Tuesday, 28 June 2016

Counting the benefits of electric cars

I have been looking at options for low carbon transport recently and electricity seems to be the best solution for cars and vans, though not yet HGVs. Two of my friends in Transition Cambridge Energy Group have been driving electric now for the last 6 months and they are very happy with their choice. (What is it like to drive an electric car? - our experiences) Neither of them went electric to save money, though cost is always a consideration. Many of the benefits of electric cars, such as reduced pollution and noise are hard to describe in economic terms. Also there are benefits to society as well as to the individual. How we value these depends partly on our expectations - and these could change.


If I was preparing evidence in support of government policy, I would have to consider all these benefits in economic terms. However the government’s point of view is not the same as an individual’s. For example, when you buy a car, you have to pay VAT and road tax but the government ignores those costs. Taxes do not cost society anything because they go to support government spending which benefits society anyway. So government cost appraisals are net of tax revenue.

As another example, suppose you are sick and off work. The government view is that society loses in terms of lost productivity and increased NHS treatment costs whereas you probably consider that being ill makes you unhappy and this is much more important.

In this table I have attempted to describe some of the costs and benefits of electric cars from different points of view.
Personal economicsSociety economicsPersonal/society
non-economics
Lower fuel and running costs.Electricity is cheaper than fuel but electric cars cost more up front.
Government loses income from road tax and fuel taxes.
-
Reduced GHG emissions.
-
Reduces cost of climate change mitigation.General health and prosperity of self and children in the future.
Reduced NOx and other air pollution.
-
Improved productivity. Reduced NHS treatment costs.General health improvements.
Less noisy and smelly.
-
Improved productivity. Reduced NHS treatment costs.Nicer driving experience. Generally more peaceful streets. Less annoyance.
Vehicle to grid energy storage service (trials running now).Sell stored power to the grid at peak times for a premium price.Reduce need for new generation plant (and hence capital investment).Allows integration of more intermittent renewables so indirectly reduced GHG emissions.

Some of these benefits only take effect when a significant proportion of cars on the road are electric. However this is something to look forward to and to contribute to.

Electric cars are cheaper if you take running costs into account.
I was surprised to see the results of the Committee on Climate Change (CCC) comparison of costs between electric cars and conventional cars. They calculate that electric cars are cheaper right now, if you consider reduced running costs over the whole lifetime of the car [1]. However, most people expect to get a financial payback in less than 12 years. Ian reckoned his car would pay back the extra capital cost in 5 years – it depends very much on how you use it. For example, if you drive in London you won’t have to pay the congestion charge.

The chart below shows the considerable difference between cost to you as an individual and ‘social’ cost. The private costs are considerably higher than the social cost.
From the CCC report on sectoral scenarios for the fifth carbon budget [1].BEV is battery electric vehicle and PHEV is a plugin hybrid electric vehicle.

In the future the purchase price of an electric car is likely to reduce but it is impossible to guess what will happen to oil prices.

Electric cars have reduced GHG emissions now and potentially zero later
Even with the current electricity grid mix, it seems electric cars have the edge on CO2 emissions. The table below shows driving emissions and it looks like the electric car brings a 40% reduction. Even if you take the whole life cycle emissions including manufacturing into account then electric cars are better than conventional cars (see Embodied Energy on my website).

 GHG emissions from driving an electric car and equivalent diesel.
CargCO2/km
Electric car (BMW I3) – based on 5.6 km/kWh as achieved by Ian, a little less than the manufacturers claimed 6.5 km/kWh.
 (Carbon factor for electricity from DUKES [2])
80
Equivalent diesel car – declared by BMW
99
Diesel car in the real world - 38% more than as declared [3]
135

GHG emissions are bad for our future health and prosperity but what does this mean in economic terms? The government uses a carbon value for policy making. The price per tonne CO2e is £5.91 in 2016, rising to £78.45 in 2030 [4]. A typical year of driving (14,000 km) would save 0.6 tonnes CO2 so the savings (in government policy terms) are £3.60/year this year, or £48 in 2030.

I think the 40% savings sounds better and means more. If you have a personal target of 80% savings by 2050 this is a step on the way. And this step will become bigger without you having to do anything else. Over time the UK electricity mix will be decarbonised – potentially to zero. Then your electric car really will be zero emissions. Only you can set an economic value on hitting your personal carbon target.

Conventional cars will never get near to zero. The CCC predicts that efficiency improvements could bring a decrease in emissions of 37% by 2030 [1] - so about the same as the electric car now. After that reductions will get much harder.

Electric cars produce less NOx now and much less later
The impact of GHG emissions will be felt more in the future but NOx is a problem right now. Defra estimated last year that NO2 emissions cause 23,500 deaths/year in the UK, with associated costs to society of £13.3 bn [5].

NOx emissions from an electric car and equivalent diesel.
CargNOx/km
Electric car (BMW I3) – based on 5 km/kWh as above and emissions factors for UK power stations [6]
150
Equivalent diesel car (legal limit) [7]
80
Diesel car in practice (7 times legal limit) [3]
350

Taking into account the fact that real world driving emissions are seven times higher than the legal limit [3], the electric car has half the NOx emissions. Plus, the power stations emissions that drive the electric car are not in the middle of town where levels are high.

As with the CO2 emissions, decarbonising the electricity grid also reduces NOx. Wind power and solar power do not rely on combustion so they have zero NOx emissions. However if biomass is used in power stations (either solid or gas) then there will be emissions. The only way to avoid generating NOx completely is to separate nitrogen from the air before it goes into the combustion chamber.

Poor health costs the economy through lost productivity and NHS treatment costs. It also costs us personally, in terms of our happiness and well being.

We have come to expect that urban streets are noisy and smelly. Can you imagine what life would be like if they were not?

James said the new car was so quiet it was surreal and Ian said he noticed pedestrians were less likely to hear him coming.

Road traffic noise is distracting and annoying and has health impacts such as high blood pressure and disturbed sleep. This has an associated cost to society due to lost productivity. For the UK this has been estimated at £2-4 bn/year. However, a lot of this is due to HGVs and we cannot convert them all to electricity yet.

Reducing road noise has a value beyond the health and productivity implications. For example, I live on the Cambridge inner ring road and I do not open the windows at the front even in summer because of the noise. Even in the back garden the traffic noise competes with birdsong and this disturbs my enjoyment.

One technique for evaluating this sort of benefit is ‘willingness to pay’. I would have been prepared to pay more for a quieter location, if I had the money and if a suitable location were on offer. But how much more is very hard to say and there are other advantages to this location that outweighed the noise nuisance, in my view.

The level of annoyance from noise varies from one individual to another and also depends on our expectations. We have come to expect that urban streets are noisy and smelly. Can you imagine what life would be like if they were not? If you could sit in your front garden and read a book, chat with neighbours, with traffic noise reduced to a background whoosh?

Animals don't like noise either. If you have a dog you might like to read this story about a family with two cars; the dogs definitely preferred the electric one. Whether it was the smell or the noise was not clear but I think it was the noise because the smell would linger after the engine was switched off.

As for smell, as far as I know, diesel and petrol fumes do not affect our health on a measurable basis, at least not unless you work at a service station. However, it does make the environment less pleasant. This comment on an article in the Guardian likens being an ex-combustion driver to being an ex-smoker.

Vehicle to grid energy storage service (trials running now)
Theoretically you can use your car battery (when it is connected to a charging station) to store electricity at cheap times and sell it back to the grid at expensive times. For most people this makes no sense at all as we pay a fixed price all the time. However, the wholesale price of electricity varies depending on demand and, now that we have a significant level of renewables integration, with supply.

Nissan is now running a pilot scheme in partnership with the National Grid. 100 Nissan leaf car owners are taking part. They also have a scheme for domestic electricity storage using retired car batteries called xStorage. They estimate the average user could earn £600/year. So when your car battery is no longer quite up to the demands of in-car use it can have a second career in domestic level grid support. This could be particularly useful if you have PV panels.

This scheme has a direct value to you through the electricity market but it also has financial and non-financial benefits to society. The more storage we have the less generating capacity we need – which means no need to subsidise building that capacity. Also the more storage we have, the more intermittent renewable energy sources we can integrate, which means less damaging fossil fuel plants and less climate change.


Lots of considerations to make – not all of them economic
When you are considering buying a new car, there are lots of considerations to take into account. Some of them are hard to quantify in economic terms but that does not mean they are not important. Also, your view of the economics is subtly different from the government's view and may differ from your neighbours' as well. Some of the benefits of electric cars are only significant when there is a high proportion of electric cars on the road. I look forward to that future where most of the traffic on the roads is quiet and clean and we do not automatically expect poor health and noise from living in an urban environment.

[1] Sectoral scenarios for the Fifth Carbon Budget. (Committee on Climate Change) Nov. 2015

[2] Digest of UK Energy Statistics (www.gov.uk)

[3] Real world exhaust emissions from modern diesel cars (International Council on Clean Transportation) Oct 2014

[4] Updated short term traded carbon values used for UK policy appraisal (www.gov.uk) Nov 2015

[5] Valuing impacts on air quality: Updates in valuing changes in emissions of Oxides of Nitrogen (NOX) and concentrations of Nitrogen Dioxide (NO2) (Defra) Sep 2015

[6] Emissions factors and efficiency for power plant from the UK TIMES model
Generation mix assumed as 40% Coal, 20% Gas, approximating 2013. The rest is nuclear and renewables (from DUKES [2], table 5.33)

[7] FAQ - Air pollutant emissions standards (http://europa.eu/) Sep 2015


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