Inside clean energy: Some EVs now pay for themselves within a year
Note: Dan Gearino is absent this week.
Pavel Molchanov did the math so you don’t have to. He’s been analyzing numbers for almost 20 years at Raymond James, the financial services company. His job is to give lucid advice to investors, without politics or marketing. And his advice is this: Buy an electric car.
“What I wanted to do was provide a comparison of the economics of owning electric vehicles based on today’s fuel prices versus what they were a year ago,” Molchanov told Inside Climate News. “Because with hundred-dollar oil, the result of war, you intuitively understand that a [electric vehicle] it makes more sense for oil prices to rise.
Most of us think of gasoline prices in dollars per gallon, not dollars per barrel. Fortunately, when Molchanov did his analysis, he used numbers that even the English majors could understand. A gallon of gasoline costs $3.10 in 2021, according to the Energy Information Administration. That same gallon costs a lot more this year, and Molchanov doesn’t expect things to get any better. He expects the average cost for 2022 to be around $4.50 per gallon. But while gas prices have jumped about 45%, Molchanov expects electricity costs to rise in 2022 by just 6%, from 13.7 to 14.5 cents per kilowatt hour. It suddenly became much cheaper to charge a battery than to fill a gas tank.
Here’s why these energy prices matter: if you buy a new car today, you’re going to pay more for an electric vehicle than for a comparable gas-powered car. But as you drive this electric car, you’ll end up paying a lot less money to run it.
There are two reasons why EVs are cheaper to run. The first is that they have fewer moving parts and don’t require an oil change, making them less expensive to maintain. The second concerns fuel: the cost of fully recharging an EV with electricity is lower than that of a petrol car. These combined savings add up to eventually cover the price difference between an electric vehicle and a gas-powered vehicle.
“The economy of an EV for an average driver has become twice as good,” Molchanov said. “So the payback period a year ago [was] between 10 and 12 years old. And today, it’s between five and six years.
It is based on cost estimates in 2021 and 2022 for a new Nissan Sentra that runs on gasoline and a Nissan Leaf, which is fully electric. This includes vehicle, fuel and maintenance costs. At $27,400, the Leaf has a higher sticker price compared to $19,510 for the Sentra. But the Leaf quickly makes up for the difference with annual fuel and maintenance savings of around $1,500.
Molchanov took his own advice four years ago when he bought a 2018 Chevrolet Bolt. But he knows most people don’t type numbers into spreadsheets when buying a car. Americans love gas guzzlers. And it takes high gas prices to make them opt for a car with better fuel economy. As soon as prices drop, they start buying SUVs again.
“The higher oil prices and the longer they stay high, the better it will be for electric vehicle sales,” Molchanov said.
But even if gas comes back to $3.10 a gallon and people crave big SUVs, they might not be able to find one. Automakers such as Cadillac, Chevrolet and Volvo have pledged to phase out gas-powered cars and trucks by 2035. And the introduction of trucks like the all-electric Ford F-150 Lightning and GMC Hummer EV will create new all-electric options for buyers not ready to downsize.
Yet electric vehicles will need to have mainstream prices if they are to reach the mainstream market. Molchanov noted that the F-150 Lightning and Hummer EV cost significantly more than middle-class car buyers can afford. Automakers will have to offer several electric cars and trucks under the $30,000 mark. It’s the magic number that will take electric vehicles out of the luxury category and into garages across the country, he said.
Speaking of magic numbers, there is one thing that Molchanov deliberately omitted from his complicated calculations. He calls it the icing on the cake: the US government is offering a $7,500 tax credit for the purchase of a new electric car. When he incorporated this tax credit into his model, he found that an electric vehicle paid for itself in less than a year.
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But hurry, the tax credit is limited. Tesla, GM and Toyota have sold enough electric vehicles to trigger the phase-out of credits for their models. Congress is considering a new electric vehicle tax credit that would again cover brands that have reached their caps. But it’s tied to broader talks among Democrats on a major spending package.
So if you’re considering a Leaf or another model that could benefit from the current tax incentive, now is the time to buy.
Other energy transition stories of note this week:
US crosses electric car tipping point for mass adoption: All-electric vehicles accounted for 5% of new cars and light trucks sold in the United States over the past six months, a level that has often marked the beginning of an even faster acceleration in the adoption of electric vehicles in many countries. other countries. A Bloomberg analysis shows the importance of the 5% threshold, using examples like China and the UK, as reported by Tom Randall for Bloomberg Green. “If the United States follows the trend set by 18 countries before it, a quarter of new car sales could be electric by the end of 2025,” he writes.
The developer extends his plan for a long-delay power line: Invenergy, the company behind the Grain Belt Express power line project, has announced that it is changing plans to allow the 800-mile line to carry around 25% more electricity, a change in response to the sharp interests of public services. The project faced years of delays as residents and lawmakers put up roadblocks. If it can be built, the Grain Belt Express would help increase the flow of cheap wind power from Plains states like Kansas to power markets in Illinois and Indiana. By increasing the line’s capacity, the project’s costs will increase, but its potential to recover those costs will also increase, as Bryce Gray reports for the St. Louis Post-Dispatch.
A new project in rural Oregon lets farmers test electric tractors in the name of science: Robert Wallace of Dulfur, Oregon, became an electric tractor guru, helping to organize a project to provide the tractors for free testing on farms and gardens. Efforts like this give the farm equipment industry a boost, a $38 billion sector that is only beginning to move away from fossil fuels, as Grant Stringer for ICN reports.
Advanced EV batteries move from labs to mass production: Some next-gen battery manufacturers are reaching the crucial and difficult stage of trying to mass-produce their product. QuantumScape, a manufacturer of batteries for electric vehicles, is among the companies making the leap, as reported by Jack Ewing for The New York Times. QuantumScape’s solid-state battery is designed to charge faster and last longer than other leading-edge batteries. The company has a partnership with Volkswagen and is a major part of the automaker’s ambitions to become a global leader in electric vehicles.
Inside Clean Energy is ICN’s weekly news and analysis bulletin on the energy transition. Send news tips and questions to [email protected]