Monday, April 17, 2006
Hybrid Technology Part II: The Economics of Hybrid Technology
The Economics of Hybrid Technology
One of the most confusing and possibly the most controversial issues surrounding hybrid technology are relative economic merits of the technology. There has been a lot written about this subject and the conclusions run from wholly with merit, to break-even to wholly without merit. The conclusion about the beneficial aspects of hybrid technology vary greatly, because those analyzing the technology make entirely different assumptions and individually value different things.
For example, the gasoline advantage of hybrid technology is heavily dependent on what people expect gasoline prices will be in the future. Hybrid technology looks like a sure loser if prices average around $2.65 per gallon, they look like a sure winner at $4.50 per gallon. Depending on where gasoline prices are headed in the future hybrid purchasers may or may not be making a wise economic choice.
Beyond assessing basic petroleum economics, comparing hybrid technology vehicle to conventional gasoline powered engines is often not an "apples to apples" analysis. For example, the Honda Accord Hybrid and the Toyota Highlander Hybrid are substantially more expensive than their non-hybrid counterparts. However, each vehicle offers a set of features distinct from the non-hybrid models and each hybrid vehicle, contrary to stereotype, has substantially more power than their non-hybrid cousins. The Honda Accord Hybrid only offers marginal fuel advantages over the standard Honda Accord EX. The Toyota Highlander Hybrid offers substantial both fuel economy gains and 53hp of additional power. Another example, the hybrid version of the Highlander offers a silky smooth CVT transmission, in contrast the non-hybrid version offers a conventional automatic transmission.
Other aspects of hybrid technology represent value, but not to the owner. Hybrids, all things being equal, consume less gasoline and produce less pollution than their non-hybrid counterparts. Those benefits are not fully captured by the owner of the vehicle but are generally spread throughout society. It is almost impossible to economically quantify this potential value. But I suspect that it exceeds the value of the tax credit that the government provides to hybrid users.
One of the most confusing and possibly the most controversial issues surrounding hybrid technology are relative economic merits of the technology. There has been a lot written about this subject and the conclusions run from wholly with merit, to break-even to wholly without merit. The conclusion about the beneficial aspects of hybrid technology vary greatly, because those analyzing the technology make entirely different assumptions and individually value different things.
For example, the gasoline advantage of hybrid technology is heavily dependent on what people expect gasoline prices will be in the future. Hybrid technology looks like a sure loser if prices average around $2.65 per gallon, they look like a sure winner at $4.50 per gallon. Depending on where gasoline prices are headed in the future hybrid purchasers may or may not be making a wise economic choice.
Beyond assessing basic petroleum economics, comparing hybrid technology vehicle to conventional gasoline powered engines is often not an "apples to apples" analysis. For example, the Honda Accord Hybrid and the Toyota Highlander Hybrid are substantially more expensive than their non-hybrid counterparts. However, each vehicle offers a set of features distinct from the non-hybrid models and each hybrid vehicle, contrary to stereotype, has substantially more power than their non-hybrid cousins. The Honda Accord Hybrid only offers marginal fuel advantages over the standard Honda Accord EX. The Toyota Highlander Hybrid offers substantial both fuel economy gains and 53hp of additional power. Another example, the hybrid version of the Highlander offers a silky smooth CVT transmission, in contrast the non-hybrid version offers a conventional automatic transmission.
Other aspects of hybrid technology represent value, but not to the owner. Hybrids, all things being equal, consume less gasoline and produce less pollution than their non-hybrid counterparts. Those benefits are not fully captured by the owner of the vehicle but are generally spread throughout society. It is almost impossible to economically quantify this potential value. But I suspect that it exceeds the value of the tax credit that the government provides to hybrid users.
# posted by Strange Anomaly : 7:03 PM
