Talk:Resolution: Self paying vehicle loans

Q: Is this proposal's approach applicable at a national level?
A: Yes. Consider the following example program: The prospective PHEV owner is told that the PHEV will cost the same as a comparable gasoline vehicle of the same class, and they will be charged for car electricity at the eqivalent of $3.50 gasoline. The program is revenue neutral with these parameters:
 * 30 mile all electric range based on one overnight recharge
 * 12.9KWH battery would be needed for a Prius class vehicle. Using GM estimate of $10K for a 16KWH battery in the Volt (63 cents per watt hour of capacity), this battery would cost $8,100
 * 3.5% inflation rate. This parameter means at the end of the 10 year period, the owner would no longer be charged $3.50 per equivalent gallon, but $4.98 per gallon.
 * 8% annual interest rate
 * cost of capital at end of 10 years: $11772
 * Amount recovered from surcharges: $11,644
 * Calculations may be found on this spreadsheet. Rates are based on actual KWHs used for all electric mode in a Renault Kangoo (unfortunately figures for Prius PHEV in all electric mode are not available from AVTA as yet). Kangoo's all electric rate was 268 watts per mile, (similar to unofficial figures for the PHEV Prius from EEA-PHEV site). The gasoline Kangoo gets 30.84 in urban driving.  The fuel for the gasoline version would cost $14,578, and the electricity at a national average rate of 10 cents per kwh would cost $2,934.  The savings is 11,644 and is applied to the battery cost and the cost of capital.

Notes:
 * 1) The figures for larger class cars are the same, because though they use larger batteries, they use more electricity.
 * 2) This scenario ignores some factors for simplicity.  For example, it assumes that batteries are 100% utilized, so surcharge dollars used to repay the loan are recovered at the maximum rate.  This most certainly would not be the case, but two factors offset this.  Firstly, there will be some recharging during the day, so that cars going over the average miles per day will be recovering more surcharges to offset those vehicles that drive less than average.  Secondly, we deliberately set a battery size smaller than necessary to travel the national average miles driven (approximately 40 miles per day), and so this will help maximize utilization.
 * 3) The goal of this example program is rapid adoption of PHEVs. Unlike the Hawaii state scheme, alternative electricity generation is not funded with a portion of the surcharge.
 * 4) There are several parameters that can be changed to alter the payback rates. Alternatively, the prospective customer can be told that they can own the PHEV with a 40 mile range for the same cost as a comparable gasoline car of the same class, and that they will pay the eqivalent of $2.80 per gallon.  The additional revenue is possible because the surcharge is based on what the average american vehicle in the fleet would have cost per mile as of 2007.  The average fleet vehicle would cost $20,860 over 10 years paying for gas at an inflation adjusted rate of $2.80 per gallon.  The inflation adjusted electricity would cost $4600, producing enough money for the larger 40 mile range battery even if paid back at 9% interest.

Q: Have other states examined these kinds of loans?
A: Yes. In 2002, it was proposed by the California Power authority that utilities collect via utility bills loan repayments for energy efficiency improvements to buildings. Finance institutions utilize capital from a State Bond and issue the loans that qualify. "FILING OF THE CALIFORNIA CONSUMER POWER AND CONSERVATION FINANCING AUTHORITY REQUESTING APPROVAL OF MECHANISM TO USE UTILITY BILLS TO COLLECT CUSTOMER PAYMENTS FOR CPA-ARRANGED FINANCING OF ENERGY EFFICIENCY OR ON-SITE RENEWABLE ENERGY INVESTMENTS ", submitted by CALIFORNIA CONSUMER POWER AND CONSERVATION FINANCING AUTHORITY to the PUC of California January 12, 2002. Copies available from E-mail: tara.dunn@dgs.cs.gov Online copy at  accessed 8-22-2008. If the link breaks, search on the title via google, and click on "View in HTML". Southern California Edison performed an analysis of the proposal, pointing out implementation details of interest to the PHEV loan proposal. There report is entitled "Southern California Edison Company's (U 338-E) Comments on THE California Consumers Power and Conservation Financing Authority’S Proposal for approval of a Mechanism to Use Utility Bills to collect loan Payments", dated April 4, 2004. Submitted by lawyers for SCE: BARBARA A. REEVES, MICHAEL MONTOYA, & LAURA A. LARKS. Contact E-mail: Laura.Larks@SCE.com Online version is here.

The California program offered the following benefits The difference in the Hawaii program is that the loans are restricted to electric automobiles proportionate to the class of the vehicle, and that surcharges are aggregated across all consumers and loans are repaid at a constant rate.
 * Accelerated energy programs
 * Lower cost of capital due to increased loan security
 * Increased participation

Q: Is this for Hybrid vehicles like Toyota Prius and Ford Escape?
A: Not unless they have been upgraded to a plug in hybrid (PHEV) This resolution concerns PHEVs and other vehicles that can travel at least 20 miles per day on a charge. This is the distance Hawaii vehicles on average drive per day. Chevrolet has announced a factory built PHEV for 2010. Toyota is widely rumored to be planning a PHEV for that timeframe, but has not made an announcement. All major manufacturers have PHEV projects, but the only PHEV that has been officially announced at this time is the Chevrolet Volt.

Q: The program looks complicated. What is the main idea behind this proposal?  What problem does it solve?
A: This program answers how to make plug in electric vehicles the same price as gasoline cars, and not run on imported coal and oil burned at Hawaii power plants.

People today can go out and purchase an electric vehicle like the Toyota Prius. Many other car companies make electrical vehicles, such as Renault, Ford, and Checrolet in all car classes from subcompact to pickup trucks to SUVs. There are three main problems for these vehicles. First, although these vehicles have electric motors, and are fully designed to run on all electric power with the gas engine off, they get their power from recycling energy used during braking. Their maximum range on all electric power is around a mile, after which they are back to burning gasoline. Many car dealerships offer an option to modify these vehicles to fix this- so that their power comes from the electric grid. Cars that will appear on the market in 2010 are designed as plug in electrics.

The second problem is that Hawaii's electricity comes from plants burning Fuel oil and other fossil fuels like coal and LPG. If the power used to charge these vehicles is nothing different, then we have just played a shell game, and nothing has changed.

These first two problems are being addressed. The toughest problem is the last. To go any significant distance solely on electrical power, these vehicles must have a very large and expensive battery that can add between $6000 to $20K to the price of the vehicle. It is true that consumers on one hand get a bargain because at current electicity prices the "gas" for these vehicles is the equivalent of $2.50 per "gallon", but even though the added battery price pays for itself over 10 years, few consumers will spend an extra $10,000 or $20,000 for such a car.

This proposal offers consumers the option of buying an electric vehicle that is near the same price as a comparable gasoline vehicle because a loan is offered that is repaid with these energy savings. That is the idea of a self paying loan. If the consumer chooses such a loan, then power that goes into the vehicle is surcharged at a higher rate in order to pay back the loan. If the surcharged power is still less than the price of gasoline, then why would consumers pay the same amount for a comparable gasoline car that forces them to lose more money at the gas pump? Many wouldn't, and the demand for such vehicles could be very high indeed- provided the sticker shock problem due to the cost of the batteries is addressed.

The second part of the problem is that this shift to electrics doesn't get us anywhere if they are ultimately powered by the same sources of energy. The problem with fueling electric vehicles with clean alternative sources like wind, solar and sea power is that power from these sources are still more expensive than fossil fuel sources. In order to defray the higher added cost of this alternative power, a portion of the surcharge goes for paying for alternative electricity generation.

The proposal does not involve subsidies or tax incentives. The savings from energy used to power the vehicle with electricity pays for the loan as well as the higher cost of alternative energy. The proposal is revenue neutral.

Q: What if the local utility refuses to generate alternative power that is produces in Hawaii?
A: If the utility does not secure qualifying Hawaiian alternative energy sources (either from third parties or by building capacity itself), then they do not receive the portion of the surcharge.set aside for alternative power.

Q: Do loans cover the entire cost of the car?
A: No. These are partial loans intended to bring electric vehicles near to the price of comparable gasoline vehicles.

Q: This proposal focuses on batteries, does that represent the entire premium of a PHEV over a conventional vehicle?
A: No. This is a shortcoming of the current calculations. There is a premium for hybrid technology minus distinct from the premium of the plug in portion (larger battery and integrated recharging). According to Consumer reports April 2006 issue, the premium for the hybrid portion is significant. Ranging from $3970 for a Honda Civic to $7185 for a Toyota Highlander (small SUV). The premium for a Prius was $5700. The cost of a longer range battery would be on top of this.

Q:Do Batteries last long enough to be paid off?
A: Yes. According to the U.S. Department of Energy -Advanced Vehicle Testing Activity (AVTA)'s report " US Department of Energy Hybrid Electric Vehicle Battery and Fuel Economy Testing" presented at the 11th Asian Battery Conference, September 2005 (http://avt.inel.gov/pdf/karner.pdf). According the the DOE researchers, "It is clear from data collected to date, that battery performance is sufficient to provide stable vehicle fuel economy over a 160,000 mile HEV life." The proposal assumes a 10 year battery life, and commercial electric vehicles such as Chevrolet Volt also assume a 10 year battery life.

Q:What types of energy carriers of electricity are allowed?
A: This resolution is technology neutral. "Battery" was chosen as an easily understood term that connotes a mechanism of storing energy, and nearly all of the examples refer to chemical batteries since these are commercially available to mass markets in the near term. However there are a variety of different kinds of energy batteries including flywheels, supercapacitors or fuel cells that differ in technology from the electrochemical batteries that are nearest to market. So long as the energy source for the energy storage technology is Hawaiian generated electricity, and the output of the storage mechanism is electricity that powers the vehicle, then the battery qualifies for the terms of the resolution. Example, Fuel cell batteries which consume hydrogen reactant generated from Hawaiian electricity qualifies, but if the hydrogen were derived from natural gas, then it wouldn't.

Q: What is the estimated cost of the program?
A: This proposal is revenue neutral. Like government backed student loan programs, there is risk should the loans default. However, payment recovery would not be a source of risk, repayment is tied to electric service.

The chief sources of risk are:
 * 1) a sharp sustained drop in the price of gasoline similar to that in the 80s.
 * 2) PHEVs become the 8 track tape of automotive technology.  Rapid adoption of another automotive technology that makes PHEVs cheaper to scrap than to operate.


 * Risk1: Due to peak oil and skyrocketing demand from China and India, there are strong reasons to believe that $4.00 a gallon gasoline is not a temporary spike, and prices will continue an upward trajectory. There are no guarantees that this will be the case, and if global gasoline demand is significantly impacted, then there could be a sustained price plunge.  During these periods, consumers buy gasoline instead of electricity to power their PHEV, and there are insufficient surcharge revenues to repay the loans or pay for the presumably more expensive green electricity.   Regardless, if gasoline plunges to the mid or low $3 range for a sustained period, the program is still viable because there are a wide set of options internal to the program:
 * 1) moratorium on the requirement of green electricity.  Since the national average electricity rate produces energy that will transport vehicles for a cost equivalent of $1 per gallon gasoline.  With gasoline above $3 per gallon, that $2 per gallon that can be used to pay off the batteries.  If nationally implemented, the costs can be shared, subsidizing regions with higher electricity costs.  When gasoline prices escalate, the green energy requirement is restored.
 * 2) The PHEV owner is asked to make a more generous cost savings comparison.  Owners are charged electricity paying the same rate as they would if driving a gas vehicle gettting an MPG that is average for the those currently on the road in the nation (about 21MPG).  This is much higher than other cost differential calculations.  For example, one which charges at the same rate as they would for gas version of the vehicle of the same class would recover the cost of the battery much more slowly, since the comparison for compacts in urban driving would be to gas versions getting 30MPG, not 21MPG.
 * 3) finance only the battery size needed for commuting- if consumers charge at work, the battery needs to be half size, meaning that half the capital is required, and the more common full charges means the highest surcharges are paid in proportion to battery size.
 * 4) reduce the finance charge by federal administration of the loan.  The cost of capital using traditional credit markets is 50% over the life of the loan.  Substantial savings are possible by bypassing these institutions and lending at near the prime rate.
 * 5) Take the long view.  Offset losses to future years.  Assume that the program will lose money in the first years and will be made up later because gas prices will again rise, and technology will deliver lower cost batteries and green energy.
 * 6) External to the program: Phase in a gas tax as gasoline prices lower.  The revenue from the gas taxes rund the program.  It could be argued that such intervention is required in any scenario since the market will otherwise reestablish a competitive equilibrium between PHEVs and gasoline vehicles.  As PHEV adoption goes up, gas demand and therefore prices will go down, making gas vehicles (or burning gas rather than electricity in PHEVs) more attractive.
 * Risk2: (Radically less expensive technology makes PHEVs obsolete) Such an energy technology would have to be sufficiently inexpensive to decide that scraping is cheaper than operation. If in the unlikely event such a revolutionarily cheap technology becomes available, the economic benefits of such a technology are so massive that tax revenue derived from that surge in economic activity will more than offset the cost of repaying any losses for this program.  Even in this extreme case, losses would not be total, since regulators could respond to market conditions and lower surcharges to lower PHEV cost of operation to a sufficently attractive level.

Q: What is the financial case to back up this proposal?
A: As of May, 2008, residential rates on Oahu are about 24 cents per KWH. Converting this to the energy delivered comparable to a gallon of gas is complicated, but the generally accepted figure is that 1KWH of electricity from the grid will deliver what .1 gallon of gas will deliver in a given vehicle. Source:Wikipedia PHEV article. This means that electrical "gas" for vehicles costs $2.50 per gallon. Crowds of eager consumers would be standing in lines at dealerships if they sold a new type of vehicle that ran on "gas" costing only $2.50/gallon. Such PHEVs will soon be available but the the response will be tepid due to a market failure. Although the vehicles are worth it in the long run, consumers are unable to take the long view.

Here's the case that the vehicles are now competitive. There are about 1.1 million gasoline vehicles registered in the state of Hawaii, and we consume 455 million gallons of refined gasoline according to the state tax records. Each vehicle consumes an average 446 gallons costing $1871 per year at $4.20 per gallon.. Since the person paying for electrical "gas" in PHEVs will pay only $612 per year to go the same distance, there is $1259 per year in savings that would comfortably pay for the battery in a few years. But cash strapped consumers will be reluctant to experiment with the new vehicles, and many would not qualify for loans for these more luxury priced vehicles given the current state of consumer credit markets.

So the financial case for the batteries is strong, but market efficiency is defeated due to the high barrier to entry for PHEV ownership. The second portion of the financial case has to do with supporting the cost of the more expensive alternative power.

The authoritative Solarbuzz solar power research site calculates the cost of Solar PV for example (including the panels, construction, maintenance, cost of capital etc.) at currently 21.3 cents per KWH. Solar Prices- See industrial Solar III). Wind is less, but the permitting is much more time consuming.  These break even figures covers cost of the plant (generation capacity).  Power suppliers are going to want to see a return on investment, and there are other improvements to infrastructure needed so it is possible to allow them a generous margin- lets say worst case their portion of the surcharge  is 34 cents per KWH.  That means the average consumer’s cost of fuel per year would be $876 per year using Heco provided Solar.  This is still substantially less than the $1,871 they would pay for gasoline.  So we still have $1004 per year to pay off the battery.

Battery cost is currently calculated at $1 per watt for current lithium-ion batteries. Chevrolet states they are confident they can bring that down to 63 cents by 2010, but let’s be conservative and assume 82 per watt hour of capacity. For the average Hawaii daily mileage running all electric- the average vehicle's motor would require 8 KWHs of power. Because you lose 20% when charging and discharging the battery, you need 10KWHs of power to fuel the 8KWH battery. Lastly, to achieve 10 year lives, current lithium batteries cannot be discharged more than 50%. Our initial program assumes PHEVs planned for market in the near term, so the battery size needed is 11KWH and at $.82 per watt-hour of capacity, the cost of the battery is about $9171.

Average battery life is targeted at 10 years, so given the cost of a loan adding $4000 in capital cost, paying off the 11KWH battery is not possible. But we are looking at a technology curve here, and so it is safe to assume that cost of subsidized clean energy will come down from 34 cents, and that Chevrolet will eventually hit there 63 cent per watt battery target. If Chev does hit their target, then by 2010 when this program starts, the batteries would pay off. Lastly, if gas prices appreciate at even modest rates of 4% per year, the program also remains revenue neutral.

For power generation companies, this presents a significant business opportunity. At 34 cents per KWH, they are getting a better than 50% ROI on capacity that can be built out incrementally using PV, with exceptionally short permitting cycles. As PHEVs become popular, 70% of Hawaii's gasoline consumption will be displaced by 2 additional terawatt hours of electricity, generating an additional $680 million in revenue for Hawaiian utilities.

(For more detail, a spreadsheet and citations for these calculations using Oahu as an example, see Resolution: Self paying vehicle loans/notes)

Q: Problems in meeting new demand?
This would require addition of significant alternative power generation quickly. Most alternative schemes require schedules of 10 years. Doesn't this create a sudden spike in demand that suppliers will have difficulty answering?

A: Not all forms of power require long schedules. Global production of Solar Photo Voltaic panels is burgeoning due to demand in Europe, so supplies are plentiful. Further, increases in capacity can be added incrementally to meet demand. It is likely that Hawaii will use a mix of technologies to meet its needs. This proposal is not prescriptive. It states how government can without subsidies set a high rate to compensate suppliers for the more expensive generation.. Note that in unexpected eventualities where demand appears to be outstripping supply, loans may be issued at a slower rate.

Q: What if a person does not drive their car often? Does the loan not get paid back?
A: Surcharges are pooled to pay back loans at a constant rate. At the discretion of regulators, the surcharge might track gasoline prices upwards, so that electric vehicle owners always have power at a substantial discount to gasoline, but in proportion to whatever gasoline is selling at. This would allow loans to be paid back quicker, so that the used vehicle at some point would be free of the battery surcharge, and the owner would enjoy $3.40 per gallon "gas" assuming that green electricity was required, and it was paid at 34 cents per KWH.

Q: How is energy metered separately from home electricity?
A: Separate metering would be included in the battery using a standard mechanism agreeable to the power utilities. It is possible to add this as an after market device that sits between the charging outlet and the power company. One possible and likely implementation would be to use broadband wi-fi used in cell phones known as EVDO. This particular scheme allows future options the power company to take advantage of advanced approaches to power management such as Vehicle to Grid use of batteries for grid energy storage, power stabilization and for power outages. However, the power utilities may propose alternate metering schemes for standardization.

Q: How many years before that grid management technology be available?
A: The DOE's Idaho National Laboratory is currently field testing such a system in 4 states. Hawaii is one of them. The communication module is known as a V2Green Connectivity Module, and it along with the grid management server software was provided by Seattle based V2Green Inc. At the V2Green website, see especially the project being conducted in Austin Texas to sychronize with wind surges that occur at night from Texas windfarms.

Q: Don't Vehicle to Grid approaches reduce battery lifetime?
A: Acording to Federal Energy Regulatory Commissioner Jon Wellinghoff, this is a myth. The idea is that a battery need not discharge to stabilize the grid. The grid keeps stability by applying and shedding the load of charging to trim the peaks, rather than drawing power from the batteries to fill the troughs. This doesn't merely mean that the cost in battery life is reduced. There is zero reduction in battery life.

Q: Will individual electric bills go up?
A: All other services are unaffected. Only power used by electric vehicles are charged the higher rate.

Q: Can consumers opt out?
A: Yes. If the owner does not opt for the loan, they are free of the battery portion of the surcharge. As a separate policy question, lawmakers and regulators may wish to require cars to be fueled by green sources of energy. But such cases are a separate issue not covered by the proposal.

Q: What about fraud?
A: Encasement of the electronics as an integral part of the battery would prevent the lions share of fraud opportunities. State vehicle inspection might add a step to verify that the device has not been tampered with (seals unbroken) that vehicle mileage and reported recharging are within predicted bounds for legitimate use.

Q: Problems with intermittent nature of alternatives?
Some alternatives like solar are not available at night when vehicles are recharged. Isn't this a problem? A: Electrical demand is lowest at night, and power could be provided by traditional sources. However, the utility would be required to show that it had generated the necessary Hawaiian alternative energy during the month in order to qualify for their portion of the surcharge for green electricity. Solar would not be excluded since it might be used to flatten peak demand during the day when utilization is highest.

Q: Does "Hawaiian alternative energy" mean "CO2 free"?
A: Not necessarily. The resolution does not restrict energy from burning Hawaiian generated waste, or locally grown biomass such as cane sugar bagasse or algal oil. Not all garbage incineration though would qualify- only that for which the fuel was grown in hawaii. So burning bagasse, palm fronds, or woodwaste from locally grown trees would qualify, but any papers or plastics would not, since wood for these papers and petroleum from these plastics did not originate in Hawaii.

Q: Does power from renewable sources such as Indonesian grown palm oil qualify as a green energy source?
A: Not under this plan. The biomass would have to be grown in Hawaii.

Q: Other electric vehicles use Nickel Metal Hydride or Lead Acid batteries. Are these coverred?
A: These batteries cost less than Lithium Ion, so as an implementation detail, since the intent of the resolution is to offset the battery price, loans for such vehicles might instead be proportionate to the cost of the batteries.

Q: Would this plan make aftermarket plug in hybrids affordable?
A: Not likely. Due to the re-engineering required, After market addition of a battery can cost between $24K to $32K, while the cost of goods for the batteries is substantially less- $6K to $14K. As a factory provided option, this additional cost of re-engineering is avoided. A Chevrolet Volt is an example of a factory produced plug in vehicle and is projected to cost approximately $10K more than a comparable gasoline burning vehicle. This proposal would benefit factory build vehicles such as these.

Q: Is the loan the same for all vehicles?
A: No, the likely implementation would be to factor curb weight. A high passenger capacity vehicle would require more battery power than a two person commuter vehicle.

Q: What is the source of these figures?
A: If not footnoted, much of the supporting Department of Energy and other official sources for data used for this proposal are cited at Resolution: Self paying vehicle loans/notes and User:Jmesserly/hawaii_energy

Q: Why not support conventional renting or leasing of the batteries?
A: Firstly, such an approach would not address whether the energy supply for the electricity contributed to energy independence/ climate change or not. Second, it doesn't help the financing. The batteries are expensive and perishable, so the rental charge will necessarily be high- comparable to a loan for the value of the battery. For example Think Inc. has a $35K SRP electric vehicle that they sell the customer for $25K if the buyer agrees to a $200 per month battery rental charge. The $10K battery is paid off in 4.1 years with this "rental", but the owners still must pay. So what is the advantage if the person is paying $700 per month on a car loan, or $500 per month on a car loan with $200 battery rental fee?

Q: what is the source of the capital for the loans?
A: A Hawaii State bond issue would provide the capital.

Q: Capital markets are tight. Is there a market for this paper?
A: Sovereign wealth funds are holding dollars they cannot use. Besides having a AAA rating, the effect of buying these bonds drives down oil demand which is in the interest of many of the nations (such as China's) whose officials control these funds.

Q: Isn't this talk of Hawaiian energy independence and "keeping money in Hawaii" diversionary?

 * After all, the money paid for alternative energy may not go to fossil fuels, but that doesn't mean it stays in hawaii. Nearly all this money goes instead to pay for the wind turbines or PV solar panels which are not built in Hawaii.

A: Focusing on Hawaiian energy independence is meaningful, and keeps money in Hawaii but not in the sense of trade protectionism, but from the significant benefits to business and employment that derive from a stable energy supply. Nearly all segments of Hawaii's economy are substantially vulnerable to fluctuations in global fossil fuel commodity prices despite best efforts with hedging strategies. Since electricity generated from alternative sources cannot be traded globally, such generation would afford the state economy a safe harbor from violent swings in fuel prices. Energy cost stability is the key benefit to the Hawaiian business community.

Construction of new generation will also generate jobs. While it is true that it will be necessary to import expensive alternative power generation devices like wind turbines, geothermal steam generators or photovoltaic solar panels, the proposal does not simply swap importing fuel for importing generation equipment. In the case of Photovoltaic panels in typical industrial applications, only 40% of the project cost goes into the panels themselves. Retrofitting and installation represent a substantial portion of the investment, requiring electrician skills more complex than that required for typical building wiring. Solar thermal towers can be large concrete structures the size of a condominium tower, and several of these need to be constructed to replace a single conventional power plant. Though the number of construction jobs is not insignificant, this factor is a spinoff benefit.

Q: Doesn't it make more sense for the Utility companies to finance the batteries?
A: This is a scheme suggested in a recent Brattle group paper, but there are a number of arguments that suggest the scheme is implausible. At a surface level, the Brattle paper doesn't do itself any favors when it makes serious errors in its assumptions about battery cost and longevity. Even if GM is successful in what they admit is an aggressive target of producing batteries for 63 cents per watt-hour of capacity, a battery that had the minimum 40 mile range for their compact class PHEV vehicle would be $10,000- not $3600 as the Brattle paper states. Current battery prices are closer to $1 per watt. Further, such batteries are projected to last 10 years, not 12. That makes the annual carrying cost $1320, not $475. The crucial errors concern not the datapoints, but on the unlikely assessment of the nature of corporate culture in utilities. That is, the proposal relies on the notion that utilities will behave like high tech companies, whose survival depends on assuming significant risks based on speculation concerning future business. This is not the environment that utilities move in. Secondly, although utilities are well known for their risk aversion to new technologies and operating models, the Brattle group requires them to adopt not just a novel financing scheme for a major capital asset but they are expected to accept the unprecedented notion that this major asset would not only be diffuse, but that it would not be under control of the utility. If that weren't enough, the location of these expensive assests are not certainly known by the utility- cars could be sold, or moved out of state. Regarding the swapping variation, the utility would have to coordinate with and rapidly reach agreement with large numbers of other utilities and auto manufacturers regarding standards for module form factors and interfaces for batteries. It is difficult even for dominant software companies to arrange such comprehensive standards, and they seldom are agreed to in rapid time frames.

The variant question is, why not the car companies? In addition to the answers above, car companies are suffering major liquidity crisises. One or more of the big 3 automakers may not survive the next decade.

Q:How expensive is it to provide separate meters for each PHEV system?

 * Rough guess: $150. Note this is existing technology being used in real-world energy trials with leading U.S. utilities.  It is wireless metering using technology that is little different than what's in cheap cell phones that do texting.  Today, Hybrids Plus will do this upgrade and are happily allowing utilities and government agencies to pay them $3700 for the functionality that provides the needed capability along with a lot of other stuff- Vehicle to Grid functionality that manages charging for grid stabilization (http://hybrids-plus.com/ht/products.html).  V2Green (the guys that provide the integration with the utility- mentioned on hybrids plus site) would probably be willing to put something in writing about their projection on the production cost of their system for AC metering only.  Actual chip cost for the wireless metering is small- a wavecom integrated cell phone/ cpu automotive chip is around $15 in quantity, but integration of the module with the guts that regulate the charger and the power management of the battery is the pricey part so it wouldn't be surprizing  if V2Green came back with a price in volume around $150.

Q: How will someone be stopped from bypassing the more expensive meter and powering the car with cheaper energy?

 * This is V2Green's business since they have to answer the fraud question. They are integrating their management unit with the battery.  Complying units would have state seals affixed to the management unit which would be a required checklist item on yearly hawaii vehicle inspections.  Evidence of tampering would trigger an audit of the vehicle to recover surcharges the owner defrauded from the loan company.  Likely there would be criminal fines.

Anyone is free to do this at any time if they elect not to take the loan, or if they pay it off.

A related fraud scenario: The batteries are expensive- so what would prevent a fraudster from taking them out selling them to the mainland, ship the car back to the mainland as a hybrid. This sort of scenario is not difficult for us since all vehicles must go through shippers to get to the mainland. VINs are checked and the owner must pay back the loan before it may be shipped off the islands.

Q: What if they need a charge away from home where there is only one meter?
The meter is integrated into the car and charging is reported wirelessly to the utility. This answers the "how do we charge at the curb" or "how do we charge at work/ parking garage" questions.

Q: What size financial assistance will be necessary per vehicle
The following assumes that financial assistance is restricted to the cost of the battery. Since the average daily driver on Oahu uses 1.18 gallons of gasoline per day, and that equates to 11.8 KWHs of grid electricity, only 80% of that electrcity makes it into the battery due to charging inefficiency. Because discharging an LI-Ion battery below 50% prevents such a battery lasting the required 10 years, that means you need an 18.8 KWH battery for the average Hawaii vehicle. Priuses will need much less (10.78 KWH), delivery trucks will need more. GM says they are expecting 63 cents per watt-hour of capacity on the batteries they are putting in the Volt. This means the average vehicle requires a $11,855 loan.

Q: What is the total money you need per year for your program?
For one year of sales with 20% being PHEVs backed by loans, then using 2007 figures for new cars (59,861 in Hawaii), the capital required would be $142 million. (.2 * 59,861 * $11,855). Initial years would be less due to lower adoption, and the fact that PHEVs will likely be compact class at first, requiring cheaper batteries. Our state bonds are AAA rated, and we will have no trouble selling them to sovereign wealth funds especially those of the Chinese and others in the orient. Significant PHEV adoption means cheaper petroleum for their economies.

Q:Hawaii Banks have stopped funding central station renewable energy projects, even if the law passes, why will they fund this?
A: State banks can opt in or out. Their choice. GMAC or any other national auto lending institution could apply as a qualifying financial institution. Same process as for California Home & Building energy efficiency loans.

Well for quick fiscal aid you can apply at http://www.etextloans.co.uk/