Since Chevy announced that the Department of Energy has anointed the forthcoming Volt with an official efficiency rating of 230 MPG, I have been methodically picking apart the methodology by which this rating was determined. By my reckoning, based on information made public by Chevrolet, the most optimistic rating that should be given to the vehicle is 185 MPGe (that Ge is short for gallon of electrons, the unit of energy I invented to compare the efficiency of electrically powered cars to gasoline powered ones.)

By advertising that the vehicle will get 230 MPG, Chevy is obscuring the true cost of operating the vehicle in both environmental and economic terms. More importantly, they are setting themselves up for a public backlash when people actually start driving the thing and find out most determinedly that they will not get 230 MPG. We know this because the same backlash happened with the Toyota Prius. Except instead of seeing a drop from 65 to 40 MPG based on driver behavior, Chevy Volt owners could see a drop from 230 MPG all the way down to 60.

Or maybe not. It's possible that this backlash will not occur, since in order to determine the fuel efficiency, people need to drive in. And in order to drive it, somebody will need to buy it. And the best estimate is that it will cost $40,000.

Forty. Thousand. Dollars.

How many people are going to line up to buy an experimental $40,000 car? I honestly don't know. But here's a question I can answer: if they do buy it, will it be worth it?

In the world of alternative energy, there is a concept known as simple payback. Take a common example, like a compact fluorescent light bulb. The bulb costs $10 more than a regular bulb, but because it uses less energy, it'll reduce your monthly energy bill by $1. That means after 10 months, you've made back the $10 investment. A CFL has a simple payback of 10 months.

A bigger example is a solar panel. A 1 kW array will cost about $8,000. If it produces 1 kW for 4 hours every day, 300 days a year (losing 65 days to clouds), then you've made 1200 kWh. Using my example from yesterday of 12 cents per kWh, that electricity is worth $144.

Simple payback = $8000 / $144/yr = 55.6 years

(If you've ever wondered why nobody buys solar panels unless there is a tax rebate involved, now you know).

We can ask the same question about the Chevy Volt. What is the simple payback on the investment?

Like in the example of the CFL, we aren't going to use the entire cost of the bulb. Instead, we are going to look at how much the Chevy Volt would cost you over a different car. The simple payback answer, then, will obviously be different depending on what car you choose. You can calculate the answer for any car using this same methodology; just substitute in the cost and fuel efficiency of the vehicle you want to compare.

To give the Chevy Volt a decent chance, we won't compare it to a hybrid. Instead, we'll pick a generic sedan with average fuel economy: a Volkswagen Jetta.

We've picked out a Jetta that costs $20,000 and gets an average fuel economy of 24 MPG. We're also going to assume that you are an average driver, meaning you clock in at 12,000 miles per year. And to give the Chevy Volt the very best chance, we're going to assume that you never use the gasoline engine. Let's see how the Volt stacks up:

Cost of operating Jetta: (12,000 miles / year) x (1 gallon / 24 miles) x ($2.50 / gallon) = $1,250

Cost of operating Chevy Volt (for the source of these numbers, see my post from yesterday): (12,000 miles / year) x (1 Ge / 185 miles) x ($4.40 / Ge) = $285

Annual savings: $1,250 - $285 = $965

Increased upfront costs: $40,000 - $20,000 = $20,000

Simple payback: $20,000 / $965/yr = 20.7 years

Anybody still planning on buying the Volt?

(Note that this is the best possible outcome. More than likely, people will not use only electricity, but will use some gas as well, making the annual savings even smaller.)  

But it isn't about the cost, you say. Its about saving the environment. Fine, I'll bite. But if you are really concerned with the environment, you don't necessarily need to put that money into an efficient car. Perhaps there is a more cost efficient way of reducing your carbon footprint. We can do a similar exercise to calculate how much money is being spent to reduce carbon output. Let's see how purchasing a Volt stacks up against a currently available carbon offset product like Terrapass, which can offset a ton of carbon for about $12.

Carbon output of Jetta: (12,000 miles / year) x (1 gallon / 24 miles) x (19 lbs CO2 / gallon) = 9,500 lbs/yr

Carbon output of Volt (again, these are from yesterday's post): (12,000 miles / year) x (1 Ge / 185 miles) x (36.2 lbs CO2 / Ge) = 2,348 lbs/yr

Cost of carbon reduction (assuming 10 year life of car): $20,000 / (2,348 lbs/yr x 10 yrs x 1 ton/2000 lbs) = $1703/ton

$1700 a ton!!! That's 140 times the cost of a Terrapass!! Instead of buying a Volt, you could offset the carbon footprint of your entire neighborhood!!

(!!!!!!!!)

Okay, so its easy to run around, poking holes in other people's balloons, you say, but its not so easy coming up with solutions. I totally agree. That's why I have a simple, elegant solution to Chevy's problems with the Volt. And I'm going to offer them up, free of charge, as a service to the world.

Tomorrow.