Some of you may know that I pre-ordered a Nissan Leaf electric vehicle over a year ago. What you may not know is that my brand new, $37,250 electric vehicle could cost much less than I once spent to purchase my used Nissan Sentra.
The numbers sound unbelievable, but they make sense. Let's compute my total cost of ownership to show why.
Electricity Costs
In Minnesota at Dakota Electric Co-op, electricity costs about ten to eleven cents [PDF] per kilowatt-hour at peak rate. At that price, one may travel 100 miles for only $3. Of course, most electric vehicle charging will likely take place at off-peak rates, which at Dakota Electric offers a small savings of two to three cents. The strange part here is that California utilities offer a much greater savings for using off-peak energy than we do.
Federal Tax Credit
First of all, government incentives to sell electric vehicles apply to the first 100,000 vehicles sold. This incentive is designed to encourage the development and production of electric vehicles. I will likely receive this $7,500 rebate because I pre-ordered the Leaf on the very first day they became available.
$37,250 minus $7,500 = $29,750
Home Charger
To be fair, we'll add in the cost of a home charging station, required for your garage. If you own an electric vehicle and don't drive much other than your commute, this may be the only fuel station you ever use. It's certainly convenient for heavy commuters who could consider the time savings of never stopping at a gas station.
$29,750 plus $2,000 = $31,750
We can likely reduce the price by a 30% federal incentive for purchasing the home charging station. It's not clear if this program will be continued into 2012, but it won't likely change the equation much.
$31,750 minus $600 = $31,150
Fuel Savings
If I drive 17,500 miles per year to get to work and all my various commitments at around $4/gallon, my net savings simply from fuel will be almost $2,500 per year. Over the ten year life of the battery at 70% or more range, fuel savings alone would accumulate to at least $25,000. This compares to $14,000 in savings from switching to a Toyota Prius and using it for ten years.
$31,150 minus $25,000 = $6,150 (price after fuel savings and incentives over ten years compared to my Nissan Sentra)
Minor Factors
Our price is already looking pretty good, but we haven't considered several factors. I could add the loan interest, which after the tax credit would be $3,761 at 4% interest, $465 per month over six years at my bank, which is a local mutual bank. However, that wouldn't exactly be a fair comparison, since any vehicle that comes with a loan comes with loan interest. I should only add the loan difference versus buying another new vehicle like the 2012 version of my current Nissan Sentra-- $2,703 at 4% interest over six years. $3,761 minus $2,703 is $1,058.
$6,150 plus $1,058 = $7,208 (price after fuel savings, incentives, and loan interest)
We could subtract the cost of oil changes. These will no longer be required at all. There is no oil to replace in an electric motor nor is there a need for transmission oil. I'll figure $80 a year as a reasonable guess.
$7,208 minus $800 = $6,408 (price after fuel savings, incentives, loan interest, and oil savings)
High-Occupancy Vehicle Lanes
Another consideration is MnPASS. Although Minnesota does not currently have a program to offer free, high-occupancy vehicle lane access to electric vehicles, eight states do. While most hybrids are no longer eligible in these states, electric vehicles are likely to receive this benefit for a few years. Since I drive on I-35W every day and use MnPass when prices are fair, I would likely make use of this benefit.
We'll figure that any free lane access might pass the legislature soon and last for three years. At ~$60 per month, $720 per year, this offers a hypothetical savings of $2,160 over three years. Even without figuring time-value savings, this potential perk offers a huge benefit to draw serious commuters to purchase electric cars while the state spends a fraction of the cost of huge rebates like California and Georgia have implemented.
Rising Fuel Prices
In my calculations above, I assumed fuel prices would fluctuate at an average of $4 per gallon over ten years. Anyone who understands peak oil and rising global demand can explain that those estimates are wishful, fairyland thinking. The price of extracting a barrel of oil from the ground is growing every day.
In fact, I had a discussion with a workplace friend awhile ago. He explained that the Bakken formation was producing oil at $60 per barrel, so prices could easily drop from $80 per barrel. What made this curious is this person is intelligent enough to realize that the oil companies do not run non-profit operations. Instead, they are the most profitable enterprises on Earth.
West Texas crude used to be extracted at less than $5 per barrel. I've gotten used to energy discussions occurring in a vacuum. People don't bother to check historical data or they'd quickly see our world is in serious energy trouble. All of our future assumptions are based upon "proven reserves" and PR numbers put out by oil drillers. Oil company numbers intended for shareholders are best case, pie in the sky estimates.
"Drill here, drill now" doesn't decrease the spot price of oil. There's much more than simply supply and demand at play. If the price of extraction rises, so must the price of sale. Most of the plentiful domestic resources politicians are pointing at are also our most expensive. These resources begin to matter when oil prices rise to the point when they're actually profitable to extract, but we have to consider all intangible costs and benefits rather than put full faith in exaggerated numbers designed to impress shareholders.
All pontificating aside, I can't build an accurate projection on oil versus energy prices. I easily expect oil prices to hit $10 per gallon in under ten years just based upon inflation and demand in Asia. However, it's not easy to guesstimate how many electric vehicles can be built in that time and the possible effect it may have on energy rates.
My conservative guess is take the energy savings number I offered above and increase it by 50% to assume $6 per gallon average for rising fuel costs, apart from inflation or deflation.
At that 50% higher fuel price, I'd figure savings closer to $40k. Here's a good calculator, if you need one: http://www.codaautomotive.com/electric-car-impact-calculator/
Electric Vehicle Downsides
Clearly, range anxiety will be a major issue for most consumers. Being an early adopter with an extra vehicle in the household, I don't care about it. The car averages 100 miles range, but 80 or less with the heater blasting in winter. That's plenty for my needs and I can charge at a dealer or shopping mall if I need extra.
The charging technology is not everywhere, but it's getting there really fast. There are already four chargers at the Mall of America, one at Southtown, and dozens popping up in downtown Saint Paul. Every Nissan dealer will have a few. I expect we'll start seeing them at every coffee shop.
Here's a map showing only the existing chargers within the Chargepoint network:
http://www.mychargepoint.net/find-stations.php
The chargers are not fast yet. The quickest chargers today are too expensive for home users and charge using 480v from flat to 80 miles range in under thirty minutes. Home chargers take from four to eight hours at 240v. However, Nissan just unveiled an amazing new charging technology that should offer ten minute charges. They expect to bring it to market in a few years.