Werner's Blog — Opinion, Analysis, Commentary
Electric vehicles are approaching price parity

Electric vehicles (EVs) are no longer the costly cousins of internal combustion engine vehicles. As the variety of EVs is expanding rapidly and the cost of batteries is falling, the still slightly higher purchase cost of EVs is offset by lower operating costs throughout the vehicle's lifetime. An article in today's New York Times by Veronica Penney shows that EVs are nearing price parity in the United States: Electric Cars Are Better for the Planet – and Often Your Budget, Too. The underlying research goes back to Miotti et al. (2016), but the interactive feature on the Carboncounter web site shows the latest data for the United States. Clearly, electric cars are becoming very affordable with the combination of generous purchase incentives (currently with a federal tax credit up to $7,500 and various state-level rebates) and lower operating costs than for conventional cars. As I had pointed out in a previous blog, How much money could be saved by driving electric in Canada?, driving electric is much cheaper than buying gasoline, especially because the price wedge is much larger in Canada than the United States. Generally, electricity is more expensive in the United States, and gasoline is more expensive in Canada. Looking at the chart for the United States in the New York Times article, EVs look even better in Canada.

There is an important caveat when it comes to comparing how beneficial electric vehicles are to the environment. The average CO2 emission intensity of electricity in the United States in 2019 is about 416 grams of CO2 per kWh, but with significant variation across states. California's intensity is only half the national average, and Washington State's just one quarter. Thus the environmental benefits of driving electric are far from even across the United States.

Similar to the United States, the environmental footprint of EVs also looks very different across Canadian provinces. Below is a chart with emission intensity data for electricity generation in each province. Driving an electric vehicle in Quebec, Manitoba, or British Columbia is really good for the environment, but not in Alberta, Nunavut, Saskatchewan, or Nova Scotia. However, electricity generation is slowly getting cleaner in some of these latter provinces, but not fast enough to make driving EVs environmentally compelling. The graph below shows the emission intensity of electricity generation (in 2018) in each province, in descending order.

CO2 Emission Intensity of Electricity 0 100 200 300 400 500 600 700 800 900 grams of CO2 per kWh [2018] Alberta 900 Nunavut 760 Saskatchewan 730 Nova Scotia 690 New Brunswick 350 P.E.I. 350 NW Territories 220 Yukon 50.0 Ontario 40.0 Newfoundland 40.0 British Columbia 11.7 Manitoba 2.20 Quebec 1.70

What is the emission intensity of electricity at which switching from a gas-powered vehicle to an EV is making environmental sense? A liter of gasoline generates about 2,300 grams of CO2 when burned. Take a car that consumes 10 litres of gasoline per 100 kilometers, and this car emits 230 grams of CO2 per kilometers. If this car is replaced with an EV that consumes 25 kWh per 100 km in Alberta, where a kWh of electricity generates 900 grams of CO2, the EV generates 225 grams of CO2 per kilometer of indirect emissions via electricity use. So the two vehicles are virtually identical in their footprint.

The table below shows the emisison intensity of electricity generation at which electric vehicles have the same carbon footprint as gas-powered vehicles. The fuel economy of the gas-powered vehicle and the electricity economy of the electric vehicle both matter. The tables shows combinations of vehicles that are compared. Vehicle size matters, and thus one may read the table diagonally from top left to bottom right to compare similar vehicles. To make the EV the superior choice, replacing a fuel-efficient gas-powered vehicle (6L/100km) with a compact EV (20kWh/100km) requires an electricity emisison intensity of less than 690 grams per kWh. Thist is not the case in Alberta. However, replacing a gas-guzzling 14L/100km vehicle with an electric SUV that consumes 30 kWh/100km actually has a higher emission intensity threshold, and Alberta is below it.

Electricity Generation Emission Intensity at which
Electric and ICE Vehicles have the same CO2 footprint

ICE Vehicle [L/100km]
6 8 10 12 14
20 690 920 1,150 1,380 1,610
22 627 836 1,045 1,255 1,464
24 575 767 958 1,150 1,342
26 531 708 885 1,062 1,238
28 493 657 821 986 1,150
30 460 613 767 920 1,073

Ideally, federal subsidies for buying EVs should be contingent on how clean the electricity is in each province, and which gas-powered vehicle is replaced with which EV. The case for subsidizing EVs in Alberta is marginal, where it makes good sense in the most populous provinces (Ontario, Quebec, B.C.) that all have low-carbon electricity. For EV subsidies to be environmentally beneficial, a "safe" emission intensity threshold for electricity is around 350 grams of CO2 per kWh. Four Canadian provinces are still clearly above this threshold.

The 2020s will become the decade of transitioning to electric mobility for automobiles. With subsidies we are already at price parity in most instances. With expected developments of making batteries more efficient (offering longer range), safer, and cheaper, true cost parity (also known as battery parity) will arrive in the next few years. If you haven't given EVs any thought yet, it's about time you looked more closely at them. EVs are becoming increasingly competitive to gas-engine cars, and many manufacturers are bringing new EV models to market in 2021. Variety will expand rapidly in the next years.

Further readings and information sources:

Posted on Friday, January 15, 2021 at 17:15 — #Transportation
© 2021  Prof. Werner Antweiler, University of British Columbia.
[Sauder School of Business] [The University of British Columbia]