Why we need a more consumer-friendly rating for electric car savings

This article originally appeared on GigaOM Pro, our premium subscription research service.

A question I get from a lot of people is how much money can they actually save if they switched from their V8 to an electric car. Everyone has some sense that giving up gasoline will save them a lot of money. But how much?

The answer to this question is relatively straight forward, though it depends on the gas mileage of the gasoline-powered car someone is giving up, the performance of the electric car they’re buying and what their electricity rates are.

We drive the new Tesla Model S ThumbnailBut generally speaking most folks in the U.S. who drive 15,000 miles per year and average around 25 miles per gallon, spend around two and a half thousand dollars on gas per year. Assuming an electricity rate of 12 cents per kilowatt hour, an equivalent electric vehicle will consume about $500 of power per year. I ran some of my own calculations through the Department of Energy’s website, but these figures are pretty close to what Tesla quotes on its website as well.

As an analyst it’s great that I can run those numbers, but my concern is that consumers don’t run those numbers and need a more simple, straightforward metric that they do understand. The Environmental Protection Agency (EPA) has thought about this issue and at the end of 2010 it introduced the miles per gallon equivalent (MPGe), which the NHTSA now requires all alternative fuel cars to carry on their window labeling.

So what’s an MPGe? Well, it’s a formula that says 33.7 kilowatt hours (kWh) of electricity is equivalent to one gallon of gasoline. Now the EPA realized right off the bat via focus groups that consumers didn’t understand the concept of a kWh being a measure of electric energy and really didn’t want to know how many miles an EV would get per kWh. What the EPA found was that consumers understood miles per gallon because they’d been seeing it on new car stickers for so long.

BMW i3But, still, I wonder if it’s the best metric. Partially I’m concerned that the reference point of comparison remains liquid fuel, “per gallon.” If my electric car is running on batteries, why are we even talking about gallons of anything? Moreover, is miles per gallon equivalent (MPGe) really driving home the cost savings of getting power from the utility, rather than the gasoline pump?

Well perhaps the Department of Energy was concerned about this very perception because it just rolled out the “eGallon.” Now before you start getting irritated that this is another metric that isn’t marketable, which will further confuse consumers, and is still based on a liquid fuel reference point — the “gallon” — check out the eGallon tool on the DOE’s website.

What it does is allow you to select your state, which will bring up the average cost of a gallon of gas. Below the gasoline cost is the eGallon cost, which is “the cost of fueling a vehicle with electricity compared to a similar vehicle that runs on gasoline.” The algorithm assumes a 12.33 cents/kWh electricity cost and based power consumption on an average of the top 5 EVs. In California, for example, the average price of gasoline is $3.99 and an eGallon is $1.53.

Nissan LEAFApparently the DOE has its own concerns about MPGe, because it noted in its methology report:

….it is hard for most consumers to make the jump from the cost of electricity per kilowatt hour, to the “dollars-per-mile” cost of fueling an EV. The eGallon does this for them by providing a metric that is easily comparable to the traditional gallon of unleaded fuel — the dominant fuel choice for vehicles in the U.S.

An eGallon is about a third of the cost of a regular gallon. That could become a great shorthand for people to start thinking about, particularly since the cost is expressed relative to a gallon of gas so people can have a takeaway of, “wow, $1.53 a gallon sure would be great.”

Expressing the performance and cost savings of an electric car in dollars and cents is the way to go. It’s the most accessible way for current consumers to conceive of their out of pocket expense. And, yeah, it sure is hard to believe that a decade ago $1.53 a gallon of gasoline was pretty normal. At least now that buys you an eGallon.