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SUMMARY

For the past forty years, United States Presidents have repeatedly called for a reduction in the country's dependence on fossil fuels in general and foreign oil specifically. Stronger efficiency standards and higher taxes on motor fuels are a step in this direction, but achieving even greater reductions in oil consumption will require changing the way Americans power their transportation system. Some officials advocate the electrification of the passenger vehicle fleet as a path to meeting this goal. The Obama administration has, for example, embraced a goal of having one million electric-powered vehicles on U.S. roads by 2015, while others proposed a medium-term goal where electric vehicles would consist of 20% of the passenger …show more content…

The latter problem will gradually disappear as motorists become more accustomed to electric cars, but range anxiety is likely to remain until battery technology improves. One can argue that such anxiety is irrational, since urban drivers, on average, drive less than 20 miles per day, but no one has ever asserted that consumers base their car purchases solely on rational calculations. One might contend that the value of greater range is (approximately) the $4,000 price premium consumers will pay for a PHEV over a BEV, according to our model. Regardless, the bottom line is that the range issue will significantly affect consumer choice and is a major barrier to the penetration of electric vehicles.

Is the Electrical Infrastructure Available?

To power an electric vehicle, consumers must have the ability to connect their vehicle to a source of electricity, the utility must have the capacity to transmit and distribute this additional power and sufficient electricity generation capacity must exist. If the private sector is unwilling to meet these three conditions (i.e. providing 1. charging equipment, 2. distribution capacity, and 3. electricity generation), then governments must intervene. However, this paper finds no clear market failure that would require or justify such interventions.

The charging equipment is not expensive, and it would not be difficult for households and commercial enterprises to install such equipment.

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