point that Norway is a place where electric car make sense is a good one. The gasoline prices are down to $7+ a gallon. When oil prices were over $100 a barrel, Norwegian regular gas was above $9 a gallon. Norway does have cheap electricity, but if your rate of usage at any given time is over 2 kW, you pay more per kilowatt hour. Norwegian homes have a watt meter in the kitchen that tells the person in the kitchen how much electricity the house is using. That is not new. The Norwegians have been doing that for over 30 years.

  6. Marshal Merriam says:

    I imagine the map looks even more skewed when you consider that many Tesla owners have installed photovoltaic panels to help with the added demand for electricity. This makes more sense in places where there is a lot of sun. Like California.

  7. dzetland says:

    (1) No car is better than an electric car
    (2) Tesla taxis are here in Amsterdam. They are ok for town trips but a disaster for drivers, as they have neither (a) range for long journeys or (b) fast recharge. For the moment (next 10 years?), that will leave the advantage for gasoline. Oh, and I’m not sure that taxis (or planes) are the best place for electric to enter the transport industry🙂

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  9. Hi Catherine! I agree with you that our eyes should be in Norway to see how their “experiment” to spur EV adoption turns out. I am corporate communications director at .Ozone Drive (a Spanish startup funded by a Haas alumnus) and an avid reader of this blog. I would be glad if you could read our take on EV adoption here ( http://goo.gl/aw3hnV ) and help us get the word out about our crowfunding campaign with other fellow readers.
    Thanks and keep up the good work!

  10. Richard Wilk says:

    Recently in Copenhagen I got to ride in a Tesla – almost snapped my neck. My friend said that with high import duties and taxes on liquid fueled vehicles, a Tesla was actually cheaper than most sedans. But I live in Indiana, where almost all our power comes from coal, though Duke energy lets us pay extra each month for some unspecified amount of green power bought from some other utility. The mercury that pollutes all our lakes and rivers and makes fish unappetizing is a more proximate reason to cut down on coal burning than CO2 emissions. The solution I am pursuing is to buy an EV (BMW i3) and then install solar – but there are two complications. First – the state legislature is in the process of changing regulations so the energy supplier will not have to buy my surplus production, which means a major investment in storage batteries. Second – I live in mature secondary forest surrounded by trees – one of the reasons we like living here. Now I am going to have to cut down a lot of those trees so I can get enough power from my PVs. And then burn them in a woodstove?? The calculations are getting away from me here.

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  14. Kevin Ng says:

    Re-confirming that energy tourism is real. I was in Paris last week and was never happier to see a Tesla S at the taxi stand, you know, right next to the multitudes of flashy Mercedes and BMW taxis.

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