Financing Electric vehicles through surcharge repaid loans

A federal or state energy independence proposal that uses electricity rate surcharges to finance the cost of the automotive battery and CO2 free power generation infrastructure to supply additional power demands from the vehicles.

Overview
Customers purchasing plug in electric vehicles recieve a loan so that the vehicle is competitive with a comparable gas burning vehicle. The loan is repaid through a surcharge placed on the electricity used to recharge the vehicles. Customers pay 30 cents per Kwh for recharging their vehicles, which is the same as paying $2.70 for a gallon of gas. The loan is repaid by the utility from the surcharge fee. If the utility has built CO2 free generation capacity since the start of the program, the utility is entitled to retain up to 25 cents per KWH of the surcharge.

Technical
As an audit control measure, metering is embedded in batteries, requiring periodic reauthorization for charging using a cellular broadband service such as Sprint or Verizon's EVDO network. Low cost cell phone- CPUs on a chip available from companies such as Wavecom can provide this funcationality at a very low cost. The battery refuses to be charged if bills have not been paid. This functionality is disabled after the battery has been paid off.

The vehicle may be driven out of state and recharged from any power source. The battery communicates the metering and surcharges are billed through the owner's home electricity account.

Benefits

 * Scheme is revenue neutral. Optionally, the government might back the loans, or offer incentives for banks to provide the loans.
 * Consumers want to buy the cars because there is no sticker shock due to the battery cost, and because they like the idea of paying $2.70 per gallon.
 * Electric companies like the idea because they have a strong commercial incentive to add capacity since they can defray the cost of more expensive technologies if they know they will be paid a rate that is 2.5X the current rate.

Governmental actions to support

 * Quasi-independent Energy board with independence and powers akin to the Federal Reserve board.
 * Taxes. With current fuel prices, no new revenue is required.  However, if Oil prices come down as they did in the 80s, a tax on gasoline is indexed to the shortfall in funds.  Hybrid owners still pay a lower surcharge rate equivalent to the lower gas prices. These adjustments of rates are set by the Energy board.

Analysis
The US retail electricity average of 10 cents per KWH translates to an operating cost of 3 cents per mile assuming a vehicle equivalent to a 30MPG gas burning car. The gas burning car costs 12 cents per mile assuming gas at $3.60. By leveraging the comparative high cost of gasoline, consumers will see it as a good deal, but also be financing the additional cost of alternative vehicles and more expensive CO2 free energy generation infrastructure.

When all cars are all electrical, the United States will need to have built an additional Terrawatt of generation capacity (or a 30% increase over current capacity). This will create a huge number of jobs, and source of high value loans to the utilities for infrastructure build out, thus stabilizing the financial system.

Too good to be true/ No free lunch?
The money doesn't come from nowhere. What is funding this operation is the cash that otherwise would go to foreign oil suppliers.

Risks

 * Price of gasoline could go down as it did in the 80s, eliminating the price advantage.
 * Unlikely- the demand for petroleum is no longer being driven by the US, but developing nations.  Besides, the decrease in demand will likely be gradual, not precipitous.

Alternative proposals

 * Brattle Group (Peter Fox-Penner chief author) argues that the Batteries should be owned by the utility.
 * They would benefit from battery use
 * They have a technical interest in the characteristics of the battery for V2G applications, and should negotiate directly with car manufacturers
 * Disadvantages: they would be allowed to spread the cost of the battery over their entire sales base- higher electricity rates would be dangerous politically.