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Electric Vehicles Won’t be Cost Competitive with Fossil Fuel Powered Vehicles for Another Decade, MIT Study Says

December 30, 2019

It will be at least a decade before electric vehicles can compete in the marketplace with fossil fuel powered cars and trucks, according to a recent report from MIT.

It is likely to be more than a decade before electric vehicles (EVs) will be price-competitive with fossil fuel-powered cars, concludes a new study by the Massachusetts Institute of Technology (MIT) Energy Initiative.

The lithium-ion batteries used in EVs are among the most important factors contributing to the higher costs, with the batteries accounting for about one-third of the cost of an EV, the study states. The metals these batteries are made of are subject to shifting prices, and the cost of mining, refining, and shipping them to manufacturing plants is likely to remain high for at least another decade, according to the report.

Alternatives to the lithium-ion battery, such as lithium-metal, solid state, and lithium-sulfur batteries, are in early stages of development, and their potential effect on the EV industry will remain uncertain for years to come, the report states.

Price Point Problems

Price parity with gas-powered vehicles is considered critical for EVs to make significant inroads into the personal transportation market. The recent decline in the price of lithium-ion batteries is expected to slow in response to ever-increasing demand driving up the cost of raw materials.

Long-term reliability, cost of operation, and factors such as delivering a comparable range of travel, ease of refueling, and creature comforts and amenities, also figure into buyers’ acceptance of EVs.

Questions About Assumptions

Currently, lithium-ion battery packs cost between $175 and $300 per kilowatt-hour (KWh). A typical midrange EV has a 60/KWh battery pack. Some projections have the cost of battery packs falling to $100 KWh by 2025 or sooner, at which point they would reach rough price parity with traditional vehicles.

The MIT study points out reaching that price by 2030 would require material costs to remain flat for the next decade, during a time when global demand for lithium-ion batteries is expected to rise sharply. Unlike more-optimistic projections, the MIT study forecasts the price to be $124 per KWh by 2030, still considerably higher than the assumed “magic number” for price parity.

The study also examines what it calls the “total cost of ownership,” including the sticker price, costs of refueling and maintenance, and other factors. It concludes the after-purchase costs of EVs and traditional cars may be comparable in the near future, but the sticker price of an EV with 200 miles of range would still be thousands of dollars higher than a similar-sized and -equipped gas-powered vehicle. MIT’s study says most consumers are sensitive to upfront costs that translate into higher monthly payments.

Coal-Powered Cars

Promoters of EVs tout them as an answer to whatever effect emissions from internal-combustion-powered vehicles have on the climate.

The MIT study says overall emissions depend on the source of the electric power used to charge EVs.

In the United States, fossil fuels still constitute the majority of the electric power supply because they are abundant, relatively inexpensive, and reliable. Their reliability is why they are used to provide baseline electricity, the minimum amount of electric power needed by the electrical grid at any given time.

EVs driven in regions of the United States where electricity is provided by coal or natural gas may not reduce net greenhouse gas emissions. And in China and India, both of which rely heavily on fossil fuel power plants, many of them not equipped with modern emission reduction systems, EVs produce higher emissions than vehicles powered by traditional internal combustion engines, MIT’s study reports.

Manufacturing EVs, accounting for their entire supply chain, generates considerably higher emissions than comparable fossil-fuel vehicle production, the study found.

No Power to Spare

The current electric power system is not set up to handle the widespread adoption of EVs in the near term, says David Wojick, director of the Climate Change Debate Education Project and a policy advisor to The Heartland Institute, which publishes Environment & Climate News.

“In addition to the price of raw materials rising with increased demand, the price of electricity will rise, too,” Wojick said. “There is almost no excess generating, distribution, or transmission capacity in the United States, or globally for that matter, so a lot of new, expensive power plants and power lines will be needed if EVs are ever to become popular.

“The EV grid simply does not exist,” Wojick said.

EVs are highly subsidized niche vehicles, playthings of the wealthy, says Dan Kish, a senior fellow at the Institute for Energy Research.

“The MIT study should be required reading for politicians trying to mastermind what we drive and how we drive,” Kish said. “In truth, almost half of U.S. EVs are sold in California to very wealthy people who buy them as virtue-signaling toys with taxpayer subsidies.

“Americans who need to work and who need a vehicle that meets all their needs won’t find what they’re looking for in an EV,” Kish said. “Without taxpayers picking up part of the tab for EVs, Hollywood celebrities wouldn’t be buying them either.”

Bonner R. Cohen, Ph.D. (bcohen@nationalcenter.org) is a senior fellow at the National Center for Public Policy Research and a senior policy analyst with the Committee for a Constructive Tomorrow.

Internet Info

Robert C. Armstrong et al., Insights into Future Mobility, MIT Energy Initiative, November 18, 2019: https://www.heartland.org/publications-resources/publications/insights-into-future-mobility

Author
Bonner R. Cohen is a senior fellow with the National Center for Public Policy Research, a position he has held since 2002.
bcohen@nationalcenter.org