Is it the right time for Solar Homes?

The Green Party has some great transport policies, and have recently announced their support for the Congestion Free Network as one of those policies. However, I haven’t been as impressed with the Greens’ energy policies (or any of the other parties’ ones, for that matter).

Earlier this year, the Greens announced their Solar Homes policy, aimed at encouraging the uptake of solar electricity. There aren’t any (direct) subsidies involved, but instead the government would offer low-interest loans for solar panels, and the homeowner would then pay the loan off over time as an extra item on their rates bill. As National correctly point out, this is still a subsidy, to the extent that the interest rate is below market levels.

Incidentally, I see Dr Susan Krumdieck is not a fan of the policy either, based on the comments on the Youtube video…

 

There are a number of flaws in this policy, as I see it. Firstly, the desired outcomes don’t seem to be well defined. What is the goal of this policy? Is it about encouraging renewable energy generally, or reducing greenhouse gas emissions? If so, there are more direct ways of tackling the problem. Or is it about solving a perceived market inefficiency, i.e. households are underinvesting in solar because they don’t value the future benefits enough? If so, the policy might be a good idea, but there are market inefficiencies everywhere, and no government can solve them all. Solar may not be the best one to tackle: perhaps we’d get more bang for our buck by focusing on another area, e.g. encouraging active transport for its health benefits, or something different altogether.

I talked to quite a few people about this at the NERI Energy Conference this year, and views were quite mixed. Some people thought the policy was a good idea, and others thought it wasn’t the right time or place. Mike Underhill, chief executive at EECA, is in the second camp, and he spoke on this at the conference, as well as writing a column which was published in the Herald.

 

The Wider Issues

There are some general issues with solar power in New Zealand. It provides power during the daytime, and with more generation in summer. That’s not a good fit with our electricity demand profile: demand is highest in the evenings, and in the winters. This isn’t the case for some countries, incidentally – in hotter climates like Australia, the Middle East, or California, air conditioning use means that demand is higher in summer, making solar a great fit.

The other thing is that solar is relatively high-cost compared to other sources of generation, and isn’t likely to be cost-competitive for NZ. Prices continue to fall, and it probably will be competitive in the medium term, but are we better off waiting a few years until prices are lower? Besides, solar will become more attractive as we develop better ways of storing energy – e.g. electric vehicle batteries (I expect this to be a long-term factor) or pumped hydro storage – and those will also be more viable in the future.

Another important factor is that New Zealand already generates most of its electricity from renewable sources. If we’re switching out other electricity for solar, we’ll get the most benefits from making sure we displace non-renewable sources, not renewable ones.

This doesn’t mean that solar won’t have its uses in New Zealand. Ideally, we could use it in a targeted fashion, to avoid having to make expensive upgrades to the grid. For example, Auckland is growing rapidly, and is a long way away from our hydro resources in the South Island. Solar here could take the edge off that demand growth, and perhaps also reduce reliance on thermal plants like those at Huntly.

Turning to the rural areas, solar may look like an attractive option for remote rural communities, where electricity is expensive. However, it may not actually save that much money. Firstly, unless households can go “off grid” entirely, they’ll still need to pay for the fixed costs of maintaining the grid – but spread over a smaller amount of purchased electricity. And if they do go off grid, they’re shifting those costs onto other people in their communities, who are still connected – that’s a bit unfair on the people left behind. Not to mention that most of these communities have a shrinking population to begin with, and therefore are likely to have a declining demand anyway.

 

The Financials

As Mike Underhill wrote in the Herald column, “the price of solar panels has dropped but it still costs about $10,000 to install a grid-tied 3kW system without storage batteries”. The Greens would lend the money for this at the Crown’s sovereign interest rate, and at 4.1%, the interest would work out to $410 a year. Would households even be able to save more than this on their power bill? I’m sure some could, but I’m sceptical that the average household could, and certainly not if the interest rate was much higher.

As Cliff Turner, an electrical engineer, pointed out on the NERI Hub:

Rather than households investing $12K or so in a PV system, in many cases they would be better investing in a more efficient vehicle, especially for city use. As an example, a Toyota Corolla GX Hatch is priced at $34K (from Toyota’s website) with efficiency 6.6L/100k and if the household was prepared to go to a Prius C at a similar or cheaper price depending on the model they could increase efficiency to 3.9L/100km. Assuming 10,000km pa this would save about $500 pa which is getting close to what the PV system might save in electricity cost. If the premium for a pluggable option was small, then even further fuel savings are possible. This is a better strategy than PV from the perspective of carbon emissions, given that NZ has low emission electricity generation options with good EROI.

I’d agree with those points.

 

Wrapping Up

As policies go, the Solar Homes one isn’t a shocker. But it’s not particularly helpful either. Overall, I don’t think now is the best time for a blanket, nationwide policy like the one proposed. I’d be more interested in a cohesive strategy to wean us off thermal generation, to get us to 100% renewables, which I’ve written about previously. With the Greens’ policy, I’d be inclined to wonder how much solar would simply be displacing other renewables, rather than non-renewables.

The Greens are also advertising a policy called Solar Schools, which, from a quick look, seems like a good idea (and is a better match with solar’s generation profile). However, if it gives substantial cost savings as implied, I can’t see why the Ministry or schools wouldn’t do it themselves, and why it would need a political party to come up with a specific policy to make it happen.

Walking in Manukau

Just over a month ago I was out at Manukau City, at the open day of the new MIT, which doubles as Manukau station. This is a brilliant facility, with world class integration of land use and transport. If you haven’t been out to check it out, you really should. Very impressive coming up the escalators from the station and straight into the concourse of the campus. If you haven’t been there my fellow blogger Patrick has a post with an excellent photo essay of the new campus.

After looking at the campus I decided to go for a walk around the wider area. Note the whole time I was within the Manukau Metropolitan Centre, and less than 800m from the station entrance. This is an area with a wide variety of shops, apartments, restaurants, offices and services including a large Westfield Mall, courts, MIT and AUT campuses and Rainbows End.. It would certainly be reasonable to expect people to walk from the station (soon to be joined by neighbouring bus interchange) to any of these areas, following the route I took. Would also be very reasonable to walk between any of these activities which is what would usually happen in an urban environment. Manukau is also one of the premier Metropolitan Centres outlined by the council in the Auckland Plan and Unitary Plan, so the pedestrian environment should be of a high standard.

Manukau aerial

However unfortunately what I found was just plain awful, dangerous and embarrassing to roading engineers everywhere (yes I know there are good ones, but your colleagues are largely responsible). These are the 7 photo locations overlaid on a council aerial photo.

This is Great South Road. Almost adjacent to Westfield Mall. Totally out of scale for what should be an urban street, especially considering there is an 8 lane motorway 200 metres away!

 

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Picture 1

This is on Lambie Drive, within 400 metres of Manukau station, and is on what might seem to be an obvious walking route from the station to the Supa Centre, which contains a large amount of big box retail shops. But no consideration given to anyone who might want to go shopping who does not have access to a car (or even chooses not to drive!).

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Picture 2

But it gets more embarrassing. Half way along this missing footpath are a few pram-ramps longing for a footpath. Great ‘future proofing’, but ridiculous that the footpath didn’t follow.

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Picture 3

This is the roundabout at the corner of Cavendish and Lambie Drives. Like many roundabouts in suburban centres it is designed for speeding truck and trailer units. This of course means usual cars travel very fast around the roundabout. To get the other side one pretty much has to run to the island. People that are elderly or infirm, well, too bad. If you want to visit the Red Cross(!) on the other side of road, get a taxi!

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Picture 4

This is Davies Avenue. Doesn’t look anything out of the ordinary for Auckland. However this is a brand new street, that has just had a large amount of money spent on traffic calming. However that calming still required 2 turning lanes, and no zebra to allow people to safely cross the road.

 

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Picture 5

This is Manukau Station Road. Up until 5 years ago this was Wiri Station Road, and also State Highway 20. This meant people on the motorway at Manukau needed to drive along here to head towards the airport. However this has been bypassed by a large motorway, 300m to the south. However no attempt has been made to calm the road to match the vastly reduced traffic volume. Probably could close half the road and it would be fine. While this road may be ok in an industrial area, once again this is a few hundred metres from the station and mall. There is also a very good reason to walk along here, and that is Rainbows End, just out of sight to the right of the picture. Only 500m from Manukau Station, and could be good patronage generator. However no chance when people have to walk along a miserable highway that barely caters for pedestrians.

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Picture 6

This is the main entrance to Rainbows End, looking back towards the mall. While there is a signalised crossing, there is only a pedestrian crossing on one out of 4 of the intersection legs. Again what should theoretically be an obvious walking route is awful for pedestrians, and thus encourages more people to drive.

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Picture 7

If Auckland Council and Auckland Transport are serious about making Manukau one of the key Metropolitan Centres in the region, they really need to fix totally unacceptable pedestrian environments like this. I would also hope that Auckland Transport realises fixing these issues would help drive public transport patronage, by increasing the reasonable walking catchment. Acceptable walking distance is heavily dictated by the form of the urban environment, and in places this bad people will be put off walking 100m. Sadly Auckland Transport seem to totally ignore walking as a mode of transport, and don’t bother fixing these type of environments.

Some readers of the blog may also be interested in what it is like to cycle around Manukau. The Regional Cycle Network suggests there is a great connected cycling grid, however I can tell you it would certainly be worse than walking. I’ll blog those pictures next week.

 

Census 2013: Auckland Travel Patterns

The Ministry of Transport has released a detailed and interesting look into some of the results coming out of the 2013 Census Journey to Work question. Both the executive summary and the full report are worth a read. As we’ve noted before, the 2013 census results confirm a shift in the way Aucklanders are travelling, with much stronger growth in public transport than in driving (especially in percentage terms). Interestingly, even within people travelling to work via private vehicle, there is a big difference between those who drove themselves (which increased and roughly maintained its modeshare) and those who were passengers (which declined fairly dramatically). This is shown in the graph below:

modeshare-change-percent

I’m struggling a bit to explain why private vehicle passengers has declined to significantly – perhaps they are the ones who are shifting mode to public transport to a greater extent than drivers?

The report compares Auckland’s mode-splits with a number of Australian cities, highlighting quite an interesting trend that although our public transport use is generally lower than those cities, our active transport modeshare is often higher:

australian-modeshare-comparisonsQuite a lot of the report is analysis of different parts of Auckland, comparing travel patterns and modes for the CBD, CBD fringe area (called other central), inner urban (isthmus and lower North Shore), outer urban and rural areas. The graph below is a fairly nifty way of representing the overall share of Auckland’s trips that start and end in these different areas:

origin-destination-graphThe Outer Urban area is reasonably “self-contained” in its trips, with a very large share of trips originating in Outer Urban areas also being destined for those areas. The CBD is a strong destination for Inner Urban areas, along with employment in other parts of those Inner Urban locations.

Looking closer at the CBD, the report analyses where people who work there are coming from, showing a strong focus on the isthmus and the lower North Shore – the “Inner Urban” areas highlighted above:

cbd-bound-modeshareIt is worth noting the difference between the west and the south in the map above – both areas reasonably equidistant from the city centre, but with the south having much more local employment and therefore much less of an employment connection with the CBD. One would expect, post City Rail Link, for the west to be even more strongly connected and also for the south to begin to benefit from improved city centre access and the employment opportunities that will provide.

Another interesting part of the report is the comparison between different local board areas, which unsurprisingly show some pretty dramatically different modal splits:

local-board-modeshare

Waitemata Local Board obviously stands out from the rest, with a private vehicle modeshare of below 50% and a very high proportion of people walking or cycling to work. Clearly Waitemata benefits from having so many jobs located within the local board area, as well as the increasing number of people who live in the city centre unsurprisingly having a very high ‘walk to work’ share. Another point of interest is how work from home varies by Local Board – higher in rural and richer areas and very low in parts of South Auckland. I guess this reflects most ‘work from home’ jobs being either rural in nature or well-paid professional work.

One of the clearest patterns highlighted in the report is the relationship between residential location and trip length, with journeys to work getting longer and longer as you live further away from the city centre – even though only a relatively small proportion of Auckland’s jobs are actually located in the city centre:

trip-length-by-originThis finding is unsurprising and a core part of why urban sprawl concerns us so much, because people living in far flung parts of Auckland need to travel a very long way to work – which is both expensive and places a lot of pressure on the transport network. It’s also clear that West Aucklanders are stuck with long commutes more so than most other parts of the city – highlighting once again the huge benefit City Rail Link will bring to the west as well as the need to increase the level of employment available in that part of Auckland.

Flipping the above map around, to instead focus on length of journey by destination reveals a much less clear pattern and some interesting anomalies – people who work at the airport have to travel a very long way to get there (rail to the airport will be very useful for them!) while people who work in the Howick/Botany area seem to have very short commutes, maybe highlighting the extent to which that area is disconnected and isolated from the rest of Auckland (only people who live in the area are prepared to work there):

trip-length-by-destination

Looking at private vehicle modeshare by point of origin highlights clearly the more and less car dependent parts of Auckland. The inner areas are doing pretty well here while the northwest and the southeast (in particular) are the most car dependent parts of Auckland. Hopefully the AMETI and Northwest busways will change this in the future:

car-modeshare-by-origin

Bus modeshare is highest on the North Shore and the Central Isthmus – reflecting locations where high quality bus service and infrastructure is available:

bus-modeshare-by-originFor rail, a key analysis relates to the question of “for trips heading to the CBD from a particular area, what proportion of those trips are carried by train”. The south does pretty well in this respect, reflecting that it’s a pretty long car journey from Papakura or Pukekohe right through into town:

rail-to-cbd-modeshareLooking at the above map it’s quite telling to see how along the inner parts of the Western Line, rail is capturing a pretty low proportion of CBD-bound trips – I imagine due to the very long an convoluted path the train takes via Newmarket. With the City Rail Link in place there’s some huge growth potential in these areas for much higher levels of train use as there’s a pretty huge untapped market at the moment.

Looking at overall public transport modeshare, the dominance of the isthmus is quite clear. This is a large reason why we were so frustrated to see intensification on the isthmus watered down in the Unitary Plan to such a great extent last year.

overall-pt-modeshareThere are a myriad of other fascinating maps and graphs within the report, but they can wait for a future post. Perhaps commenters might have a think about what they think might be behind a few of the results above – particularly:

  • Why might private vehicle passenger trips have decreased so significantly compared to all other modes of getting to work?
  • What impact might CRL, Airport Rail, AMETI and other major projects have on these patterns over the coming decades?
  • What’s up with Stonefields? – its travel patterns are much more like an ex-urban piece of sprawl than a fairly dense inner-urban suburb.

Stuart’s 100 #12: Auckland’s “Missing” Urban Neighbourhoods

12: Auckland’s “Missing” Urban Neighbourhoods

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What if Auckland’s “missing” urban neighbourhoods re-emerged as real places?

Auckland is growing up fast. In central Auckland, this can be seen in the emerging new destinations (Britomart, Wynyard Quarter for example) and many smaller changes all over the place that are contributing to a city centre and fringe neighbourhoods that are much richer and interesting places to live, work and visit.

That said, there are still many streets in and around the city centre and fringe where great potential to become good people-focused places is thwarted by the dominance of their traffic movement functions. Often, this has been reinforced by poor quality building development that contributes little to the adjacent public realm of the street.

Some of these stretches might be considered ‘missing neighbourhoods’ with an untapped potential to emerge as great urban places if we can pay more attention to supporting their place-making qualities as well as traffic movement. Take a look at Wakefield Street, Wellington Street, Upper Symonds Street or Khyber Pass. Ought we not look to these areas to support more development and activity to support future growth?

 

Stuart’s 100 #11: Teenagers in the City

11: Teenagers in the City

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What if teenagers had more independence and freedom in this city?

This to me, is one of the more important social changes we can expect for Auckland life from current and future changes to our public transport network in Auckland. The reliance on driving or being driven for kids growing up in our auto-dependent suburbs (and for many I’m sure, a feeling of social isolation) makes them far less independent and mobile than growing up in the transit-rich cities of Europe and Asia for example. Of course, any changes in this area can also improve the lives of driving parents as much as their children!

 

Postcard from Downtown Los Angeles

We’re going to need to re-inhabit and rehabilitate our cities and our urban neighborhoods whether we like it or not, because the suburbs are bankrupting our culture, economically, ecologically, socially, and spiritually. - James Howard Kunstler

On a recent west coast (US) whistle stop tour I took a couple of days to check out Downtown Los Angeles. For half a century downtown LA epitomised the country’s flight to the suburbs abetted by mass motorisation — fleeing businesses and residents, abandoned buildings, and a concentration of social problems. Over the last decade, and in particular the last few years, Downtown LA has emerged as one of the most interesting urban stories in America. From mothballed turn-of-the century buildings being re-imagined as lofts and co-working offices- to 21st century transportation systems both unlocking and re-centralising the place, Downtown LA has been quite seriously called “America’s Next Great City.”

Arts District, Downtown Los Angeles

Arts District, Downtown Los Angeles

Like 100 years ago Downtown benefits from a convergence of public transportation routes. I arrived from the south via Metrolink into the remodeled Union Station and effortlessly switched to the Red and Purple subway lines which overlap to provide 5 minute headways across Downtown. Los Angeles is rapidly extending and connecting this subway system. The Purple Line will be extended to the “Westside” (UCLA, Westwood) by 2035 and the Metro Line LRT will be extended from the busy 7th St/Metro Station all the way to the beach in Santa Monica by next year. In the short term (2020) the Central Connector project will allow the regional LRT lines from Long Beach (Blue Line) and Pasadena (Gold Line) to run through Downtown using a new alignment while adding three more stations.

Arts District, Downtown Los Angeles

Arts District, Downtown Los Angeles

Arcade

Recently opened Spring Arcade under redevelopment

An ambitious focused rehab project is currently underway on Broadway. Widened footpaths, mid-block crossings, and tightened intersections are part of this ambitious project to help resurrect the district with 12 old theatres and dozens of amazing old buildings many of which remain mothballed above the street level. A circuitous downtown streetcar will be added along here as well. In the short term street upgrades have been “painted on” using the NYC interim design technique of textured paint and physical barriers. The recent changes don’t seem to cause any problems and the traffic is surprisingly tame and civil. The traffic signals are timed with very short phases and concurrent crossings (and better road rules), allow people to walk effortlessly across the numerous dense districts that form the downtown.

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Los Angeles Theater. Broadway, Los Angeles

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NYC-interim design on Broadway

The residential population in the city has exploded from 29,000 in 2006 to 52,400 in 2014 . While the local population looks very DINK-y (dogs, gym bags) a grade school was opened just last year. This new population has an abundance of consumer choices from the 600 new stores, restaurants and bars that have opened since 2008. In addition to steampunk bars and taco trucks local residents are increasingly being served by conventional retail. So not only can you buy a pair of brand new 1982 Nike Air Force sneakers from the specialty boutique store but you can also pick up a vacuum at Target or socks at Ross. Global brands like H&M and Zara have recently opened very successful flagship stores and the uber hip ACE Hotel has just opened in a refurbished old building.

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Angel City Brewery, Arts District, Los Angeles

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Urban Outfitters, Broadway, opened 2014.

According to a friend, the technology sector has reached a critical mass with tech companies like NationBuilder using a Downtown location as a key branding and talent attraction strategy. Other large, established creative firms like Yahoo which traditionally locate in Hollywood, Santa Monica, and Culver City are now looking for options Downtown.

During my time in LA I kept thinking about what Gordon Price said to me a couple of years ago- “In 10 years Los Angeles will be unrecognisable”. At that time he was referring to Measure R a successful local tax initiative that provided specific funding from sales tax for public transportation projects. Since that time Downtown LA is already unrecognisable. This is what a city looks like being turned over and re-imagined in real time, and like NYC, it will be worth revisiting time and time again to enjoy the changes. If you are in Los Angeles for a short period of time, do yourself a favour- skip the beach and head Downtown. If you are there after the extension of the Metro Line you will soon be able to do both.

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7th Street, Jewelry District, Downtown Los Angeles

The World’s Most Liveable Cities

Auckland has the goal of becoming the World’s Most Liveable City – a goal that is highly achievable given many of our current advantages (natural setting, low crime rates, mild climate etc.) But what makes a truly liveable city? This is something various agencies like Mercer, the Economist and Monocle try to figure out in their annual surveys. Monocle magazine has explained, in the video below, key features that it considers when determining its liveability rankings (their 2014 survey placed Auckland 12th):

Some key matters that stand out for me are:

  • The importance of reliable public transport (the very first thing mentioned)
  • The mix of both “soft” and “hard” measurements
  • The importance of a vibrant heart to a city, and for that heart to be a place where people live
  • The ease of undertaking entrepreneurial activity
  • Access to quality public spaces

It’s also very interesting to see Tokyo – the world’s largest city – excel and reach number two on the list. It seems that cities which embrace their urban-ness, rather than hide from it, are increasingly being seen as particularly liveable locations.

Maybe once CRL is built, the new bus network implemented, the city centre revitalisation advanced further, mass cycle lanes built across Auckland and the numerous other things in the plans made a reality, Auckland will be number one.

Stuart’s 100 #10: Bag Hooks Under Tables

10: Bag Hooks Under Tables

DAY 10

What if all restaurants and bars understood the value of bag and coat hooks under bar tables?

Not all great ideas need be large or ambitious. As someone who lives car free in Auckland and walks most places I can vouch personally for the value of somewhere to hang my winter coat and bag that is with me much of the time.

 

Postcard from Wuppertal

…from where you say? Wuppertal! It’s a little German city I just dropped in on while passing through from Hamburg to Cologne.

Why would I bother stopping in a small nondescript city on the outskirts of the Rhine-Ruhr? There is only one reason to visit Wuppertal, the Wuppertaler Schwebebahn!

The, ahem, Anlage einer elektrischen Hochbahn Schwebebahn System Eugen Langen, which translates roughly to ‘electric elevated swinging railway system’, is the oldest suspension monorail in the world.

The hanging carriages indeed do swing around the corners, in the same way a motorcyclist leans into a turn. The trains, if you can call them that, are fairly small but come by every two or three minutes so great frequency and capacity. This setup has been running since 1901, and the one line carries some 25 million passengers a year.

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It’s actually a fairly ingenious solution to an urban mobility problem. The city of Wuppertal grew as a conurbation of villages stretching down both sides of a river valley. Rather than demolish buildings for a conventional railway or dig underground at great expense, the city elected to use it’s very heart for transport: the river. The Schwebebahn hangs on A frame struts over the water as the gentle Wupper winds it’s way through the city. The swinging system allows the track to follow the sweeping curves of the river at high speed while keeping the passengers comfortable, while the track is totally grade separated and completely avoids all buildings and other structures.

A real oddity, but certainly fun and undeniably functional. The only thing that perplexes me is I noticed the carriages are only driven from one end. Somehow at each end of the line manage to turn these things around!

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Electric vehicles (part 4)

It’s been a while since the last post in this series on electric vehicles (here are parts one, two and three), but this post is number four. Today, I’m looking at the costs of these cars – both their running costs, and their capital costs. Again, I’ll abbreviate plug-in hybrid electric vehicles to PHEVs, and battery electric vehicles to BEVs – these are the “full” electric vehicles which don’t have an engine for backup.

This post is about the cost of electric vehicles – the main reason they’ve been so slow to take off. These cars are much more expensive than conventional cars, unless there are hefty subsidies involved.

 

Capital (“Up Front”) Costs

The high capital cost of EVs is driven in large part by the batteries. The latest generation of vehicles use lithium-ion batteries, which are much better at storing energy than the traditional lead-acid batteries you’ll find in your Corolla. They’re also much more expensive, although the price is falling and will continue to do so. The graph below shows some scenarios for price decline:

BEV battery cost forecasts

Battery costs are usually measured in terms of a cost per kilowatt-hour (kWh) of energy storage; a PHEV might have a battery with 8 kWh, and a BEV might have 30 or 40 kWh. When I was writing my thesis a couple of years ago, costs of up to USD $1,000/kWh were being floated around, although there was and continues to be a wide range of different opinions. Adding to the uncertainty, early EVs will have been sold below cost, or at least at less-than-economic returns to the manufacturer, as they started to develop the technology. It seems to be generally agreed that battery costs are now less than USD $500 per kWh, although manufacturers would obviously want to make a profit on those costs at some point, and there are taxes and other considerations as well.

So, what kind of price difference would that mean for a new PHEV or BEV in New Zealand? Let’s say that the car manufacturers are happy with a battery selling price of USD $500 per kWh, around $570 in NZ dollars. Adding GST onto that brings the figure to around $650. Therefore, an 8 kWh PHEV battery could cost $5,200, and a 33 kWh BEV battery might be around $21,450 – still not cheap by any measure. Things get a little less straightforward when you consider that the PHEV will cost a little more due to having both an electric motor and an engine, and the BEV will cost a bit less since its electric motor is quite a bit cheaper than the typical engine.

 

Running Costs

As discussed in part two, electric motors use a lot less energy than a traditional car engine. This means lower running costs. But how much lower? From my earlier posts, a vehicle running on electricity could use around 20 kWh to travel 100 km. To see how much that costs, simply look at your power bill. Across New Zealand, households pay an average of 28 cents per kWh, according to the MBIE. The “marginal” cost you’ll pay for an extra unit of electricity, though, will be a bit lower. I’ll use a figure of 22 cents per kWh.

This gives a cost of $5 per 100 km – certainly much cheaper than a typical petrol car, which uses 10 litres of petrol to travel 100 km, costing around $22.00 at current petrol prices.

However, a big chunk of the petrol price is tax, comprising a contribution to the National Land Transport Fund, and a bit to ACC as well. According to the MBIE, that’s around 77 cents per litre once GST is added on, or $7.70 per 100 km. Since EVs also contribute to road wear and tear (and demand for new investment), and to accidents, they should also be paying something for this. We obviously can’t tax them through petrol, and it’d be pretty hard to do it through electricity prices as well, so the logical way to do it is through Road User Charges. Indeed, EVs would normally be subject to these, but they’ve received an exemption for the time being (to encourage their uptake). Perhaps that’s a sensible move, but it’s probably not something we’d still want to do in 20 years time when a growing number of cars are electric, and drivers of old cars will need to pick up the slack and pay more tax.

As I’ve written previously, the long-term solution may be to make Road User Charges universal, although there are issues with this as well. For now, I’ll just note that EVs might either be exempt from Road User Charges (i.e. not directly contributing to the upkeep of the transport network and accident costs), or they might end up paying the full charge. This would more than double the running costs of BEVs, although they’ll still be cheaper than petrol cars.

Sitting awkwardly in the middle of all this are PHEVs. At the moment, they get a somewhat inconsistent treatment. Petrol-electric hybrids, for the time being, pay tax through their petrol consumption. In my thesis, I assumed they average 3 litres of petrol per 100 km, although this will vary substantially. Drivers who only do short trips could end up using the electric motor for nearly all their driving. Regardless of the actual figure, they may end up paying very little tax.

Diesel-electric hybrids, on the other hand, have to pay Road User Charges, so they end up paying the full whammy of costs (once the RUC-petrol tax discrepancy gets resolved in the next few years). That’s a real disincentive from buying diesel-electric PHEVs, so we’d expect them to be much less popular here.

The graph below compares the lifetime running costs of several kinds of car, under several taxation scenarios. As you can see, RUCs or the lack of them make a big difference. The Excel file is here if you want to play around with it.

Lifetime opex

 

Getting the costs to stack up

Setting aside environmental concerns, “range anxiety”, and all the rest, consumers will be prepared to pay the higher capital cost of electric cars, if they’re going to save enough money on their running costs. In the graph here, for a car travelling 12,000 km a year for 25 years (perhaps a bit on the high side), and using an 8% discount rate, you’ll pay nearly $30,000 in running costs for a petrol car, compared with $7,000 for a BEV which is exempt from Road User Charges forever.

That’s a $23,000 difference, for quite an extreme case. For some of the other BEV/ PHEV combinations, the difference is $10,000 to $15,000. The difference would get smaller with a higher discount rate, or with less travel.

Overall, if you compare these running cost savings to the extra capital cost, it looks like the financial argument for BEVs and PHEVs isn’t quite there yet.

 

Wrapping Up

Battery costs will continue to decline, driven by economies of scale (i.e. production scaling up) and technological advances. It’s hard to predict how fast costs will come down, or by how much. Someone might invent a transformational new battery chemistry (rather than lithium-ion), or we might simply see incremental advances.

There are ways of reducing this issue: for example, customers could lease electric vehicles, or buy the vehicles but only lease the batteries. This kind of scheme could allow the buyer to avoid the high up-front cost, which could be recouped over time through the running cost savings. Electricity providers would find this a straightforward extension to their business, and I believe a number of companies in New Zealand would look at running these schemes.

At current price levels, BEVs have running costs that are only marginally lower than petrol-electric PHEVs, because these hybrids are only taxed on their petrol consumption. Furthermore, even though diesel-electric PHEVs will be more efficient than petrol-electric PHEVs, they are likely to have higher running costs.

BEVs currently have an exemption from Road User Charges, to encourage their uptake over the next few years, but there’s no reason why this should be the case in the long term – they use the road network, and should pay their share.

Since the costs associated with the road network are primarily dependent on the weight and number of vehicles using the road – and not on the litres of fuel used – the Road User Charges scheme arguably provides a more equitable way of charging for road use.