I tend to approach many popular subjects with skepticism. A recent topic of Electronic Vehicle Trends & Opportunities at the New Economy New Rules series is one of those subjects. Electric vehicles and alternative energy are no doubt politically charged to gain support of environmentalists. However, it was my own skepticism that made this topic more interesting to me than any of the topics for the previous times I have attended. I went into the presentation with an open mind and have found new faith in the notion of switching to electric vehicles.
I am fascinated with the social science that is economics. It is no secret however that economists and environmentalists tend to butt heads. A major driving force behind the discussion of electric vehicles is that they are more environmentally friendly. Of course, a car running on electricity is going to pollute less than a car running off gas. However, it does not take an economist to realize that to run a car off electricity, it needs to be charged. To be charged, it needs to be plugged into an outlet. That outlet provides energy coming from the power lines. The power lines get their energy from the power plant. The power plant can produce that energy through many different means. According to the U.S. Energy Information Administration (EIA), in 2012 the energy sources’ share of total electricity generation in the U.S. were as follows: Coal- 37%, Natural Gas- 30%, Nuclear- 19%, Hydropower- 7%, Other Renewable- 5%, Petroleum – 1% , Other Gases- <1%. So if you plug your car into any given outlet in the United States, you have a more than 1 in 3 chance that instead of burning oil, you are burning coal. And contrary to what any presidential candidate might tell you, “clean coal” is an oxymoron. Is there any good news? Indianapolis Power & Light is replacing one of their old coal power plants with a natural gas plant set to open in 2017. The topic of what energy sources power companies should use is an entirely separate debate in itself. But at this time, coal is still the cheapest option.
As the presentation started, I heard other things that I expected to hear for which I was skeptical. One of which was how buying an electric car is cheaper because of government tax credits. As long as tax credits exist, that will help to mask the reality of what is the more cost effective form of transportation. What I wanted to hear about was how we can have a clean electric vehicle system that is, in fact, economically efficient. I am from the Austrian school of economic thought. What that means is I don’t think something is truly meant to happen unless someone is willing to pay for it voluntarily. This means not propping it up with government subsidies or tax credits. I got my answer.
In the later part of the discussion it was brought up that a French company, Ballore, will be implementing an electric car share company in Indianapolis. This is not something that Indianapolis is using public funds to purchase the implementation from Ballore as a vendor. Ballore is investing 35 million dollars into this project. There are going to be 500 electric cars in Indianapolis and 1200 charging stations. Users will pay for the mileage they drive and be able to pick up and drop off the cars at different locations.
I, for one, am not particularly excited as I have my own car, it’s new, and I love having a car of my own. But I’m also an oddball for my generation. I do believe that other Millenials will use this service. More importantly, Ballore is willing to risk $35 million on that belief. Even for a large company, that’s no chump change for a market test.
Are electric vehicles an imminent part of our future? The jury is still out. But I think that the new car share program being rolled out next year is still worth a try.