"Diversify, diversify, diversify." That has long been the mantra of many Wall Street pundits when advising investors on how to weather the risks of the stock market. Now advocates of electric vehicles (EVs) are using this same logic to champion plug-in hybrid electric vehicles (PHEVs).

After the dizzying roller-coaster ride of oil prices in 2008, when prices spiked at $147 a barrel, many now see the logic in trying to transition at least a portion of the U.S. vehicular transportation sector from its sole reliance on petroleum to the use of electricity, which is fueled by a variety of sources, including coal, nuclear, natural gas, and renewables.

PHEV Pros and Cons

PHEVs (aka, grid-enabled vehicles) combine the benefits of pure EVs and hybrid EVs. Like pure EVs, PHEVs plug into the electric grid and can be powered by stored electricity alone. Like hybrid EVs, they have gasoline-powered engines that enable greater driving range and battery recharging.

The Electric Drive Transportation Association (EDTA), an EV advocacy group, said recently that PHEVs and extended-range electric vehicles are expected to be developed this year by General Motors, Toyota, Chrysler, Fisker, and BYD. The group points to several advantages that PHEVs have over traditional vehicles: the use of cleaner electric energy such as that fueled by natural gas; optimized fuel efficiency and performance; recovered energy from regenerative braking; "home-based" battery recharging at a fraction of the cost of petroleum equivalent; reduced tailpipe emissions; and pure emissions capability.

The EDTA, however, does acknowledge the current challenges that PHEV technology faces: the higher initial cost, the cost and complexity of two power trains, the added weight, the cost of batteries and battery replacement, and the lack of available components such as batteries and power trains.

Debating the Government’s Appropriate Role in EV Development

A looming question is what role, if any, the U.S. government should play in promoting the development of EVs. In 2009, Ronald Minsk, Sam P. Ori, and Sabrina Howell, who represent the organization Securing America’s Future Energy, published their article "Plugging Cars into the Grid: Why Government Should Make a Choice," in the Energy Bar Association’s Energy Law Journal.

They argue that the main advantages of using electricity to fuel a large portion of the U.S. light-duty fleet are as follows: It promotes fuel diversity; electricity is generated from a domestic fuel portfolio; electricity prices are less volatile than oil and gasoline prices; it is more efficient than gasoline and will help cut greenhouse gases; and it is a lower-cost alternative.

The authors assert that due to the diverse interests of the power generation and automotive industries, the U.S. government needs to help develop an efficient overall deployment strategy for EVs. They advocate that significant government funding should be directed at improving battery technology and developing recharging infrastructure.

Recent Governmental Initiatives

Recently, support for electric vehicles has come from a variety of different levels in the federal government.

Legislation. Under the provisions of the American Recovery and Reinvestment Act (ARRA), which was enacted into law in February 2009, the U.S. Department of Energy announced in March 2009 the release of two competitive solicitations for up to $2 billion in federal funding for competitively awarded cost-shared agreements for the manufacture of advanced batteries and related drive components as well as up to $400 million for transportation electrification demonstration and deployment projects.

Presidential Support. Both recent Republican and Democratic administrations have backed governmental funding for EV research. For example, former President George W. Bush’s 2007 budget included $30 million — a $6.7 million increase over the 2006 budget — to speed up the development of battery technology for EVs and extend the range of these vehicles.

Likewise, President Barack Obama supports the new technology and has called for 1 million PHEVs on the roads by 2015. In August 2009 he announced the awarding of $2.4 billion in grants to 48 projects to accelerate the manufacture and deployment of advanced batteries and EVs paid for by funds authorized by ARRA.

Tax Incentives. This year the federal government enacted a tax credit ($2,500 to $7,500) for individuals, which applies to qualified PHEVs acquired in 2010.

Government-Funded Research. The federally funded National Renewable Energy Laboratory is focused on overcoming one of the biggest challenges PHEVs have, which is the cost and weight of batteries.

Moving Forward

Given the current financial disarray of many automotive manufacturers and the weak U.S. economy, it is difficult to predict which new alternative vehicular technologies — ones that use biofuels, natural gas, hydrogen, or electricity — will win the race against the long-time preeminent gasoline-powered vehicles. For PHEVs to move successfully ahead, it will be necessary for the federal government to play some limited role. Ultimately, however, automotive manufacturers and U.S. electric utilities will have to be the main leaders in developing PHEVs and their underlying infrastructure for them to reach their full potential in our national transportation industry.

—Angela Neville, JD , is POWER’s senior editor.