Yesterday I concluded that purchasing a Toyota Prius might make sense if gasoline prices remained at or above $4.00 per gallon, and if I used the vehicle for 20,000 or more miles annually.
A critical assumption underlying this analysis was that my marginal cost of electricity was $0.40 per kWh. Under these conditions, purchasing a Nissan Leaf only made sense at extreme and persistently high gas prices. Both the Tesla Roadster and the Chevy Volt (assuming no behavioral switch from gas to electricity at high gas prices) did not make sense at any realistic fuel price.
In this analysis, I relaxed the $0.40-per-kWh price constraint to determine under which conditions EVs and PHEVs might make economic sense. While $0.40 per kWh is the marginal cost for my electricity, it is much higher than in other areas of the country. For example, the utility rate in Massachusetts is in the $0.10 per kWh range.
Of course, the price of electricity has no bearing on the decision to purchase a Prius. The chart below shows the time to breakeven for a Prius under different gas and electricity prices. It also assumes that one drives the Prius for an average of 10,000 miles annually. Note that the range of payback periods are the same regardless of electricity price.
The same exercise shows that the Chevy Volt (without any behavioral changes during a price shock) and the Tesla Roadster are still not attractive alternatives from a purely economic standpoint.
The Nissan Leaf, however, looks much more compelling at low electricity prices and a high number of annual miles. Below shows the payback period required on the Leaf’s price premium above a Toyota Corolla at 10,000 annual miles.
The following chart shows the payback period required on the Leaf’s price premium above a Toyota Corolla at 20,000 annual miles.
Just when it seems this analysis is over, there are some wildcards that one should consider.
The foremost of these wildcards is a carbon tax.
If the United States government began levying carbon taxes on fuel emissions, would it change the results of my analysis?
Tune in tomorrow for the results.
Click here for the next installment of this series.