California makes hybrid cars the expensive option

Posted by Emma Woollacott

California's energy policies aimed at curbing greenhouse gas emissions are making plug-in hybrid vehicles uneconomical.

Purdue University economist Wally Tyner has calculated that the state's tiered electricity pricing system - whereby consumers pay a higher rate for electricity they use beyond a certain amount - means Californians will pay some of the highest rates in the country to recharge.

States with flat electricity rates or those that vary price based on the time of use are more economical, he says.

Californians pay some of the highest electricity rates in the country - an average of 14.42 cents per kilowatt hour, about 35 percent higher than the national average.

"The objective of a tiered pricing system is to discourage consumption. In California, the unintended consequence is that plug-in hybrid cars won't be economical under this system," said Tyner. "Almost everyone in California reaches the third pricing tier each month. If they add a plug-in hybrid, they are charged the highest rate."

Adding a plug-in hybrid would increase the average use of electricity nearly 60 percent per household, according to the findings. In California, most of that increase would be charged at the highest rate.

Tyner said states such as Indiana, which charges a flat rate of about 8 cents per kilowatt hour, would be more economical.

Those that use time-of-use rates would be the most economical for drivers because the lower rates at night would coincide with when people are most likely to charge their cars.

"If you have time-of-use pricing, you have the opportunity to charge the car at the lowest available price," Tyner said, adding that California should change its rate system or issue extra electricity meters for charging cars on flat rates.

The researchers evaluated the plug-in hybrid Chevrolet Volt against the Toyota Prius, a hybrid that doesn't charge its battery through a plug, and the gas-fueled Chevy Cobalt.

To make the Volt more economical than either the Prius or the Cobalt, they found, oil prices would have to rise to between $171 and $254 per barrel. That's because the Volt has a higher purchase price and will cost more in electricity than gasoline over the life of the vehicle. They took into account a $7,500 federal rebate for purchasing plug-in hybrids.

"People who view the Volt as green will pay $10,000 more over the lifetime of the car because it's green," Tyner said. "Most consumers will look at the numbers and won't pay that."