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The stars are finally aligning for what might be the year of the electric car.  Demand will be there as gasoline prices are expected to hit $4 per gallon this summer.  Consumers will be able to test drive all-electric vehicles at car rental agencies such as Hertz, and a number of different manufacturers will offer a range of models to choose from.  The infrastructure -- a network of electric recharging stations -- is starting to fall into place.  There's even an iPhone app that will tell you where the nearest charging station is located.

Let's begin with demand for all-electric vehicles.  As noted in yesterday's post, most experts expect oil prices to exceed  $100 per barrel this year.  That means gasoline prices above $4 per gallon this summer.  And high prices are most likely here to stay.  While most analysts expect that OPEC will try to keep prices in the $100 to $150 range, Morgan Stanley and others question whether they have enough capacity to keep up with increasing demand from China and other emerging economies.  If not, then $200 per barrel oil is within the range of possibilities.  John Hofmeister, former president of Shell Oil and author of "Why We Hate The Oil Companies," points out that this could mean gasoline at $5 per gallon by 2012.

Gasoline at $4 to $5 per gallon will start people thinking about alternatives.  Can all-electric cars meet their needs?

Car makers and car rental companies are betting that consumers will fall in love with electric cars once they drive them, and so far the reviews have been great.  Jim Motavalli, writing in Forbes.com, describes the Nissan Leaf as "impressive, quiet, comfortable, sophisticated, and bristling with high-tech aids to help with charging and plug-in connectivity."  He also says that it "handles excellently."  In addition to the Nissan Leaf and the Chevy Volt, new all-electric cars are expected this year from BMW, Ford, Mercedes, Mitsubishi, Renault, Subaru, and Toyota in a variety of price ranges.  At the top end of the price range, you can even get the very sleek, powerful, and fast all-electric Aston Martin pictured above.  A number of other manufacturers are also preparing to enter the market with all-electric vehicles, including China's BYD (backed by Warren Buffett), which is building an all-electric 5-passenger sedan.

OK, so the supply of all-electric vehicles and the demand for them might show up this year, but what about the infrastructure needed to recharge them?  Turns out that charging stations are already in place, and more can come on line very quickly in response to demand.  For example, utilities around the nation are installing recharging stations for electric cars.  Hertz has installed charging stations in Manhattan, and will soon be installing more charging stations at select Starwood Hotels.  Walmart has been planning to deploy recharging stations in its parking lots across the country, and if that happens it won't be long before Target, Walgreens, CVS, and other national chains follow the lead.

The constraint this year may be whether supply of all-electric vehicles can keep up with demand.  When the Prius first came out, many prospective buyers found themselves on waiting lists to get one of the now iconic hybrids.  The same could happen this year, especially with a federal tax credit of up to $7,500 for electric vehicles plus additional credits from states such as California, Georgia and Tennessee.

The longer term, and more troubling issue is whether the electric grid will be "smart" enough to handle the new type of demand for electricity.  It is not simply a capacity issue.  Existing generation capacity could probably handle tens of thousands of electric cars being recharged during off-peak hours, such as overnight.  The problem arises if large numbers of electric cars are being charged during peak demand periods.  Ideally, electric cars would act as back-up storage sending electricity back to the grid during peak demand hours and recharging during off-peak hours.  But the grid is not yet capable of handling that or billing for it.  Building a smarter grid, more than anything else, is the biggest barrier to a future of electric vehicles.

John Howley
Woodbridge, New Jersey

Holt McChord
1/3/2011

Bring it on already. Its very exciting to see this technology blossoming. Now lets make sure we have the correct recycling proceedures and disposal protocol for all these new batteries and old cars. As much as depending on old technologies and oil for our daily energy needs makes me crazy, the waste biproducts of our consumer based society is equally disturbing. Not to change the topic, but in line with smart grid technologies, alternate energy sources and conservation; packaging and recycling proceedures on a much larger scale should be implemented to save energy and our natural resources.

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Tony Broomfield
1/7/2011

$4 to $5 per US gallon price of fuel will make people think about a change??? wow
That would be nice
In the Netherlands right now its $7.3 a gallon, and I would take a bet that we use more efficient cars overall.
This of course will be what they Call FREE market economy will it?

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Jim Bergen
1/7/2011

Toyota is betting that the hybrid will dominate over the all-electric car. Take a look at this article. http://www.nytimes.com/2011/01/07/business/global/07toyota.html?nl=todaysheadlines&emc=tha25

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Hopefully as adoption rates increase the per unit price for the advanced batteries will begin to come down to levels that will really begin to make these types of vehicles attractive to your average consumer.

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