Published February 15, 2011
The federal government is hitting the gas on incentive programs meant to prop up the electric car market, raising questions about whether it's appropriate for Washington to continue subsidizing an industry it's already invested in heavily.
As part of that interplay, nine cities across the country are set to receive thousands of free charging stations this year as part of a special program. In Austin, one of the lucky cities, the City Council could vote as early as this week to set the rates for those stations.
If the local utility company has its way, drivers will get a deal -- a $25 flat fee for six months of unlimited charging. The idea is to serve electric car owners, while making prospective buyers comfortable with the technology, potentially inspiring them to buy an electric vehicle of their own.
But the experiment is coming at a cost to taxpayers, who whether they realize it or not are subsidizing several initiatives designed to boost the electric vehicle market -- raising concerns among free enterprisers.
If electric cars are the wave of the future, they say, the industry should be able to attract private investment. If it's not, then the government is throwing away money. And if it's a viable idea but not quite ready for prime time, they worry the government is pushing it out too early, fating the sector to live off a perpetual federal lifeline the way ethanol, sugar and other commodities have done.
"I have never seen an industry that receives subsidies for any period of time like this that didn't fail and then cost taxpayers even more," said David Littmann, senior economist at the Michigan-based Mackinac Center for Public Policy.
The auto industry, government officials and environmentalists are hopeful that electric car technology can take off. The benefits are apparent -- a nationwide electric- or hybrid-car craze would reduce pollution and help wean the United States off foreign oil.
But several barriers remain. A report released last fall from J.D. Power and Associates found that consumers are worried about the relatively short driving range of the vehicles, the amount of time it takes to charge them and the higher retail cost. The first two concerns are more applicable to all-electric cars than hybrid ones. The Nissan LEAF, for instance, takes six to eight hours to charge and has a range of about 100 miles.
"It certainly would not be a car you would be very comfortable driving through West Virginia," the Cato Institute's Patrick Michaels said of the all-battery vehicles. He said the industry is understandably jittery about the new investment.
"If they could easily make money from it without a federal subsidy, they would be there. Obviously, they don't think there's a big demand," he said.
But that's exactly why the government is getting involved -- to incentivize the industry, and consumers, on the front end with the hope of building the groundwork for a bona-fide market that would be good for America's economic and energy security.
The Alliance of Automobile Manufacturers has described the Obama administration's support as "critical." The administration has set a goal of getting 1 million electric vehicles on the road by 2015. To advance that goal, the administration also reportedly has included a $7,500 rebate in its 2012 budget proposal for drivers who buy electric vehicles.
"It's a slow process for a few years, but eventually people are predicting that this will really take off," said Carlos Cordova, spokesman with Austin Energy, the local utility company that will operate charging stations in Austin.
Karl Rabago, Austin Energy's vice president for distributed energy services, said the federal aid is critical for getting the market off the ground. He said the subsidies won't be indefinite and expressed confidence that the industry can eventually survive on its own. He said the private sector is eager to step in with investment as soon as it has the confidence it will pay off.
"Customers are just not going to buy these cars until they can look around and say, 'I'm comfortable. I won't feel stranded.' This is the chicken that has to come before the egg," Rabago told FoxNews.com. "This is just government doing what government does best."
The plug-in station program is a $37 million subsidized initiative run by Coulomb Technologies. Fifteen million dollars came from the 2009 federal stimulus, another few million came from the California Energy Commission and the rest came from Coulomb and other sources. Coulomb already sells charging units on its own, outside the program. But through what's known as the ChargePoint America initiative, it plans to deliver nearly 5,000 of them to Austin, Detroit, Los Angeles, Orlando and other cities.
In Austin, the city is getting more than 100 stations -- worth about $700 apiece -- free of charge from Coulomb. Austin Energy and other private companies will front the cost, estimated at about $3,000 apiece, for installing the stations.
Rabago said that if the program were not subsidized, his company could probably afford to get on board, considering the cost of the units. But, he said, "It just makes it a lot easier."
"Utilities are, I think the word is, conservative," Rabago said.
But some worry the government is taking a risk, on behalf of taxpayers, better reserved for venture capitalists, banks and the companies themselves. Littmann said that if and when the technology is at a marketable level, "there's plenty of capital here, and worldwide, and plenty of entrepreneurs to take care of that for expanding demand."
Nick Loris, a research associate at the Heritage Foundation, said he assumes America's vehicle fleet will look a lot different 50 years from now, but that it's not the government's role to promote electric vehicles before they're "economically viable."
Michael Quinn Sullivan, president of Texans for Fiscal Responsibility, said his organization takes a "dim view" of the charging station program in his state.
"Electric cars -- by definition -- shouldn't require a jump start, and neither should their market," he said in an e-mail. "If the people benefiting from the sale of the cars won't invest in the infrastructure to make core-consumers confident about the product, it is troubling taxpayers would be asked to do so. Taxpayer subsidies become a narcotic, and once begun it's hard to wean off."