Government-funded study says plug-in subsidies a bad deal

By Mark Kleis - Posted December 21st 2009

Vice President Joe Biden has announced that the Obama administration plans to push more than triple the current $2.4 billion allotted in tax credits for manufacturers of advanced energy technologies – including the batteries for plug-in hybrid vehicles. A recent study by the congressionally chartered body, the National Research Council, concluded that plug-in hybrids will most likely not produce meaningful savings in emissions or fuel consumption for at least two decades.

The report pointed to the high cost of batteries as the main concern, and suggested that not even heavy government subsidies will make it a practical alternative to traditional market-driven electric vehicles and standard hybrids. The program being driven by VP Biden is aimed directly at the issue of bringing down the cost of batteries, but the study claims that, “the potential for dramatic reductions appears limited” due to the lithium-ion batteries which “are already being produced in great numbers and are well along their learning curves.”

The report argues that plug-in hybrids will continue to be too expensive for the average or low-income Americans to be able to purchase them. The federal government currently plans on offering a $7,500 tax credit for Chevy Volt purchasers – but even then the price is still over $30,000. Similar alternatives such as the Tesla pure EV come in just under $50,000 after tax credits, and the Fisker subsidized plug-in will register in at approximately $40,000 after tax breaks.

The same research arm, the National Research Council, concluded that focusing on improving the fuel efficiency of traditional gasoline-powered vehicles and gas-electric hybrids could reduce fuel consumption by as much as 40 percent over the next four decades, and at a considerably lower cost to taxpayers and consumers alike.

In October, VP Biden delivered the announcement of a $500 million loan to Fisker in order to retool an idle Delaware auto plant. VP Biden also took part in the unveiling of the $2 billion federal battery research grant program in Michigan. The federal grant was intended to help make the Obama administration’s goal of having 1 million plug-in and pure EV sales by 2015 in the U.S. possible – with the federal government setting aside a total of $25 billion for the development of electric vehicles.