US not into electric cars, but feds gave company $100M for charging stations, watchdog says

March 15, 2013: A Chevy Volt electric car is shown being charged during a tour of the Argonne National Lab near Chicago by U.S. President Barack Obama. (Reuters)

A California company was given more than $100 million in taxpayer funds by the federal government – with few strings attached – to establish a network of electric car charging stations that is fraught with problems, according to a government audit.

All this, despite weak demand by the American public for electric cars.

While President Obama has pledged to get 1 million electric cars on U.S. roads by 2015, a new report by the Department of Energy’s inspector general found that Americans’ aversion to electric vehicles and loose department supervision led to stalling the charging network – which cost taxpayers more than $135 million.

The report noted the project was filled with problems from the beginning, and said taxpayer-funded grants to San Francisco-based ECOtality for it were “very generous” and involved little risk by the company.

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ECOtality, which recently named Brandon Hurlbut, former chief of staff for ex-Energy Secretary Steven Chu, to its board, won a $99.8 million award in 2009 to install nearly 15,000 electric vehicle chargers throughout the country.

The company and its subsidiaries also received about $35 million from the department’s Vehicle Technologies Program from 2005 to 2011, “for two multiyear projects to evaluate and test specific vehicles.”

According to the Inspector General’s report, ECOtality was required to kick in a minimum of 20 percent of cost sharing under the $35 million in grants, and under the $100 million award, it was to match the taxpayer subsidy. But the DOE allowed ECOtality to use monthly costs of car owners and other expenses it did not directly incur to leverage the federal funds. That meant the company took on little risk in return for its subsidies, the report said.

“Although there is no clear legislative history on the meaning behind requiring recipients to provide cost-share, the concept is generally understood to mitigate risk, help leverage federal investments, and ensure that recipients have some ‘skin in the game’ in these kinds of transactions,” the IG report said.

ECOtality planned a full rollout of charging stations in five major metro areas to address one of the biggest problems facing the market for electric cars – “range anxiety,” or fear that owners won’t be able to easily charge them. The goal, according to the report, was for government to stimulate the installation of so many chargers at commercial and residential locations, that places to re-power cars would be nearly as ubiquitous as gas stations.

But weak demand for the electric cars resulted in a diminished need for chargers and the DOE and ECOtality sought to reach the 15,000-charging station goal by spreading the program to five more markets. The company also went heavier on home-chargers for individual owners and lighter on commercial stations that could serve multiple users. Those factors, according to the report, undermined the goal of easing range anxiety in the original markets.

"The real problem is the policy approach of the Obama administration," said Paul Chesser, of the National Legal and Policy Center. "The department of Energy and, really ECOtality, were in an impossible situation. President Obama says, 'There's going to be 1 million electric cars on the road by 2015, so here are billions to make it happen.' And then nobody buys the cars.

"It's a disastrous domino effect, a complication of a policy that was a bad idea," Chesser said.

Under the plan, all charging stations were to be used to gather data from users, but many commercial stations were so seldom used that they proved useless in gauging public satisfaction.

“The lack of analysis by the Department or ECOtality prevented us from determining whether the reasoning behind these changes was sound and in the best interest of U.S. taxpayers,” the IG wrote.

Although the audit found “no issues with the selection of Ecotality for the project,” Chesser said the company relies more on political connections than expertise in winning taxpayer grants. ECOtality began as a maker of biodegradeable products, but in 2006 jumped into the electric car industry. And the company has been upfront about its business strategy of going after government money.

“I’m a political beast,” ECOtality President Jonathan Read said on a 2007 shareholder conference call. “Playing the political card is something that when the time is right we’re going to play very hard.”