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Why we need a more consumer-friendly rating for electric car savings

This article originally appeared on GigaOM Pro, our premium subscription research service.

A question I get from a lot of people is how much money can they actually save if they switched from their V8 to an electric car. Everyone has some sense that giving up gasoline will save them a lot of money. But how much?

The answer to this question is relatively straight forward, though it depends on the gas mileage of the gasoline-powered car someone is giving up, the performance of the electric car they’re buying and what their electricity rates are.

We drive the new Tesla Model S ThumbnailBut generally speaking most folks in the U.S. who drive 15,000 miles per year and average around 25 miles per gallon, spend around two and a half thousand dollars on gas per year. Assuming an electricity rate of 12 cents per kilowatt hour, an equivalent electric vehicle will consume about $500 of power per year. I ran some of my own calculations through the Department of Energy’s website, but these figures are pretty close to what Tesla quotes on its website as well.

As an analyst it’s great that I can run those numbers, but my concern is that consumers don’t run those numbers and need a more simple, straightforward metric that they do understand. The Environmental Protection Agency (EPA) has thought about this issue and at the end of 2010 it introduced the miles per gallon equivalent (MPGe), which the NHTSA now requires all alternative fuel cars to carry on their window labeling.

So what’s an MPGe? Well, it’s a formula that says 33.7 kilowatt hours (kWh) of electricity is equivalent to one gallon of gasoline. Now the EPA realized right off the bat via focus groups that consumers didn’t understand the concept of a kWh being a measure of electric energy and really didn’t want to know how many miles an EV would get per kWh. What the EPA found was that consumers understood miles per gallon because they’d been seeing it on new car stickers for so long.

BMW i3But, still, I wonder if it’s the best metric. Partially I’m concerned that the reference point of comparison remains liquid fuel, “per gallon.” If my electric car is running on batteries, why are we even talking about gallons of anything? Moreover, is miles per gallon equivalent (MPGe) really driving home the cost savings of getting power from the utility, rather than the gasoline pump?

Well perhaps the Department of Energy was concerned about this very perception because it just rolled out the “eGallon.” Now before you start getting irritated that this is another metric that isn’t marketable, which will further confuse consumers, and is still based on a liquid fuel reference point — the “gallon” — check out the eGallon tool on the DOE’s website.

What it does is allow you to select your state, which will bring up the average cost of a gallon of gas. Below the gasoline cost is the eGallon cost, which is “the cost of fueling a vehicle with electricity compared to a similar vehicle that runs on gasoline.” The algorithm assumes a 12.33 cents/kWh electricity cost and based power consumption on an average of the top 5 EVs. In California, for example, the average price of gasoline is $3.99 and an eGallon is $1.53.

Nissan LEAFApparently the DOE has its own concerns about MPGe, because it noted in its methology report:

….it is hard for most consumers to make the jump from the cost of electricity per kilowatt hour, to the “dollars-per-mile” cost of fueling an EV. The eGallon does this for them by providing a metric that is easily comparable to the traditional gallon of unleaded fuel — the dominant fuel choice for vehicles in the U.S.

An eGallon is about a third of the cost of a regular gallon. That could become a great shorthand for people to start thinking about, particularly since the cost is expressed relative to a gallon of gas so people can have a takeaway of, “wow, $1.53 a gallon sure would be great.”

Expressing the performance and cost savings of an electric car in dollars and cents is the way to go. It’s the most accessible way for current consumers to conceive of their out of pocket expense. And, yeah, it sure is hard to believe that a decade ago $1.53 a gallon of gasoline was pretty normal. At least now that buys you an eGallon.

13 Responses to “Why we need a more consumer-friendly rating for electric car savings”

  1. Pat Dawson

    Take away the federal and state tax from the price of gasoline and you will find that electric IS more expensive than gasoline. Add the tax back in to my 13.5/kWh home electric price and the e-gallon is over $5. Stop telling people that electricity is cheaper than gasoline.

    IT’S THE EFFICIENCY, SILLY. Gas- 33%, diesel – 40%, electric 90% +.

    Electric would have to be sold at 10 cents/kWh to match current gas prices.

  2. I recently bought an EV and tried to sign up with Southern California Edison for their EV rate. Surprise! The EV option gives you 9 cents/kwh from midnight to 6 AM but daytime rates went up to double or triple the normal rate! I had to keep the old plan or see my bill jump higher. EV rates here are nothing but a fraud.

    • steve EV

      Not a fraud, an agreement with SCE that you will charge your EV during off-peak hours. SCE will allow a discount to compensate you for that inconvenience and the agreement will effect their long-term planning process. if you charge during peak hours you will place an excessive load on the system. SCE charges for that.

    • Randy Hamlet

      You signed up for the smart metering program. You should make sure you use as little power as possible during peak hours, it is a major load on the system. You can save a lot of money if you go to smart metering and you plan your energy usage accordingly.

  3. This “eGallon” just makes it worse. They will see 25 MPG and 4 dollars a gallon and then see 130 MPGe and 1.50 a gallon. It makes things much more confusing. Just tell people it takes about a dollar to two dollars to charge your car for a hundred miles, thats what makes people realize the savings. Off peak power is only 3-4 cents a kW, and the people buying these can normally switch to smart metering, so it is only 60-100 cents to go a hundred miles in a Leaf. The Leaf also doesn’t require ANY maintenance, at all, other than the tire rotation. The gas car is very expensive to maintain, and much less reliable. The Leaf battery replacement? In 10 years it will cost a total of 12000, but in 10 years it will be so much cheaper and better! By then the car would have literally paid for itself!

    • I agree the DOE’s eGallon makes it worse. The epa sticker on the LEAF says it gets 34kWh per 100 miles. That’s just as bad. Why not just tell people miles/kWh, just like miles/gallon? Then you can easily calculate cost/mile. They treat consumers like dummies who can’t do math.

      The actual metered wall to wheel for my LEAF is 3.14 miles/kWh for the past 1.5yr or 20k miles in the Chicagoland area. My electric rate is $.056, with taxes and other crap it’s $.084/kWh. .084/3.14 = 2.6 cents per mile, significantly lower than the DOE’s stupid egallon.

  4. I also think miles per dollar of fuel is the way to go. But to be fair, the cost of the battery in an EV should be included since it is consumed, just like the fuel is. So if the battery is warranted for 100,000 miles and costs $10,000, the battery cost of $0.10 per mile should be added to the cost of electricity to come to a fair comparison.

    • Philip Courtois

      Your point makes sense – but the battery is the one technology that is guaranteed to drop significantly in price in the future, so who knows how cheap it will be when the current battery runs out? Also, you need to take into account the savings from not having to perform oil changes or many of the routine maintenance items common with conventional cars. Because of regenerative braking, brake jobs are less frequent on electric vehicles too.

    • James Adcock

      In an electric vehicle the battery degrades as a function of the number of miles driven. In a gasser it is the engine that degrades in a similar number of miles. Should we add the cost of the gasser engine degradation to the cost per mile? Well, of course we should, leading to a total cost of ownership metric, say cost to own for 100,000 miles. The next question becomes, do we include the cost of the environmental degradations the vehicle costs? These environmental degradations hurt the economy, meaning that people don’t have jobs — these are real costs to real humans in our society. So I suggest that the environmental degradations should be included also, meaning including the cost of externalities, currently by EPA estimates about $45 / ton CO2 emission, in the case of both vehicles, plus the local asthma causing smog emissions in the case of the gasser, etc. So, ultimately the eGallon, or what have you, doesn’t really capture the “true costs” of owning a vehicle.

  5. Electric cars and clean energy are becoming more popular. If you are thinking of getting an electric car, why not consider solar panels as well? As it turns out the two have a symbiotic relationship and by purchasing both at the same time, you will save even more money. Our latest blog outlines the numbers.

    • Adam Lesser

      Hi Steve,

      I do think cost per mile is where we’ll eventually end up. I think the issue is that we’d need window sticker labeling on new cars to move away from MPG toward cost per mile, which would be an additional consumer re-education. Also, I don’t know this for sure but I suspect there’s greater disparity in electricity rates geographically than there is for gas pricing, which is something the state by state egallon metric is trying to address.



  6. I live near chicago, the DOE says my egallon in illinois is $1.04. Using their method with with my real world data(I meter the electricity going into my car) my egallon is actually $0.76. Yes that’s all per kWh charges.