We all seemed to have sticker shock when we saw the $1000/kWh estimated battery bank cost for the Volt in the recent gm-volt.com feature article (http://gm-volt.com/2008/05/01/if-the-volts-cost-is-about-the-batteries-how-much-do-the-batteries-cost/). The way I figure it, though, if gasoline costs $3.38/gallon or more in late 2010, the Volt will actually make economic sense, even at the high end of the estimated costs for the LI battery bank.

Here’s how I got there:

ASSUMPTIONS

Cost/kWh capacity- $1,000
# of full cycles in 10 years (very conservative estimate) -3,000
Electrical kWh cost (national average) - $0.12/kWh
KWh’s equivalent to 1 gallon of gas through an ICE - 10
EV mileage improvement via dynamic brake energy recovery - 25%

CALCULATIONS
batt. depreciation = $1,000/3000 cycles = $0.33/kWh consumed.
+ $0.12/kWh energy cost = $0.45/kWh.
Less 25% “free” recovered brake energy = $0.3375/kWh net energy cost
Net cost for 10 kWh (including battery depreciation) = $3.375
Since 1 gallon gas = 10 kWh, break-even point = $3.375/gallon

CONCLUSIONS
1. If gas costs more than $3.375/gallon, the electric option is cheaper, even with current $1,000/kWh LI battery costs.
2. As battery costs come down, the break-even gas price drops much lower.
3. GM engineers probably have already run these numbers. Now we know why GM’s management is getting VERY EXCITED about the Volt.

This is what’s called a “simple payback” calculation. It does not factor in the time-value of the money spent upfront for the batteries nor for increasing electrical rates.

On the other side, though, the calculation assumed 100% battery value depreciation in 3,000 full-cycle equivalents. It may be that these batteries will be Energizer Bunnies and go on and on, or will have substantial salvage value. It also doesn’t factor for the increased cost of gasoline through the 10 year battery life, which could (and probably will) go up at a much higher rate than the electrical or money costs.

Nice ROI calculation! I don't see any fault with your logic. Thanks for posting it.

Feeling inspired by your ROI analysis, I was curious the see the break even cost if a 10 year battery is defined as 3650 cycles.

CALCULATIONS
batt. depreciation = $1,000/3650 cycles = $0.27/kWh consumed.
+ $0.12/kWh energy cost = $0.39/kWh.
Less 25% “free” recovered brake energy = $0.2955/kWh net energy cost
Net cost for 10 kWh (including battery depreciation) = $2.955


Thus the break-even point reduces to $2.955/gallon.

this may be a more general observation outside the scope of pure battery break even, but,

a true break even should include the total cost of the car, yet since the battery play such a big part of the additive cost the question becomes, what size battery vs. my specific daily mileage (mileage between charges)

So I would expect that a person with a 10 mile roundtrip commute need only purchase a 1/4 of the amount of batteries and thus lower the price of the car by x dollars and reach break even in y years assuming the price of gas is z dollars.

Indeed breaking even by purchasing a higher priced but more fuel efficient vehicle is important and the length of period before we reach the cross-over point is getting shorter and shorter with ever-increasing gas price. But, I think people who are interested in purchasing the Volt or other hybrid or purely electric automobiles are motivated more by the statement they can make by driving them and by the feeling of satisfaction that they are helping save the Earth. Already a significant number of people are driving hybrid automobiles. I do not think they are much concerned about the bottom line, although certainly driving them helps ease their cash flow.

We are witnessing the spectacle of what happened to the camera and TV industry is happening to the automobile industry also. Automotive companies have been fighting the game of boxing in the past century only to realize that the game of the 21st century is sumo wrestling.

Electric rates are governed, by state BPU, gas prices governed by speculators. Give me Electric and hopefully Hydrogen fuel cell close behind.:)

Electric rates are governed, by state BPU, gas prices governed by speculators. Give me Electric and hopefully Hydrogen fuel cell close behind.:)

So I'm guessing you feel the solar-battery-motor solution is just to simple. Eh? I know you like to have oil companies bring you your liquid refreshment and dictate how much they charge you for the pleasure. You like complicated mechanical devices to keep the workers on the line. Fuels cells, very higher pressure systems, leaking hoses, water filters, hydrogen filters, carbon fiber tanks. Nice! I agree! So what if hydrogen is 4 times less efficient than wall electricity. I'm also a motor head!

To all those people that are going to put up solar panels on your roofs and power your houses and cars... Your’re un-American! Our government needs your taxes and the oil companies have lots of workers to pay, not to mention their huge salaries! Forget about solar. It's for girly men!

One key open issue is the life time of the battery. Lithium ion batteries can rack up a lot of cycles. But the degradation mechanisms may be time related rather than cycle related. Therefore, one looks for data on how long the battery pack has cycled. Unfortunately, such data is very rare, expensive, and hard to get. Most electronic toys like laptops and cell phones become obsolete about three years after purchase, so no one cares much that the batteries wear out in this time. But if you are counting on a 10 year automobile battery life, don't you need 10 years of battery data to justify your faith? Who has some data on life time? The USABC tried to speed up degradation by testing at higher temperatures, but I don't know where the data is.

Nasaman just posted that the battery for the volt will cost GM ~$3500. If total battery cost for GM is that low then that is excellent excellent news. I hope that 35 hundred dollar price isn't for 1 of the 3 battery packs that will be in each Volt.

Sure it is obvious to all, but the calc used $3.38/gallon. I just topped off at $4.29, and summer has just begun. Here in unregulated California, heh heh heh, we have seen gas climb over $1.40/gallon in under a year. Take a guess at the price in July 2010. Not one to tamper with the equation, but that has to help the battery/electric side.

The calculation does not consider the time value of money. For example, 40 years ago the price of gas was $0.35, today it is $3.50. This is a discount rate of 5.8% per year. With a factor of 1/10 after 40 years, it is clear that time can have a huge effect. For 7 years the factor is 1/1.5.

Say the price adder for an EV over a conventional vehicle was $10,000 and you get $1,000 back when you sell it in 7 years. Then the net price adder is $9,000 (discounted). Then the graph shows that the price of gas (with power at $0.12/kWhr) must get to $5.25/gal (between 2nd and 3rd curves from the top) for breakeven when considering the real world time value of money. The calculations are attached.

Surveys show that most car buyers only consider the first three years of energy savings when considering a purchase. For these folk, all else being equal, they would have to expect gas to rise to $10/gal in three years for them to pay an additional $10,000.

Or the fact that people don't normally want to spend more upfront if it will take them more than about 3 years to break even. Another thing to consider is that this is GM's cost (right?) not our cost which will be higher.

Or the fact that people don't normally want to spend more upfront if it will take them more than about 3 years to break even. Another thing to consider is that this is GM's cost (right?) not our cost which will be higher.

What you say is true, but, for me anyway, in ten years I get a 'free' storage battery for my house PV system which after another 5 years or so I can trade in.

If they come out with an improved version in say 5 years ie 60 mile range, things just look better & better for the house PV system. I will be grid free. hehehe.

On second thought, I forgot about charging the Volt so no I won't. Dang.

How about 6$ / gallon next year, would people buy then? GM has time and the laws of peak oil on its side.