As deadlock continues on Capitol Hill and storm clouds darken over the Super Committee on deficit reduction, there is increasing danger that government support for vehicle electrification may get sucked into the maelstrom. 

Vehicle electrification has historically been one of the few points of bi-partisan policy agreement. It is important that supporters of vehicle electrification and advanced battery technology rearticulate why vehicle electrification is so important to the country and why government support for it is essential and should find strong backing on both sides of the aisle.

The latest sign of trouble for vehicle electrification was a white paper released this week by former U.S. Secretary of Transportation Norman Mineta and the U.S. Coalition for Advanced Diesel Cars.  The white paper, entitled “The Case for Technology Neutral Public Policy in Fuel Economy Debate:  Allowing Performance To Determine Solutions”, is designed to appeal to those who believe that the federal government has spent too much money trying to outguess the market on technology investments over the past three years. 

The white paper reiterates the familiar argument that the fastest and cheapest way to promote greater fuel efficiency is to invest in more efficient internal combustion engines (ICE’s) rather than in electric vehicles.  It suggests that this is exactly what the market would do if left to its own devices.

Mr. Mineta is right, of course.  If the goal is simply to increase the short term fuel economy of the U.S. light vehicle fleet, concentrating on more efficient ICE’s, including diesel engines and mild hybrids, is clearly the way to go.  Moreover, if the government requires the market to put a price on fuel inefficiency through CAFE standards (which Mr. Mineta, despite his free market mantra, is implicitly advocating), business investment and consumer purchases will flow into these new ICE technologies without the need for further subsidy.  Few in the advanced battery community would argue with the effectiveness or efficacy of this approach.

But the point of vehicle electrification is not to improve short term fuel efficiency.   The point of vehicle electrification is to address the single greatest economic and strategic threat that the United States faces:  its near complete dependence on petroleum-based fuels.

The statistics concerning our dependence on petroleum fuels are stark and well known:  Today petroleum accounts for approximately 37 percent of all energy used in the United States and, more critically, in excess of 95 percent of all fuels used for transportation.  Nearly 60 percent of all petroleum used in the United States is imported.  Worldwide demand for petroleum is growing steadily, most rapidly in the developing world.  The Energy Information Administration (EIA) projects that, at the current rate of growth, world oil consumption will rise 50% in the next 20 years.

Petroleum is a wonderful fuel but a finite resource.  Over the past 30 years, the oil industry has done a remarkable job of finding and exploiting new sources of conventional petroleum and of developing new technologies to recover oil from non-conventional sources, such as oil sands and shale, though often at an economic and environmental cost that remains unclear.  Three decades ago most experts, if informed what would happen to oil consumption over the next 30 years, would have predicted that we would reach “peak” oil well before 2011.  It is not clear that we have hit it yet.

But all the promise of petroleum technology and all the power of the Big Oil companies cannot repeal the law of gravity.  There is a limit to economically recoverable petroleum reserves and that limit grows closer the faster that demand for oil rises.  Information about petroleum reserves is notoriously unreliable and many of those with access to information have no incentive to share it.  Moreover, petroleum imports travel from and through some of the least stable parts of the world and are subject to sudden and critical disruption.  Sooner or later a major imbalance must occur in the supply and demand for petroleum fuel.  Based upon our limited experience with such imbalances in 1973 and 1979, we know that when that imbalance occurs it will occur suddenly, without much warning and with catastrophic consequences.

Vehicle electrification is simply a hedge against a petroleum crisis that we know to a certainty is coming.  Within the transportation sector, electrification is the most complete, technologically feasible and cost effective hedge that we know of.   More efficient ICE’s may offer improved fuel efficiency, but they offer no such hedge.  The Chinese government, which is estimated to have spent about three times what the U.S. government has spent on vehicle electrification technology, has made the same calculation.  The Chinese interest in vehicle electrification has less to do with its desire to compete with the West than with its concern for economic survival in a post-peak oil world.

Unfortunately, there is no market for a long-term hedge against oil shocks.  Higher fuel economy standards will not in themselves push consumers to buy, or investors to invest money in, electric vehicles or advanced battery technologies.  The billions of dollars that are required to develop the batteries, the vehicles and the charging infrastructure necessary to prepare the country for the post-peak oil period must come from somewhere other than consumer purchases of relatively short-lived assets.  It must come from government incentives and investment leveraging private capital as best it can.

Electrifying transportation infrastructure is a national insurance policy that benefits everyone and will protect the entire nation from a clear and well-defined threat to its economic and strategic position in the world.  Both the threat and the hedge against that threat have long been recognized by Republicans and Democrats alike.  Support for vehicle electrification should not be made an issue in the unfortunate partisan wars ongoing in Washington.