Electric car charging points ‘shortfall’

Wednesday, May 11, 2011

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Should the state really be intervening in this market in the first place? The Department of Transport had aimed to provide 9,000 charging points by 2013.

This begs questions about who is responsible for investment in the grid of recharging points. Is the provision of charging points really a market failure, due to the failure of nerve by Chargemaster and other private firms, (car makers, and energy companies) to invest their shareholders’ funds in the charging stations. Instead of taking the risk of building the charging station points, there is further special pleading for subsidies from the taxpayer.

The UK government has intervened in the market for electric cars, with subsidies up to £5,000 for their purchase, and such vehicles may be ‘defined’ as merit goods. If cars like the Nissan Leaf, Renault Zoe, are produced, do they match the expectations of private motorists, or has the subsidy scheme resulted in the output of goods which few consumers really want to buy? Is there a risk of allocative inefficiency if they lack the range and are not big enough for the school run?

If the figures in this article are accurate, then only 0.1% of vehicles on UK roads are electric cars. The article is full of normative economics campaigning for intervention.

Look at me, I’m saving the planet driving an electric car as you queue for a bus.
Electric cars on the market have low ranges, and have to be recharged for many hours before use on the road. They might be useful in city centres, but are of little use for sales reps and executives. This article implies that electric cars can save money, but what happens if diesel and petrol cars become more fuel efficient, or if oil prices drop back to £1.00 - £1.10 per litre?

Is the electric car a good of ostentatious consumption, how many consumers can afford to spend £20,000 or more on a small hatchback car? Families earning less than the UK average wage are still priced out of the market for electric vehicles and hybrid cars, even with a subsidy of £5,000.

It also invites sceptical questions about the costs and benefits from the generation of the electricity to charge the car. Is there a danger that supporters of the scheme overstate the marginal social benefits whilst understating the marginal social costs; leading to sub optimal decisions by governments and other economic agents.

If there is provision of charging sites, the plug and cabling needs to meet common standards, without which other firms will be excluded from supplying the market. Government intervention can be beneficial.

The suppliers of charging stations may be concerned by the lack of orders from the government, but should Chargemaster and other private firms go ahead and invest in production facilities and charging stations without seeking subsidies? Is this really a shocking suggestion?

Tags: risk, market failure, externalities, subsidies, government failure, merit goods, demerit goods, as micro, normative economics, transport economics, gorvernment intervention, state intervention

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Electric car charging points ‘shortfall’

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