Federal Energy and Fleet Management
Plug-in Vehicles Offer Potential Benefits, but High Costs and Limited Information Could Hinder Integration into the Federal Fleet Gao ID: GAO-09-493 June 9, 2009The U.S. transportation sector relies almost exclusively on oil; as a result, it causes about a third of the nation's greenhouse gas emissions. Advanced technology vehicles powered by alternative fuels, such as electricity and ethanol, are one way to reduce oil consumption. The federal government set a goal for federal agencies to use plug-in hybrid electric vehicles--vehicles that run on both gasoline and batteries charged by connecting a plug into an electric power source--as they become available at a reasonable cost. This goal is on top of other requirements agencies must meet for conserving energy. In response to a request, GAO examined the (1) potential benefits of plug-ins, (2) factors affecting the availability of plug-ins, and (3) challenges to incorporating plug-ins into the federal fleet. GAO reviewed literature on plug-ins, federal legislation, and agency policies and interviewed federal officials, experts, and industry stakeholders, including auto and battery manufacturers.
Increasing the use of plug-ins could result in environmental and other benefits, but realizing these benefits depends on several factors. Because plug-ins are powered at least in part by electricity, they could significantly reduce oil consumption and associated greenhouse gas emissions. For plug-ins to realize their full potential, electricity would need to be generated from lower-emission fuels such as nuclear and renewable energy rather than the fossil fuels--coal and natural gas--used most often to generate electricity today. However, new nuclear plants and renewable energy sources can be controversial and expensive. In addition, research suggests that for plug-ins to be cost-effective relative to gasoline vehicles the price of batteries must come down significantly and gasoline prices must be high relative to electricity. Auto manufacturers plan to introduce a range of plug-in models over the next 6 years, but several factors could delay widespread availability and affect the extent to which consumers are willing to purchase plug-ins. For example, limited battery manufacturing, relatively low gasoline prices, and declining vehicle sales could delay availability and discourage consumers. Other factors may emerge over the longer term if the use of plug-ins increases, including managing the impact on the electrical grid (the network linking the generation, transmission, and distribution of electricity) and increasing consumer access to public charging infrastructure needed to charge the vehicles. The federal government has supported plug-in-related research and initiated new programs to encourage manufacturing. Experts also identified options for providing additional federal support. To incorporate plug-ins into the federal fleet, agencies will face challenges related to cost, availability, planning, and federal requirements. Plug-ins are expected to have high upfront costs when they are first introduced. However, they could become comparable to gasoline vehicles over the life of ownership if certain factors change, such as a decrease in the cost of batteries and an increase in gasoline prices. Agencies vary in the extent to which they use life-cycle costing when evaluating which vehicle to purchase. Agencies also may find that plug-ins are not available to them, especially when the vehicles are initially introduced because the number available to the government may be limited. In addition, agencies have not made plans to incorporate plug-ins due to uncertainties about vehicle cost, performance, and infrastructure needs. Finally, agencies must meet a number of requirements covering energy use and vehicle acquisition--such as acquiring alternative fuel vehicles and reducing facility energy and petroleum consumption--but these sometimes conflict with one another. For example, plugging vehicles into federal facilities could reduce petroleum consumption but increase facility energy use. The federal government has not yet provided information to agencies on how to set priorities for these requirements or leverage different types of vehicles to do so. Without such information, agencies face challenges in making decisions about acquiring plug-ins that will meet the requirements, as well as maximize plug-ins' potential benefits and minimize costs.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-09-493, Federal Energy and Fleet Management: Plug-in Vehicles Offer Potential Benefits, but High Costs and Limited Information Could Hinder Integration into the Federal Fleet
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
June 2009:
Federal Energy And Fleet Management:
Plug-in Vehicles Offer Potential Benefits, but High Costs and Limited
Information Could Hinder Integration into the Federal Fleet:
GAO-09-493:
GAO Highlights:
Highlights of GAO-09-493, a report to congressional requesters.
Why GAO Did This Study:
The U.S. transportation sector relies almost exclusively on oil; as a
result, it causes about a third of the nation‘s greenhouse gas
emissions. Advanced technology vehicles powered by alternative fuels,
such as electricity and ethanol, are one way to reduce oil consumption.
The federal government set a goal for federal agencies to use plug-in
hybrid electric vehicles”vehicles that run on both gasoline and
batteries charged by connecting a plug into an electric power source”as
they become available at a reasonable cost. This goal is on top of
other requirements agencies must meet for conserving energy. In
response to a request, GAO examined the (1) potential benefits of plug-
ins, (2) factors affecting the availability of plug-ins, and (3)
challenges to incorporating plug-ins into the federal fleet. GAO
reviewed literature on plug-ins, federal legislation, and agency
policies and interviewed federal officials, experts, and industry
stakeholders, including auto and battery manufacturers.
What GAO Found:
Increasing the use of plug-ins could result in environmental and other
benefits, but realizing these benefits depends on several factors.
Because plug-ins are powered at least in part by electricity, they
could significantly reduce oil consumption and associated greenhouse
gas emissions. For plug-ins to realize their full potential,
electricity would need to be generated from lower-emission fuels such
as nuclear and renewable energy rather than the fossil fuels”coal and
natural gas”used most often to generate electricity today. However, new
nuclear plants and renewable energy sources can be controversial and
expensive. In addition, research suggests that for plug-ins to be cost-
effective relative to gasoline vehicles the price of batteries must
come down significantly and gasoline prices must be high relative to
electricity.
Auto manufacturers plan to introduce a range of plug-in models over the
next 6 years, but several factors could delay widespread availability
and affect the extent to which consumers are willing to purchase plug-
ins. For example, limited battery manufacturing, relatively low
gasoline prices, and declining vehicle sales could delay availability
and discourage consumers. Other factors may emerge over the longer term
if the use of plug-ins increases, including managing the impact on the
electrical grid (the network linking the generation, transmission, and
distribution of electricity) and increasing consumer access to public
charging infrastructure needed to charge the vehicles. The federal
government has supported plug-in-related research and initiated new
programs to encourage manufacturing. Experts also identified options
for providing additional federal support.
To incorporate plug-ins into the federal fleet, agencies will face
challenges related to cost, availability, planning, and federal
requirements. Plug-ins are expected to have high upfront costs when
they are first introduced. However, they could become comparable to
gasoline vehicles over the life of ownership if certain factors change,
such as a decrease in the cost of batteries and an increase in gasoline
prices. Agencies vary in the extent to which they use life-cycle
costing when evaluating which vehicle to purchase. Agencies also may
find that plug-ins are not available to them, especially when the
vehicles are initially introduced because the number available to the
government may be limited. In addition, agencies have not made plans to
incorporate plug-ins due to uncertainties about vehicle cost,
performance, and infrastructure needs. Finally, agencies must meet a
number of requirements covering energy use and vehicle acquisition”such
as acquiring alternative fuel vehicles and reducing facility energy and
petroleum consumption”but these sometimes conflict with one another.
For example, plugging vehicles into federal facilities could reduce
petroleum consumption but increase facility energy use. The federal
government has not yet provided information to agencies on how to set
priorities for these requirements or leverage different types of
vehicles to do so. Without such information, agencies face challenges
in making decisions about acquiring plug-ins that will meet the
requirements, as well as maximize plug-ins‘ potential benefits and
minimize costs.
What GAO Recommends:
GAO recommends the Department of Energy (DOE)”in consultation with
other agencies”propose legislative changes to resolve conflicts among
energy and vehicle acquisition requirements. GAO also recommends DOE
and the General Services Administration (GSA) provide guidance to help
agencies make decisions about acquiring plug-ins. GSA agreed with our
recommendations, and DOE did not comment.
View [hyperlink, http://www.gao.gov/products/GAO-09-493] or key
components. For more information, contact Susan Fleming at (202) 512-
2834 or flemings@gao.gov or Mark Gaffigan at (202) 512-3841 or
gaffiganm@gao.gov.
[End of section]
Contents:
Letter:
Background:
Plug-in Vehicles Offer Environmental and Other Benefits, but These
Benefits Depend on Several Factors:
Several Factors Could Delay the Widespread Availability of Plug-in
Vehicles, and the Federal Government Has Options to Provide Support:
Cost and Other Factors, Including Federal Requirements, Could Hinder
the Integration of Plug-in Vehicles into the Federal Fleet:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: GSA Procurement Process:
Appendix III: GAO Contacts and Staff Acknowledgments:
Tables:
Table 1: Estimates of the Percentage Decrease in Carbon Dioxide
Emissions from Plug-in Hybrids with 20-or 60-mile All-Electric Range
Compared with Gasoline-Powered Vehicles:
Table 2: Lithium Reserve Base as of January 2009:
Table 3: Potential Total Costs of Battery Packs Based on Size and per
Kilowatt Hour Cost:
Table 4: Types of Plug-in Vehicles and Years in Which They Are Expected
to Be Available for Sale, 2009 through 2014:
Table 5: List of Site Visits:
Figures:
Figure 1: Types of Plug-in Vehicles:
Figure 2: Changes in U.S. Retail Gasoline Prices, January 2006 through
May 2009:
Figure 3: GSA's Acquisition Process:
Abbreviations:
AFV: Alternative Fuel Vehicle:
ARRA: American Recovery and Reinvestment Act of 2009:
CO2: carbon dioxide:
DOD: Departments of Defense:
DOE: Department of Energy:
EISA: Energy Independence and Security Act of 2007:
EPA: Environmental Protection Agency:
EPAct 1992: Energy Policy Act of 1992:
EPAct 2005: Energy Policy Act of 2005:
EPRI: Electric Power Research Institute:
FEDFLEET: Federal Fleet Policy Council:
E85: Ethanol:
GSA: General Services Administration:
INTERFUEL: Interagency Committee for Alternative Fuels and Low-Emission
Vehicles:
mpg: miles per gallon:
SUV: sport utility vehicle:
USPS: United States Postal Service:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
June 9, 2009:
The Honorable Henry Waxman:
Chairman:
Committee on Energy and Commerce:
House of Representatives:
The Honorable Edolphus Towns:
Chairman:
The Honorable Darrell Issa:
Ranking Member:
Committee on Oversight and Government Reform:
House of Representatives:
The nation faces a number of energy-related challenges, including heavy
reliance on oil, environmental stress from greenhouse gas emissions
caused by burning fossil fuels, and public health problems associated
with local air pollution. While many sectors of the economy contribute
to these problems, the transportation sector poses particular
challenges because of its nearly exclusive reliance on oil.
Stakeholders from industry, environmental groups, and others, as well
as Congress, are working to identify strategies to address these
challenges, including the development of vehicles that use advanced
technology to make substantial improvements in fuel economy.
Plug-in vehicles, which use electricity to charge a battery that helps
to power the car, are one type of these advanced technologies.
Manufacturers plan to introduce plug-ins--a term that encompasses
several vehicle designs--into the market in the next few years, and
federal agencies have already been directed to adopt this technology
into the federal fleet. Specifically, Executive Order 13423[Footnote 1]
calls for federal agencies to begin using plug-in hybrid electric
vehicles when they become commercially available and can be procured at
a reasonably comparable life-cycle cost to conventional gasoline-
powered vehicles. In this context, you asked us to determine (1)
potential benefits and challenges associated with plug-ins; (2) current
status of development and factors that could either delay availability
or encourage development, including those available to the federal
government; and (3) challenges to incorporating plug-in hybrids or all-
electric vehicles into the federal fleet.
To address these objectives, we reviewed the goals outlined in
Executive Order 13423 that encourage the integration of plug-in hybrid
vehicles into federal fleets, as well as federal statutory requirements
related to the acquisition of alternative fuel vehicles. To broaden our
understanding of the potential benefits, current status of development,
and factors that could delay availability of plug-ins, we analyzed
research studies and interviewed experts from industry, academic, and
government sources. To determine the current status of plug-in
vehicles, we obtained information directly from Chrysler, Ford, General
Motors, Phoenix Motorcars (a small manufacturer of all-electric
vehicles), Toyota, and the Association of International Automobile
Manufacturers. We also reviewed published material on other auto
manufacturers' Web sites about the plug-ins that manufacturers plan to
bring to market. To identify factors affecting availability and
development of plug-ins that could be addressed by the federal
government, we analyzed and synthesized information from experts and
recent research. We considered these in light of the potential costs of
federal government actions, as well as what role the government might
play relative to other stakeholders who also stand to benefit from this
technology. We used professional judgment in identifying the relative
benefits and limitations of these options. To identify the challenges
of incorporating plug-in hybrids or all-electric vehicles into the
federal fleet, we reviewed federal fleet documents and relevant laws
and regulations governing fleet management and procurement. We
interviewed officials from the General Services Administration (GSA)
about the federal motor vehicle procurement process and spoke with
fleet managers from a selected group of agencies--namely, the
Departments of Defense (DOD) and Energy (DOE), the General Services
Administration (GSA), and the United States Postal Service (USPS)
[Footnote 2]--about the challenges plug-ins might pose for the federal
fleet. We chose DOD and USPS because they have the largest federal
fleets, while DOE and GSA have much smaller fleets, which provided
perspective on the challenges agencies with different sized fleets and
resources could have in meeting the executive order. Finally, we
conducted nine visits to organizations that are conducting research on
plug-in vehicle technology or are field testing plug-in vehicles
through demonstration fleets. We conducted this performance audit from
July 2008 to June 2009, in accordance with generally accepted
government auditing standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide
a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
(For more information on our scope and methodology, see appendix I.)
Background:
"Plug-ins" refer to vehicles that can be plugged into an electrical
outlet to charge the car's battery. The option to plug in and charge is
also the basic difference between a plug-in and a "conventional
hybrid," which uses both gasoline and stored energy in a battery to
power the vehicle. Battery technology plays an important role in the
development of plug-ins. Nickel metal hydride batteries--such as those
currently used in existing conventional hybrid vehicles--can only store
enough energy for limited all-electric driving without the batteries
being made so large as to affect the vehicle's fuel economy. As a
result, many manufacturers are developing lithium-ion batteries because
they have the potential to store more energy and are typically smaller
and lighter than batteries currently in use.[Footnote 3]
Plug-ins are expected to come equipped with a 110-volt plug that can be
used with any standard electrical outlet. Some manufacturers also plan
to make 220-volt charging an option, which requires the same type of
outlet as used for household appliances like clothing dryers. With a
110-volt plug, manufacturers estimate that most plug-ins will reach a
full charge if the vehicle were plugged in overnight (estimates are 8
hours depending on the size of the battery). A 220-volt plug can reduce
that time by at least half. Technologies to further shorten the length
of time needed to charge a plug-in are being explored. See figure 1 for
descriptions of several types of plug-ins.
Figure 1: Types of Plug-in Vehicles:
[Refer to PDF for image: illustration]
Plug-in hybrid electric vehicle (PHEV):
Sample vehicle: Chevrolet Volt;
Drive power: Electric motor (internal combustion engine can charge the
battery but does not turn the wheels);
Fuel source: Gasoline pump and plug;
Expected electric range: About 40 miles.
Sample vehicle: Saturn Vue Green Line (plug-in version);
Drive power: Electric motor and internal combustion engine;
Fuel source: Gasoline pump and plug;
Expected electric range: About 10 miles.
All-electric vehicle:
Sample vehicle: Phoenix Motorcars Sport Utility Truck;
Drive power: Electric motor;
Fuel source: Plug;
Expected electric range: More than 100 miles.
Neighborhood electric vehicle (NEV):
Sample vehicle: Zenn Motor Company ZENN:
Drive power: Electric motor (maximum speed 25 mph);
Fuel source: Plug;
Expected electric range: 30-50 miles.
Source: GAO.
[End of figure]
These plug-ins are powered differently:
* Plug-in hybrid electric vehicles (referred to as "plug-in hybrids" in
this report) have both an internal combustion engine and a battery pack
that can power the vehicle.[Footnote 4] Unlike conventional hybrid
vehicles, plug-in hybrids offer drivers an "all-electric range" of
driving powered by the battery, with an internal combustion engine that
extends the overall range of the vehicle. Plug-in hybrids can be
designed to use the two power sources in different ways. For example,
as shown in figure 1, the plug-in version of the Saturn Vue Green Line
can use its electric motor or gasoline-powered engine either separately
or simultaneously to drive the vehicle's wheels. The Chevrolet Volt
only uses power from the electric motor to drive the wheels. The
gasoline engine in the Volt is used to generate additional power for
the electric motor, but it does not use gasoline to power the wheels.
* All-electric vehicles, also known as battery electric vehicles, have
an electric motor to turn the wheels powered by a battery. They do not
have a backup gasoline-powered engine so they consume no liquid fuel
and do not emit greenhouse gases. Unlike a plug-in hybrid, the driving
distance of these vehicles is limited to the storage capacity of the
battery, which, once reached, must be plugged back into an outlet
before the car can be driven further.
* Neighborhood electric vehicles, also known as low-speed vehicles, are
all-electric vehicles that cannot travel faster than about 25 miles per
hour and are subject to different federal safety standards from normal
cars.[Footnote 5] These vehicles are suitable for use on campuses,
military bases, and--because they tend to be small and do not produce
emissions by burning fuel--inside buildings like warehouses. Some
states also permit the use of these vehicles on state highways.
The development of plug-ins is, in part, a response to federal and
state actions to address growing concerns over the reliance of the
transportation and automotive sectors on petroleum and the resulting
environmental effects of fuel consumption. Two of the key efforts to
get auto manufacturers to produce more fuel-efficient and low-emitting
vehicles include corporate average fuel economy standards--which have
been raised to require auto manufacturers to achieve a combined fuel
economy average of 35 miles per gallon (mpg) for both passenger and non-
passenger vehicles beginning in model year 2020[Footnote 6]--and
California's Zero Emission Vehicle program--which has a goal of
increasing the number of low-emission vehicles in California and was
recently modified and includes plug-in hybrids, conventional hybrids,
and all-electric vehicles.
The federal government is also trying to reduce petroleum consumption
in federal fleet vehicles by requiring agencies to take several actions
and by setting a number of goals and requirements for federal agencies,
as follows:
* Begin acquiring plug-in hybrid electric vehicles: Executive Order
13423 sets a goal for federal agencies operating fleets of 20 or more
vehicles to begin using plug-in hybrids when these vehicles become
commercially available and can be purchased at a cost reasonably
comparable to conventional vehicles based on life-cycle costs.
* Acquire low greenhouse gas emitting vehicles: The Energy Independence
and Security Act of 2007 (EISA) prohibits agencies from acquiring any
light-duty motor vehicle or medium-duty passenger vehicle that is not a
"low greenhouse gas emitting vehicle."[Footnote 7]
* Decrease petroleum consumption: EISA also establishes the requirement
of decreasing annual vehicle petroleum consumption at least 20 percent
relative to a baseline established by the Energy Secretary for fiscal
year 2005.
* Acquire alternative fuel vehicles (AFV): The Energy Policy Act of
1992 (EPAct 1992) requires that 75 percent of all vehicles acquired by
the federal fleet in fiscal year 1999 and beyond be AFVs. Eligible
vehicles include any vehicle designed to operate on at least one
alternative fuel,[Footnote 8] including electric vehicles and plug-in
hybrids. GSA considers neighborhood electric vehicles to be equipment,
rather than vehicles; acquiring them does not help agencies meet the
AFV acquisition requirement.[Footnote 9]
* Use alternative fuel with AFVs: The Energy Policy Act of 2005 (EPAct
2005) requires that all AFVs be fueled with alternative fuel. However,
DOE guidance grants an agency a waiver from meeting the requirement if
it can prove that alternative fuel is not available within 5 miles of
or 15 minutes from a vehicle's address, or if the cost of alternative
fuel exceeds that of conventional fuel.
* Increase consumption of alternative fuels: EISA requires that no
later than October 2015 and each year thereafter, agencies must achieve
a 10 percent increase in vehicle alternative fuel consumption relative
to a baseline established by the Energy Secretary for fiscal year 2005.
The American Recovery and Reinvestment Act of 2009 (Recovery Act)
[Footnote 10] appropriated funding to help agencies meet some of these
goals and requirements. For example, it provided $300 million for GSA
to purchase vehicles with higher fuel economy.
Several federal agencies and offices play key roles in ensuring agency
compliance with fleet related requirements. The Council on
Environmental Quality is responsible for issuing instructions regarding
implementation of Executive Order 13423.[Footnote 11] DOE is
responsible for issuing guidance to agencies relative to EPAct 1992 and
2005, and EISA; compiles an annual report on agencies' progress in
meeting facility and fleet energy requirements that it submits to
Congress; and promotes the development of plug-in technology. For
example, DOE's Vehicle Technologies Program is actively evaluating plug-
in hybrid technology and researching the most critical technical
barriers to commercialization. Moreover, DOE performs battery testing
and evaluation, vehicle simulation, and plug-in hybrid system testing
through its work at Argonne and Idaho National Laboratories. DOE also
provides financial support to promote the development of plug-in hybrid
technology. For example, the department will contribute up to $30
million over 3 years for three cost-shared plug-in hybrid demonstration
and development projects. These projects are expected to accelerate the
development of plug-in hybrids capable of traveling up to 40 miles on
electricity only without recharge.
The Office of Management and Budget (OMB) oversees agencies'
implementation of fleet goals. Specifically, it provides
recommendations to help agencies overcome barriers in meeting these
goals and requirements through transportation management scorecards it
issues semiannually. These scorecards track agencies' performance on a
number of indicators.
GSA is responsible for acquiring vehicles for agencies to use in the
federal fleet. Federal agencies may choose to purchase or lease
vehicles for their motor vehicle fleets. With the exception of USPS,
which can acquire its own vehicles or use GSA, agencies that choose to
purchase vehicles are required by federal regulation to obtain them
through GSA, which is able to acquire vehicles at significant
discounts.[Footnote 12] Although federal agencies may lease vehicles
from whatever source they choose, including commercial lessors, most
agencies lease from GSA because of the significant discounts it is able
to offer. In addition to motor vehicles, GSA also lists specialized
vehicles, such as neighborhood electric vehicles, on its supply
schedules. Lastly, GSA also provides fleet management consulting
services and guidance for federal agencies.
Three additional organizations of federal fleet managers exist to help
agencies manage their fleets and facilitate information sharing. The
Interagency Committee for Alternative Fuels and Low-Emission Vehicles
(INTERFUEL) offers a forum for fleet managers to understand statutory
requirements and rule-making processes, discuss policy implications and
barriers, and develop comments on legislation, executive orders, and
new regulations related to the use of alternative fuels and reductions
in petroleum consumption among the federal fleet. The Federal Fleet
Policy Council (FEDFLEET) consists of representatives from agencies
operating a federal motor vehicle fleet and provides a focal point to
federal agencies for the coordination of vehicle management problems,
plans, and programs common to all federal fleets. Finally, the Motor
Vehicle Executive Council establishes a long-term strategic vision for
the management of government wide motor vehicles and develops
interagency planning in conjunction with FEDFLEET.
The federal fleet currently numbers about 645,000 vehicles, according
to fiscal year 2008 data--the most recent data available--and includes
a wide range of vehicles from large trucks to small sedans, many of
which are alternative fuel vehicles such as flex-fuel vehicles, which
can be fueled with gasoline or ethanol (E85). The fleet may be roughly
divided into three sectors: DOD as a whole operates 30 percent of the
fleet, USPS operates 34 percent of the fleet, and all other civilian
agencies operate the remaining 36 percent. From fiscal years 2004
through 2008, the overall size of the fleet increased about 4 percent.
Most vehicles in the federal fleet are owned by the agencies that
operate them--for example, in fiscal year 2008 about 69 percent of
vehicles were owned. The remaining 31 percent were leased almost
entirely from GSA rather than commercial lessors. The number of leased
vehicles as a proportion of the overall fleet remained essentially
unchanged from fiscal years 2004 through 2008, showing a slight overall
increase of 1 percent. In addition, federal agencies placed orders for
70,865 vehicles through GSA in fiscal year 2008, or approximately 11
percent of the overall fleet. This figure includes vehicles purchased
by GSA for lease to agencies, as well as those purchased by USPS. The
majority of vehicles in the federal fleet are light duty trucks--44
percent--with passenger vehicles making up 36 percent of the fleet, and
medium and heavy duty trucks, buses, and ambulances making up the
remaining 20 percent.
Plug-in Vehicles Offer Environmental and Other Benefits, but These
Benefits Depend on Several Factors:
The adoption of plug-ins could result in several benefits by reducing
petroleum consumption, such as reduced emissions of greenhouse gases
and air pollutants. However, the environmental benefits depend on
whether the electricity used to power plug-ins emits fewer greenhouse
gases and pollutants than the fuel it replaces, as well as on consumers
adopting plug-ins, who may be deterred if plug-ins are not cost-
effective. The cost-effectiveness of plug-ins will be determined by the
cost of batteries and trends in the price of gasoline relative to the
price of electricity to charge the vehicles.
Plug-ins Offer Environmental Benefits, but These Benefits Depend on
Shifting to Lower-Emission Fuel Sources to Generate Electricity:
Through their potential to make substantial reductions in oil
consumption, plug-ins could produce environmental benefits such as
reducing greenhouse gas emissions. All-electric vehicles will consume
no gasoline, and the fuel economy of plug-in hybrids is expected to be
high, which means these vehicles will consume limited amounts of
gasoline. For example, in tests that mimic the driving patterns of a
typical driver, a test fleet of hybrids converted to plug-in hybrids
operated by Google's RechargeIT program[Footnote 13] averaged 93.5 mpg.
Plug-in hybrids also have the potential to operate without consuming
any gasoline. Specifically, planned plug-in hybrids will be able to
operate on electric power for 10 miles to about 40 miles, depending on
the specific design of the vehicle.[Footnote 14] The vehicle would
consume no petroleum at all if drivers could limit their driving
between charges to the vehicle's all-electric range.
Burning fossil fuels, including gasoline, accounts for most of the
world's manmade greenhouse gas emissions, primarily carbon dioxide
(CO2), which have been linked to global climate change.[Footnote 15]
According to the Environmental Protection Agency (EPA), the
transportation sector accounted for about 28 percent of the total U.S.
greenhouse gas emissions produced in 2006.[Footnote 16] That number
rises to 36 percent if nonroad mobile sources such as construction,
farm, lawn, and garden equipment and upstream transportation fuel-
related emissions such as extraction, shipping, refining, and
distribution are included.[Footnote 17] Within transportation,
passenger cars and light duty trucks, which include sport utility
vehicles (SUV), minivans, and other vehicles commonly used for personal
transportation, produced 62 percent of greenhouse gas emissions.
Recent research suggests that plug-ins could produce substantial
reductions in CO2 emissions through reductions in fossil fuel
consumption by passenger vehicles. For example, a 2008 study by
researchers at the University of California, Berkeley, estimated a
range of potential CO2 reductions--depending on the size of the vehicle
and energy source used to generate electricity--when plug-in hybrids
driven within their all-electric range (in this case either 20 or 60
miles) were compared with gasoline-powered vehicles (see table 1).
[Footnote 18]
Table 1: Estimates of the Percentage Decrease in Carbon Dioxide
Emissions from Plug-in Hybrids with 20-or 60-mile All-Electric Range
Compared with Gasoline-Powered Vehicles:
Fuel source used to generate electricity to charge the vehicle: Plug-in
compact car vs. compact gasoline car;
Coal: 4-5;
Natural gas: 54;
Low carbon sources (e.g., nuclear or wind): 85-100.
Fuel source used to generate electricity to charge the vehicle: Plug-in
SUV vs. gasoline SUV;
Coal: 19-23;
Natural gas: 61-63;
Low carbon sources (e.g., nuclear or wind): 85-100.
Source: Kammen, Arons, Lemoine and Hummel (2008).
Note: Estimates are based on driving the plug-in hybrids within their
all-electric range.
[End of table]
As the table indicates, reductions in CO2 emissions depend on
generating electricity used to charge the vehicles from lower-emission
sources of energy. Natural gas is widely used for electricity
generation, though its emissions benefits are less than those of other
low-carbon sources. Energy sources with even lower emissions include
nuclear, hydropower, solar, wind, and, if the technology develops,
fossil fuel plants equipped to capture and sequester (store) CO2 before
it is emitted into the atmosphere. However, shifting to these sources
will require new power plants that can be expensive to build, as well
as investments to develop, test, and equip coal and other fossil fuel
plants with carbon sequestration technology. In addition, the
construction of new nuclear plants can be controversial because of
public concern about safety. Similarly, construction of some renewable
energy sources, such as wind turbines, can be controversial.
In addition, in regions of the country that are heavily reliant on coal
for power generation, conventional hybrids might offer greater CO2
reductions than plug-in hybrids. For example, a study by the Electric
Power Research Institute (EPRI) estimated that, with electricity
provided by current coal technology, a plug-in hybrid with a 20-mile
all-electric range had slightly higher CO2 emissions than a
conventional hybrid. Thus, in the immediate future, plug-ins could be
used to reduce greenhouse gas emissions--relative to conventional
hybrids--in regions of the country where electricity is already
generated from low-carbon energy sources. For example, a plug-in
vehicle charging in a coal-reliant state may not reduce greenhouse gas
emissions relative to a conventional hybrid. But a plug-in charging in
a state that relies heavily on hydropower would substantially reduce
greenhouse gas emissions. However, developing policy or incentives to
encourage consumers to buy plug-ins only in regions with low-carbon
energy sources could be difficult and may not correspond with
manufacturers' business plans.
Plug-ins could also reduce emissions that affect air quality. About 50
percent of Americans live in areas where levels of one or more air
pollutants are high enough to affect public health. Research we
reviewed indicated that plug-ins could shift air pollutant emissions
away from population centers even if there was no change in the fuel
used to generate electricity (e.g., if low-emitting renewable sources
were not substituted for higher-emitting sources). For example, a study
from the University of Texas modeled the potential impact plug-in
hybrids could have on the formation of smog in a region of the country
that relies heavily on coal for power generation.[Footnote 19]
Specifically, the study estimated that using plug-in hybrids
substantially reduced smog in major cities if they were charged at
night. These benefits remained even if nighttime power generation had
to be increased to full capacity to meet additional demand. One
potential downside the study identified was that rural areas near power
plants could experience an increase in the overall amount of airborne
emissions. However, since power generation would be increased at night,
pollutants would not be exposed to sunlight, which would limit the
production of smog. This benefit would depend on consumers adopting a
substantial number of plug-ins.
Finally, plug-in vehicles, which are expected to use lithium-ion
batteries, could also provide environmental benefits by reducing toxic
waste that would otherwise be generated from car batteries. Compared
with lead acid batteries in gasoline vehicles and nickel metal hydride
batteries used in conventional hybrid vehicles, lithium-ion batteries
produce insignificant levels of toxic waste, which means they are less
likely to pose environmental challenges in disposal. However,
extracting lithium from locations where it is abundant, such as in
South America, could pose environmental challenges that would damage
the ecosystems in these areas. Furthermore, lithium-ion batteries can
pose challenges and potential costs and risks related to safety and
transport. For example, lithium-ion batteries have previously posed a
risk of "thermal runaway," in which the batteries overheat and catch
fire. Mitigating this safety issue is a priority of battery
manufacturers, and one battery manufacturer we visited showed us
several innovations to ensure that this would not be a risk while
operating the vehicle. In addition, because of the current risks, there
are restrictions on the transportation of lithium-ion batteries, which
could pose challenges for consumers--including the federal government--
in maintaining these vehicles.
Plug-ins Could Reduce Oil Dependence, Although They Could Create a
Reliance on Imported Lithium:
Besides offering environmental benefits, reduced oil consumption from
plug-ins could help to limit U.S. vulnerability to supply reductions
and subsequent oil price shocks. A study by the EPRI estimated that if
plug-in hybrid vehicles grew to compose about 62 percent of the cars on
the road, they could help save about 3.7 million barrels of oil per day
by 2050[Footnote 20] (about 9.3 million barrels of oil were consumed
per day by automobiles in the United States in 2007).[Footnote 21]
Research from the National Renewable Energy Laboratory found that a
plug-in hybrid with a 60-mile all-electric range could reduce gasoline
consumption by 53 percent to 64 percent over a gasoline vehicle. By
comparison, a conventional hybrid compared with the same gasoline
vehicle would reduce consumption by 21 percent to 28 percent.
Since 1973, supply constraints have contributed to several energy price
shocks. The most recent price spike not only increased basic costs for
consumers but also increased operating costs for organizations like
USPS, which operates a large fleet of vehicles. Although gas prices
declined steeply in late 2008 (see figure 2), worldwide demand for oil
is expected to grow, and gas prices are expected to rebound as economic
conditions improve.
Figure 2: Changes in U.S. Retail Gasoline Prices, January 2006 through
May 2009:
[Refer to PDF for image: line graph]
Month: January 2006;
Average retail price: 236 cents per gallon.
Month: February 2006;
Average retail price: 232.6 cents per gallon.
Month: March 2006;
Average retail price: 246.8 cents per gallon.
Month: April 2006;
Average retail price: 278.7 cents per gallon.
Month: May 2006;
Average retail price: 295.3 cents per gallon.
Month: June 2006;
Average retail price: 293 cents per gallon.
Month: July 2006;
Average retail price: 302.5 cents per gallon.
Month: August 2006;
Average retail price: 299.9 cents per gallon.
Month: September 2006;
Average retail price: 260.6 cents per gallon.
Month: October 2006;
Average retail price: 229.3 cents per gallon.
Month: November 2006;
Average retail price: 227.5 cents per gallon.
Month: December 2006;
Average retail price: 235.9 cents per gallon.
Month: January 2007;
Average retail price: 228.9 cents per gallon.
Month: February 2007;
Average retail price: 232.3 cents per gallon.
Month: march 2007;
Average retail price: 260.9 cents per gallon.
Month: April 2007;
Average retail price: 289.1 cents per gallon.
Month: May 2007;
Average retail price: 318.7 cents per gallon.
Month: June 2007;
Average retail price: 310.2 cents per gallon.
Month: July 2007;
Average retail price: 301.1v
Month: August 2007;
Average retail price: 283.4 cents per gallon.
Month: September 2007;
Average retail price: 284.9 cents per gallon.
Month: October 2007;
Average retail price: 285.3 cents per gallon.
Month: November 2007;
Average retail price: 312.8 cents per gallon.
Month: December 2007;
Average retail price: 307 cents per gallon.
Month: January 2008;
Average retail price: 309.5 cents per gallon.
Month: February 2008;
Average retail price: 307.8 cents per gallon.
Month: March 2008;
Average retail price: 329.3 cents per gallon.
Month: April 2008;
Average retail price: 350.7 cents per gallon.
Month: May 2008;
Average retail price: 381.5 cents per gallon.
Month: June 2008;
Average retail price: 410.5 cents per gallon.
Month: July 2008;
Average retail price: 411.4 cents per gallon.
Month: August 2008;
Average retail price: 383.3 cents per gallon.
Month: September 2008;
Average retail price: 375.6 cents per gallon.
Month: October 2008;
Average retail price: 311.2 cents per gallon.
Month: November 2008;
Average retail price: 220.8 cents per gallon.
Month: December 2008;
Average retail price: 174.5 cents per gallon.
Month: January 2009;
Average retail price: 184 cents per gallon.
Month: February 2009;
Average retail price: 197.5 cents per gallon.
Month: March 2009;
Average retail price: 201.1 cents per gallon.
Month: April 2009;
Average retail price: 210.2 cents per gallon.
Month: May 2009;
Average retail price: 231.6 cents per gallon.
Source: Energy Information Administration.
[End of figure]
The administration, in an effort to strengthen national security, has
set as one of its objectives decreasing U.S. reliance on foreign
sources of energy. According to the Energy Information Administration,
in 2007 about 58 percent of the oil consumed in the United States was
imported. Through their potential to reduce oil consumption overall,
plug-ins could help to reduce consumption of oil coming from foreign
sources, but they could also create a reliance on another foreign
resource. Specifically, most of the world's reserves of lithium, which
is needed to manufacture batteries for plug-ins, are located abroad,
predominately in South America and China (see table 2). The United
States has supplies of lithium, but if demand for lithium exceeded
domestic supplies, or if lithium from overseas is less expensive, the
United States could substitute reliance on one foreign resource (oil)
for another (lithium). The consequences of relying on foreign sources
of lithium could vary. On one hand, to the extent that this product is
less expensive and readily available, as has often been the case for
foreign sources of oil, manufacturers would be able to produce
batteries at lower cost. On the other hand, if lithium supplies prove
unstable--for example, due to political unrest in the countries in
which they are located--or follow a similar pattern of price shocks as
has oil, cost and risk for battery and plug-in manufacturers would
increase.
Table 2: Lithium Reserve Base as of January 2009:
Country: Bolivia;
Reserve base[A] in tons: 5,400,000.
Country: Chile;
Reserve base[A] in tons: 3,000,000.
Country: China;
Reserve base[A] in tons: 1,100,000.
Country: Brazil;
Reserve base[A] in tons: 910,000.
Country: United States;
Reserve base[A] in tons: 410,000.
Country: Canada;
Reserve base[A] in tons: 360,000.
Country: Australia;
Reserve base[A] in tons: 220,000.
Source: U.S. Geological Survey.
[A] The reserve base is the part of the resource that meets specified
minimum physical and chemical criteria related to current mining and
production practices.
[End of table]
Furthermore, manufacturing batteries to mass produce plug-ins could be
limited by the amount of lithium that can be extracted and produced.
According to EPA officials, there is considerable disagreement on the
ultimate worldwide supply of lithium, making it difficult to determine
how many (or how few) batteries for plug-in vehicles could be
manufactured in the long term. In addition, while current levels of
global production (mining and refining) of lithium are measurable,
other uncertainties--such as how much lithium will be needed in each
battery--make it difficult to determine whether current levels of
lithium production will need to be increased to meet demand.
Despite these issues, reliance on foreign sources of lithium may not
pose the same dependence issues as oil. For example, industry officials
told us that lithium, including that from spent car batteries, is
highly recyclable, so some future demand could be met by ensuring that
sufficient recycling processes are in place. Industry officials also
noted that the current recycling process used for car batteries--which
has a high rate of participation by consumers, auto dealerships, and
parts suppliers--could be adapted to lithium ion batteries. In
addition, technology such as ultracapacitors, which are energy storage
devises that are an alternative to batteries and that do not need
lithium, or batteries that use materials besides lithium, which are
being researched by at least one auto manufacturer, could be used in
plug-ins. If these options prove viable, it would help avoid reliance
on a single commodity for the production of plug-ins.
Plug-ins' Benefits Will Only Be Cost-Effective with Lower-Cost
Batteries and Higher Gasoline Prices:
Environmental and other benefits will depend on consumers adopting plug-
ins, and consumers may be deterred if plug-ins are not cost-effective.
The cost of lithium based batteries will make plug-ins more expensive
than other vehicles, including conventional hybrids. According to
industry participants we interviewed and recent research, the current
cost of lithium batteries is about $1,000 to $1,300 per kilowatt hour.
[Footnote 22] Depending on the size of the battery pack, which is a key
factor in the all-electric range of plug-in hybrids and all-electric
vehicles, the additional cost per vehicle can be substantial at this
price. Ultimately, however, these batteries may become more affordable.
A study by Carnegie Mellon University researchers found that if the
cost of lithium batteries could be reduced to $250 per kilowatt hour,
plug-in hybrids could become cost competitive with both conventional
hybrids and gasoline vehicles. [Footnote 23] Industry observers from
one organization we interviewed thought that $250 is an aggressive
target, while a report from the Massachusetts Institute of Technology
indicated that this price could be attainable in 20 to 30 years as
manufacturers achieve economies of scale. [Footnote 24] However, if
this price could be achieved, it would substantially reduce the cost
battery packs add to the price of plug-in vehicle. Table 3 illustrates
how the total cost of a battery pack can change depending on its size
and the per kilowatt hour cost.
Table 3: Potential Total Costs of Battery Packs Based on Size and per
Kilowatt Hour Cost:
Battery size: 5;
Estimated all-electric range in miles: 10;
$1,000/kwh: 5,000;
$500/kwh: 2,500;
$250/kwh: 1,250.
Battery size: 10;
Estimated all-electric range in miles: 30;
$1,000/kwh: 10,000;
$500/kwh: 5,000;
$250/kwh: 2,500.
Battery size: 20;
Estimated all-electric range in miles: 60;
$1,000/kwh: 20,000;
$500/kwh: 10,000;
$250/kwh: 5,000.
Battery size: 30;
Estimated all-electric range in miles: 100;
$1,000/kwh: 30,000;
$500/kwh: 15,000;
$250/kwh: 7,500.
Battery size: 50;
Estimated all-electric range in miles: 200;
$1,000/kwh: 50,000;
$500/kwh: 25,000;
$250/kwh: 12,500.
Source: GAO analysis of Kromer and Heywood data.
Note: Battery size and all-electric range estimates are from Kromer and
Heywood (2007).
[End of table]
Until the cost of batteries comes down, the Carnegie Mellon study
concluded, the weight and size of the battery is a key consideration in
the extent to which plug-in hybrids are cost-effective methods of
reducing greenhouse gas emissions. For example, this study concluded
that plug in hybrids with smaller batteries that are charged
frequently--every 10 miles or fewer--are less expensive and release
fewer greenhouse gases than conventional hybrids, but plug-in hybrids
with larger batteries and all-electric ranges may not offer the same
advantages.
General Motors has contested the per kilowatt hour cost of batteries
used in the Carnegie Mellon study, stating that the cost of the Volt's
battery pack is hundreds less than $1,000 per kilowatt hour--the
baseline case used in the study to evaluate cost-effectiveness. General
Motors further noted that its battery research team has already started
work on new concepts that will further decrease the cost of the Volt
battery pack substantially in a second-generation Volt pack.
Gasoline and electricity costs will also determine whether plug-ins are
cost-effective. Specifically, even if plug-ins have higher upfront
costs, lower overall fueling costs relative to a gasoline-powered
vehicle could offset the purchase price over time. For this to occur,
the price of gasoline must be high relative to the cost of electricity
to charge the vehicles. However, gasoline prices have varied greatly in
the last few years, and if consumers do not believe that prices will
return to previous highs, they may be unwilling to purchase a plug-in.
Also, if power companies construct new power plants, including plants
that use low-carbon power sources, these investments may increase the
cost of electricity, which could offset the savings from reduced
gasoline consumption, making plug-ins less appealing to consumers.
Several Factors Could Delay the Widespread Availability of Plug-in
Vehicles, and the Federal Government Has Options to Provide Support:
Manufacturers plan to introduce several types of plug-in vehicles over
the next 6 years. However, certain factors, such as the limitations of
current battery technology, could delay availability of plug-ins, and
the current financial situation could prevent consumers from purchasing
plug-ins. The federal government has taken steps to encourage the
development and manufacturing of plug-ins and has additional options
for furthering this goal.
Although Plug-ins Are Not Yet Widely Available, Manufacturers Plan to
Introduce Plug-in Hybrids and other Plug-in Vehicles through 2014:
Plug-in vehicles are not widely available. Currently available plug-ins
include neighborhood electric vehicles, which have limited uses, and
all-electric vehicles being made in limited numbers by small auto
manufacturers. In addition, kits are currently available that allow
consumers to convert conventional hybrids into plug-in hybrid vehicles,
although there are several problems with more widespread adoption of
conversions. First and foremost, a conversion typically voids the
warranty on the vehicle. Second, not all of the conversion kits
available have been crash tested to ensure they will meet safety
requirements set by the National Highway Traffic Safety Administration
for operating a vehicle on public roads. Third, EPA officials noted
that conversions constitute tampering with emissions control systems,
which creates an uncertified vehicle, can lead to increased emissions,
and may cause warning lights to fail even if there is a serious problem
with the engine or emissions system. Although officials stated that
companies can certify a converted vehicle and obtain a certificate of
conformity for their product, which would enable them to legally sell
their plug-in hybrids, none of the companies offering conversions have
done so. Finally, conversion kits cost at least $10,000, in addition to
the cost of the vehicle. These factors could create a deterrent for
consumers who might otherwise consider converting their vehicles and,
according to GSA and DOE officials, have prevented the federal fleet
from using this option to save fuel.
However, both domestic and foreign auto manufacturers have announced
plans to develop plug-in hybrids and mass produce additional all-
electric vehicles. In the near term--2009 through 2012--plug-ins are
expected to include sports cars, compact sedans, SUVs, at least one all-
electric pickup truck, and a commercial all-electric van. In 2013 and
2014, the number of models of cars and SUVs--both plug-in hybrids and
all-electric vehicles--will expand, and a minivan may be introduced
(see table 4). Information from the Association of International
Automobile Manufacturers suggests that Asian manufacturers will focus
on producing all-electric and conventional hybrid vehicles and that
only one plug-in hybrid is currently being planned. Domestic auto
manufacturers are planning more plug-in hybrids, in addition to all-
electric vehicles, and plan to expand conventional hybrid technology to
existing gasoline-fueled models. However, the bankruptcy and
restructuring of Chrysler and General Motors could affect these plans.
As explained in the note in table 4, we received information on these
plans directly from Chrysler, General Motors, and other auto
manufacturers.
Table 4: Types of Plug-in Vehicles and Years in Which They Are Expected
to Be Available for Sale, 2009 through 2014:
Vehicle type: Sportscar;
Number of planned all-electric vehicles (years of introduction): 2;
(Tesla 2009, Chrysler 2010);
Number of planned plug-in hybrids (years of introduction): 1; (Fisker
Automotive 2010).
Vehicle type: Compact and subcompact;
Number of planned all-electric vehicles (years of introduction): 1;
(Chrysler 2011);
Number of planned plug-in hybrids (years of introduction): 1; (General
Motors 2010).
Vehicle type: Sedan (midsized or larger);
Number of planned all-electric vehicles (years of introduction): 2;
(Ford 2011, Tesla 2011);
Number of planned plug-in hybrids (years of introduction): 1; (Chrysler
2013).
Vehicle type: Compact SUV;
Number of planned all-electric vehicles (years of introduction): 0;
Number of planned plug-in hybrids (years of introduction): 3; (General
Motors 2011, Chrysler 2013, Chrysler 2014).
Vehicle type: SUV;
Number of planned all-electric vehicles (years of introduction): 1;
(Phoenix Motorcars 2009);
Number of planned plug-in hybrids (years of introduction): 0.
Vehicle type: Wagon;
Number of planned all-electric vehicles (years of introduction): 0;
Number of planned plug-in hybrids (years of introduction): 1; (Volvo
2012).
Vehicle type: Pickup truck;
Number of planned all-electric vehicles (years of introduction): 1;
(Phoenix Motorcars 2009);
Number of planned plug-in hybrids (years of introduction): 0.
Vehicle type: Minivan;
Number of planned all-electric vehicles (years of introduction): 0;
Number of planned plug-in hybrids (years of introduction): 1; (Chrysler
2013).
Vehicle type: Commercial van;
Number of planned all-electric vehicles (years of introduction): 1;
(Ford 2010);
Number of planned plug-in hybrids (years of introduction): 0.
Source: Alliance of International Automobile Manufacturers, Chrysler,
GM, Fisker Automotive, Ford, Mini-E, Phoenix Motorcars, Tesla Motors,
and Toyota.
Notes: Mini is conducting a pilot test in which it will lease 500 of
its all-electric Mini-E cars to consumers for 1 year. Toyota also has
announced that it will begin leasing a plug-in hybrid version of the
Prius late in 2009. These vehicles were not listed in the chart above.
We limited our information sources to data provided directly from
manufacturers or information published on manufacturer Web sites.
Specifically, we obtained data from Chrysler and General Motors in June
2009; the Alliance of International Automobile Manufacturers, Ford, and
Phoenix Motorcars in February 2009; and Toyota in April 2009. We also
viewed information on the Web sites of Tesla Motors, Fisker Automotive,
and Mini-E in April 2009 and from Volvo's Web site in June 2009.
Because of our approach to obtaining data, the information presented
here may differ from news sources.
[End of table]
The planned vehicles will have a range of capacities. The expected all-
electric driving range of plug-in hybrids varies from a low of 10 miles
per charge for the planned plug-in version of the Saturn VUE to a 50-
mile all-electric range per charge for the Fisker Automotive Karma.
Many of the planned all-electric vehicles are expected to have a
driving range of about 100 miles on a single charge, although Tesla
Motors plans to introduce an all-electric sedan with a range of 300
miles. As discussed earlier, the larger batteries necessary for plug-in
vehicles will result in these initial vehicles being considerably more
expensive than comparable vehicles. For example, Phoenix Motorcars' all-
electric pickup truck is expected to retail for $47,500, which is about
81 percent higher than the $26,175 suggested retail price of the
comparably sized Ford F-150 pickup truck. Similarly the Chevrolet Volt
is expected to retail for about $40,000 when it is first marketed, and
it will be sized somewhere between a Chevrolet Cobalt and Pontiac G6.
The Volt's retail price is about $25,000 higher than the Chevrolet
Cobalt and about $20,000 more than the Pontiac G6.
Development of Battery Technology, Limited Charging Infrastructure, and
Current Economic Conditions Could Delay Plug-ins and Affect Consumer
Demand:
Factors Associated with Battery Development:
Achieving economies of scale to help lower the cost of plug-in
batteries will be difficult. For example, industry experts told us that
manufacturing high-quality batteries requires considerable skill and
sophisticated, precision-oriented manufacturing processes. Inadequate
manufacturing processes will likely result in batteries that are more
likely to fail. In addition, industry officials told us that most
battery component manufacturing and assembly of battery packs is done
abroad, and there is limited manufacturing capacity worldwide. While
some manufacturers have announced plans to establish battery plants
domestically, the capital investments will be significant. Congress
established a program to assist companies interested in developing
these plants in the Recovery Act. In addition, some industry
participants told us that the purchasing power of the federal fleet
could help manufacturers achieve economies of scale in battery
manufacturing. However, with a total purchase of about 70,000 vehicles
in 2008, and with only about 20,000 passenger sedans being purchased
annually, the purchasing power of the federal government is small
relative to the overall auto market. For example, about 13 million
vehicles were sold in the United States in 2008 and about 16 million in
2007.[Footnote 25]
In addition, questions about the potential longevity of lithium
batteries remain and have caused at least one prominent manufacturer to
be conservative in its plans to develop plug-ins. In early tests, and
under testing conditions, lithium-ion batteries have been shown to last
for a sufficient number of charging cycles to enable plug-ins to have a
comparable lifetime to conventional automobiles. However, if the
batteries prove unreliable in real world conditions, manufacturers
could be exposed to significant costs associated with warranties. In
addition, if consumers believe they may have to replace the battery
after the warranty expires, the cost of doing so may discourage them
from buying plug-ins or could drive down vehicle resale prices.
Factors Associated with Charging Infrastructure:
As plug-ins reach a significant level of market penetration, additional
infrastructure to charge them will likely be needed. One study
estimated that about 40 percent of consumers do not have access to an
outlet near their vehicle at home. Consumers without ready access to an
outlet, such as those who only have street parking, would need public
charging infrastructure, which manufacturers and others told us could
be installed at the relatively low cost of perhaps a few thousand
dollars for a new charging box. By comparison, ethanol (E85), another
alternative to petroleum, has struggled to make inroads as an
alternative transportation fuel, in part because it can cost up to
$62,400 to install a new E85 fuel pump.[Footnote 26] However, public
charging infrastructure would require establishment of a new system for
building outlets and billing for the power dispensed, whereas fueling
stations for gasoline vehicles are already widely available.
In addition, plug-ins could increase demand for electrical power and,
over time, power companies may have to generate more electricity to
meet this demand, depending on when and how often vehicles were
charged. Results from a Duke University study suggested that if plug-in
hybrids reached 56 percent of the cars on the road by 2030, they would
require an increase in electricity production, much of which would
likely come from additional coal plants. Although an increase in coal
consumption would produce additional carbon dioxide emissions, the
study noted that if this increased consumption came during off peak
hours, power companies would likely build additional capacity that
produces electricity more efficiently and--excluding upfront capital
costs--at lower cost on a daily operational basis. In the near term, a
study by the World Wildlife Federation using 2005 levels of power
generation estimated that 1 million plug-in hybrids would demand 0.04
percent of the nation's power. In addition, a 2006 analysis by the
Pacific National Laboratory estimated that, if plug-ins were charged
during off-peak hours, about 84 percent of cars, SUVs, and pickup
trucks on the road in 2001 could be supported without building new
electricity-generation capacity. The variations in these studies are a
consequence of different assumptions, and ultimately only real-world
experience will show the actual demand for power.
Thus, a large number of plug-ins could be put into use with available
power, if consumers charge their plug-ins during off-peak hours. To
encourage consumers to do so, cheaper rates for electricity could be
charged after a certain hour at night. However, power companies would
need to be able to apply different rates during off-peak hours and
would need to make this cost advantage evident to consumers on their
bills or through some other means, such as new technology. Such
technology, or "smart charging infrastructure," would likely need to
include features that allow consumers to indicate by what time the car
needs to be charged and a way to meter and bill consumers different
prices for on-and off-peak consumption. Power companies, start-ups, and
others have been working on smart charging infrastructure, but it is
still under development.[Footnote 27]
Factors Associated with Current Economic Conditions:
The economic recession has put the auto industry under significant
financial stress, which could affect plans to introduce and mass-
produce plug-ins over the next few years.[Footnote 28] In addition, if
the following conditions are still present when manufacturers introduce
plug-ins, consumers may also be discouraged from purchasing these
vehicles.
* Declining sales: Auto sales declined in 2008 and early 2009, and
while most auto manufacturers have been affected, declines have been
more substantial for the "Detroit 3"--Chrysler, Ford, and General
Motors. For example, Detroit 3 sales in the United States dropped by
nearly 50 percent from February 2008 through February 2009, whereas
U.S. sales for Honda, Nissan, and Toyota dropped 39 percent during this
period. To stabilize their operations, Chrysler and General Motors will
receive a total of about $13 billion and $50 billion in assistance,
respectively, pending approval of the bankruptcy court and finalization
of related transactions. To the extent that auto manufacturers have
limited cash to continue developing plug-ins, as well as the capital to
build or retrofit manufacturing plants to produce them, the development
and availability of plug-ins could be hindered.
* Reduced consumer confidence: Deteriorating financial, real estate,
and labor markets have reduced consumer confidence, which could make it
difficult for manufacturers to market plug-in vehicles because of their
significant price premium compared with less expensive gasoline-powered
vehicles in the same class.
* Tight credit markets: Tightening credit markets have also limited the
availability of loans for consumers to finance car purchases, even from
the financial arms of the car companies. Should this continue,
consumers may have difficulty financing the purchase of a plug-in.
In addition to these issues, the recent spike and decline in gasoline
prices may make it more difficult to market plug-ins in that consumers
may be doubtful that they will recoup the high upfront costs of plug-
ins through fuel savings over the life of the vehicle. However,
industry stakeholders and researchers have pointed out that, in
addition to fuel savings, buyers also consider performance, styling,
and other intangibles--such as whether the vehicle makes a statement
about its owner being "green"--when choosing between vehicles.
The Federal Government Has Encouraged the Development and Manufacture
of Plug-in Vehicles, and Experts Identified Several Additional Options:
The federal government has historically played a role in the research
and development of plug-in vehicle technology and has recently provided
grant funding for plug-in hybrid test fleets:
* Funding for basic research to develop technology: DOE funds basic
research to develop battery technology for vehicles as well as other
components necessary for electric-powered vehicles. DOE's annual budget
for such research was about $101 million in fiscal year 2009. In
addition, the national laboratories have ongoing work related to plug-
ins. Argonne National Laboratory has been designated by DOE as the lead
laboratory and is testing and evaluating plug-in vehicle technology,
including batteries, components, and vehicles, to shed light on the
reliability of the technology over its expected life.
* Cost sharing for test fleets: DOE also supports the introduction of
plug-in hybrid test fleets. For example, the Idaho National Laboratory
is coordinating the collection and analysis of data from more than 150
converted plug-in hybrids deployed across the United States to
understand the effects of real-world use on the technology. To initiate
this test fleet, DOE established partnerships with organizations such
as power companies, local government agencies, and others across the
United States and Canada. DOE covered half the cost of converting a
conventional hybrid to a plug-in hybrid, as well as the cost of the
devices to collect and transmit data on fuel economy, charging
patterns, and driver behavior back to the lab. In addition, DOE is
administering a $30 million grant program to facilitate the deployment
of demonstration vehicles to accelerate improvements to plug-in vehicle
technology. The program offers funding to a team of businesses,
including an auto manufacturer and battery development company that is
willing to cover half of the cost of the demonstration fleet and data
collection.
In addition to research and development, the federal government has
also taken steps to encourage the development and manufacture of plug-
ins through a variety of programs, several of which were initiated by
the Recovery Act. While these programs are designed to either directly
or indirectly support the development and manufacture of plug-ins, they
are still being implemented.
* Loans for modernizing manufacturing plants: The government has sought
to help manufacturers manage the capital costs associated with
producing advanced technology vehicles. In 2007, Congress established
the Advanced Technology Vehicle Manufacturing (ATVM) loan program,
which offers low-cost loans to auto manufacturers and component parts
suppliers to retool aging plants or build new plants that will lead to
the production of advanced vehicles that are at least 25 percent more
fuel efficient than current vehicles for sale or advanced technology
components for these new vehicles.[Footnote 29] Officials from the ATVM
program noted that applicants include a wide range of technologies,
from making improvements to components for gasoline vehicles to major
technological breakthroughs in advanced vehicle technology. This
program received an appropriation in the fall of 2008 of $7.5 billion,
and DOE, which is tasked with administering the program, plans to offer
the first round of loans in June 2009. In addition, Title XVII of the
Energy Policy Act of 2005 established a loan guarantee program for
innovative energy technologies. Congress has authorized this program to
provide up to a total of $22.5 billion of loan guarantees for a
category of renewable or energy efficient systems and manufacturing
projects that could include production facilities for alternative fuel
vehicles. Under the program, borrowers must pay the subsidy costs of
the loan guarantees unless Congress appropriates funds to cover the
costs, and it has not done so for alternative fuel vehicle production
facilities.
* Battery manufacturing: To encourage the development of domestic
manufacturing of advanced technology batteries, the Recovery Act
appropriated $2 billion in grants for manufacturing batteries and
related components. Battery technology to be targeted includes, but is
not limited to, lithium-ion batteries, hybrid electrical systems, and
related software. DOE will administer the program and released the
solicitation on March 19, 2009.
* Direct funding to purchase fuel-efficient vehicles for the federal
fleet: The Recovery Act appropriated $300 million to GSA for capital
expenses associated with acquiring vehicles with high fuel economy,
including conventional hybrids, plug-in hybrids, and all-electric
vehicles. These funds must be used by September 30, 2011. GSA's April
plan to Congress states that GSA intends to spend this funding by
September 30, 2009, to help stimulate the economy and purchase more
fuel-efficient vehicles. As of June 1, 2009, GSA officials told us that
they had obligated $287.5 million, ordering 3,100 vehicles in April and
14,105 on June 1. Because GSA will spend most of the funding before
many plug-ins are commercially available, it does not plan to purchase
this technology, save for a few hundred neighborhood electric vehicles.
* Tax credits for consumers purchasing plug-ins: The Recovery Act
established a tax credit to consumers for the purchase of a plug-in
vehicle. The credit increases with the size of the battery up to $7,500
but is not applicable for vehicles over 14,000 pounds. In addition, the
Recovery Act established a credit of up to $2,500 for two-wheeled,
three-wheeled, and low-speed four-wheeled plug-in vehicles, such as
neighborhood electric vehicles, and establishes a credit of 10 percent
of the cost of converting a vehicle--up to $4,000--for the conversion
of existing vehicles to run on battery power. One study has indicated
that smaller batteries that are more frequently charged may be more
cost-effective solutions for reducing greenhouse gas emissions, but
this tax credit program benefits plug-ins with larger batteries. In
addition, tax incentives aimed at consumers with the oldest and least
fuel-efficient vehicles can encourage them to retire these vehicles and
replace them with plug-ins, thus resulting in a greater public benefit
than replacing vehicles with average or higher fuel economy. However,
the existing tax credit program is not designed with the replacement
vehicle in mind but rather focuses on encouraging the adoption of plug-
ins regardless of the vehicles they would replace.
* Transportation electrification: DOE is utilizing $400 million of
funding from the Recovery Act to support the integration of electric-
drive vehicles and technologies into the United States' transportation
sector. The Funding Opportunity Announcement that was released by DOE
on March 19, 2009, includes a request for proposals to establish wide-
scale demonstrations of electric-drive vehicles, including plug-in
hybrid electric and battery electric vehicles.
Several additional steps the federal government could take to encourage
the development, manufacture, and commercialization of plug-ins emerged
consistently during our discussions with experts and reviews of recent
literature. Most of these options would impose costs on the federal
government or society at large and therefore would require additional
analysis to determine whether the potential benefit would be worth the
cost.
* To reduce cost and risk of investing in battery technology and
manufacturing for auto manufacturers, the government could share the
cost of honoring warranties for plug-in batteries. However, if
batteries prove to be unreliable, the government would be exposed to
additional costs. To mitigate consumer reluctance to buy vehicles from
a financially distressed company, Treasury provided $280 million to
Chrysler and $360 million to General Motors to back warranties of these
companies. As of June 2009, Treasury officials noted that Chrysler and
General Motors continue to support their warranties and Treasury
believes that the money provided to them will be returned to Treasury.
We were not able to find estimates of the cost of this approach if it
were to be applied to plug-in vehicles. Furthermore, if such funding
were directed to troubled manufacturers, these costs would be in
addition to the $17.4 billion already provided by the government to
Chrysler and General Motors through the Troubled Asset Relief Program.
Such a program could also be used to assist start-up companies
specializing in all-electric vehicles, but we were not able to estimate
the potential risk to the government.
* To reduce the cost of batteries by broadening the market for lithium
batteries, the federal government could encourage the development of
secondary uses for battery packs. Industry officials told us that
lithium-ion batteries can be used to store energy--for example, from
renewable sources like wind--which could then be used during a period
of peak demand. These officials noted that both new batteries, and
batteries that no longer had a useful life for a plug-in vehicle but
that nonetheless could still retain a charge, could be used for this
purpose. However, power companies also stand to benefit from developing
this technology, and officials from some of the companies with whom we
spoke indicated they were exploring this idea, which suggests that if
government refrains from sponsoring such development, the private
sector may do so.
* To encourage the continued development of low-carbon electricity, the
government could institute a carbon pricing program, such as a carbon
cap-and-trade program or carbon tax. [Footnote 30] If a cap-and-trade
program, or carbon tax, were applied to transportation fuels, it could
make the life-cycle costs of plug-ins more competitive with other
vehicles, depending on its effect in changing the price differential of
gasoline relative to electricity. An energy bill that includes a carbon
cap-and-trade program was introduced in the 111th Congress,[Footnote
31] and the administration has indicated an interest in supporting such
a program. Some economists advocate using revenue from a cap-and-trade
program to lower income taxes, which could offset some of the increased
cost consumers would experience from higher fuel prices.
* To enhance consumer acceptance of the technology and once reasonably
accurate information on the performance of plug-ins is available, the
government could play a role in providing consumer education. At the
most basic level, the government could provide information to help
consumers make the decision to invest in plug-ins by, for example,
showing the extent to which fuel savings may offset the initial higher
cost of plug-ins. In addition, it could inform consumers of potential
electrical updates that may be needed in a home, such as a dedicated
circuit for charging a plug-in, to prevent consumers from becoming
frustrated once they bring their vehicles home. Finally, the government
could provide information to help consumers use the technology more
wisely. For example, it could explain the effects of driving style on
plug-in hybrid fuel economy and the potential cost savings of charging
during off-peak hours. The government already provides similar types of
information on vehicles through sources such as its fuel economy Web
site.
* Government may also need to both provide and standardize how some
information on the performance of vehicles is communicated to
consumers. For example, car companies are currently required to post
EPA-validated fuel economy labels on new cars, but consumers may need
other kinds of metrics about plug-ins, such as the length of time it
takes to charge one with a 110-or 220-volt plug, and how far the
different vehicles can go before they require charging or will begin to
rely on gasoline for additional power. Such options could increase the
regulatory role played by the federal government. However, EPA already
plays a role in providing information on vehicle fuel economy and may
be able to adapt current processes to include information on plug-ins.
* In the longer term, government could help facilitate smart charging
by helping to develop the necessary infrastructure, which includes
meters and a standardized communications between power companies and
consumers. This would help ensure the electrical grid could accommodate
widespread use of plug-ins. Federal rules and regulations may be needed
to support these standards.
Cost and Other Factors, Including Federal Requirements, Could Hinder
the Integration of Plug-in Vehicles into the Federal Fleet:
Once plug-ins become commercially available, agencies will face
challenges related to cost, availability, planning, and federal
requirements. Agencies may have difficulty making the decision to
invest in these vehicles instead of less expensive gasoline vehicles,
given that they have limited information to help them take the longer-
term costs into account using life-cycle analysis. Agencies also have
not formulated plans for incorporating plug-ins into their fleets,
largely because information they would need is not yet available.
Finally, agencies may have difficulty meeting the federal goal of
acquiring plug-in hybrids, as it conflicts with some federal
requirements and agencies lack guidance on how to negotiate this
situation.
High Upfront Costs of Plug-ins Will Initially Create a Challenge for
Agencies:
Just as the high initial cost of plug-ins may hinder consumer adoption
of these vehicles, it will also limit agencies ability to acquire them.
Plug-ins are likely to cost significantly more than comparably sized
gasoline-powered vehicles, and because the upfront cost of a vehicle is
a key factor when agencies select a vehicle, federal customers will
likely not be able to purchase or lease many of these vehicles without
additional funding to help cover costs. Thus, as a practical matter,
agencies' budgets will determine the extent to which they can integrate
plug-in hybrids and all-electric vehicles into their fleets. GSA
typically negotiates with auto manufacturers for significantly
discounted prices for the vehicles it purchases and leases for federal
agencies--typically more than 40 percent below the manufacturer's
suggested retail price. (See appendix II for more information on GSA
procurement processes.) For example, GSA offers agencies a Ford F-150
pickup truck for $15,111 (about an $11,000 discount to the suggested
retail price), a Chevrolet Cobalt for $12,600 (about a $2,400
discount), and a 4-cylinder Pontiac G6 for $14,000 (about a $6,000
discount). GSA officials did not think they would be able to obtain the
usual discount for early plug-ins since auto manufacturers are often
reluctant to offer the same discounts for new model lines because they
can better recover their start-up costs in the retail market.
Therefore, since discounted plug-in hybrids will not likely be offered
to the government, the cost differential between plug-ins and
comparable vehicles--including other alternative fuel vehicles such as
flex-fuel vehicles--could be even greater for the government than it
would be for an individual consumer.
The additional expense of plug-in hybrids and all-electric vehicles
could also make it more difficult to incorporate leased plug-ins into
the fleet. GSA officials said that their authorization limits the
agency's ability to replace existing vehicles with plug-ins in its
leasing program, at least initially. Because the high cost of plug-ins
will stretch thin GSA's revolving fund's ability to absorb costs over
the life of the lease, GSA would need additional funding upfront to
cover the higher costs of plug-ins. It could subsequently recover some
of these costs by setting the lease rates for agencies at a level that
would replenish these funds. However, this additional cost would cause
lease rates for plug-ins to not be competitive with lease rates for
similarly sized vehicles. In addition, GSA determines its lease rates
for vehicles not just based on the initial price but also the price
they can get for the vehicle in the used car market. However,
uncertainties regarding the resale value of plug-ins will make it
difficult for GSA to lower the lease rate based on the amount of money
it could recoup through resale.
Life-Cycle Cost Analysis Is Not Widely Used in Making Choices between
Vehicles, and Agencies Do Not Have Information Needed to Compare Plug-
ins with Other Vehicles:
Executive Order 13423 directs agencies to begin purchasing plug-in
hybrids once they are reasonably comparable on a life-cycle cost basis
with conventional vehicles. A life-cycle cost analysis includes factors
such as the expected total fuel and maintenance costs of a vehicle over
the years that the agency would operate it.[Footnote 32] This helps the
purchaser determine the best long-term value for the investment. The
Federal Acquisition Regulation does not explicitly require agencies to
perform life-cycle cost analysis for their acquisitions, including
vehicles they acquire, although agencies are free to do so.
Among the agencies we reviewed, the use of life-cycle cost analysis
varied, and according to FEDFLEET, an organization representing federal
fleet managers, most agencies do not use life-cycle costing when
evaluating which vehicles to purchase. When selecting vehicles, fleet
managers with whom we spoke said they primarily consider mission needs,
upfront costs, and federal goals and requirements, rather than long-
term savings. However, of the agencies we reviewed, only agencies
within DOD--the Air Force, Navy, and Marine Corps--reported that they
evaluate life-cycle costs to differentiate between multiple vehicles
that met the agencies' needs.
In order to conduct analysis of life-cycle costs, agencies need access
to information that would enable such an analysis, such as estimates of
lifetime fuel economy, and ongoing maintenance and repair data for
specific vehicles. GSA officials told us that some information on life-
cycle costs of vehicles is available though a database that houses
information on fuel consumption reported by agencies, and that GSA
Fleet would have some information on lifetime maintenance costs of some
vehicles. In addition, life-cycle cost estimates for existing vehicles
are available from public sources of automotive information.[Footnote
33] However, such information for specific vehicles is not readily
available from GSA. For example, AutoChoice, a Web site developed by
GSA to provide information to agencies on vehicles available for
purchase, includes information about upfront costs and vehicle
performance characteristics (such as engine size and fuel economy) but
does not include information on total cost of ownership, such as
estimated lifetime fuel or maintenance costs.
For comparable conventional gasoline vehicles in the same class,
differences in life-cycle costs may not be significant, but differences
could arise when comparing a conventional gasoline-powered vehicle to a
plug-in hybrid or all-electric vehicle, depending on a number of
factors. However, since plug-in hybrids are not currently available in
the marketplace, much of the information about their lifetime ownership
costs is unknown. First, the fuel economy of planned plug-in hybrids
has not been announced and will vary greatly depending on how agencies
plan to use them. For example, plug-in hybrids used only within the all-
electric range will use no gasoline at all, while plug-in hybrids used
for long-distance driving may not offer fuel economy much better than a
conventional hybrid or highly fuel-efficient gasoline-powered vehicle.
Secondly, their maintenance costs could be significantly more or less
than conventional technology. For example, failure of vehicle
batteries--which will likely be the vehicles' most expensive component-
-after warranties expire could entail significant costs for agencies.
In addition, some maintenance issues may involve proprietary
considerations or require additional specialized training for
maintenance staff among agencies that service their own vehicles.
Conversely, to the extent that plug-in vehicles will have fewer moving
parts, they may offer significantly lower maintenance costs over the
life of the vehicle. Finally, another important factor in determining
vehicle life-cycle costs is resale value, which is also uncertain in
the case of plug-ins. GSA officials said that past experience with
advanced technology vehicles underscored the risk federal agencies
might face when trying to resell the vehicles. For example, when GSA
attempted to resell some of its compressed natural gas vehicles in the
1990s, there was no market for them and the resale value was
essentially zero. By comparison, information from public sources of
automotive data suggests that the projected value of a Toyota Prius, a
conventional hybrid, will hold up well over time compared with
similarly sized gasoline vehicles.
We believe these uncertainties make it difficult for fleet managers to
plan for the integration of plug-in hybrids in the early years of their
commercialization and pose challenges for agencies in complying with
the executive order. In addition, to compare plug-in hybrids with other
vehicles available to them, agencies will need to make certain
assumptions that can materially affect the estimation of whether the
vehicles are comparable on a life-cycle cost basis. For example,
factors such as agency policies about when and how often vehicles are
charged, driving behavior and the types of trips plug-in hybrids are
predominantly used for, and the potential for training needed to
service the vehicles all can influence the costs of the vehicle to the
agency over its lifetime. Currently there is no guidance on how to deal
with these uncertainties and no further information about the
performance of the vehicles.
GSA and DOD have started to explore options that would allow the
agencies to acquire and use neighborhood electric vehicles while
minimizing some of the risk associated with the uncertainties described
above. Specifically, GSA, on behalf of the Department of the Army, is
currently negotiating "pass-through lease agreements" in which it would
lease neighborhood electric vehicles directly from manufacturers and
pass the leases on to the customer. In its effort to reduce petroleum
consumption, the Army would like to order 4,000 neighborhood electric
vehicles over a 3-year period beginning in 2009 and replace gas-powered
vehicles, where appropriate, on a one-for-one basis. Leasing, rather
than purchasing, the neighborhood electric vehicles will help mitigate
risks associated with their maintenance and their minimal resale value,
according to GSA and DOD officials. The cost of the leases could be
higher if manufacturers adjust the rate to account for risk associated
with expected costs and performance of plug-in vehicles. However, if
the government leased these vehicles, it would avoid liability of
ownership, especially with regard to the maintenance and resale
challenges GSA and federal agencies would otherwise face. GSA has not
yet explored the possibility of leasing other plug-ins directly from
manufacturers; however, GSA officials thought this option would be
worth exploring.
Availability of Plug-in Vehicles to the Federal Fleet May Be Limited:
Auto manufacturers may not make a high volume or wide range of plug-in
vehicle models available to the federal government. The vehicles GSA is
able to provide to its customers are limited to the models automakers
are willing to sell to the government. Those offered have generally
been limited to models that have been on the market for several years
and are no longer at the peak of their retail sales. In addition,
foreign manufacturers historically have not entered into procurement
contracts with GSA. GSA officials informed us that although they have
regularly pursued discussions with Toyota and Honda, both manufacturers
have declined to submit proposals because of franchising and licensing
agreements with their dealers in the United States. Of the large
manufacturers that have announced plans to market plug-in hybrids in
the next several years, only GM has said it would make these available
to the government, but it has not indicated the quantities it would
provide. The availability of plug-ins through smaller start-up
manufacturers is also uncertain. For example, Phoenix Motorcars is
marketing its all-electric pickup truck and SUV to fleets, and its
first production run is scheduled to begin in 2009. GSA officials
noted, however, that the Phoenix vehicles were not yet in production
when it met with auto manufacturers to plan for fiscal year 2010.
Agencies Have Not Developed Plans to Incorporate Plug-ins Due to
Uncertainties Surrounding Vehicle Performance and Infrastructure Needs:
Almost all of the agency officials we interviewed stated they have not
developed plans for incorporating plug-ins into their fleets, in some
cases because of the uncertainties surrounding plug-ins. The Government
Performance and Results Act of 1993 (GPRA) requires executive branch
agencies to clearly establish their missions and goals.[Footnote 34] In
guidance GAO developed to assist agencies implement GPRA, we stated
that plans can help clarify organizational priorities and unify agency
staff in pursuit of shared goals, like integrating plug-ins into the
federal fleet. As we have mentioned in previous reports, plans can help
clarify organizational priorities and unify agency staff in pursuit of
shared goals, like integrating plug-ins into the federal fleet. These
plans also must be updated to reflect changing circumstances and should
include a number of key elements, such as (1) approaches for achieving
long-term goals; (2) linkages to goals; (3) frameworks for aligning
agency activities, processes, and resources to attain goals; (4)
consideration of external factors; and (5) reliable performance data
needed to set goals, evaluate results, and improve performance.
[Footnote 35]
Agency officials told us that the uncertainties surrounding plug-ins,
as discussed throughout this report, prevent them from developing plans
for integrating plug-ins into their fleets. For example, agency
officials reported that the performance characteristics of plug-ins--
such as fuel economy, length of time to charge, and range--are still in
question. While there is some preliminary information on performance
characteristics and potential benefits, agencies cannot determine with
certainty whether the vehicles will meet their mission, which is one of
the most important criteria in purchasing vehicles. In addition,
according to FEDFLEET, plug-in hybrids are a suitable option for
agencies located in metropolitan areas, on military bases, and federal
centers, but agency fleet managers noted that plug-in hybrids may not
be appropriate for agency missions located in remote areas or that
require long-distance driving without assurance that charging
infrastructure will be accessible. Finally, the compact size of the
first plug-in hybrids expected on the market may be problematic. For
example, USPS officials stated that they are unlikely to acquire plug-
in hybrids with limited cargo capacity, such as the Chevy Volt, but
viewed plug-in vans with larger cargo space as an option.
Agencies are also uncertain how to plan for the integration of plug-ins
because they have not determined whether additional charging
infrastructure would be needed at federal facilities to accommodate the
use of plug-ins. The first generation of plug-ins is expected to use
ordinary plugs and outlets to recharge the vehicles, and agency
officials expected that small numbers of plug-ins would not pose
considerable infrastructure challenges. However, many agency officials
we interviewed stated that they had yet to conduct any assessment of
their current facilities to determine the extent to which they could
support plug-ins and, thus, what modifications might be necessary. For
example, according to several agency officials, federal agencies
located in a commercially leased space may not have access to
additional electrical infrastructure necessary to support vehicle
charging, or the building owner may not be willing to provide it. Also,
as the number of plug-ins used by federal agencies increases, it will
likely become necessary to upgrade the facility's electrical service to
accommodate the growing demand. In addition, some agencies with their
own charging facilities may need to collaborate with the local utility
to ensure transformers serving the building can manage additional load.
Agencies may also need to collaborate with local power companies and be
prepared to install smart charging capability to ensure that electrical
power is being used in the most efficient manner possible. Finally,
some officials emphasized that they may need funding for additional
infrastructure, such as charging stations. Because of these
uncertainties, agency officials informed us that it would be extremely
difficult to develop a plan that successfully incorporates plug-ins
into their mission and uses these vehicles as effectively as possible.
Incorporating Plug-ins into the Federal Fleet May Be at Odds with Other
Federal Requirements:
Agencies also face a challenge posed by the patchwork of existing
federal requirements that covers energy use and vehicle acquisitions.
In deciding whether to acquire plug-in hybrids and all-electric
vehicles, agencies must also consider how this decision will affect
their ability to meet these other requirements, some of which conflict
with one another. These requirements are intended to further several
important objectives, including reducing petroleum consumption and
encouraging the use of alternative fuel vehicles and alternative fuel
in the federal fleet. However, the current set of requirements does not
provide agencies with a means to set priorities for these objectives
and make complex decisions such as what vehicles to acquire under what
circumstances.
Using plug-in vehicles could create several challenges related to
meeting energy reduction and fuel consumption goals.
* Consumption of electricity by plug-ins could conflict with energy
reduction requirements for facilities: Under Executive Order 13423
agencies are expected to reduce energy intensity in federal facilities
by 3 percent per year through the end of fiscal year 2015; further,
EISA requires a reduction in energy intensity in facilities by 30
percent by the end of fiscal year 2015, relative to the baseline of
their energy use in fiscal year 2003. Energy intensity is defined as
energy consumed per gross square foot of facilities. Because plug-ins
are expected to rely on electricity from federal facilities while
charging, they could increase energy consumption, particularly if plug-
ins are used in large numbers. Such an increase could create a conflict
with the requirement in EISA for federal facilities to reduce energy
consumption of facilities.[Footnote 36] If agencies do not have a means
to determine the electricity used by plug-ins, they will have no way of
subtracting vehicle usage from facility usage to track their progress
in meeting the facility requirement.
* Without means to measure electricity used to "fuel" plug-ins,
agencies may underestimate progress toward alternative fuel consumption
requirements: EISA requires agencies to increase alternative fuel use
by 10 percent annually. The electricity used to charge plug-in hybrids
and all-electric vehicles, except neighborhood electric vehicles, can
count toward this requirement. But according to agency officials,
facilities are generally not equipped with dedicated meters or other
means of measuring the amount of electricity used by vehicles.
According to the DOE official responsible for federal fleet policy,
electricity used by plug-in hybrids and all-electric vehicles could be
estimated, but there is currently no guidance for how to do this.
* The lack of guidance regarding alternative fuel use for plug-in
hybrids could hamper agencies' ability to meet the 100-percent
alternative fueling requirement: EPAct 2005 requires that alternative
fuel vehicles be fueled with alternative fuel 100 percent of the time,
unless they qualify for a waiver. In the case of flex-fuel vehicles
that are fueled by ethanol (E85) and gasoline, agencies can qualify for
a waiver to use gasoline in flex-fuel vehicles if E85 is not readily
available or costs too much. DOE guidance allows exceptions under
certain conditions--for example, agencies may use gasoline, instead of
E85, to complete the mission at hand if E85 is unavailable. According
to DOE officials, similar guidance will be necessary to address
conditions when alternative fuel, specifically electricity, is
unavailable for plug-in hybrids.
* The lack of guidance regarding the electricity used by neighborhood
electric vehicles could lead to inaccuracies in alternative fuel
consumption reporting: According to DOE, neighborhood electric vehicles
do not qualify as alternative fuel vehicles under EPAct 1992. However,
because neighborhood electric vehicles are fueled with electricity,
without a means of accounting for their electricity use separately from
that of plug-in hybrids and other all-electric vehicles, agencies could
be improperly counting the electricity used by neighborhood electric
vehicles as alternative fuel. Neighborhood electric vehicles can,
however, help agencies meet their petroleum reduction targets, and DOD
and GSA plan to put more of these vehicles into use. DOE has not
provided guidance to agencies on this subject. DOE's official
responsible for fleet policy noted that because so few neighborhood
electric vehicles have been used to date, the lack of policy has not
been a problem. Now that neighborhood electric vehicles are becoming
more popular, he said, DOE has begun developing guidance specifying how
to account for the electricity used in neighborhood electric vehicles.
In addition, the various federal requirements that pertain to energy
use and vehicle acquisitions do not provide agencies with a clear way
to set priorities and effectively address conflicts between these
requirements.
* Until they are more affordable, plug-ins are unlikely to be the most
cost-effective type of AFV for reducing petroleum consumption: EPAct
1992 requires that at least 75 percent of all new vehicle acquisitions
by agencies for EPAct-covered fleets be alternative fuel
vehicles.[Footnote 37] In addition, EISA requires agencies to reduce
petroleum consumption. Acquiring plug-ins would be helpful in meeting
both requirements. However, agencies would be able to replace more of
their older, less-efficient vehicles by acquiring either less costly
AFVs or fuel-efficient gasoline-powered vehicles. Depending on the
circumstances, acquiring plug-ins could limit an agency's ability to
meet the requirement to reduce petroleum consumption.
* The new requirement to acquire low-emission vehicles creates an
additional priority that agencies must manage: EISA directs agencies to
procure only low-emission greenhouse gas vehicles, and EPA is in the
process of developing a definition for these vehicles. DOE officials
noted that the EISA requirement may be at odds with the AFV acquisition
requirement because most AFVs in use today, particularly flex-fuel
vehicles, meet the EISA emissions requirement only if they are fueled
with alternative fuel, not gasoline. In addition, the amount of
emissions produced by a plug-in hybrid depends in part on the source of
energy used to generate electricity, as well as how much gasoline it
consumes. Once agencies have guidance defining low-emission vehicles,
they may face similar conflicts in trying to meet the various vehicle
acquisition requirements and goals.
Finally, in our 2008 report, which addressed the extent to which
agencies were making progress toward meeting federal fleet energy
objectives, we found several additional conflicts agencies experienced
in trying to meet all of the current regulations. For example, we found
that while agencies were able to meet the alternative fuel vehicle
acquisition requirement, they were highly unlikely be able to meet the
alternative fuel use requirement because of a limited supply of
alternative fuel and an inadequate alternative fuel infrastructure.
These issues were also factors in some agencies' inability to meet the
petroleum requirements for fiscal year 2007. Accordingly, we suggested
that Congress consider aligning the federal fleet AFV acquisition and
fueling requirement with current alternative fuel availability and
revising those requirements as appropriate.
Conclusions:
As federal agencies work to cost-effectively comply with requirements
and goals for conserving energy in their facilities and vehicle fleets,
a number of uncertainties hinder their efforts. Although, by making
statutory requirements, Congress signified the importance of acquiring
alternative fuel vehicles, using alternative fuel, decreasing petroleum
use, decreasing greenhouse gas emissions, and improving energy
efficiency in facilities, the requirements can be costly and are
sometimes in conflict. As a result, agencies are uncertain about
setting priorities and struggle to meet the overall intent of these
requirements and goals. Executive Order 13423's directive to
incorporate plug-in hybrids into fleets adds to the agencies' struggle
to balance requirements and goals within their budgets. Without having
clear priorities for the patchwork of requirements that compete for
funding, agencies may miss opportunities to effectively use new
technologies and maximize petroleum reduction. Alternatively, agencies
may opt to meet the requirements that are most feasible for them,
regardless of whether the actions match the priorities of Congress.
In the past, agencies chose among vehicles with internal combustion
engines, which simplified the process of comparing the cost of vehicles
and making cost-effective choices. With the advent of plug-in hybrids
and all-electric vehicles, as well as new requirements such as reducing
greenhouse gas emissions and petroleum consumption, the process has
become more complicated. For several reasons, agencies lack information
critical to making informed vehicle acquisition decisions that will
meet energy-conservation requirements in a cost-effective manner.
Specifically, agencies lack (1) data on how the different
configurations of plug-ins will affect the costs of the vehicles over
their life cycles, (2) strategic plans for how they will incorporate
plug-in vehicles, and (3) guidance on how to account for the
electricity plug-ins will use.
Plug-ins will be expensive relative to other vehicles until battery
costs come down and challenges such as achieving economies of scale are
met. These high upfront costs will prevent agencies from including plug-
ins in large numbers in their fleets without additional funding.
Furthermore, agencies will also be hindered from incorporating plug-ins
because of uncertainties regarding their performance, the maintenance
and reliability associated with the vehicles' batteries, and the resale
value of the vehicles. Exploring the option of leasing the vehicles
directly from manufacturers could help mitigate these risks and allow
agencies to experiment with how well the vehicles perform within their
fleet.
Recommendations for Executive Action:
To enable agencies to more effectively meet congressional requirements,
we recommend that the Secretary of Energy, in consultation with EPA,
GSA, OMB, and organizations representing federal fleet customers such
as INTERFUEL, FEDFLEET, and the Motor Vehicle Executive Council,
propose legislative changes that would resolve the conflicts and set
priorities for the multiple requirements and goals with respect to
reducing petroleum consumption, reducing emissions, managing costs, and
acquiring advanced technology vehicles.
We recommend that the Secretary of Energy begin to develop guidance for
when agencies consider acquiring plug-in vehicles, as well as guidance
specifying the elements that agencies should include in their plans for
acquiring the mix of vehicles that will best enable them to meet their
requirements and goals. Such guidance might include assessing the need
for installing charging infrastructure and identifying areas where
improvements may be necessary, mapping current driving patterns, and
determining the energy sources used to generate electricity in an area.
We also recommend that the Secretary of Energy continue ongoing efforts
to develop guidance for agencies on how electricity used to charge plug-
ins should be measured and accounted for in meeting energy-reduction
goals related to federal facilities and alternative fuel consumption.
In doing so, the Secretary should determine whether changes to existing
legislation will be needed to ensure there is no conflict between using
electricity to charge vehicles and requirements to reduce the energy
intensity of federal facilities, and advise Congress accordingly.
We recommend that the Administrator of the General Services
Administration consider providing information to agencies regarding
total cost of ownership or life-cycle cost for vehicles in the same
class. For plug-in vehicles that are newly offered, the Administrator
should provide guidance for how agencies should address uncertainties
about the vehicles' future performance in estimating the life-cycle
costs of plug-ins, so agencies can make better-informed, consistent,
and cost-effective decisions in acquiring vehicles.
We also recommend that, once plug-in hybrids and all-electrics become
available to the federal government but are still in the early phases
of commercialization, the Administrator of GSA explore the possibility
of arranging pass-through leases of plug-in vehicles directly from
vehicle manufacturers or dealers--as is being done with DOD's
acquisition of neighborhood electric vehicles--if doing so proves to be
a cost-effective means of reducing some of the risk agencies face
associated with acquiring new technology.
Agency Comments and Our Evaluation:
We provided a draft of this report to DOD, DOE, EPA, GSA, OMB, and USPS
for review and comment. The audit liaisons from DOD, EPA, and USPS each
provided comments via e-mail, and each agreed with the report findings
and recommendations. In addition, EPA and USPS provided technical
comments, which we incorporated into the draft. The Acting
Administrator of GSA provided written comments and agreed with the
findings and recommendations pertaining to GSA. The Deputy Associate
Administrator for Procurement and Senior Budget Analyst responded
orally on behalf of OMB and stated that OMB had no comment on the
report's findings and recommendations. DOE did not provide comments on
our report within the 30-day review period.
We are sending copies of this report to interested congressional
committees and the Secretary of Defense, the Secretary of Energy, the
Administrator of the Environmental Protection Agency, the Acting
Administrator of the General Services Administration, the Director of
the Office of Management and Budget, and the Postmaster General and
Chief Executive Officer of the United States Postal Service. In
addition, this report will be available at no charge on GAO's Web site
at [hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact Susan Fleming at flemings@gao.gov and (202) 512-2843 or Mark
Gaffigan at gaffiganm@gao.gov and (202) 512-3841. Contact points for
our Office of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff who made major contributions
to this report are listed in appendix III.
Signed by:
Susan Fleming:
Director, Physical Infrastructure Issues:
Signed by:
Mark Gaffigan:
Director, Natural Resources and Environment:
[End of section]
Appendix I: Scope and Methodology:
The scope of our work included all of the various plug-in hybrid
electric vehicle designs as well as the full range of plug-in electric
vehicles that are currently in development or already on the market. We
defined this set of vehicles as "plug-ins" since they derive part or
all of their energy from plugging into an electricity source. Although
the United States Postal Service (USPS) is not subject to Executive
Order 13423 as are other federal agencies, our review encompassed the
fleet operations of USPS because of its size, its past experience in
testing electric vehicles, and the potential of that fleet to utilize
plug-in technologies. In addition, USPS officials indicated that they
will try to comply with the executive order even though they are not
required to do so. To inform each of our objectives, we conducted nine
site visits with organizations that have test fleets of plug-in hybrids
and all-electric vehicles (see table 5).
Table 5: List of Site Visits:
Name: Argonne National Lab;
Type of organization: National laboratory;
Location: Argonne, IL.
Name: Austin Energy;
Type of organization: Power company;
Location: Austin, TX.
Name: Google RechargeIT;
Type of organization: Nonprofit research;
Location: Mountain View, CA.
Name: Johnson Controls Inc.;
Type of organization:
Battery manufacturer; Location: Glendale, WI.
Name: Pacific Gas & Electric;
Type of organization: Power company;
Location: San Francisco, CA.
Name: Reliant Energy;
Type of organization: Power company;
Location: Houston, TX.
Name: Seattle City Light;
Type of organization: Power company;
Location: Seattle, WA.
Name: Southern California Edison;
Type of organization: Power company;
Location: Pomona, CA.
Name: USPS Manhattan Station;
Type of organization: Government agency;
Location: New York, NY.
Source: GAO.
[End of table]
To identify the potential benefits and trade-offs of plug-ins, we
interviewed officials from power companies and other entities, such as
the National Laboratories, currently testing plug-ins. We also reviewed
data from these organizations on the performance of plug-ins when it
was available. We analyzed the results of published studies from
academic research centers and others that evaluated the potential
benefits plug-ins can offer with respect to issues such as reducing
fuel consumption and greenhouse gas emissions and identified trade-offs
plug-ins could require compared to other alternative fuel vehicles and
conventional gasoline vehicles. In addition, we used these articles to
identify changes in current conditions--such as shifting power sources
used to produce electricity from fossil fuels to low carbon energy
sources--that would be needed to ensure that plug-ins realized their
potential.
To determine the current status of plug-ins, in February 2009 we
obtained information directly from Chrysler, Ford, General Motors,
Phoenix Motorcars, and the Association of International Automobile
Manufacturers. We also reviewed published material on Web sites of a
variety of smaller manufacturers, such as Tesla Motors, Fisker
Automotive, and others about the plug-ins that those manufacturers plan
to bring to market. To understand the development of plug-in vehicle
and battery development and identify any potential challenges to the
development and commercialization of these technologies, we interviewed
a wide variety of stakeholders, and reviewed documents from diverse
stakeholders, including auto manufacturers, battery manufacturers,
Department of Energy (DOE) and Environmental Protection Agency (EPA)
officials, National Laboratory researchers, power companies, charging
infrastructure equipment companies, and others. We reviewed published
research related to plug-in technology, such as studies on vehicle and
battery performance and consumer acceptance of plug-in technology. In
addition, to examine the impact of rising or falling gasoline prices
relative to electricity prices, different battery costs and prices of
vehicles, and different assumptions regarding maintenance expenses and
resale values, we developed a model to attempt to estimate the life-
cycle and cost-effectiveness of plug-ins relative to conventional
hybrids and conventional gasoline-powered vehicles. While our modeling
effort highlighted the importance of certain variables, such as battery
cost, because of the significant uncertainties regarding the estimates
used in these models, we do not report specific results. We also
tracked and analyzed developments related to the current economic
crisis and financial stress facing the auto industry and the potential
impact this crisis could have on plug-in vehicle development. In
addition, we reviewed programs and incentives the federal government is
using to assist auto manufacturers in developing and commercializing
plug-ins, as well as incentives offered to consumers to purchase plug-
ins.
To determine the options that exist for the federal government to
address challenges in the development, manufacture, and
commercialization of plug-ins, we analyzed and synthesized the views of
a wide range of stakeholders from interviews, published studies, and
analyses regarding options for federal involvement. To ensure the
studies we considered were of sufficient scientific rigor, we limited
our review to articles published in well-respected peer-reviewed
journals or those provided by experts or organizations because of their
level of expertise in this area. Articles using cost-benefit analysis
to describe the relative benefits of plug-ins were reviewed by an
economist. The options selected for discussion represent those
supported by many of these experts. In addition, we considered the
potential costs the options could pose to the federal government as
well as what role the government might play relative to other
stakeholders who also stand to benefit from this technology. Inherently
there are certain limitations and variances in the quality of
information available about these options. Therefore, we used
professional judgment in identifying the relative benefits and
limitations of these options. In addition, we identified steps already
taken by DOE and others to hasten the development of plug-ins and
reviewed recent legislation, including the Recovery Act, to describe
the most recent actions taken by the government to forward this
technology.
To describe how agencies are addressing the requirement to integrate
plug-in hybrids into the federal fleet, we reviewed and analyzed plans
and analyses prepared by the Department of Defense (DOD), DOE, EPA, the
General Services Administration (GSA), USPS, and other agencies in
order to represent a mixture of large and small fleets, vehicle use
patterns, and types and conduct interviews with fleet managers from
those agencies. We also interviewed officials from the Office of
Management and Budget to understand their role in overseeing agency
compliance with federal energy and fleet requirements and goals,
including Executive Order 13423. To identify challenges related to
integrating plug-in hybrids or all-electric vehicles into federal
fleets, we interviewed fleet managers from DOD--including those of the
Army, Navy, Air Force, and Marines--DOE, GSA, and USPS. We also
attended and held discussions with those attending federal fleet
manager meetings (FEDFLEET) organized by GSA. Furthermore, we used in-
depth discussions with fleet managers from the selected agencies and
our discussions at the FEDFLEET meetings to examine the life-cycle
costing methodologies used by fleet managers to select vehicles for
their fleets. To understand how alternative fuel vehicles and others
are priced and made available to the federal fleet, we reviewed GSA's
procurement process. We also analyzed and compared the requirements
contained in various legislative mandates and executive orders related
to (1) federal fleet use of alternative fuels, (2) reductions in
agencies' overall energy consumption, and (3) increased reliance on
renewable energy sources to identify how integrating plug-ins might
help or hinder agencies' efforts to meet these requirements. Because we
did not interview managers from all of the agencies operating vehicle
fleets, our findings are not be applicable to all federal agencies.
We conducted this performance audit from July 2008 to June 2009 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives:
[End of section]
Appendix II: GSA Procurement Process:
Federal agencies are required by regulation to purchase all nontactical
vehicles through the General Services Administration (GSA), which
leverages its status to procure vehicles at significant discounts. The
United States Postal Service (USPS) is not subject to GSA's purchase
restrictions as USPS can purchase its own vehicles or use GSA's
services to do so. Motor vehicle supply activities are largely carried
out by two units within GSA's Federal Acquisition Service--GSA
Automotive, which is responsible for contracting with manufacturers and
other suppliers for nontactical motor vehicles, and GSA Fleet, which
leases a broad range of vehicles to federal customers and other
eligible entities.
Using the previous year's purchase as a baseline, GSA Automotive
contracts with auto manufacturers and other suppliers to procure
vehicles for federal customers. This annual process begins each winter
with discussions between GSA and auto manufacturers about anticipated
federal needs, future vehicle availability, and any changes that have
been made to federal vehicle standards. The purpose of the standards is
to establish a practical degree of standardization within the federal
fleet. The standards are organized by class of vehicle--such as sedans,
trucks, and buses--and outline minimum criteria for vehicle
characteristics such as engine horsepower, cabin space, and safety
features. GSA publishes the standards and encourages the manufacturers
to identify models they could offer at a competitive price to the
government that meet or exceed the standards. If GSA modifies the
standards to address, for example, new federal mandates or goals, GSA
publishes a draft version and provides a comment period for
stakeholders before finalizing them. Once the standards are finalized,
GSA Automotive issues at least five solicitations in the FedBizOpps,
the government portal for federal procurement opportunities to cover
specific types of vehicles, such as sedans, trucks, buses and
ambulances, reviews proposals, and awards contracts in time for the
beginning of the fiscal year on October 1. The contracts are typically
indefinite quantity/indefinite delivery contracts.
Although federal motor vehicle procurement has not been limited to
purchasing vehicles made by domestic manufacturers by the Federal
Acquisition Regulations, historically, only domestic automakers have
submitted proposals. According to GSA officials, the agency may
contract with auto manufacturers from any country with which the United
States has a trade agreement if the order is greater than $194,000.
However, foreign manufactures have not submitted proposals in the past,
citing franchise and licensing agreements with their domestic dealers
as preventing direct sales of vehicles to the government. Nonetheless,
some foreign manufacturers have encouraged their dealers to contract
with GSA, which has allowed GSA to procure vehicles made by foreign
manufacturers in limited numbers through domestic dealers.
GSA is required by law to recover all costs it incurs in providing
vehicles and services to federal customers.[Footnote 38] Since neither
GSA Automotive nor GSA Fleet receives appropriations through the annual
budget cycle, both the procurement and the leasing activities operate
out of revolving funds that are reconciled each year. GSA Automotive
awards contracts for vehicles, provides information to agencies on
pricing for evaluation, and places orders against the awarded contracts
using their agency funds. GSA Automotive applies a 1 percent surcharge
to the final purchase price of each vehicle ordered. Similarly, GSA
Fleet obligates money to GSA Automotive from its revolving fund to
purchase the vehicles it leases to federal customers and recovers
purchase and maintenance costs through lease fees and the resale of
vehicles at the end of their life cycle. According to GSA Fleet
officials, approximately 20 percent of the leased vehicles are replaced
each year. GSA Fleet replaces the leased vehicles using several
criteria, among which age and mileage are foremost. Since GSA Fleet
needs to recover its costs to maintain the solvency of its revolving
fund, it auctions off most of its sedans, for example, within 5 years
of their purchase. Agency-owned vehicles are usually retained for
longer periods, as are larger vehicles such as trucks and buses.
Figure 3: GSA's Acquisition Process:
[Refer to PDF for image: illustration]
Entity: Auto Manufacturers and other dealers;
Interaction with: GSA Automotive (vehicle sales);
Action: GSA Automotive negotiates with and awards contracts to auto
manufacturers and other dealers; dealers provide vehicles to GSA
Automotive.
Entity: GSA Automotive (vehicle sales);
Interaction with: Customer agencies buying vehicles;
Action: Customer agencies order vehicles and obligate agency funds to
GSA Automotive to pay for them. Typically, vehicle procurement is
funded with agency operations and maintenance funds; GSA Automotive
provides vehicles to Customer agencies buying vehicles.
Entity: GSA Automotive (vehicle sales);
Interaction with: GSA Fleet (vehicle leasing);
Action: Vehicle purchase orders and fund obligations through GSA
Automotive. Twenty percent of GSA Fleet vehicles are replaced each
year; GSA Automotive provides vehicles to GSA Fleet.
Entity: GSA Fleet (vehicle leasing);
Interaction with: Customer agencies leasing vehicles;
Action: Customer agencies submit vehicle orders and obligate funds for
monthly lease fees; GSA Fleet provides vehicles to Customer agencies
leasing vehicles (31 percent of federal fleet vehicles leased through
GSA Fleet).
Entity: GSA Fleet (vehicle leasing);
Interaction with: Commercial Auction House (sales of former GSA Fleet
vehicles only);
Action: Vehicles replacement based on age and mileage (approximately 20
percent of leased fleet is resold each year); Proceeds are returned to
the GSA Fleet revolving fund.
Entity: Customer agencies leasing vehicles;
Interaction with: Customer Lessors (1 percent of federal fleet
vehicles);
Action: Typically short-term leases or vehicles GSA cannot supply;
Lease fees provided to Customer Lessors.
Source: GAO.
[End of figure]
Federal customers purchase vehicles by using AutoChoice, an automated
internet-based tool maintained by GSA Automotive. AutoChoice allows
users to configure and evaluate the vehicles they would like to buy, by
displaying side-by-side comparisons of vehicle models from several
manufacturers. The side-by-side comparisons include costs, fuel
ratings, and vehicle safety data, manufacturers' past performance, and
comparisons between GSA's contract discounts and retail prices, among
other features. Agency fleet managers place orders for most vehicles
between October and May of each year, after which the manufacturers
close their plants to prepare for the next model year's production
which begins in August. GSA's AutoChoice Summer Program, however,
allows federal customers to obligate current year funds during the
summer to purchase next model year vehicles for delivery when
production resumes in the fall. According to GSA Automotive, the size
of orders placed on AutoChoice ranged from 1 to 200 vehicles in fiscal
year 2008 but averaged two vehicles per order.
Federal customers can purchase most types of vehicles--including
sedans, heavy trucks, wreckers, and buses--through AutoChoice. However,
for certain specialized vehicles, such as low-speed neighborhood
electric vehicles, heavy vehicles such as those used for construction,
or tankers, fire trucks, and trash collectors, GSA is not the mandatory
source and these vehicles are not listed in AutoChoice. Instead, GSA
makes these vehicles available through its Multiple Award Schedules
program whereby it has negotiated long-term governmentwide contracts
with a multitude of different commercial vendors--providing access to
millions of commercially supplied products. Agencies are free to
procure supplies from any of the vendors listed on GSA's multiple award
schedules or contract with vendors on their own. In addition, for
purposes of EPAct reporting requirements, the specialized vehicles sold
through GSA multiple award schedules are considered equipment rather
than vehicles.
GSA Fleet buys vehicles through GSA Automotive, then leases them to
federal customers. The process used to lease vehicles from GSA Fleet is
similar to purchasing vehicles with several exceptions. First, federal
customers are not restricted by federal regulations from leasing
vehicles through GSA but may choose to lease from commercial vendors,
such as those listed on the multiple award supply schedules.
Nonetheless, since GSA Fleet procures the vehicles it leases at
discount and passes those savings on to customers, nearly all of the
vehicles leased by federal customers are leased through GSA Fleet
rather than commercial vendors, which accounted for only 1 percent of
all federal fleet vehicles in fiscal year 2008. Fleet managers told us
they typically lease vehicles from commercial vendors only in cases
where GSA Fleet is unable to supply the vehicle, for overseas locations
where GSA Fleet does not operate, such as in Southeast Asia, or for
very short lease periods. Second, agencies negotiate leases for
vehicles through GSA's Regional Offices or local Fleet Management
Centers rather than using AutoChoice or online automated tools. GSA
Fleet offers different leasing arrangements to meet customer needs. For
example, because GSA Fleet vehicles are in high demand and some
requests for additional vehicles must go unfilled, GSA Fleet offers
customers the option of leasing from commercial vendors through its
Schedule 751. Should the agency choose to open a commercial lease
through GSA Fleet rather than on its own, GSA Fleet will manage the
lease for the customer, including the provision of maintenance and
fuel.
[End of section]
Appendix III: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Susan A. Fleming, (202) 512-2834 or flemings@gao.gov:
Mark Gaffigan, (202) 512-3841 or gaffiganm@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Andrew Von Ah, Assistant
Director; Karla Springer, Assistant Director; Lindsay Bach; Nabajyoti
Barkakati; Charles Bausell; David Hooper; Joah Iannotta; John Johnson;
SaraAnn Moessbauer; Madhav Panwar; and Crystal Wesco made key
contributions to this report.
[End of section]
Footnotes:
[1] Strengthening Federal Environmental, Energy, and Transportation
Management, Exec. Order No. 13423 (Jan. 24, 2007).
[2] While USPS is considered part of the federal fleet in terms of
complying with the government's alternative fuel vehicle acquisition
requirements, it is not subject to Executive Order 13423. However, USPS
officials indicated they would make every effort to comply with the
executive order.
[3] USPS has about 30 all-electric delivery vehicles in Manhattan that
use lead acid batteries.
[4] Plug-in vehicles may also have other components that recapture
energy to charge the battery. For instance, regenerative brakes capture
energy generated from deceleration and use that energy to recharge the
car's battery.
[5] See generally 49 C.F.R. Part 571.
[6] Pub. L. No. 110-140, §102, 121 Stat. 1498 (Dec. 19, 2007).
[7] The Environmental Protection Agency (EPA) is in the process of
defining low greenhouse gas emitting vehicles. An agency may instead
demonstrate that it has adopted cost-effective policies to reduce its
petroleum consumption sufficiently to achieve a comparable reduction in
greenhouse gas emissions.
[8] Alternative fuel under EPAct 2005 includes: methanol; ethanol; and
other alcohols; blends of 85 percent or more of alcohol with gasoline;
natural gas and liquid fuels domestically produced from natural gas;
liquefied petroleum gas (propane); coal-derived liquid fuels; hydrogen;
electricity; biodiesel (B100); fuels (other than alcohol) derived from
biological materials; and p-series fuels, which are fuel mixtures
designed to operate in extreme cold weather conditions.
[9] The requirement covers federal fleets with 20 or more vehicles that
are capable of being centrally fueled and operate in metropolitan
statistical areas with a population of more than 250,000. Certain law
enforcement, emergency, and military tactical vehicles are exempt from
this requirement.
[10] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[11] The Office of the Federal Environmental Executive, under the
Council on Environmental Quality, is responsible for monitoring and
reporting on agency's implementation of the executive order regarding
plug-in vehicles governing the federal fleet, while DOE is primarily
responsible for overseeing and administering the requirements under the
law. In practice, however, according to the Office of the Federal
Environmental Executive, it has delegated much of its responsibility to
DOE.
[12] Under GSA regulations, the Department of Defense is authorized to
acquire its own tactical vehicles. See 41 C.F.R. §§101-26.500-26.501-1.
[13] Google's RechargeIT program is an initiative within Google's
nonprofit arm that aims to reduce carbon dioxide emissions, reduce oil
use, and stabilize the electrical grid--the network linking the
generation, transmission, and distribution of electricity--by
accelerating the adoption of plug-in vehicles.
[14] One design challenge for auto manufacturers is finding a balance
between the size of the battery and weight of the vehicles. Larger
batteries can store more energy, which extends the all-electric range
of a vehicle. However, larger batteries are also heavier, and weight
depresses the fuel economy of a vehicle.
[15] According to EPA's Inventory of Greenhouse Gas Emissions and Sinks
1990-2006, about 83 percent of energy consumed in the United States in
2006 came from fossil fuels. The remaining 17 percent came from energy
sources such as hydropower, biomass, nuclear, wind, and solar energy.
[16] By comparison, the 2006 World Energy Outlook from the
International Energy Agency estimated that worldwide transportation
will account for about 20 percent of carbon dioxide emissions in 2010,
which suggests that reducing emissions from transportation presents an
opportunity in the United States.
[17] EPA included information on nonroad mobile sources in its Advanced
Notice of Rule making, 73 Fed. Reg. 44354 (July 30, 2008).
[18] D.M. Kammen, S.M. Arons, D. Lemoine, and H. Hummel, Cost-
Effectiveness of Greenhouse Gas Emission Reductions from Plug-in Hybrid
Electric Vehicles, GSPP08-014 (University of California, Berkeley,
2008).
[19] T. Thompson, M. Webber, and D.T. Allen, "Air quality impacts of
using overnight electricity generation to charge plug-in hybrid
electric vehicles for daytime use." Environmental Research Letters,
vol. 4, no. 1 (2009).
[20] Electric Power Research Institute, Environmental Assessment of
Plug-in Hybrid Electric Vehicles, Volume 1: National Greenhouse Gas
Emissions (2007). We presented information from the study's midrange
scenario, which, as noted, assumed that plug-in vehicles would compose
62 percent of the fleet by 2050.
[21] Energy Information Administration 2007 data.
[22] See Kammen, Arons, Lemoine and Hummel, Cost-Effectiveness of
Greenhouse Gas Emission Reductions from Plug-in Hybrid Electric
Vehicles, which used $1300 from Hymotion and found that $500 per
kilowatt hour was the target for plug-in hybrids to be economical.
[23] Ching-Shin Norman Shiau, Constantine Samaras, Richard Hauffe, and
Jeremy J. Michalek, "Impact of battery weight and charging patterns on
the economic and environmental benefits of plug-in hybrid vehicles,"
Energy Policy (February 2009).
[24] M.A. Kromer, and J.B. Heywood, Sloan Automotive Laboratory,
Massachusetts Institute of Technology, Electric powertrains:
Opportunities and challenges in the U.S. light duty fleet, Publication
no. LFEE 2007-02 RP (Cambridge, MA, 2007).
[25] Data taken from the Department of Commerce' Bureau of Economic
Analysis. To the extent that the number of vehicles federal agencies
purchased has remained essentially steady between fiscal years 2004 and
2008--averaging around 64,000--the total federal purchase represents
less than 1 percent of vehicles sold in the United States in 2008.
[26] USPS officials voiced additional concerns regarding the use of
ethanol, such as the lower fuel economy of ethanol compared with
gasoline (ethanol provides 20 percent to 25 percent fewer miles per
gallon).
[27] Over the long term, utility companies we interviewed highlighted
the importance of developing vehicle-to-grid, or vehicle-to-home
technologies, that can help utilities manage peak periods of electrical
usage and can eventually result in additional financial incentives for
consumers.
[28] GAO has published work monitoring the assistance provided to the
auto industry, including Auto Industry: A Framework for Considering
Federal Financial Assistance, [hyperlink,
http://www.gao.gov/products/GAO-09-242T] (Washington, D.C.: Dec. 4,
2008); and Auto Industry: Summary of Government Assistance and
Automakers' Restructuring Efforts, [hyperlink,
http://www.gao.gov/products/GAO-09-553] (Washington, D.C.: Apr. 23,
2009).
[29] 42 U.S.C §17013.
[30] Cap-and-trade programs combine a regulatory limit or cap on the
amount of a substance--in this case, carbon dioxide--that can be
emitted into the atmosphere with market elements like credit trading to
give industries flexibility in meeting the cap. The cap can be reduced
in each subsequent year after its introduction in order to steadily
decrease the total amount of carbon dioxide emitted; and, in this
scenario, individual companies would comply with the cap by either
reducing their emissions to the cap's limit or buying credits from a
company that is below the cap.
[31] As of the publication of this report, H.R. 2454 has not been
passed by either the House or the Senate.
[32] Although costs associated with greenhouse gas emissions are not
considered in the life-cycle costing methodology currently used by GSA,
GSA officials told us that they expect a requirement to include these
in the future.
[33] For example, Edmunds Inc. publishes total cost of ownership data
on its Web site.
[34] Pub. L. No. 103-62, 107 Stat. 285 (Aug. 3, 1993).
[35] GAO, Executive Guide: Effectively Implementing the Government
Performance and Results Act, [hyperlink,
http://www.gao.gov/products/GAO/GGD-96-118] (Washington, D.C.: June
1996); and GAO/GGD-10.1.16.
[36] Pub. L. No. 110-140, §431.
[37] Pub. L. No. 102-486, §303, 106 Stat. 2871 (Oct. 24, 1992).
[38] 40 U.S.C. §605.
[End of section]
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441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548:
