I have been accused of dissing hybrids. I was mostly discussing Prius-type parallel hybrids and all the support they get, when one can get the same carbon reduction by buying a cheaper, similar-sized and -featured car and buying $10 worth of carbon credits. I was objecting to greenwashing (powered by a large marketing machine) that suggests hybrids can solve our problems.

Corn ethanol, which has been heavily maligned in the mainstream media, reduces carbon emissions (on a per-mile-driven basis) by almost the same amount as today’s typical hybrid. Despite the similar environmental profiles, one is a media darling and the other is demonized, despite its more competitive economics.

My main complaint has been the lack of critical analysis in this space. Corn ethanol (which I don’t believe is a long term solution) has been framed by the oil companies’ marketing machine, farm policy critics, and impractical environmentalists (though the NRDC and Sierra Club support corn ethanol’s transition role as I do, subject to certain constraints). The Prius and hybrids have been positioned by Toyota’s marketing machine. The public is gullible.

I am open and hopeful, especially longer term, on serial plug-in hybrids (a point I’ll address in Part III). Price still remains a major issue. Even for serial hybrids, the ability to keep cost, or at least monthly payments, close to that of a regular ICE (internal combustion engine) car is unclear. Maybe another blogger with knowledge of practical automotive costs can detail the likely trajectory of serial hybrid costs (say, with a typical 40-mile “battery range”), as this remains the critical question.

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The Prius is the corn ethanol of hybrid cars, and we should recognize that. It has increased investment in battery development, but beyond that it is no different than Gucci bags, a branding luxury for a few who want the “cool eco” branding (70%+ of Prius buyers make more than $100k per year).

In this series, I will try to lay out my views on hybrids as a whole — what I believe hybrids are good for and what they are not. (My paper on Biofuels Pathways (PDF) delves into the details.)

The primary question is one of cost: how many people will pay $5,000 more (today’s typical parallel hybrid premium) for a hybrid that reduces carbon emissions by 25%? Especially when they can get a flex-fuel car that costs about the same as a regular ICE car and can reduce emissions by 75% or more when run on cellulosic biofuels?

The Prius is selling well as a car model (so are Gucci bags) but in irrelevant numbers as a percentage of worldwide new car sales. It and its cohort hybrids are unlikely to make 50% penetration of the new car sales worldwide (or U.S.) anytime soon. Flex-fuel cars went from under 5% of new car sales in Brazil to over 75% in less than three years because they don’t cost any more than a regular car. They are projected to be 50% of GM, Ford, and Chrysler’s new car sales in the U.S. by 2012.

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Serial or parallel plug-in hybrids or electric vehicles (EVs) are unlikely to achieve these kind of penetration numbers any time in the next twenty years. A plug-in, serial hybrid with sufficient driving range to get consumer acceptance (based on automotive folks I have talked to), powered mostly by electricity, would cost at least $5,000 more (probably much more) for the average buyer. (The GM Volt is rumored to have a price point of “less than $30,000” — I suspect EV’s with “sufficient” range of around 150 miles would be at least $15,000 more.)

The exact percentage by which they would reduce carbon emissions is uncertain, dependant on the location and source of electricity — how much fossil fuel is used in the power grid. Total carbon dioxide emissions from power generation in the grid might one day reach zero, when we have all renewable power in a region and all cars are fully plug-in with large batteries … but when might that happen? Even if we reached a point where 50% of the cars of the U.S. fleet were today’s hybrids, emissions reductions would be an inadequate 10-20%! (Serial hybrid carbon reductions are estimated in Part II.)

Could we get people in India and China, the fastest growing car markets, to ante up this much additional money, when the biggest thrust in volume cars in India is to reduce the cost of the whole car to $2500? Our goal has to be solving the global problem in carbon emissions, and we need to pick technologies that will be adopted by market forces worldwide. We will need cost points such that 50-80% of the car buyers worldwide adopt these new “low-carbon” technology automobiles (in each market — market conditions and price points vary widely form the US to India).

I believe that battery costs will decline and performance increases will continue, but my review of the technology suggests that the upside with known chemistries is limited to maybe 2-4x change in cost per kwh of capacity — a significant improvement to be sure, but not nearly enough to change the hybrid or plug-in hybrid cost dynamic.

That being said, we at Khosla Ventures are investing in batteries to try and enable breakthroughs that can beat this 2-4X barrier, hopefully to 5-10X. Other technologists are doing the same. Still, the outcomes look uncertain at this point and, more importantly in our opinion, far less predictable than $1.00-per-gallon production cost, 75-90% carbon reduction capable cellulosic biofuels. Others may differ with our assessment, but we base it on the status of technologies we see under non-disclosure agreements.

Furthermore, it should be noted that it takes approximately fifteen years for the automotive fleet to turn over in the U.S. Any impact will be gradual, not instantaneous. What is the “adoption” cost point and timeline for these technologies, when the fifteen year fleet turnover period can start? I suspect it is when the additional up-front cost of hybrids is paid back through lower fuel costs within 3-4 years.

When will that happen in the U.S.? In the world? In the long term, I still believe we can reach this laudable, clean-electricity-driven transportation goal, but probably not in the next decade or even two (more calculations on carbon emissions per mile later). I do believe that fifty years from now we will probably be running an all-electric fleet for transportation (be it personal cars or public transportation).