CaseNumber1932.

ThiscasewaswrittenbyYenngaKhuong,graduatestudentinurbanplanning,andJosA.GmezIbez,Professorof
UrbanPlanningandPublicPolicyatHarvardUniversity.Preparationofthiscaseandtheteachingnoteweresupported
inpartbyagrantfromtheU.S.DepartmentofTransportationthroughtheNewEnglandRegionUniversity
TransportationCenter.Theauthorsareresponsibleforthefactsandtheaccuracyoftheinformationinthecase,which
doesnotnecessarilyreflecttheviewsoftheU.S.DepartmentofTransportation.HKScasesaredevelopedsolelyasthe
basisforclassdiscussion.Casesarenotintendedtoserveasendorsements,sourcesofprimarydata,orillustrationsof
effectiveorineffectivemanagement.

Copyright2010PresidentandFellowsofHarvardCollege.Nopartofthispublicationmaybereproduced,revised,
translated,storedinaretrievalsystem,usedinaspreadsheet,ortransmittedinanyformorbyanymeanswithoutthe
expresswrittenconsentoftheCaseProgram.Forordersandcopyrightpermissioninformation,pleasevisitour
websiteatcaseweb.hks.harvard.eduorsendawrittenrequesttoCaseProgram,JohnF.KennedySchoolof
Government,HarvardUniversity,79JohnF.KennedyStreet,Cambridge,MA02138.
ElectricVehiclesinCities
ElectrifyingSanFrancisco
In2010,theCityofSanFranciscowasbeginningtoimplementaplantoencouragetheuseof
electricvehiclesinthemetropolitanarea.SanFranciscowasanaffiliateoftheLargeCityClimate
LeadershipGroup,anassociationofmajorcitiesaroundtheworldthatrecognizedthatclimatechange
requiredglobalactionbutwerenotwaitingforotherstoact.ThegroupcommonlyreferredtoastheC40
sinceithad40fullmembersinadditiontoagrowinglistofaffiliatesfirstmetinLondonin2005and
reconvenedeverytwoyearstoshareinformationonhowmemberscouldreducetheirgreenhousegas
emissions.AttheUnitedNationsConferenceonClimateChangeinCopenhageninDecember2009almost
80citymayorsparticipatedinaClimateSummitforMayors,atwhich,14C40membersannouncedthe
formationofaC40ElectricVehicleNetworktohelppromotetheuseofelectricvehiclesby,amongother
measures,workingwithlocalutilitiestodevelopthecharginginfrastructureforelectricvehicles.
Transportationaccountedfor14percentofglobalgreenhousegasemissionsin2000,anditssharewas
growingrapidlyasthedevelopingcountriesmotorized(Exhibit1).Electricvehiclescouldmakeakey
contributiontoreducingtransportationemissions,themayorsargued,andtheywouldbemosteasily
introducedincities.
SanFranciscosplanhadbeenannouncedayearearlieratapressconferenceinwhichthemayors
ofSanFrancisco,OaklandandSanJoseproclaimedtheirintentiontomaketheSanFranciscoBayArea
knownastheElectricVehicleCapitaloftheWorld.By2010theCityofSanFranciscohadmadegoodon
severalofthepromisesintheplan.Thebuildingcodehadbeenamendedtorequirethatparkingspacesin
allnewbuildingshavethewiringneededtochargeanelectricvehicle.Theprocessofobtainingabuilding
permittoinstallachargingdeviceinanexistinghomehadbeenstreamlinedtotakeaslittleasoneday
insteadofuptotwoweeks.AndtheCityhadestablishedaprogramtoallowresidentstofinancethecost
ofupgradingtheiroutletsforelectricchargingover20yearsthroughalienontheirpropertytax.However,
theprocessofinstallingchargingstationsinpublicparkingspotswasgoingmoreslowlythanplanned.The
proposalcalledforinstallingover200chargingpointsonstreets,andingaragesandlotsinthefirstyear
andahalf,butsofartherewerefewerthan70chargingpointsintheentireBayArea.
AlthoughSanFranciscoseffortstoaccommodateelectricvehicleshadnotbeencontroversialor
muchnoticedbythegeneralpublicsofar,therewassubstantialuncertaintyaboutwhethertheywould
proveadequate.TheSanFranciscometropolitanareawashometo7.3millionpeopleand3.9millioncars,
ofwhich800,000peopleand350,000carsresidedinthecityitselfandtheremainderwereinSanJose,
Oakland,Berkeleyandthe97othercitiesthatmadeuptheBayArea.Roughlyfivepercentofthecarswere
scrappedandreplacedeveryyear,andthetotalnumberofoperatingcarswasprojectedtoincreaseby1
millionbetween2006and2030(Exhibit2).BayArearesidentshadproventobereceptivetonewtypesof
motorvehicles.OneinfivecarssoldinBerkeleywasreportedlyahybridgasolineelectricToyotaPrius,for
example;andSanFranciscoMayorGavinNewsomownedaTesla,madebyacompanyheadquarteredin
PaloAltoandtheonlyhighwaycapableallelectricvehiclecurrentlysoldintheUnitedStates.Theregion
wasalsohometoBetterPlace,acompanypioneeringarevolutionarybatteryleasingschemeforelectric
vehicles.Ifevenamodestnumberoftheregionsreplacementandnewvehicleswereelectric,thenthe
demandforchargingathomeorelsewheremightbeenormous.Alreadythelocalelectricutility,Pacific
GasandElectric,wasidentifyingareasofitsgridlikelytooverloadifelectricvehiclesbecamemore
common.Ifelectricvehiclesprovedlesspopular,however,thentheinvestmentinwiringforcharging
stationsinnewbuildingsandatpublicparkingspaceswouldbewasted.
TheEnvironmentalMandate
TheinterestofSanFranciscoandotherC40citiesinelectricvehiclesstemmedfromthepromise
thattheywouldbesubstantiallyenvironmentallycleanerthanvehiclespoweredbygasoline,dieselorother
alternativefuels.Motorvehiclespollutetheairbothatthegroundlevelandinthestratosphere.Ground
levelpollutantsfromcarsincludefineparticulates,volatileorganiccompounds(VOCs)andnitrogenoxide
(NOx),withthelasttwocompoundscombiningintheatmospheretoformozone.Bothparticulatesand
ozonecontributetorespiratoryandheartdiseases,andparticulatesareimplicatedincancersaswell.The
primarystratosphericpollutantfromcarsiscarbondioxide(CO
2
)andbelievedtocauseglobalwarming.
Themotorvehiclescontributiontogroundlevelairpollutionhadbeenreducedconsiderablysince
the1970swhenCongressmandatedthatnewcarsandtrucksmeetstrictfederalstandardsforemissionsof
VOCs,NOxandparticulates.TheU.S.EnvironmentalProtectionAgency(EPA)wasalsoempoweredtoset
standardsfortheemissionsofstationarysources,suchaspowerplants,andforthemaximumpermissible
ambientconcentrationsofozone,particulatesandothergroundlevelpollutants.Stategovernmentswere
responsiblefordevelopingandimplementingplanstoachievetheseambientstandardsby,ifnecessary,
imposingadditionalcontrolsonstationaryandmobileemissionsources.TheEPAhadrecentlyproposed
tighteningitsambientstandardsforozonesothat96percentofmonitoredcounties,includingthecityof
SanFrancisco,wouldnolongerbeincompliance.
TherewasnocomparablefederalprogramtocontroltheCO
2
emissionsofmotorvehicles.The
prospectsthatCongresswoulddevelopsuchaprogramsoonweredimming,moreover,becauseofthe
failureoftheU.N.ConferenceonClimateChangeinCopenhagentoproduceameaningfulglobal
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HKSCaseProgram 3of20 CaseNumber1932.0
agreementandthegrowingpreoccupationoftheDemocraticandRepublicanpartieswiththeNovember
2010midtermelections.TheclosestanalogwastheCorporateAverageFuelEconomy(CAFE)program
establishedtosetfuelefficiencystandardsfornewcarsaftertheenergycrisisof197374.TheCAFE
standardsweremotivatedbyadesiretomaketheUnitedStateslessvulnerabletooilimports,buttheyhad
theeffectofcontrollinggreenhousegasesaswellsinceCO
2
emissionswereroughlyproportionaltothe
amountoffuelburned.CongresshadgraduallyincreasedtheCAFEstandardsforcarsfrom18milesper
gallon(mpg)in1978to27.5mpginmodelyear1990,wheretheyremainedunchanged.Congresssetmore
lenientstandardsforlighttrucksof14mpginmodelyear1980,andrisingto20.7mpginthe1990s.Many
ofthesportsutilityvehicles(SUVs)thatbecamepopularinthe1990swereclassifiedaslighttrucks,thus
dilutingtheeffectofCAFEstandardsontheefficiencyofpersonalmotorvehicles.Congressrecently
orderedthestandardstightenedto35mpgforcarsbymodelyear2020and23.5mpgforlighttrucksby
modelyear2010.ThenewstandardswouldstillfallfarshortofEuropewhereaveragenewcarfuel
economywas42mpg.
ImprovingvehiclefuelefficiencywasonlyoneofseveraloptionsforreducingmotorvehicleCO
2

emissions.Thecarbonemissionsfrommotorvehiclesweretheproductofthenumberofpersonmiles
traveled(PMT),thenumberofvehiclemilestraveled(VMT)perPMT,theenergyconsumedperVMT,and
thecarbonintensityoftheenergy:
Energy
Carbon
VMT
Energy
PMT
VMT
PMT CO
2

Intheory,emissionscouldbecutbyreducinganyofthefourelementsintheequationbutinpracticemany
observersthoughtthatmajorreductionsinPMTorinVMT/PMTwereunlikely.Theproblemwasthat
reducingPMTorVMT/PMTrequiredlifestylechanges,includingtravelingless,switchingtoothermodes
suchaswalkingorpublictransit,andmovingtocitiesanddensersuburbswherethereweremore
alternativestodriving.Indeed,thetrendswereintheoppositedirectionasVMTperhouseholdinthe
UnitedStateshadincreasedfrom16,400milesperyearin1970to24,300milesperyearin2005.
1
Since
Americansseemedtovaluepersonalmobilityhighlyitwouldbemuchmorepalatableifthebulkofneeded
emissionsreductionscouldbeachievedbyimprovingtheenergyefficiencyofthevehicleorreducingthe
carbonintensityoftheenergyitused.
VehicleandFuelOptions
Amongthevehicleandfueloptionsthereweretwodifferenttypesofinternalcombustion
engines:

1
RobertCerveroandJonMurakam,ShrinkingUrbanTransportation'sEnvironmentalFootprint:EvidenceonBuilt
EnvironmentsandTravelfrom370U.S.UrbanizedAreas,PaperPreparedfortheInstituteofUrbanandRegional
Development,UniversityofCalifornia,BerkeleyandNationalScienceFoundation,2008.
SparkIgnitionEngines(SIEs)burnedconventionalgasolineorethanolandgottheirnamefromthefact
thatasparkwasrequiredtoignitethefuelairmix.Astudyofvehicletechnologyoptionsdonebya
respectedMITresearchgroupestimatedthatthetypicalnewSIEcurrentlyconsumedtheequivalentof
8.9litersofgasolineper100kilometers(26mpg)butthatby2035,fuelconsumptioncouldbereduced
to5.5litersper100kilometers(43mpg)throughimprovementsinaerodynamics,moreefficient
transmissionsandothermeasures.Afurtherreductionto4.9literswaspossiblewithturbocharging
(Exhibit3).
Dieselenginesignitedthefuelairmixturethroughcompressionandweremorefuelefficientthan
comparableSIEs.TheMITresearchersthoughtthatby2035newdieselvehicleswouldconsumeonly
4.7literequivalentsper100kilometers(50mpg).
Therewerethreedifferenttypesofelectricvehicles:
HybridElectricVehicles(HEVs)combinedasmallsparkignitionenginewithasmallbattery.TheSIE
providedthedrivepowerandchargedthebatterywhilethebatteryassistedwithaccelerationand
braking.AnHEVcouldnotdriveinanallelectricmodeforlong.HEVscostmoretobuythanSEIsbut
thecombinationofthetwopowersourceswasprojectedtoreducefuelconsumptionto3.1litersper
100kilometers(76mpg)in2035.
PluginHybridElectricVehicles(PHEVs)weresimilartoHEVsexceptthattheyhadalargerbatterythat
couldbechargedbypluggingintotheelectricgrid.Thepluginfeatureandlargerbatterymeantthat
PHEVsdidnotrelyentirelyonpetroleumforfuelbutcoulduseelectricity,someofwhichmightbe
generatedbyhydro,wind,solarorothercleanmethods.Thelargerthebatterythelessreliantthe
vehiclewasonpetroleumbutthehigherthepurchaseprice.TheMITgroupestimatedthata2035
PHEVcapableoftraveling30milesbeforeswitchingtotheSIEwouldproduceemissionsequivalentto
thosefrom2.2litersoffuelper100kilometers(107mpg).
BatteryElectricVehicles(BEVs)obtainedalloftheirpowerfromtheelectricgridandhadno
supplementaryengine.MoststudiesassumedthatthedrivingrangeofaBEVwouldnotmatchthatof
acurrentSIEordieselinordertokeepthesizeandcostofthebatteryreasonable.TheMIT
researchersestimatedthata2035BEVwouldconsumetheequivalentofonly1.7litersofpetroleum
per100kilometers(138mpg).
Afinalandmorespeculativeoptionwas:
FuelCellVehicles(FCVs),whichranonhydrogenpowerandofferedthepromiseofbeingcompletely
clean.ThefutureofFCVswashighlyuncertain,however,sincemanyissueswithhydrogensupply,
storage,anddistributionhadyettoberesolved.
TheenvironmentaladvantagesofaPHEVoraBEVdependedinpartonhowtheelectricitythey
consumedwasproduced.BurningcoalproducesthemostCO
2
permegawatthour(MWh)ofelectricity
HKSCaseProgram 4of20 CaseNumber1932.0
generatedwithgasandoilcloseseconds.Solar,wind,nuclear,hydroandotherrenewablesourcesarenot
completelyemissionsfreebutgenerateonetwentiethorlessoftheCO
2
perkilowatthour(kWh)ofcoal
(Exhibit4).TheMITestimatesoftheequivalentfueleconomyofPHEVsandBEVsassumedamixof
generatingsourcestypicalintheUnitedStates,where50percentoftheelectricitywasgeneratedbycoal
and18percentbygasoroil.Europe,bycontrast,wasmuchlessdependentoncoal,oilandgas,while
PacificGasandElectric,theprincipalutilityservingtheBayArea,burnedverylittlecoalalthoughafair
amountofgas(Exhibit4).
Itwouldbedifficultforutilitiestoincreasetheiruseofrenewablesourcesofelectricityquickly,
althoughmanyweretryingtodoso.Renewablesourcesweretypicallymoreexpensivethancoalorgas,
absentspecialgovernmentincentivesorsubsidies.Andthereweretechnicalchallengesaswell,especially
sincetheoutputofsomerenewablesourceswasintermittentorcouldnotbeeasilyadjustedtomatch
demand.Solar,windandhydrowerenotcompletelyreliable,forexample,andwindandnuclearplants
typicallyranallnightwhenelectricitydemandwasatitslowest.ProponentssawBEVsandPHEVsasassets
inintegratingrenewablesourcesintotheenergysystemsinceelectricitycouldbestoredtemporarilyin
millionsofcarbatteries.Attheveryleast,carscouldbechargedovernighttotakeadvantageofanyexcess
ofnighttimewind,hydroornuclearproduction,ortostabilizeloadsandimproveutilizationoffossilfuel
plants.Inamoresophisticatedsystemelectriccarscouldbepluggedintothegridwhennotinusesothat
theirbatterieswouldserveasstoragefortheentiresystem,charginganddischargingtohelpbalance
generationandpeakconsumption.Suchasystemwasalongtermpossibility,requiringthedevelopment
ofasmartgridcapableofmonitoringandcontrollingmillionsofdispersedsourcesofelectricitystorage,
generationandconsumption.
Whilemuchofthefocuswasonelectricpoweredpersonalvehicles,somepolicymakerswere
intriguedbythepotentialofreducingcarbonemissionswithelectricheavyrailandlightrailmasstransit
systems,morepopularlyknownasmetrosandstreetcars.(Thetermsheavyandlightrailweremisleading
inthatthedistinctionbetweenthetwomodeswasnottheweightofthecarsortherails,butwhetherthey
drewtheirpowerfromwiresoverhead,andthuscouldoperatesafelyincitystreets,orfromrailsbeside
thetracks,andthusrequiredanexclusiverightofway).Forexample,theSanFranciscometropolitanarea
wasservedbybothametro(theBayAreaRapidTransitSystem,orBART)andastreetcarsystem(TheSan
FranciscoMunicipalRailway,orMuni),inadditiontothousandsofdieselpoweredmasstransitbuses;
togethertheseseveralformsofpublictransitcarried11percentofworkpersontripsbutlessthan4
percentofnonworkpersontrips(Exhibit2).
TheCO
2
emissionssavingsgainedbyswitchingfrompersonalvehiclestoelectricordiesel
poweredmasstransitdependednotjustonthesourcesoftheelectricityemployedbutontheaverage
occupancyofthevehiclesaswell.Iftransitvehicleswerefullyloaded,thenheavyandlightrailcars,and
dieseltransitbuseswouldgenerateslightlylessCO
2
emissionsperpassengermilethanaBEV,andabout
halftheemissionsperpassengermileasaHEV.Iftransitvehiclescarriedonlytheiractualaverage
passengerloads,however,thenheavyandlightrailcarswouldhaveemissionssimilartoanHEV,while
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dieselbuseswouldhaveemissionssimilartoaSIE.BARTemissionsperpassengermilewereestimatedto
besignificantlylowerthanthoseoftheaverageU.S.heavyrailtransitsystembecauseBARTboughtan
unusuallyhighpercentageofitselectricityfromhydroandotherrelativelycleansources(Exhibit5).
ConsumerExperiencetoDate
Ifelectriccarsweretobecomeanimportantcontributortogreenhousegasreductionthenthey
wouldhavetobebuiltandboughtinlargenumbers.Bothvehiclemanufacturersandconsumershad
shownconsiderableinterestinHEVsinthelastdecade.HondaofferedthefirstHEV,theInsight,forthe
U.S.massmarketin1999;ToyotasfamousPriusdebutedin2000,andAmericanmanufacturersbeganto
offerHEVs,includinghybridSUVs,beginningin2004.SalesofnewHEVsincreasedfromaround10,000in
2000to350,000in2007,butthenfellto290,000in2009reflectingthe20082009economicrecessionand
thedeclineinoilpricesfromtheir2008peak(Exhibits6aand6b).In2007,OpinionResearchCorporation
InternationalaskedconsumerswhethertheirnextnewvehiclepurchasedwouldbeanHEV,dieselorSIE
vehicleassumingHEVsandcleandieselcarshada$3,000pricepremiumoverastandardSIEbutreduced
annualfuelcostsby30percent.Sixtypercentofallrespondentsclaimedtheywouldbuyhybridsand15
percentwouldbuycleandieselvehiclesfortheirnextcarpurchase.
2

PHEVshadbeguntoappear,butmassmarketversionswerestillayearortwoaway.Specialty
autoshopswereconvertingproductionmodelHEVsintopluginsforautoenthusiastsandseveral
manufacturers,includingToyota,werepromisingtoofferpluginversionsoftheirHEVsinlimitednumbers
in2011or2012.Mostoftheattentionwasdevotedtothe2011ChevroletVolt,whichGeneralMotors
(GM)wasscheduledtolaunchinCaliforniaandMichiganinlate2010withfullavailabilitypromisedfor
calendaryear2011.ThefourdoorVolthadbeendesignedfromthestartasaPHEVand,perhapsasa
result,differedfrommosthybridsinthatitsSIEonlychargedthebatterywhileitswheelswerepowered
justbyelectricmotorsinsteadofboththeSIEandelectricmotors.TheVoltwouldplugintoahousehold
outletandchargeovernight,andithadarangeof40milessolelyonafullychargedbatteryand600milesif
theSIEwasusedaswell.GMhadnotannouncedthepriceyetbutitwasrumoredtobearound$35,000,
orabout$15,000morethanacomparableSIE.
BEVswerealsonotinwidespreaduseyet,unlessonecountedspecializedlowspeed,shortrange
vehiclessuchasgolfcarts.TherehadbeenaflurryofinterestinhighwaycapableBEVsintheearly1990sin
responsetoa1990requirementbyCaliforniathatby1998twopercentofnewcarssoldinthatstatebythe
sevenlargestcarmanufacturershadtobezeroemittingvehicles.Themandatestimulatedextensive
researchandthedevelopmentandlimitedleasingofseveralprototypes,themostfamousofwhichwas
GMsEV1.In1996thecarmakerswonalawsuitthatCaliforniasrequirementwasunreasonableand
promptlycancelledtheleasesandscrappedthevehicles,provokingadocumentaryfilmtitled,WhoKilled
theElectricCar?
HKSCaseProgram 7of20 CaseNumber1932.0
Asofearly2010theonlyhighwaycapableBEVforsaleintheUnitedStateswasproducedbythe
specialistmanufacturerTesla.Between2008and2010,Teslahadsoldover700ofitsRoadstermodel,a
sportscarcapableof060mphin3.9secondswithaclaimedrangeof291milesonafullchargeandaprice
tagof$110,000.In2012TeslaisplanningtointroduceamoreaffordablefourdoorModelSwithaprice
tagof$57,400andarangeof160miles.Manymajormanufacturersaroundtheworldwereatvarious
stagesofresearchingBEVs,buttheonlyonewithawelldevelopedplanformassproductionwasNissan,
whoseLeafmodelwasscheduledtogoonsaleinlate2010.ThefivedoorhatchbackLeafwasprojectedto
havearangeof100milesonafullcharge.NissanhadyettoannounceLeafsprice,butautoindustry
sourcesthoughtitwouldbebetween$25,000and$33,000.Tokeepthesellingpricelowitwasrumored
thatNissanwouldrequireconsumerstoleasethebatteryonamonthlybasisinadditiontotheinitial
purchasepriceofthecar.
ObstaclestoAcceptance
BatteryTechnology.ThefailureofthefirstroundofBEVsintroducedintheearly1990swas
blamedinpartonthelowgasolinepricesatthetimebutmainlyonthestateofbatterytechnology.The
batteriesoftheearly1990swereexpensive,heavyanddeterioratedwithrepeatedcharges.Auto
designershadsinceswitchedtolithiumionbatteriesthathadahigherenergydensityandlastedthrough
morerechargecycles.Lithiumbatteriesdelivered100percentpowerforthefirst2,000fullchargingcycles
and80percentforanother2,000chargingcycles.
3
Thenewbatteriesstillhadalowerenergydensitythan
gasoline,however,sothatthebatterieshadtobemanytimesthesizeandweightofastandardgastank
forequivalentdrivingrange.Andlithiumbatteriescurrentlycostabout$2,000perkWhofcapacity,
althoughmassproductionwasprojectedtoreducepricesrapidlyto$500$700perkWhby2020.
4
Acar
used1kWhofelectricitytotravel4or5milessothataBEVwitha100mile(161kilometer)rangeneededa
batterywith20to24kWhofcapacity;suchabatterywouldcost$40,000to$48,000atthecurrentpriceof
$2,000perkWh,butaslittleas$10,000to$12,000ifpricesdroppedto$500perkWh.
Exhibit7showsestimatesoftheretailpricedifferentialsbetweendieselandelectricvehiclesanda
comparableSIEvehiclein2009and2035.Theestimates,madebyMITresearchers,suggestthattheprice
ofanSIEpoweredcarwillincreasebyabout$2,000between2009and2035duetoimprovementstomake
itmorefuelefficient.ThedifferenceincostbetweenanHEVandanSIEwilldrop,however,from$4,900to
$2,500.ThePHEVandBEV,notavailablein2010,areprojectedtocost$5,900and$14,400more,
respectively,thananSIEin2035.
LifecycleCosts.ThehigherretailpriceofaHEV,PHEVorBEVwasoffset,atleastinpart,bythe
lowercostforenergyconsumedoverthevehicleslifetime.Whichtypeofvehiclewasmoreeconomicalto

2
WouldYouBuyaHybridVehicle,U.S.DepartmentofEnergy:EnergyEfficiencyandRenewableEnergyDepartment,
July3,2006,http://www1.eere.energy.gov/vehiclesandfuels/facts/2006_fcvt_fotw431.html
3
DanGalves,RodLacheandPatrickNolan,pg.42.
4
ElectricCars:PluggedIn,DeutscheBankGlobalMarketsResearch,June9,2008,pg.12.
operateonalifecyclebasisdependedontheassumptionsaboutbatterycosts,gasolineandelectricity
prices,andontheinterestrateusedtodiscountfuturecosts.Exhibits8and9showthebatterycostper
kWhatwhichaPHEVorBEVischeaperthanacomparableHEVorSIE.Theestimates,basedonananalysis
byresearchersattheUniversityofCalifornia,Berkeleyassumeacardriven15,000milesperyearfor10
yearsandadiscountrateof10percentperyear.Forexample,ifgasolinecost$3pergallonandelectricity
15centsperkWh,theapproximateretailpricesinCaliforniainearly2010,thenaPHEVwouldsave$474in
fuelcostseveryyearcomparedtoanSIE.Thediscountedpresentvalueofthefuelsavingsintheyearthe
vehiclewaspurchasedwouldbe$2,914,enoughtojustifyspendingasmuchas$570perkWhforthe
vehiclesbattery.UsingthesameassumptionsthebreakevenbatterycostforaBEVcomparedtoanSIE
was$208perkWh.
Howsensitivecarbuyerswouldbetothepurchasepricedifferentialsandwhethertheywould
makebasiclifecyclecostcalculationswasunclear.Somestudiesofconsumerbehaviorsuggestedthat
consumersdiscountedfuturecostsandbenefitsheavilyandavoidedcomplexcalculations.Theprice
differentialbetweencurrentHEVandSIEvehiclesdidnotseemtobediscouragingHEVsalesunduly,
however.AndTeslaofferedcarbuyerstheoptionofleasingitsRoadsterandNissanwasexpectedtodo
thesamewithLeaf.Leasingspreadtheretailpricedifferentialoverthevehicleslifetimeandreduced
buyerconcernaboutbatterylifeandperformance.
RangeAnxiety.AfinalissuewaswhethercarbuyerswouldworryaboutthelimitedrangeofBEVs.
MotoristswereaccustomedtoSIEswithrangesofaround400milesonafulltankofgasandHEVsand
PHEVscouldgoasfar.ThepriceandweightofbatteriesmadeaBEVwithacomparablerangeprohibitively
expensive.Accordingtoa2001survey,57percentofcartripsintheUnitedStateswere30milesorless
and82percentoftripswere60milesorless.
5
Inaddition,55percentofAmericanhouseholdsownedtwo
ormoremotorvehicles.A2024kWhbatterywitha100milerangewouldcovermosteverydaytripsbut
somehouseholdswouldrequireeitheranothercarforlongertripsorinfrastructureforrechargingalong
theway.RangeanxietywasoneofthereasonsthatSanFranciscoandothercitieswereworkinghardto
establishpublicchargingstations.
BetterPlace
AnIsraeliAmericanentrepreneur,ShaiAgassi,waspromotingastrategytoaddressboththe
problemsofrangeanxietyandlifecyclecosts.HisPaloAltobasedcompany,BetterPlace,proposedto
makeowningandoperatingaBEVasconvenientandflexibleasaconventionalcarbyseparatingthe
vehicleandthebatterybothphysicallyandfinancially.Thephysicalseparationwouldcomebymakingthe
batteryremovablefromthecar,allowingmotoriststoquicklyexchangeadischargedbatteryforacharged
oneataBetterPlacebatteryswitchstation.Eventhefastestchargingstationswereprojectedtotake30or
moreminutes,andafullchargewouldtake4to8hoursatthevoltagesnormallyavailableinhouseholds.
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Exchangingabatteryataswitchstationwouldtakeonlyafewminutes,aboutthesametimeittooktofill
upatagasstation.Thefinancialseparationwasachievedbyseparatingtheownershipofthebatteryand
thevehicle.BetterPlacewouldownthebatteriesandleasethem,chargingbythemilemuchasmobile
phonecompaniessoldtelephonecallsbytheminuteorthemonth.TheclientcouldchargeupatBetter
Placesexpensethroughachargespotathome,workorinpublic,orexchangebatteriesatoneofBetter
Placesswitchstations.Payingforelectricvehicleservicesbythemilewouldmakeiteasyforcarbuyersto
compareelectricandgasolinecarswithoutmakinglifecyclecostcalculations.AndBetterPlacewas
projectingthatthecostofmobility(i.e.,amortizedcostofthebatterypluscostofelectricity)atonly7or8
centspermileintheUnitedStates,wouldbelessthanthecostoffuelingaconventionalgasolinepowered
car.
BetterPlacehadcapturedtheworldsimaginationseveralyearsearlierafteritsignedagreements
withtheIsraeligovernmenttosetupitsbatteryswitchsysteminthatcountry,andwithRenault,Nissans
parentcompany,toproduceandsellaBEVwitharemovablebattery.TheIsraeliagreementrequiredthat
BetterPlacespend$200milliontorolloutanetworkofswitchstationsandchargespotsinadvanceof
masssalesofBEVsbyRenaultin2011.Inreturn,thegovernment,whichhopedtoreplaceimported
petroleumwithsolarpoweredelectricityforsecurityandenvironmentalreasons,promisedtokeepthe
existingtaxonnewconventionalcarsandhybridsat72percentbuttoreducetaxesonnewBEVsto10
percent.By2010BetterPlaceseemedtobeonschedule.Thefirmhadopenedaprototypebatteryswitch
station,reachedanagreementwithalargeIsraeligasolineretailertoinstallthebatteryswitchsystemin
theretailersgasstations,andsignedupmostofIsraelsmajorfleetoperatorstoconverttoelectriccars
whentheircurrentvehicleleasesexpired.RenaultwasgearinguptoproduceitsBEVataplantinTurkey,
startingwithanoutputof1,000unitsamonthin2011butwithacommitmenttoproduceatleast100,000
by2016.
BetterPlacehadsubsequentlyannouncedagreementstopromoteelectricvehicleswithDenmark,
Hawaii,Australia,thewestcoastofCanada,asmalltaxioperationinJapan,andSanFrancisco.InDenmark,
BetterPlacepartneredwithDONGEnergy,thebiggestDanishelectricutilitythathopedtochargevehicle
batterieswithnighttimewindandhydropower.Thetwocompaniescommittedtobuilda$300million
networkofbatteryswitchstationsandchargespotswhilethegovernment,inreturn,agreedtowaiveits
customary180percenttaxonnewcarregistrationsforBEVs,atleastuntil2015.Mostoftheother
agreementswerelessspecificandfirm.InSanFrancisco,forexample,BetterPlacehadfollowedMayor
Newsomsannouncementofthecitysintentiontobecometheelectricvehiclecapitaloftheworldby
announcingthatthefirmplannedtoinvest$1billioninchargepointsandswitchstationinfrastructurein
theregionbeginningin2012.
6
BetterPlaceestimatedthat100,000to200,000chargingpointswouldbe
neededfor100,000BayAreasubscribers,butsofarthefirmhadbuiltonlyafewpointsforemployeesatits

5
2001NationalHouseholdTravelSurvey,DepartmentofTransportation,2004,
http://www.bts.gov/programs/national_household_travel_survey/
6
http://www.betterplace.com/globalprogress/california/
HKSCaseProgram 10of20 CaseNumber1932.0
PaloAltoheadquarters.
7
Theautomanufacturerswerestillskepticalaboutbatteryswitchandnoneofthe
majorautomakershadjoinedRenaultinitscommitmenttobuildcarswithremovablebatteries.OnlyTesla
plannedtodesignitsnewModelSwitharemovablebattery,althoughtheyhadhadnonegotiationsabout
possibleintegrationwithBetterPlacessystem.Nevertheless,BetterPlacewasahitwithinvestors,who
hadpoured$700millionintothefirmsofar,andAgassiseemedonthevergeofseeinghisdreambecomea
realityinIsraelandDenmark.
SisterCities
Meanwhile,SanFranciscossistercitiesintheC40weredevelopingavarietyofdifferent
approachestomakingtheircitiesEVready.Mostcitieswerepromotingchargingpointsbothatprivate
homesandatoffices,shoppingcentersandotherpublicplaces.Buttherelativeimportancecitiesplaced
onchargingpointsathomeandelsewherevaried,asdidthenumberofpublicchargingpointstheythought
werenecessary.Theplansalsodifferedinthedegreetowhichthepublicsectorortheprivatesectorwas
expectedtotaketheleadandhowdeeplylocalelectricutilitiesorcarmakerswereinvolved.
OneoftheleadersintheC40electricvehiclenetworkwasLondonsMayorBorisJohnson,who
announcedanambitiousElectricVehicleDeliveryPlaninMay2009.
8
Theplancalledforinstalling25,000
chargingpointsinpublicspacesby2015,enoughsothateveryLondonerwouldliveorworkwithinamileof
achargingpoint.Fivehundredofthepointswouldbeoncitystreets,2,000atpubliccarparks,and22,500
atworkplacesandshoppingcenters.Theplanincludedarequirementthat20percentoftheparking
spacesinnewdevelopmentsbeequippedwithelectriccharginginfrastructure,butintheshorttermthe
bulkofthepointswereexpectedtobeinstalledinexistinggarages,parkinglotsandstreets.Thecitys
transportationagency,TransportforLondon(TfL),projectedthecostofthe25,000spacesat60million
($90million),andhadbudgeted20millionofitsfundstosupporttheeffort.Theremaining40million
wastocomefromprivatefirmsthatwouldproposeschemestobuildandoperatechargingpoints.TfLwas
alsocommittedtoelectrifyingitsenormousfleetofdieselbuses,butintendedtopurchasehybridssincea
buspoweredonlybybatteriescouldnotmeetitsoperationalrequirements.
BerlinwaspilotingadifferentapproachwithapartnershipbetweenitslocalelectricutilityRWE
andtheGermancarmanufacturerDaimlertoofferacoordinatedpackageofBEVs,electricityandcharging
points.DaimlerwouldleasesubscribersanelectriccarandRWEwouldinstallachargingstationintheir
home,allowthemaccesstoanetworkof500publicchargingpointsacrossthecity,andsellthem
electricityatadiscountedpricedependingonwhenandwheretheychargedwithallcostschargedtothe
customersutilitybill.Theeffortwasapilot,andDaimlerwascommittedtosupplyingonly100BEVstothe
scheme.Asofearly2010,the500chargingpointswereopenandDaimlerhadturnedoverahandfulof

7
MartinZimmerman,ChargingAheadinPushforElectricCars;BetterPlaceWantstoInstallThousandsofPluginand
BatteryreplacementStations,L.A.TIMES,Dec.27,2008,atC1.
8
LondonsElectricVehicleInfrastructureStrategy:TurningLondonElectric,MayorofLondonDecember2009.
HKSCaseProgram 11of20 CaseNumber1932.0
electricpoweredversionsofitstwopassengerSmartForTwoscartosubscribers.Daimlerintendedto
supplyelectricversionsoftheMercedesBenzEclasscarslaterinthepilot.
9

WhatNextSanFrancisco?
ComparedtothevisionsofLondon,BerlinorBetterPlace,SanFranciscosplansseemedanemic.
Therequirementsforchargingpointsinnewbuildingswouldtakedecadestohavemucheffectsincethey
affectedonlynewconstruction.InSanFranciscossuburbs,mosthomeshadanattachedgaragewherea
homechargingpointcouldbeinstalled.But84percentofthecitysresidentswhoownedcarshadno
garagesandparkedtheirvehiclesonthepublicstreetsatnight.
Asofearly2010themetropolitanareahadonlyabout70publicparkingspotsequippedwith
chargingpoints,manyintheparkinglotsofTeslaandBetterPlace,andmostoftherestbuiltand
maintainedbyasmallprivatecompanycalledCoulombTechnologies.Thefirmhaddesignedauniversal
pluginstationthatcouldbeeasilymountedonstreetlightpolesandwasactivatedviaasmartcard.
CoulombinstalleditsfirstthreechargingpointsonthestreetacrossfromSanFranciscosCityHallin2009
andby2010had29chargingstationsscatteredthroughouttheBayArea.
10
Coulombstationscost$2,000to
$4,000eachtobuildandthefirmchargedamonthlysubscriptionfeewiththeamountdependingonwhen
andhowoftenonecharged.Themonthlyfeeincreasedfrom$15for10orfewernighttimechargesto$50
forunlimitedchargesatanytime.ItwastooearlytoknowwhetherCoulombsbusinessplanwasrealistic
andthefirmwasthinlycapitalized.
InFebruary2010theBayAreaAirQualityManagementDistrict,theregionsairqualityregulator,
triedtohelpbyannouncing$428,200ingrantstobuildanother226publicchargingpointsthroughoutthe
BayArea.Thegrantsincluded$100,000totheCityofSanFranciscotoopen60chargingpointsinpublic
garages,$286,200tothegovernmentsoffoursurroundingcountiestobuild130pointsintheirterritories,
and$42,000totheCityofPaloAltoandBetterPlacetobuild36pointsinthatcity.
11

Thegrantprogramwouldleaveametropolitanareaofover7millionpersonswithonlyaround300
publicchargingpoints.HowimportantwasittopromoteelectricvehicleuseinSanFrancisco?Woulda
shortageofpublicchargingpointsinhibitthespreadofelectricvehiclesinthemetropolitanarea?Orwas
theplanprudentgiventhelimitationsoftheavailabletechnologiesandtheuncertaintiessurrounding
consumeracceptance?

9
DaimlerwebsiteaccessedMarch1,2010athttp://www.daimler.com/dccom/057153112625021000009293
71450000000.htmlandCarolinReichert,RWEEMobility:MarketExpectation,Strategy/BusinessModel,
ImplementationStatus,RWE,PresentationinFrankfurt:September15,2009.
10
http://www.coulombtech.com
11
http://abclocal.go.com/kgo/story?section=news/local/san_francisco&id=7296724

Exhibit1
GlobalAnthropogenicGreenhouseGasEmissionsbySector,2000.

Source:ClimateChange2007:MitigationofClimateChange.WorkingGroupIIIContributiontotheFourth
AssessmentReportoftheIntergovernmentalPanelonClimateChange,FigureTS.2b.CambridgeUniversity
Press.
HKSCaseProgram 12of20 CaseNumber1932.0
Exhibit2
SanFranciscoMetropolitanAreaDemographicTrendsandProjections,19902030

HKSCaseProgram 13of20 CaseNumber1932.0

Exhibit3:
EstimatesofRelativeFuelEconomyofDifferentVehicleTypesin2035

Source:Report,MITLaboratoryforEnergyandEnvironment,OntheRoadin2035:Reducing
TransportationsPetroleumConsumptionandGHGEmissions,July2008.
HKSCaseProgram 14of20 CaseNumber1932.0
Exhibit4:
CO2EmissionsfromElectricityGenerationbyEnergySource

Shareofsources

Energysource
Emissionsin
kilogramsofCO2
perMWh

UnitedState
average

European
average

PacificGasand
Electric
Coal 990 50% 23.8% 2%
Oil
Gas 653
18%* 23.5%*
44%
Nuclear 21 20% 16.9% 22%
Hydro 18 23% 17%
Wind 37 4.6%
Solar 59
Otherrenewables

11%**
6.6%***

15%***

*Gasandoiltogether
**Renewables
***Otherrenewables

Sources:
Emissions:"EnergyTechnologyLifeCycleAnalysisthatTakesCO2EmissionReductionIntoConsideration,"
CentralResearchInstituteofElectricPowerIndustry,Japan,AnnualResearchReport,1995.

UnitedStates:CarbonReductionofPluginHybridElectricVehicles,U.S.DepartmentofEnergy:Energy
EfficiencyandRenewableEnergyDepartment,March16,2009,
http://www1.eere.energy.gov/vehiclesandfuels/facts/2009_fotw562.html

EuropeanUnion:Factbook:GeneralCapacityinEurope,RheinischWestflischesElektrizittswerk(RWE),
June,2007.

PacificGasandElectric:www.pge.com/

HKSCaseProgram 15of20 CaseNumber1932.0

HKSCaseProgram 16of20 CaseNumber1932.0
Exhibit5:
PoundsofCO
2
perPassengerMileinPersonalandPublicTransportation

PersonalVehicles
Assumptions
LbsofCO
2
per
PMT
VMTper
gallon
WhperVMT LbsofCO2
perVMT
Occupancy
(PMT/VMT)
AverageSUV 0.719 18 1.078 1.5
AverageSIE 0.577 22.4 0.866 1.5
HEV(ToyotaPrius) 0.278 46.6 0.416 1.5
BEV(NisanLeaf) 0.141 240 0.211 1.5
Assumptions:1gallonofgasolinecauses19.4lbsofCO
2
emissions,PacificGasandElectricemits0.879lbs
ofCO
2
perWh.Thesearejustthedirecttanktowheelemissions;welltotankemissionswouldadd25
percenttothesefigures.

PublicTransportation:NationalAverage
LbsofCO
2
perPMT
Average
occupancy
Fulloccupancy
Dieselbus 0.65 0.16
Heavyrail 0.24 0.11
Lightrail 0.41 0.15
Commuterrail 0.35 0.11

PublicTransportation:SanFranciscoMetropolitanArea
LbsofCO
2
perPMT Assumptions
Average
occupancy
Fulloccupancy kWhper
seatmile
LbsofCO2
perMWh
Occupancy
Bus(Muni) 0.559 0.179 32%
Heavyrail(BART) 0.089 0.026 0.071 399 37%
Lightrail(Muni) 0.410 0.152 0.172 879 32%
Note:BARTpurchaseselectricitywithlowercarbonemissionsperWhthanthePacificGasandElectric
average.

Source:FederalTransitAdministration,PublicTransportationsRoleinRespondingtoClimateChange,
January2009.

_____________________________________________________________________________________________________________
HKSCaseProgram 17of20 CaseNumber1932.0
Exhibit6a:
RetailGasPricesperGallon19902009
RealPricesAdjustedwithConsumerPriceIndex(2000=BaseYear)
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
1
9
9
0
1
9
9
1
1
9
9
2
1
9
9
3
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
Year
P
r
i
c
e
Nominal Prices
Real Prices

Source:BureauofLaborStatistics(CPIforallUrbanConsumers)http://www.bls.gov/cpi/#tables

RetailGasPricesperGallon19902009

Nominal
Prices
RealPrices
CPI
(2000=100)
1990 $1.16 $1.53 75.88
1991 $1.14 $1.44 79.09
1992 $1.13 $1.39 81.48
1993 $1.11 $1.32 83.89
1994 $1.11 $1.29 86.08
1995 $1.15 $1.30 88.49
1996 $1.23 $1.35 91.09
1997 $1.23 $1.32 93.22
1998 $1.06 $1.12 94.66
1999 $1.17 $1.21 96.73
2000 $1.51 $1.51 100
2001 $1.46 $1.42 102.83
2002 $1.28 $1.23 104.46
2003 $1.59 $1.49 106.83
2004 $1.88 $1.71 109.69
2005 $2.30 $2.03 113.41
2006 $2.59 $2.21 117.07
2007 $2.80 $2.33 120.41
2008 $3.27 $2.62 125.03
2009 $2.40 $1.93 124.59

Source:EnergyInformationAssociationhttp://www.eia.doe.gov/emeu/steo/realprices/index.cfm

Exhibit7:
IncrementalRetailPriceIncreaseofDieselandElectricVehiclesOveranSIEVehiclein
2009and2035

RetailPriceIncrease($2007)
VehicleType Cars LightTrucks
CurrentGasolineSIE*RetailPrice $19,600 $21,000
IncrementrelativetocurrentGasolineSIE
CurrentDiesel $1,700 $2,100
CurrentTurboGasoline $700 $800
CurrentHybrid $4,900 $6,300
2035GasolineSIE $2,000 $2,400
2035GasolineSIERetailPrice $21,600 $23,400
Incrementrelativeto2035GasolineSIE
2035Diesel $1,700 $2,100
2035TurboGasoline $700 $800
2035Hybrid $2,500 $3,200
2035PluginHybrid $5,900 $8,300
2035BatteryElectric $14,400 $22,100
2035FuelCell $5,300 $7,400
*SIE=sparkignitionenginevehicle

Source:MITLaboratoryforEnergyandtheEnvironment,OntheRoadin2035:Reducing
TransportationsPetroleumConsumptionandGHGEmissions,July2008,p.ES5.

_____________________________________________________________________________________________________________
HKSCaseProgram 18of20 CaseNumber1932.0
Exhibit8:
BreakevenBatteryCostperkWhforPHEVRelativetoHEVandSIEVehicle

HKSCaseProgram 19of20 CaseNumber1932.0

HKSCaseProgram 20of20 CaseNumber1932.0
Exhibit9:
BreakevenBatteryCostperkWhforBEVRelativetoHEVandSIEVehicle

AnnualEVsfuelsavingsrelativetoeachtypeofvehicle
Gasolineprice $3 $4 $5
HEV ICE HEV ICE HEV ICE
$0.05 $761 $1,044 $1,065 $1,442 $1,368 $1,839
$0.10 $611 $894 $915 $1,292 $1,218 $1,689
$0.15 $461 $744 $765 $1,142 $1,068 $1,539
$0.20 $311 $594 $615 $992 $918 $1,389
$0.25 $161 $444 $465 $842 $768 $1,239
E
l
e
c
t
r
i
c
i
t
y

p
r
i
c
e

(
$
/
k
W
h
)

$0.30 $11 $294 $315 $692 $618 $1,089

Discountedvalueoffuelsavings
Gasolineprice $3 $4 $5
HEV ICE HEV ICE HEV ICE
$0.05 $4,675 $6,412 $6,541 $8,857 $8,407 $11,302
$0.10 $3,754 $5,491 $5,619 $7,935 $7,485 $10,380
$0.15 $2,832 $4,569 $4,698 $7,014 $6,563 $9,457
$0.20 $1,910 $3,647 $3,776 $6,092 $5,642 $8,537
$0.25 $988 $2,726 $2,854 $5,170 $4,720 $7,615
E
l
e
c
t
r
i
c
i
t
y

p
r
i
c
e

(
$
/
k
W
h
)

$0.30 $67 $1,804 $1,933 $4,249 $3,798 $6,693

Breakevenbatterycost($/kWh)
Gasolineprice $3 $4 $5
HEV ICE HEV ICE HEV ICE
$0.05 $236 $291 $330 $403 $425 $514
$0.10 $190 $250 $284 $361 $378 $472
$0.15 $143 $208 $237 $319 $331 $430
$0.20 $96 $166 $191 $277 $285 $388
$0.25 $50 $124 $144 $235 $238 $346
E
l
e
c
t
r
i
c
i
t
y

p
r
i
c
e

(
$
/
k
W
h
)

$0.30 $3 $82 $98 $193 $192 $304

Assumptions
ICE:37.7MPG
HEV:49.4MPG;2.2kWhBattery
EV:22kWhBattery;5miles/kWh
MilesTraveledaYear:15,000;VehicleLife:10years;DiscountRate:10%

Source:AdaptedfromDMLemoine,DMKammenandAEFarrell,AnInnovationandPolicyAgendafor
CommerciallyCompetitivePluginHybridElectricVehicles,Environ.Res.Lett.3.2008.