Cost-Benefit Analysis of Plug-In Hybrid Electric Vehicle Technology ^†

Plug-in hybrid electric vehicles (PHEVs) have emerged as a promising technology that uses electricity to displace petroleum consumption in the vehicle fleet. This paper presents a comparison of the costs (vehicle purchase costs and energy costs) and benefits (reduced petroleum consumption) of PHEVs relative to hybrid electric and conventional vehicles. A detailed simulation model is used to predict petroleum reductions and costs of PHEV designs compared to a baseline midsize sedan. The analysis finds that petroleum reductions exceeding 45% per vehicle can be achieved by PHEVs equipped with 20 mi (32 km) or more of energy storage. However, the long-term incremental costs of these vehicles are projected to exceed US$8,000. A simple economic analysis is used to show that high petroleum prices and low battery costs are needed to make a compelling business case for PHEVs in the absence of other incentives. However, the large petroleum reduction potential of PHEVs provides strong justification for governmental support to accelerate the deployment of PHEV technology.