In this paper we examine what we call the battery problem:
the contention that battery technology is not sufficiently
advanced to allow the commercial success of electric-drive
vehicles. We investigate the specific case of plug-in hybrid
electric vehicles (PHEVs). For instance, Anderman (2008) states
that the battery chemistries being developed for PHEV applica-
tions are “not ready for commercial introduction” due to
limitations in performance, reliability, longevity, safety, and
cost-presenting an overall “tremendous” business risk to
potential PHEV manufacturers. We contend that potential
solutions to the battery problem are not just a matter of
technology development and cost reduction, but instead involve
a concurrence between battery technology and appropriate PHEV
performance goals. The present analysis explores both, with a
particular emphasis on the latter-challenging untested assump-
tions regarding consumer valuation of PHEV capabilities.

Efforts to start plugging in

Why should transportation and energy policy makers, auto-
mobile manufacturers, the electricity industry, and consumers be
concerned about the battery problem in general, and the case of
PHEVs in particular? Spurred by petroleum supply and price
disruptions, air pollution policy, and climate change policy, much
effort and many resources have been devoted to the development
of electric-drive vehicles over the past three decades. In the
United States, the federal government initiated efforts to develop
alternatives to petroleum-based fuels for transportation in the
late 1970s and early 1980s, including the Hybrid and Electric
Vehicle Act of 1976. Such actions laid the ground work for the
battery, motor, and power and control electronics technologies
that emerged during the 1990s (Turrentine and Kurani, 1996 ).
Battery electric vehicles (EVs) garnered renewed attention in the
1990s, stimulated by General Motor’s development of the EV-1
(aka Impact) and California’s Zero Emissions Vehicle (ZEV)
mandate. However, after years of further technology development
and policy debate, policymakers were convinced by automobile
manufacturers in the late 1990s that battery technology was not
ready to meet manufacturers’ EV performance goals. Some battery
technologies later proved successful in less demanding hybrid
electric vehicles (HEVs).

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