PHEV marketplace penetration: An agent based simulation

Abstract

Energy security and climate change issues have increased the call for improved energy efficiency from all sectors of the economy, especially the transportation sector. While vehicle manufacturers can in principle make their current vehicle offerings more fuel efficient, historically they have not done so for reasons of poor auto market sensitivity to fuel economy. However, recent economic events have changed the automobile marketplace. Now, despite current gasoline prices at around $2/gal, there is nonetheless a greater demand for more fuel efficient vehicles, the primary reason for which is anticipation of a return to higher ($3/gal to $4/gal) fuel prices when the recession is over. Unfortunately, simply making the existing fleet of conventional vehicle offerings more fuel efficient will not adequately address energy security and climate change issues. New advanced technology vehicles also need to be considered such as plug in hybrid electric vehicles (PHEV), which hold the promise of considerably improving fleet energy efficiency and reducing fleet carbon footprint. However, because these vehicles cost a lot more than their conventional counterparts, especially in the near term, their market viability is in question, especially if no government policy initiatives are instituted to enable successful market penetration. To address this question, UMTRI has developed an agent based simulation to characterize the penetration of new vehicle penetration into the marketplace under a variety of consumer, economic and policy conditions. Our results show that by 2015, sales could reach 2 – 3 percent with fleet penetration of around 1%. By 2020, sales could reach around 4 – 5 percent with fleet penetration a little more than 2%. And in 30 years, they could be around twenty percent of sales with a fleet penetration of about 16%. Without subsidies, the current policy case would result in a fleet penetration level of less than 1% in ten years. Subsidies are critical; sales tax exemptions can help if applied to scenarios where OEM subsidies are in place.