Federal Energy and Fleet Management: Plug-in Vehicles Offer Potential Benefits, but High Costs and Limited Information Could Hinder Integration into the Federal Fleet
Published: 2009-06-09T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The U.S. transportation sector relies almost exclusively on oil; as a result, it causes about a third of the nation's greenhouse gas emissions. Advanced technology vehicles powered by alternative fuels, such as electricity and ethanol, are one way to reduce oil consumption. The federal government set a goal for federal agencies to use plug-in hybrid electric vehicles--vehicles that run on both gasoline and batteries charged by connecting a plug into an electric power source--as they become available at a reasonable cost. This goal is on top of other requirements agencies must meet for conserving energy. In response to a request, GAO examined the (1) potential benefits of plug-ins, (2) factors affecting the availability of plug-ins, and (3) challenges to incorporating plug-ins into the federal fleet. GAO reviewed literature on plug-ins, federal legislation, and agency policies and interviewed federal officials, experts, and industry stakeholders, including auto and battery manufacturers.
section_title: What GAO Found
paragraphs: Increasing the use of plug-ins could result in environmental and other benefits, but realizing these benefits depends on several factors. Because plug-ins are powered at least in part by electricity, they could significantly reduce oil consumption and associated greenhouse gas emissions. For plug-ins to realize their full potential, electricity would need to be generated from lower-emission fuels such as nuclear and renewable energy rather than the fossil fuels--coal and natural gas--used most often to generate electricity today. However, new nuclear plants and renewable energy sources can be controversial and expensive. In addition, research suggests that for plug-ins to be cost-effective relative to gasoline vehicles the price of batteries must come down significantly and gasoline prices must be high relative to electricity. Auto manufacturers plan to introduce a range of plug-in models over the next 6 years, but several factors could delay widespread availability and affect the extent to which consumers are willing to purchase plug-ins. For example, limited battery manufacturing, relatively low gasoline prices, and declining vehicle sales could delay availability and discourage consumers. Other factors may emerge over the longer term if the use of plug-ins increases, including managing the impact on the electrical grid (the network linking the generation, transmission, and distribution of electricity) and increasing consumer access to public charging infrastructure needed to charge the vehicles. The federal government has supported plug-in-related research and initiated new programs to encourage manufacturing. Experts also identified options for providing additional federal support. To incorporate plug-ins into the federal fleet, agencies will face challenges related to cost, availability, planning, and federal requirements. Plug-ins are expected to have high upfront costs when they are first introduced. However, they could become comparable to gasoline vehicles over the life of ownership if certain factors change, such as a decrease in the cost of batteries and an increase in gasoline prices. Agencies vary in the extent to which they use life-cycle costing when evaluating which vehicle to purchase. Agencies also may find that plug-ins are not available to them, especially when the vehicles are initially introduced because the number available to the government may be limited. In addition, agencies have not made plans to incorporate plug-ins due to uncertainties about vehicle cost, performance, and infrastructure needs. Finally, agencies must meet a number of requirements covering energy use and vehicle acquisition--such as acquiring alternative fuel vehicles and reducing facility energy and petroleum consumption--but these sometimes conflict with one another. For example, plugging vehicles into federal facilities could reduce petroleum consumption but increase facility energy use. The federal government has not yet provided information to agencies on how to set priorities for these requirements or leverage different types of vehicles to do so. Without such information, agencies face challenges in making decisions about acquiring plug-ins that will meet the requirements, as well as maximize plug-ins' potential benefits and minimize costs.

section_title: Letter
paragraphs: The nation faces a number of energy-related challenges, including heavy  reliance on oil, environmental stress from greenhouse gas emissions  caused by burning fossil fuels, and public health problems associated with  local air pollution. While many sectors of the economy contribute to these  problems, the transportation sector poses particular challenges because of  its nearly exclusive reliance on oil. Stakeholders from industry,  environmental groups, and others, as well as Congress, are working to  identify strategies to address these challenges, including the development  of vehicles that use advanced technology to make substantial  improvements in fuel economy.
Plug-in vehicles, which use electricity to charge a battery that helps to  power the car, are one type of these advanced technologies.  Manufacturers plan to introduce plug-ins—a term that encompasses  several vehicle designs—into the market in the next few years, and federal  agencies have already been directed to adopt this technology into the  federal fleet. Specifically, Executive Order 13423 calls for federal agencies  to begin using plug-in hybrid electric vehicles when they become  commercially available and can be procured at a reasonably comparable  life-cycle cost to conventional gasoline-powered vehicles. In this context,  you asked us to determine (1) potential benefits and challenges associated  with plug-ins; (2) current status of development and factors that could  either delay availability or encourage development, including those  available to the federal government; and (3) challenges to incorporating  plug-in hybrids or all-electric vehicles into the federal fleet.
To address these objectives, we reviewed the goals outlined in Executive  Order 13423 that encourage the integration of plug-in hybrid vehicles into  federal fleets, as well as federal statutory requirements related to the  acquisition of alternative fuel vehicles. To broaden our understanding of  the potential benefits, current status of development, and factors that  could delay availability of plug-ins, we analyzed research studies and  interviewed experts from industry, academic, and government sources. To  determine the current status of plug-in vehicles, we obtained information  directly from Chrysler, Ford, General Motors, Phoenix Motorcars (a small  manufacturer of all-electric vehicles), Toyota, and the Association of  International Automobile Manufacturers. We also reviewed published  material on other auto manufacturers’ Web sites about the plug-ins that  manufacturers plan to bring to market. To identify factors affecting  availability and development of plug-ins that could be addressed by the  federal government, we analyzed and synthesized information from  experts and recent research. We considered these in light of the potential  costs of federal government actions, as well as what role the government  might play relative to other stakeholders who also stand to benefit from  this technology. We used professional judgment in identifying the relative  benefits and limitations of these options. To identify the challenges of  incorporating plug-in hybrids or all-electric vehicles into the federal fleet,  we reviewed federal fleet documents and relevant laws and regulations  governing fleet management and procurement. We interviewed officials  from the General Services Administration (GSA) about the federal motor  vehicle procurement process and spoke with fleet managers from a  selected group of agencies—namely, the Departments of Defense (DOD)  and Energy (DOE), the General Services Administration (GSA), and the  United States Postal Service (USPS)—about the challenges plug-ins might  pose for the federal fleet. We chose DOD and USPS because they have the  largest federal fleets, while DOE and GSA have much smaller fleets, which  provided perspective on the challenges agencies with different sized fleets  and resources could have in meeting the executive order. Finally, we  conducted nine visits to organizations that are conducting research on  plug-in vehicle technology or are field testing plug-in vehicles through  demonstration fleets. We conducted this performance audit from July 2008  to June 2009, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives. (For more information on  our scope and methodology, see app. I.)
subsections: section_title: Background
paragraphs: “Plug-ins” refer to vehicles that can be plugged into an electrical outlet to  charge the car’s battery. The option to plug in and charge is also the basic  difference between a plug-in and a “conventional hybrid,” which uses both  gasoline and stored energy in a battery to power the vehicle. Battery  technology plays an important role in the development of plug-ins. Nickel  metal hydride batteries—such as those currently used in existing  conventional hybrid vehicles—can only store enough energy for limited  all-electric driving without the batteries being made so large as to affect  the vehicle’s fuel economy. As a result, many manufacturers are  developing lithium-ion batteries because they have the potential to store  more energy and are typically smaller and lighter than batteries currently  in use.
Plug-ins are expected to come equipped with a 110-volt plug that can be  used with any standard electrical outlet. Some manufacturers also plan to  make 220-volt charging an option, which requires the same type of outlet  as used for household appliances like clothing dryers. With a 110-volt plug,  manufacturers estimate that most plug-ins will reach a full charge if the  vehicle were plugged in overnight (estimates are 8 hours depending on the  size of the battery). A 220-volt plug can reduce that time by at least half.  Technologies to further shorten the length of time needed to charge a  plug-in are being explored. See figure 1 for descriptions of several types of  plug-ins.
Plug-in hybrid electric vehicle (PHEV)
Saturn Vue Green Line (plug-in version)
Electric motor (internal  combustion engine can  charge the battery but  does not turn the wheels)
Electric motor  and internal  combustion engine Neighborhood electric vehicle (NEV)
Electric motor  (maximum speed 25 mph)
These plug-ins are powered differently:    Plug-in hybrid electric vehicles (referred to as “plug-in hybrids” in this  report) have both an internal combustion engine and a battery pack that  can power the vehicle. Unlike conventional hybrid vehicles, plug-in  hybrids offer drivers an “all-electric range” of driving powered by the  battery, with an internal combustion engine that extends the overall r of the vehicle. Plug-in hybrids can be designed to use the two power  sources in different ways. For example, as shown in figure 1, the plug-in  version of the Saturn Vue Green Line can use its electric motor or  gasoline-powered engine either separately or simultaneously to drive the vehicle’s wheels. The Chevrolet Volt only uses power from the elec motor to drive the wheels. The gasoline engine in the Volt is used to  generate additional power for the electric motor, but it does not use  gasoline to power the wheels.
Emission Vehicle program—which has a goal of increasing the number of low-emission vehicles in California and was recently modified and  includes plug-in hybrids, conventional hybrids, and all-electric vehicles.
The federal government is also trying to reduce petroleum consumption in  federal fleet vehicles by requiring agencies to take several actions and by  setting a number of goals and requirements for federal agencies, as  follows:    Begin acquiring plug-in hybrid electric vehicles: Executive Order 13423  sets a goal for federal agencies operating fleets of 20 or more vehicles to  begin using plug-in hybrids when these vehicles become commercially  available and can be purchased at a cost reasonably comparable to  conventional vehicles based on life-cycle costs.
Acquire low greenhouse gas emitting vehicles: T and Security Act of 2007 (EISA) prohibits agencies from acquiring any  light-duty motor vehicle or medium-duty passenger vehicle that is not a “low greenhouse gas emitting vehicle.”
Decrease petroleum consumption: EISA of decreasing annual vehicle petroleum consumption at least 20 percent  relative to a baseline established by the Energy Secretary for fiscal year  2005.  e alternative fuel vehicles (AFV): The Energy Policy Act of 1992  (EPAct 1992) requires that 75 percent of all vehicles acquired by the  federal fleet in fiscal year 1999 and beyond be AFVs. Eligible vehicles  include any vehicle designed to operate on at least one alternative fuel including electric vehicles and plug-in hybrids. GSA considers  neighborhood electric vehicles to be equipment, rather than ve hicles;  acquiring them does not help agencies meet the AFV acquisition  requirement.
Use alternative fuel with AFVs: The Energy Policy Act of 2005 (EPAct  2005) requires that all AFVs be fueled with alternative fuel. However, DOE  guidance grants an agency a waiver from meeting the requirement if it can  prove that alternative fuel is not available within 5 miles of or 15 minutes  from a vehicle’s address, or if the cost of alternative fuel exceeds that of  conventional fuel.
Increase consumption of alternative fuels: EISA requires that no later  than October 2015 and each year thereafter, agencies must achieve a 10  percent increase in vehicle alternative fuel consumption relative to a  baseline established by the Energy Secretary for fiscal year 2005.
The American Recovery and Reinvestment Act of 2009 (Recovery Act)  appropriated funding to help agencies meet some of these goals and  requirements. For example, it provided $300 million for GSA to purchase  vehicles with higher fuel economy.
Several federal agencies and offices play key roles in ensuring agency  compliance with fleet related requirements. The Council on Environmental  Quality is responsible for issuing instructions regarding implementation of  Executive Order 13423. DOE is responsible for issuing guidance to  agencies relative to EPAct 1992 and 2005, and EISA; compiles an annual  report on agencies’ progress in meeting facility and fleet energy  requirements that it submits to Congress; and promotes the development  of plug-in technology. For example, DOE’s Vehicle Technologies Program  is actively evaluating plug-in hybrid technology and researching the most  critical technical barriers to commercialization. Moreover, DOE performs  battery testing and evaluation, vehicle simulation, and plug-in hybrid  system testing through its work at Argonne and Idaho National  Laboratories. DOE also provides financial support to promote the  development of plug-in hybrid technology. For example, the department  will contribute up to $30 million over 3 years for three cost-shared plug-in  hybrid demonstration and development projects. These projects are  expected to accelerate the development of plug-in hybrids capable of  traveling up to 40 miles on electricity only without recharge.
The Office of Management and Budget (OMB) oversees agencies’  implementation of fleet goals. Specifically, it provides recommendations to  help agencies overcome barriers in meeting these goals and requirements  through transportation management scorecards it issues semiannually.  These scorecards track agencies’ performance on a number of indicators.
GSA is responsible for acquiring vehicles for agencies to use in the federal  fleet. Federal agencies may choose to purchase or lease vehicles for their  motor vehicle fleets. With the exception of USPS, which can acquire its  own vehicles or use GSA, agencies that choose to purchase vehicles are  required by federal regulation to obtain them through GSA, which is able  to acquire vehicles at significant discounts. Although federal agencies  may lease vehicles from whatever source they choose, including  commercial lessors, most agencies lease from GSA because of the  significant discounts it is able to offer. In addition to motor vehicles, GSA  also lists specialized vehicles, such as neighborhood electric vehicles, on  its supply schedules. Lastly, GSA also provides fleet management  consulting services and guidance for federal agencies.
Three additional organizations of federal fleet managers exist to help  agencies manage their fleets and facilitate information sharing. The  Interagency Committee for Alternative Fuels and Low-Emission Vehicles  (INTERFUEL) offers a forum for fleet managers to understand statutory  requirements and rule-making processes, discuss policy implications and  barriers, and develop comments on legislation, executive orders, and new  regulations related to the use of alternative fuels and reductions in  petroleum consumption among the federal fleet. The Federal Fleet Policy  Council (FEDFLEET) consists of representatives from agencies operating  a federal motor vehicle fleet and provides a focal point to federal agencies  for the coordination of vehicle management problems, plans, and  programs common to all federal fleets. Finally, the Motor Vehicle  Executive Council establishes a long-term strategic vision for the  management of government wide motor vehicles and develops interagency  planning in conjunction with FEDFLEET.
The federal fleet currently numbers about 645,000 vehicles, according to  fiscal year 2008 data––the most recent data available—and includes a wide  range of vehicles from large trucks to small sedans, many of which are  alternative fuel vehicles such as flex-fuel vehicles, which can be fueled  with gasoline or ethanol (E85). The fleet may be roughly divided into three  sectors: DOD as a whole operates 30 percent of the fleet, USPS operates  34 percent of the fleet, and all other civilian agencies operate the  remaining 36 percent. From fiscal years 2004 through 2008, the overall size  of the fleet increased about 4 percent.
Most vehicles in the federal fleet are owned by the agencies that operate  them—for example, in fiscal year 2008 about 69 percent of vehicles were  owned. The remaining 31 percent were leased almost entirely from GSA  rather than commercial lessors. The number of leased vehicles as a  proportion of the overall fleet remained essentially unchanged from fiscal  years 2004 through 2008, showing a slight overall increase of 1 percent. In  addition, federal agencies placed orders for 70,865 vehicles through GSA  in fiscal year 2008, or approximately 11 percent of the overall fleet. This  figure includes vehicles purchased by GSA for lease to agencies, as well as  those purchased by USPS. The majority of vehicles in the federal fleet are  light duty trucks—44 percent—with passenger vehicles making up 36  percent of the fleet, and medium and heavy duty trucks, buses, and  ambulances making up the remaining 20 percent.
section_title: Plug-in Vehicles Offer Environmental and Other Benefits, but These Benefits Depend on Several Factors
paragraphs: The adoption of plug-ins could result in several benefits by reducing  petroleum consumption, such as reduced emissions of greenhouse gases  and air pollutants. However, the environmental benefits depend on  whether the electricity used to power plug-ins emits fewer greenhouse  gases and pollutants than the fuel it replaces, as well as on consumers  adopting plug-ins, who may be deterred if plug-ins are not cost-effective.  The cost-effectiveness of plug-ins will be determined by the cost of  batteries and trends in the price of gasoline relative to the price of  electricity to charge the vehicles.
subsections: section_title: Plug-ins Offer Environmental Benefits, but These Benefits Depend on Shifting to Lower- Emission Fuel Sources to Generate Electricity
paragraphs: Through their potential to make substantial reductions in oil consumption,  plug-ins could produce environmental benefits such as reducing  greenhouse gas emissions. All-electric vehicles will consume no gasoline,  and the fuel economy of plug-in hybrids is expected to be high, which  means these vehicles will consume limited amounts of gasoline. For  example, in tests that mimic the driving patterns of a typical driver, a test  fleet of hybrids converted to plug-in hybrids operated by Google’s  RechargeIT program averaged 93.5 mpg. Plug-in hybrids also have the  potential to operate without consuming any gasoline. Specifically, planned  plug-in hybrids will be able to operate on electric power for 10 miles to  about 40 miles, depending on the specific design of the vehicle. The  vehicle would consume no petroleum at all if drivers could limit their  driving between charges to the vehicle’s all-electric range.
Burning fossil fuels, including gasoline, accounts for most of the world’s  manmade greenhouse gas emissions, primarily carbon dioxide (CO),  which have been linked to global climate change. According to the  Environmental Protection Agency (EPA), the transportation sector  accounted for about 28 percent of the total U.S. greenhouse gas emissions  produced in 2006. That number rises to 36 percent if nonroad mobile  sources such as construction, farm, lawn, and garden equipment and  upstream transportation fuel-related emissions such as extraction,  shipping, refining, and distribution are included. Within transportation,  passenger cars and light duty trucks, which include sport utility vehicles  (SUV), minivans, and other vehicles commonly used for personal  transportation, produced 62 percent of greenhouse gas emissions.
Recent research suggests that plug-ins could produce substantial  reductions in CO  reductions—depending on the size of the vehicle and energy source used  to generate electricity—when plug-in hybrids driven within their all- electric range (in this case either 20 or 60 miles) were compared with  gasoline-powered vehicles (see table 1).
As the table indicates, reductions in CO before it is emitted into the atmosphere.  However, shifting to these sources will require new power plants that can  be expensive to build, as well as investments to develop, test, and equip  coal and other fossil fuel plants with carbon sequestration technology. In  addition, the construction of new nuclear plants can be controversial  because of public concern about safety. Similarly, construction of some  renewable energy sources, such as wind turbines, can be controversial.
In addition, in regions of the country that are heavily reliant on coal for  power generation, conventional hybrids might offer greater CO emissions than a conventional hybrid. Thus, in the immediate future, plug-ins could be used to reduce greenhouse gas  emissions—relative to conventional hybrids—in regions of the country  where electricity is already generated from low-carbon energy sources.  For example, a plug-in vehicle charging in a coal-reliant state may not  reduce greenhouse gas emissions relative to a conventional hybrid. But a  plug-in charging in a state that relies heavily on hydropower would  substantially reduce greenhouse gas emissions. However, developing  policy or incentives to encourage consumers to buy plug-ins only in  regions with low-carbon energy sources could be difficult and may not  correspond with manufacturers’ business plans.
Plug-ins could also reduce emissions that affect air quality. About 50  percent of Americans live in areas where levels of one or more air  pollutants are high enough to affect public health. Research we reviewed  indicated that plug-ins could shift air pollutant emissions away from  population centers even if there was no change in the fuel used to generate  electricity (e.g., if low-emitting renewable sources were not substituted for  higher-emitting sources). For example, a study from the University of  Texas modeled the potential impact plug-in hybrids could have on the  formation of smog in a region of the country that relies heavily on coal for  power generation. Specifically, the study estimated that using plug-in  hybrids substantially reduced smog in major cities if they were charged at  night. These benefits remained even if nighttime power generation had to  be increased to full capacity to meet additional demand. One potential  downside the study identified was that rural areas near power plants could  experience an increase in the overall amount of airborne emissions.  However, since power generation would be increased at night, pollutants  would not be exposed to sunlight, which would limit the production of  smog. This benefit would depend on consumers adopting a substantial  number of plug-ins.
Finally, plug-in vehicles, which are expected to use lithium-ion batteries,  could also provide environmental benefits by reducing toxic waste that  would otherwise be generated from car batteries. Compared with lead acid  batteries in gasoline vehicles and nickel metal hydride batteries used in  conventional hybrid vehicles, lithium-ion batteries produce insignificant  levels of toxic waste, which means they are less likely to pose  environmental challenges in disposal. However, extracting lithium from  locations where it is abundant, such as in South America, could pose  environmental challenges that would damage the ecosystems in these  areas. Furthermore, lithium-ion batteries can pose challenges and  potential costs and risks related to safety and transport. For example,  lithium-ion batteries have previously posed a risk of “thermal runaway,” in  which the batteries overheat and catch fire. Mitigating this safety issue is a  priority of battery manufacturers, and one battery manufacturer we visited  showed us several innovations to ensure that this would not be a risk  while operating the vehicle. In addition, because of the current risks, there  are restrictions on the transportation of lithium-ion batteries, which could  pose challenges for consumers—including the federal government—in  maintaining these vehicles.
section_title: Plug-ins Could Reduce Oil Dependence, Although They Could Create a Reliance on Imported Lithium
paragraphs: Besides offering environmental benefits, reduced oil consumption from  plug-ins could help to limit U.S. vulnerability to supply reductions and  subsequent oil price shocks. A study by the EPRI estimated that if plug-in  hybrid vehicles grew to compose about 62 percent of the cars on the road,  they could help save about 3.7 million barrels of oil per day by 2050  (about 9.3 million barrels of oil were consumed per day by automobiles in  the United States in 2007). Research from the National Renewable  Energy Laboratory found that a plug-in hybrid with a 60-mile all-electric range could reduce gasoline consumption by 53 percent to 64 percent o a gasoline vehicle. By comparison, a conventional hybrid compared with  ver  the same gasoline vehicle would reduce consumption by 21 percent to  percent.
Since 1973, supply constraints have contributed to several energy price  shocks. The most recent price spike not only increased basic costs for  consumers but also increased operating costs for organizations like USPS,  which operates a large fleet of vehicles. Although gas prices declined  steeply in late 2008 (see fig. 2), worldwide demand for oil is expected to  ate 2008 (see fig. 2), worldwide demand for oil is expected to  grow, and gas prices are expected to rebound as economic conditions  grow, and gas prices are expected to rebound as economic conditions  improve.  improve.
The administration, in an effort to strengthen national security, has set as  one of its objectives decreasing U.S. reliance on foreign sources of energy.  According to the Energy Information Administration, in 2007 about 58  percent of the oil consumed in the United States was imported. Through  their potential to reduce oil consumption overall, plug-ins could help to  reduce consumption of oil coming from foreign sources, but they could  also create a reliance on another foreign resource. Specifically, most of the  world’s reserves of lithium, which is needed to manufacture batteries for  plug-ins, are located abroad, predominately in South America and China  (see table 2). The United States has supplies of lithium, but if demand for  lithium exceeded domestic supplies, or if lithium from overseas is less  expensive, the United States could substitute reliance on one foreign  resource (oil) for another (lithium). The consequences of relying on  foreign sources of lithium could vary. On one hand, to the extent that this  product is less expensive and readily available, as has often been the case  for foreign sources of oil, manufacturers would be able to produce  batteries at lower cost. On the other hand, if lithium supplies prove  unstable—for example, due to political unrest in the countries in which  they are located—or follow a similar pattern of price shocks as has oil,  cost and risk for battery and plug-in manufacturers would increase.
Furthermore, manufacturing batteries to mass produce plug-ins could be  limited by the amount of lithium that can be extracted and produced.  According to EPA officials, there is considerable disagreement on the  ultimate worldwide supply of lithium, making it difficult to determine how  many (or how few) batteries for plug-in vehicles could be manufactured in  the long term. In addition, while current levels of global production  (mining and refining) of lithium are measurable, other uncertainties—such  as how much lithium will be needed in each battery—make it difficult to  determine whether current levels of lithium production will need to be  increased to meet demand.
Despite these issues, reliance on foreign sources of lithium may not pose  the same dependence issues as oil. For example, industry officials told us  that lithium, including that from spent car batteries, is highly recyclable, so  some future demand could be met by ensuring that sufficient recycling  processes are in place. Industry officials also noted that the current  recycling process used for car batteries—which has a high rate of  participation by consumers, auto dealerships, and parts suppliers—could  be adapted to lithium ion batteries. In addition, technology such as  ultracapacitors, which are energy storage devises that are an alternative to  batteries and that do not need lithium, or batteries that use materials  besides lithium, which are being researched by at least one auto  manufacturer, could be used in plug-ins. If these options prove viable, it  would help avoid reliance on a single commodity for the production of  plug-ins.
section_title: Plug-ins’ Benefits Will Only Be Cost-Effective with Lower-Cost Batteries and Higher Gasoline Prices
paragraphs: Environmental and other benefits will depend on consumers adopting plug- ins, and consumers may be deterred if plug-ins are not cost-effective. The  cost of lithium based batteries will make plug-ins more expensive than other  vehicles, including conventional hybrids. According to industry participants  we interviewed and recent research, the current cost of lithium batteries is  about $1,000 to $1,300 per kilowatt hour. Depending on the size of the  battery pack, which is a key factor in the all-electric range of plug-in hybrids  and all-electric vehicles, the additional cost per vehicle can be substantial at  this price. Ultimately, however, these batteries may become more  affordable. A study by Carnegie Mellon University researchers found that if  the cost of lithium batteries could be reduced to $250 per kilowatt hour,  plug-in hybrids could become cost competitive with both conventional  hybrids and gasoline vehicles.  Industry observers from one organization  we interviewed thought that $250 is an aggressive target, while a report from  the Massachusetts Institute of Technology indicated that this price could be  attainable in 20 to 30 years as manufacturers achieve economies of scale.   However, if this price could be achieved, it would substantially reduce the  cost battery packs add to the price of plug-in vehicle. Table 3 illustrates how  the total cost of a battery pack can change depending on its size and the per  kilowatt hour cost.
Until the cost of batteries comes down, the Carnegie Mellon study  concluded, the weight and size of the battery is a key consideration in the  extent to which plug-in hybrids are cost-effective methods of reducing  greenhouse gas emissions. For example, this study concluded that plug in  hybrids with smaller batteries that are charged frequently—every 10 miles  or fewer—are less expensive and release fewer greenhouse gases than  conventional hybrids, but plug-in hybrids with larger batteries and all- electric ranges may not offer the same advantages.
General Motors has contested the per kilowatt hour cost of batteries used  in the Carnegie Mellon study, stating that the cost of the Volt’s battery  pack is hundreds less than $1,000 per kilowatt hour—the baseline case  used in the study to evaluate cost-effectiveness. General Motors further  noted that its battery research team has already started work on new  concepts that will further decrease the cost of the Volt battery pack  substantially in a second-generation Volt pack.
Gasoline and electricity costs will also determine whether plug-ins are  cost-effective. Specifically, even if plug-ins have higher upfront costs,  lower overall fueling costs relative to a gasoline-powered vehicle could  offset the purchase price over time. For this to occur, the price of gasoline  must be high relative to the cost of electricity to charge the vehicles.  However, gasoline prices have varied greatly in the last few years, and if  consumers do not believe that prices will return to previous highs, they  may be unwilling to purchase a plug-in. Also, if power companies  construct new power plants, including plants that use low-carbon power  sources, these investments may increase the cost of electricity, which  could offset the savings from reduced gasoline consumption, making plug- ins less appealing to consumers.
section_title: Several Factors Could Delay the Widespread Availability of Plug-in Vehicles, and the Federal Government Has Options to Provide Support
paragraphs: Manufacturers plan to introduce several types of plug-in vehicles over the  next 6 years. However, certain factors, such as the limitations of current  battery technology, could delay availability of plug-ins, and the current  financial situation could prevent consumers from purchasing plug-ins. The  federal government has taken steps to encourage the development and  manufacturing of plug-ins and has additional options for furthering this  goal.
subsections: section_title: Although Plug-ins Are Not Yet Widely Available, Manufacturers Plan to Introduce Plug-in Hybrids and other Plug-in Vehicles through 2014
paragraphs: Plug-in vehicles are not widely available. Currently available plug-ins  include neighborhood electric vehicles, which have limited uses, and all- electric vehicles being made in limited numbers by small auto  manufacturers. In addition, kits are currently available that allow  consumers to convert conventional hybrids into plug-in hybrid vehicles,  although there are several problems with more widespread adoption of  conversions. First and foremost, a conversion typically voids the warranty  on the vehicle. Second, not all of the conversion kits available have been  crash tested to ensure they will meet safety requirements set by the  National Highway Traffic Safety Administration for operating a vehicle on  public roads. Third, EPA officials noted that conversions constitute  tampering with emissions control systems, which creates an uncertified  vehicle, can lead to increased emissions, and may cause warning lights to  fail even if there is a serious problem with the engine or emissions system.  Although officials stated that companies can certify a converted vehicle  and obtain a certificate of conformity for their product, which would  enable them to legally sell their plug-in hybrids, none of the companies  offering conversions have done so. Finally, conversion kits cost at least  $10,000, in addition to the cost of the vehicle. These factors could create a  deterrent for consumers who might otherwise consider converting their  vehicles and, according to GSA and DOE officials, have prevented the  federal fleet from using this option to save fuel.
However, both domestic and foreign auto manufacturers have announced  plans to develop plug-in hybrids and mass produce additional all-electric  vehicles. In the near term—2009 through 2012—plug-ins are expected to  include sports cars, compact sedans, SUVs, at least one all-electric pickup  truck, and a commercial all-electric van. In 2013 and 2014, the number of  models of cars and SUVs—both plug-in hybrids and all-electric vehicles— will expand, and a minivan may be introduced (see table 4). Information  from the Association of International Automobile Manufacturers suggests  that Asian manufacturers will focus on producing all-electric and  conventional hybrid vehicles and that only one plug-in hybrid is currently  being planned. Domestic auto manufacturers are planning more plug-in  hybrids, in addition to all-electric vehicles, and plan to expand  conventional hybrid technology to existing gasoline-fueled models.  However, the bankruptcy and restructuring of Chrysler and General  Motors could affect these plans. As explained in the note in table 4, we  received information on these plans directly from Chrysler, General  Motors, and other auto manufacturers.
The planned vehicles will have a range of capacities. The expected all-electric  driving range of plug-in hybrids varies from a low of 10 miles per charge for  the planned plug-in version of the Saturn VUE to a 50-mile all-electric range  per charge for the Fisker Automotive Karma. Many of the planned all-electric  vehicles are expected to have a driving range of about 100 miles on a single  charge, although Tesla Motors plans to introduce an all-electric sedan with a  range of 300 miles. As discussed earlier, the larger batteries necessary for  plug-in vehicles will result in these initial vehicles being considerably more  expensive than comparable vehicles. For example, Phoenix Motorcars’ all- electric pickup truck is expected to retail for $47,500, which is about 81  percent higher than the $26,175 suggested retail price of the comparably sized  Ford F-150 pickup truck. Similarly the Chevrolet Volt is expected to retail for  about $40,000 when it is first marketed, and it will be sized somewhere  between a Chevrolet Cobalt and Pontiac G6. The Volt’s retail price is about  $25,000 higher than the Chevrolet Cobalt and about $20,000 more than the  Pontiac G6.
section_title: Development of Battery Technology, Limited Charging Infrastructure, and Current Economic Conditions Could Delay Plug-ins and Affect Consumer Demand
subsections: section_title: Factors Associated with Battery Development
paragraphs: Achieving economies of scale to help lower the cost of plug-in batteries  will be difficult. For example, industry experts told us that manufacturing  high-quality batteries requires considerable skill and sophisticated,  precision-oriented manufacturing processes. Inadequate manufacturing  processes will likely result in batteries that are more likely to fail. In  addition, industry officials told us that most battery component  manufacturing and assembly of battery packs is done abroad, and there is  limited manufacturing capacity worldwide. While some manufacturers  have announced plans to establish battery plants domestically, the capital  investments will be significant. Congress established a program to assist  companies interested in developing these plants in the Recovery Act. In  addition, some industry participants told us that the purchasing power of  the federal fleet could help manufacturers achieve economies of scale in  battery manufacturing. However, with a total purchase of about 70,000  vehicles in 2008, and with only about 20,000 passenger sedans being  purchased annually, the purchasing power of the federal government is  small relative to the overall auto market. For example, about 13 million  vehicles were sold in the United States in 2008 and about 16 million in  2007.
In addition, questions about the potential longevity of lithium batteries  remain and have caused at least one prominent manufacturer to be  conservative in its plans to develop plug-ins. In early tests, and under  testing conditions, lithium-ion batteries have been shown to last for a  sufficient number of charging cycles to enable plug-ins to have a  comparable lifetime to conventional automobiles. However, if the batteries  prove unreliable in real world conditions, manufacturers could be exposed  to significant costs associated with warranties. In addition, if consumers  believe they may have to replace the battery after the warranty expires,  the cost of doing so may discourage them from buying plug-ins or could  drive down vehicle resale prices.
section_title: Factors Associated with Charging Infrastructure
paragraphs: As plug-ins reach a significant level of market penetration, additional  infrastructure to charge them will likely be needed. One study estimated  that about 40 percent of consumers do not have access to an outlet near  their vehicle at home. Consumers without ready access to an outlet, such  as those who only have street parking, would need public charging  infrastructure, which manufacturers and others told us could be installed  at the relatively low cost of perhaps a few thousand dollars for a new  charging box. By comparison, ethanol (E85), another alternative to  petroleum, has struggled to make inroads as an alternative transportation  fuel, in part because it can cost up to $62,400 to install a new E85 fuel  pump. However, public charging infrastructure would require  establishment of a new system for building outlets and billing for the  power dispensed, whereas fueling stations for gasoline vehicles are  already widely available.
In addition, plug-ins could increase demand for electrical power and, over  time, power companies may have to generate more electricity to meet this  demand, depending on when and how often vehicles were charged.  Results from a Duke University study suggested that if plug-in hybrids  reached 56 percent of the cars on the road by 2030, they would require an  increase in electricity production, much of which would likely come from  additional coal plants. Although an increase in coal consumption would  produce additional carbon dioxide emissions, the study noted that if this  increased consumption came during off peak hours, power companies  would likely build additional capacity that produces electricity more  efficiently and—excluding upfront capital costs—at lower cost on a daily  operational basis. In the near term, a study by the World Wildlife  Federation using 2005 levels of power generation estimated that 1 million  plug-in hybrids would demand 0.04 percent of the nation’s power. In  addition, a 2006 analysis by the Pacific National Laboratory estimated that,  if plug-ins were charged during off-peak hours, about 84 percent of cars,  SUVs, and pickup trucks on the road in 2001 could be supported without  building new electricity-generation capacity. The variations in these  studies are a consequence of different assumptions, and ultimately only  real-world experience will show the actual demand for power.
Thus, a large number of plug-ins could be put into use with available  power, if consumers charge their plug-ins during off-peak hours. To  encourage consumers to do so, cheaper rates for electricity could be  charged after a certain hour at night. However, power companies would  need to be able to apply different rates during off-peak hours and would  need to make this cost advantage evident to consumers on their bills or  through some other means, such as new technology. Such technology, or  “smart charging infrastructure,” would likely need to include features that  allow consumers to indicate by what time the car needs to be charged and  a way to meter and bill consumers different prices for on- and off-peak  consumption. Power companies, start-ups, and others have been working  on smart charging infrastructure, but it is still under development.
section_title: Factors Associated with Current Economic Conditions
paragraphs: The economic recession has put the auto industry under significant  financial stress, which could affect plans to introduce and mass-produce  plug-ins over the next few years. In addition, if the following conditions  are still present when manufacturers introduce plug-ins, consumers may  also be discouraged from purchasing these vehicles.
Declining sales: Auto sales declined in 2008 and early 2009, and while  most auto manufacturers have been affected, declines have been more  substantial for the “Detroit 3”—Chrysler, Ford, and General Motors. For  example, Detroit 3 sales in the United States dropped by nearly 50 percent  from February 2008 through February 2009, whereas U.S. sales for Honda,  Nissan, and Toyota dropped 39 percent during this period. To stabilize  their operations, Chrysler and General Motors will receive a total of about  $13 billion and $50 billion in assistance, respectively, pending approval of  the bankruptcy court and finalization of related transactions. To the extent  that auto manufacturers have limited cash to continue developing plug-ins,  as well as the capital to build or retrofit manufacturing plants to produce  them, the development and availability of plug-ins could be hindered.
Reduced consumer confidence: Deteriorating financial, real estate, and  labor markets have reduced consumer confidence, which could make it  difficult for manufacturers to market plug-in vehicles because of their  significant price premium compared with less expensive gasoline-powered  vehicles in the same class.
Tight credit markets: Tightening credit markets have also limited the  availability of loans for consumers to finance car purchases, even from the  financial arms of the car companies. Should this continue, consumers may  have difficulty financing the purchase of a plug-in.
In addition to these issues, the recent spike and decline in gasoline prices  may make it more difficult to market plug-ins in that consumers may be  doubtful that they will recoup the high upfront costs of plug-ins through  fuel savings over the life of the vehicle. However, industry stakeholders  and researchers have pointed out that, in addition to fuel savings, buyers  also consider performance, styling, and other intangibles—such as  whether the vehicle makes a statement about its owner being “green”— when choosing between vehicles.
section_title: The Federal Government Has Encouraged the Development and Manufacture of Plug-in Vehicles, and Experts Identified Several Additional Options
paragraphs: The federal government has historically played a role in the research and  development of plug-in vehicle technology and has recently provided grant  funding for plug-in hybrid test fleets:    Funding for basic research to develop technology: DOE funds basic  research to develop battery technology for vehicles as well as other  components necessary for electric-powered vehicles. DOE’s annual budget  for such research was about $101 million in fiscal year 2009. In addition,  the national laboratories have ongoing work related to plug-ins. Argonne  National Laboratory has been designated by DOE as the lead laboratory  and is testing and evaluating plug-in vehicle technology, including  batteries, components, and vehicles, to shed light on the reliability of the  technology over its expected life.
Cost sharing for test fleets: DOE also supports the introduction of plug-in  hybrid test fleets. For example, the Idaho National Laboratory is  coordinating the collection and analysis of data from more than 150  converted plug-in hybrids deployed across the United States to understand  the effects of real-world use on the technology. To initiate this test fleet,  DOE established partnerships with organizations such as power  companies, local government agencies, and others across the United  States and Canada. DOE covered half the cost of converting a  conventional hybrid to a plug-in hybrid, as well as the cost of the devices  to collect and transmit data on fuel economy, charging patterns, and driver  behavior back to the lab. In addition, DOE is administering a $30 million  grant program to facilitate the deployment of demonstration vehicles to  accelerate improvements to plug-in vehicle technology. The program  offers funding to a team of businesses, including an auto manufacturer and  battery development company that is willing to cover half of the cost of  the demonstration fleet and data collection.
In addition to research and development, the federal government has also  taken steps to encourage the development and manufacture of plug-ins  through a variety of programs, several of which were initiated by the  Recovery Act. While these programs are designed to either directly or  indirectly support the development and manufacture of plug-ins, they are  still being implemented.
Loans for modernizing manufacturing plants: The government has  sought to help manufacturers manage the capital costs associated with  producing advanced technology vehicles. In 2007, Congress established  the Advanced Technology Vehicle Manufacturing (ATVM) loan program,  which offers low-cost loans to auto manufacturers and component parts  suppliers to retool aging plants or build new plants that will lead to the  production of advanced vehicles that are at least 25 percent more fuel  efficient than current vehicles for sale or advanced technology  components for these new vehicles. Officials from the ATVM program  noted that applicants include a wide range of technologies, from making  improvements to components for gasoline vehicles to major technological  breakthroughs in advanced vehicle technology. This program received an  appropriation in the fall of 2008 of $7.5 billion, and DOE, which is tasked  with administering the program, plans to offer the first round of loans in  June 2009. In addition, Title XVII of the Energy Policy Act of 2005  established a loan guarantee program for innovative energy technologies.  Congress has authorized this program to provide up to a total of $22.5  billion of loan guarantees for a category of renewable or energy efficient  systems and manufacturing projects that could include production  facilities for alternative fuel vehicles. Under the program, borrowers must  pay the subsidy costs of the loan guarantees unless Congress appropriates  funds to cover the costs, and it has not done so for alternative fuel vehicle  production facilities.
Battery manufacturing: To encourage the development of domestic  manufacturing of advanced technology batteries, the Recovery Act  appropriated $2 billion in grants for manufacturing batteries and related  components. Battery technology to be targeted includes, but is not limited  to, lithium-ion batteries, hybrid electrical systems, and related software.  DOE will administer the program and released the solicitation on March  19, 2009.
Direct funding to purchase fuel-efficient vehicles for the federal fleet: The  Recovery Act appropriated $300 million to GSA for capital expenses  associated with acquiring vehicles with high fuel economy, including  conventional hybrids, plug-in hybrids, and all-electric vehicles. These  funds must be used by September 30, 2011. GSA’s April plan to Congress  states that GSA intends to spend this funding by September 30, 2009, to  help stimulate the economy and purchase more fuel-efficient vehicles. As  of June 1, 2009, GSA officials told us that they had obligated $287.5 million,  ordering 3,100 vehicles in April and 14,105 on June 1. Because GSA will  spend most of the funding before many plug-ins are commercially  available, it does not plan to purchase this technology, save for a few  hundred neighborhood electric vehicles.
Tax credits for consumers purchasing plug-ins: The Recovery Act  established a tax credit to consumers for the purchase of a plug-in vehicle.  The credit increases with the size of the battery up to $7,500 but is not  applicable for vehicles over 14,000 pounds. In addition, the Recovery Act  established a credit of up to $2,500 for two-wheeled, three-wheeled, and  low-speed four-wheeled plug-in vehicles, such as neighborhood electric  vehicles, and establishes a credit of 10 percent of the cost of converting a  vehicle—up to $4,000—for the conversion of existing vehicles to run on  battery power. One study has indicated that smaller batteries that are  more frequently charged may be more cost-effective solutions for reducing  greenhouse gas emissions, but this tax credit program benefits plug-ins  with larger batteries. In addition, tax incentives aimed at consumers with  the oldest and least fuel-efficient vehicles can encourage them to retire  these vehicles and replace them with plug-ins, thus resulting in a greater  public benefit than replacing vehicles with average or higher fuel  economy. However, the existing tax credit program is not designed with  the replacement vehicle in mind but rather focuses on encouraging the  adoption of plug-ins regardless of the vehicles they would replace.
Transportation electrification: DOE is utilizing $400 million of funding  from the Recovery Act to support the integration of electric-drive vehicles  and technologies into the United States’ transportation sector. The  Funding Opportunity Announcement that was released by DOE on March  19, 2009, includes a request for proposals to establish wide-scale  demonstrations of electric-drive vehicles, including plug-in hybrid electric  and battery electric vehicles.
Several additional steps the federal government could take to encourage  the development, manufacture, and commercialization of plug-ins emerged  consistently during our discussions with experts and reviews of recent  literature. Most of these options would impose costs on the federal  government or society at large and therefore would require additional  analysis to determine whether the potential benefit would be worth the  cost.
To reduce cost and risk of investing in battery technology and  manufacturing for auto manufacturers, the government could share the  cost of honoring warranties for plug-in batteries. However, if batteries  prove to be unreliable, the government would be exposed to additional  costs. To mitigate consumer reluctance to buy vehicles from a financially  distressed company, Treasury provided $280 million to Chrysler and $360  million to General Motors to back warranties of these companies. As of  June 2009, Treasury officials noted that Chrysler and General Motors  continue to support their warranties and Treasury believes that the money  provided to them will be returned to Treasury. We were not able to find  estimates of the cost of this approach if it were to be applied to plug-in  vehicles. Furthermore, if such funding were directed to troubled  manufacturers, these costs would be in addition to the $17.4 billion  already provided by the government to Chrysler and General Motors  through the Troubled Asset Relief Program. Such a program could also be  used to assist start-up companies specializing in all-electric vehicles, but  we were not able to estimate the potential risk to the government.
To reduce the cost of batteries by broadening the market for lithium  batteries, the federal government could encourage the development of  secondary uses for battery packs. Industry officials told us that lithium-ion  batteries can be used to store energy—for example, from renewable  sources like wind—which could then be used during a period of peak  demand. These officials noted that both new batteries, and batteries that  no longer had a useful life for a plug-in vehicle but that nonetheless could  still retain a charge, could be used for this purpose. However, power  companies also stand to benefit from developing this technology, and  officials from some of the companies with whom we spoke indicated they  were exploring this idea, which suggests that if government refrains from  sponsoring such development, the private sector may do so.
To encourage the continued development of low-carbon electricity, the  government could institute a carbon pricing program, such as a carbon  cap-and-trade program or carbon tax.  If a cap-and-trade program, or  carbon tax, were applied to transportation fuels, it could make the life- cycle costs of plug-ins more competitive with other vehicles, depending on  its effect in changing the price differential of gasoline relative to  electricity. An energy bill that includes a carbon cap-and-trade program  was introduced in the 111th Congress, and the administration has  indicated an interest in supporting such a program. Some economists  advocate using revenue from a cap-and-trade program to lower income  taxes, which could offset some of the increased cost consumers would  experience from higher fuel prices.
To enhance consumer acceptance of the technology and once reasonably  accurate information on the performance of plug-ins is available, the  government could play a role in providing consumer education. At the  most basic level, the government could provide information to help  consumers make the decision to invest in plug-ins by, for example,  showing the extent to which fuel savings may offset the initial higher cost  of plug-ins. In addition, it could inform consumers of potential electrical  updates that may be needed in a home, such as a dedicated circuit for  charging a plug-in, to prevent consumers from becoming frustrated once  they bring their vehicles home. Finally, the government could provide  information to help consumers use the technology more wisely. For  example, it could explain the effects of driving style on plug-in hybrid fuel  economy and the potential cost savings of charging during off-peak hours.  The government already provides similar types of information on vehicles  through sources such as its fuel economy Web site.
Government may also need to both provide and standardize how some  information on the performance of vehicles is communicated to  consumers. For example, car companies are currently required to post  EPA-validated fuel economy labels on new cars, but consumers may need  other kinds of metrics about plug-ins, such as the length of time it takes to  charge one with a 110- or 220-volt plug, and how far the different vehicles  can go before they require charging or will begin to rely on gasoline for  additional power. Such options could increase the regulatory role played  by the federal government. However, EPA already plays a role in providing  information on vehicle fuel economy and may be able to adapt current  processes to include information on plug-ins.
In the longer term, government could help facilitate smart charging by  helping to develop the necessary infrastructure, which includes meters  and a standardized communications between power companies and  consumers. This would help ensure the electrical grid could accommodate  widespread use of plug-ins. Federal rules and regulations may be needed  to support these standards.
section_title: Cost and Other Factors, Including Federal Requirements, Could Hinder the Integration of Plug-in Vehicles into the Federal Fleet
paragraphs: Once plug-ins become commercially available, agencies will face  challenges related to cost, availability, planning, and federal requirements.  Agencies may have difficulty making the decision to invest in these  vehicles instead of less expensive gasoline vehicles, given that they have  limited information to help them take the longer-term costs into account  using life-cycle analysis. Agencies also have not formulated plans for  incorporating plug-ins into their fleets, largely because information they  would need is not yet available. Finally, agencies may have difficulty  meeting the federal goal of acquiring plug-in hybrids, as it conflicts with  some federal requirements and agencies lack guidance on how to  negotiate this situation.
subsections: section_title: High Upfront Costs of Plug-ins Will Initially Create a Challenge for Agencies
paragraphs: Just as the high initial cost of plug-ins may hinder consumer adoption of  these vehicles, it will also limit agencies ability to acquire them. Plug-ins  are likely to cost significantly more than comparably sized gasoline- powered vehicles, and because the upfront cost of a vehicle is a key factor  when agencies select a vehicle, federal customers will likely not be able to  purchase or lease many of these vehicles without additional funding to  help cover costs. Thus, as a practical matter, agencies’ budgets will  determine the extent to which they can integrate plug-in hybrids and all- electric vehicles into their fleets. GSA typically negotiates with auto  manufacturers for significantly discounted prices for the vehicles it  purchases and leases for federal agencies—typically more than 40 percent  below the manufacturer’s suggested retail price. (See app. II for more  information on GSA procurement processes.) For example, GSA offers  agencies a Ford F-150 pickup truck for $15,111 (about an $11,000 discount  to the suggested retail price), a Chevrolet Cobalt for $12,600 (about a  $2,400 discount), and a 4-cylinder Pontiac G6 for $14,000 (about a $6,000  discount). GSA officials did not think they would be able to obtain the  usual discount for early plug-ins since auto manufacturers are often  reluctant to offer the same discounts for new model lines because they can  better recover their start-up costs in the retail market. Therefore, since  discounted plug-in hybrids will not likely be offered to the government, the  cost differential between plug-ins and comparable vehicles—including  other alternative fuel vehicles such as flex-fuel vehicles—could be even  greater for the government than it would be for an individual consumer.
The additional expense of plug-in hybrids and all-electric vehicles could  also make it more difficult to incorporate leased plug-ins into the fleet.  GSA officials said that their authorization limits the agency’s ability to  replace existing vehicles with plug-ins in its leasing program, at least  initially. Because the high cost of plug-ins will stretch thin GSA’s revolving  fund’s ability to absorb costs over the life of the lease, GSA would need  additional funding upfront to cover the higher costs of plug-ins. It could  subsequently recover some of these costs by setting the lease rates for  agencies at a level that would replenish these funds. However, this  additional cost would cause lease rates for plug-ins to not be competitive  with lease rates for similarly sized vehicles. In addition, GSA determines  its lease rates for vehicles not just based on the initial price but also the  price they can get for the vehicle in the used car market. However,  uncertainties regarding the resale value of plug-ins will make it difficult for  GSA to lower the lease rate based on the amount of money it could recoup  through resale.
section_title: Life-Cycle Cost Analysis Is Not Widely Used in Making Choices between Vehicles, and Agencies Do Not Have Information Needed to Compare Plug-ins with Other Vehicles
paragraphs: Executive Order 13423 directs agencies to begin purchasing plug-in  hybrids once they are reasonably comparable on a life-cycle cost basis  with conventional vehicles. A life-cycle cost analysis includes factors such  as the expected total fuel and maintenance costs of a vehicle over the  years that the agency would operate it. This helps the purchaser  determine the best long-term value for the investment. The Federal  Acquisition Regulation does not explicitly require agencies to perform life- cycle cost analysis for their acquisitions, including vehicles they acquire,  although agencies are free to do so.
Among the agencies we reviewed, the use of life-cycle cost analysis varied,  and according to FEDFLEET, an organization representing federal fleet  managers, most agencies do not use life-cycle costing when evaluating  which vehicles to purchase. When selecting vehicles, fleet managers with  whom we spoke said they primarily consider mission needs, upfront costs,  and federal goals and requirements, rather than long-term savings.  However, of the agencies we reviewed, only agencies within DOD—the Air  Force, Navy, and Marine Corps—reported that they evaluate life-cycle  costs to differentiate between multiple vehicles that met the agencies’  needs.
In order to conduct analysis of life-cycle costs, agencies need access to  information that would enable such an analysis, such as estimates of  lifetime fuel economy, and ongoing maintenance and repair data for  specific vehicles. GSA officials told us that some information on life-cycle  costs of vehicles is available though a database that houses information on  fuel consumption reported by agencies, and that GSA Fleet would have  some information on lifetime maintenance costs of some vehicles. In  addition, life-cycle cost estimates for existing vehicles are available from  public sources of automotive information. However, such information for  specific vehicles is not readily available from GSA. For example,  AutoChoice, a Web site developed by GSA to provide information to  agencies on vehicles available for purchase, includes information about  upfront costs and vehicle performance characteristics (such as engine size  and fuel economy) but does not include information on total cost of  ownership, such as estimated lifetime fuel or maintenance costs.
For comparable conventional gasoline vehicles in the same class,  differences in life-cycle costs may not be significant, but differences could  arise when comparing a conventional gasoline-powered vehicle to a plug- in hybrid or all-electric vehicle, depending on a number of factors.  However, since plug-in hybrids are not currently available in the  marketplace, much of the information about their lifetime ownership costs  is unknown. First, the fuel economy of planned plug-in hybrids has not  been announced and will vary greatly depending on how agencies plan to  use them. For example, plug-in hybrids used only within the all-electric  range will use no gasoline at all, while plug-in hybrids used for long- distance driving may not offer fuel economy much better than a  conventional hybrid or highly fuel-efficient gasoline-powered vehicle.  Secondly, their maintenance costs could be significantly more or less than  conventional technology. For example, failure of vehicle batteries––which  will likely be the vehicles’ most expensive component––after warranties  expire could entail significant costs for agencies. In addition, some  maintenance issues may involve proprietary considerations or require  additional specialized training for maintenance staff among agencies that  service their own vehicles. Conversely, to the extent that plug-in vehicles  will have fewer moving parts, they may offer significantly lower  maintenance costs over the life of the vehicle. Finally, another important  factor in determining vehicle life-cycle costs is resale value, which is also  uncertain in the case of plug-ins. GSA officials said that past experience  with advanced technology vehicles underscored the risk federal agencies  might face when trying to resell the vehicles. For example, when GSA  attempted to resell some of its compressed natural gas vehicles in the  1990s, there was no market for them and the resale value was essentially  zero. By comparison, information from public sources of automotive data  suggests that the projected value of a Toyota Prius, a conventional hybrid,  will hold up well over time compared with similarly sized gasoline  vehicles.
We believe these uncertainties make it difficult for fleet managers to plan  for the integration of plug-in hybrids in the early years of their  commercialization and pose challenges for agencies in complying with the  executive order. In addition, to compare plug-in hybrids with other  vehicles available to them, agencies will need to make certain assumptions  that can materially affect the estimation of whether the vehicles are  comparable on a life-cycle cost basis. For example, factors such as agency  policies about when and how often vehicles are charged, driving behavior  and the types of trips plug-in hybrids are predominantly used for, and the  potential for training needed to service the vehicles all can influence the  costs of the vehicle to the agency over its lifetime. Currently there is no  guidance on how to deal with these uncertainties and no further  information about the performance of the vehicles.
GSA and DOD have started to explore options that would allow the  agencies to acquire and use neighborhood electric vehicles while  minimizing some of the risk associated with the uncertainties described  above. Specifically, GSA, on behalf of the Department of the Army, is  currently negotiating “pass-through lease agreements” in which it would  lease neighborhood electric vehicles directly from manufacturers and pass  the leases on to the customer. In its effort to reduce petroleum  consumption, the Army would like to order 4,000 neighborhood electric  vehicles over a 3-year period beginning in 2009 and replace gas-powered  vehicles, where appropriate, on a one-for-one basis. Leasing, rather than  purchasing, the neighborhood electric vehicles will help mitigate risks  associated with their maintenance and their minimal resale value,  according to GSA and DOD officials. The cost of the leases could be higher  if manufacturers adjust the rate to account for risk associated with  expected costs and performance of plug-in vehicles. However, if the  government leased these vehicles, it would avoid liability of ownership,  especially with regard to the maintenance and resale challenges GSA and  federal agencies would otherwise face. GSA has not yet explored the  possibility of leasing other plug-ins directly from manufacturers; however,  GSA officials thought this option would be worth exploring.
section_title: Availability of Plug-in Vehicles to the Federal Fleet May Be Limited
paragraphs: Auto manufacturers may not make a high volume or wide range of plug-in  vehicle models available to the federal government. The vehicles GSA is  able to provide to its customers are limited to the models automakers are  willing to sell to the government. Those offered have generally been  limited to models that have been on the market for several years and are  no longer at the peak of their retail sales. In addition, foreign  manufacturers historically have not entered into procurement contracts  with GSA. GSA officials informed us that although they have regularly  pursued discussions with Toyota and Honda, both manufacturers have  declined to submit proposals because of franchising and licensing  agreements with their dealers in the United States. Of the large  manufacturers that have announced plans to market plug-in hybrids in the  next several years, only GM has said it would make these available to the  government, but it has not indicated the quantities it would provide. The  availability of plug-ins through smaller start-up manufacturers is also  uncertain. For example, Phoenix Motorcars is marketing its all-electric  pickup truck and SUV to fleets, and its first production run is scheduled to  begin in 2009. GSA officials noted, however, that the Phoenix vehicles  were not yet in production when it met with auto manufacturers to plan  for fiscal year 2010.
section_title: Agencies Have Not Developed Plans to Incorporate Plug-ins Due to Uncertainties Surrounding Vehicle Performance and Infrastructure Needs
paragraphs: Almost all of the agency officials we interviewed stated they have not  developed plans for incorporating plug-ins into their fleets, in some cases  because of the uncertainties surrounding plug-ins. The Government  Performance and Results Act of 1993 (GPRA) requires executive branch  agencies to clearly establish their missions and goals. In guidance GAO  developed to assist agencies implement GPRA, we stated that plans can  help clarify organizational priorities and unify agency staff in pursuit of  shared goals, like integrating plug-ins into the federal fleet. As we have  mentioned in previous reports, plans can help clarify organizational  priorities and unify agency staff in pursuit of shared goals, like integrating  plug-ins into the federal fleet. These plans also must be updated to reflect  changing circumstances and should include a number of key elements,  such as (1) approaches for achieving long-term goals; (2) linkages to goals;  (3) frameworks for aligning agency activities, processes, and resources to  attain goals; (4) consideration of external factors; and (5) reliable  performance data needed to set goals, evaluate results, and improve  performance.
Agency officials told us that the uncertainties surrounding plug-ins, as  discussed throughout this report, prevent them from developing plans for  integrating plug-ins into their fleets. For example, agency officials reported  that the performance characteristics of plug-ins—such as fuel economy,  length of time to charge, and range—are still in question. While there is  some preliminary information on performance characteristics and  potential benefits, agencies cannot determine with certainty whether the  vehicles will meet their mission, which is one of the most important  criteria in purchasing vehicles. In addition, according to FEDFLEET, plug- in hybrids are a suitable option for agencies located in metropolitan areas,  on military bases, and federal centers, but agency fleet managers noted  that plug-in hybrids may not be appropriate for agency missions located in  remote areas or that require long-distance driving without assurance that  charging infrastructure will be accessible. Finally, the compact size of the  first plug-in hybrids expected on the market may be problematic. For  example, USPS officials stated that they are unlikely to acquire plug-in  hybrids with limited cargo capacity, such as the Chevy Volt, but viewed  plug-in vans with larger cargo space as an option.
Agencies are also uncertain how to plan for the integration of plug-ins  because they have not determined whether additional charging  infrastructure would be needed at federal facilities to accommodate the  use of plug-ins. The first generation of plug-ins is expected to use ordinary  plugs and outlets to recharge the vehicles, and agency officials expected  that small numbers of plug-ins would not pose considerable infrastructure  challenges. However, many agency officials we interviewed stated that  they had yet to conduct any assessment of their current facilities to  determine the extent to which they could support plug-ins and, thus, what  modifications might be necessary. For example, according to several  agency officials, federal agencies located in a commercially leased space  may not have access to additional electrical infrastructure necessary to  support vehicle charging, or the building owner may not be willing to  provide it. Also, as the number of plug-ins used by federal agencies  increases, it will likely become necessary to upgrade the facility’s  electrical service to accommodate the growing demand. In addition, some  agencies with their own charging facilities may need to collaborate with  the local utility to ensure transformers serving the building can manage  additional load. Agencies may also need to collaborate with local power  companies and be prepared to install smart charging capability to ensure  that electrical power is being used in the most efficient manner possible.  Finally, some officials emphasized that they may need funding for  additional infrastructure, such as charging stations. Because of these  uncertainties, agency officials informed us that it would be extremely  difficult to develop a plan that successfully incorporates plug-ins into their  mission and uses these vehicles as effectively as possible.
section_title: Incorporating Plug-ins into the Federal Fleet May Be at Odds with Other Federal Requirements
paragraphs: Agencies also face a challenge posed by the patchwork of existing federal  requirements that covers energy use and vehicle acquisitions. In deciding  whether to acquire plug-in hybrids and all-electric vehicles, agencies must  also consider how this decision will affect their ability to meet these other  requirements, some of which conflict with one another. These  requirements are intended to further several important objectives,  including reducing petroleum consumption and encouraging the use of  alternative fuel vehicles and alternative fuel in the federal fleet. However,  the current set of requirements does not provide agencies with a means to  set priorities for these objectives and make complex decisions such as  what vehicles to acquire under what circumstances.
Using plug-in vehicles could create several challenges related to meeting  energy reduction and fuel consumption goals.
Consumption of electricity by plug-ins could conflict with energy  reduction requirements for facilities: Under Executive Order 13423  agencies are expected to reduce energy intensity in federal facilities by 3  percent per year through the end of fiscal year 2015; further, EISA requires  a reduction in energy intensity in facilities by 30 percent by the end of  fiscal year 2015, relative to the baseline of their energy use in fiscal year  2003. Energy intensity is defined as energy consumed per gross square foot  of facilities. Because plug-ins are expected to rely on electricity from  federal facilities while charging, they could increase energy consumption,  particularly if plug-ins are used in large numbers. Such an increase could  create a conflict with the requirement in EISA for federal facilities to  reduce energy consumption of facilities. If agencies do not have a means  to determine the electricity used by plug-ins, they will have no way of  subtracting vehicle usage from facility usage to track their progress in  meeting the facility requirement.
Without means to measure electricity used to “fuel” plug-ins, agencies  may underestimate progress toward alternative fuel consumption  requirements: EISA requires agencies to increase alternative fuel use by  10 percent annually. The electricity used to charge plug-in hybrids and all- electric vehicles, except neighborhood electric vehicles, can count toward  this requirement. But according to agency officials, facilities are generally  not equipped with dedicated meters or other means of measuring the  amount of electricity used by vehicles. According to the DOE official  responsible for federal fleet policy, electricity used by plug-in hybrids and  all-electric vehicles could be estimated, but there is currently no guidance  for how to do this.
The lack of guidance regarding alternative fuel use for plug-in hybrids  could hamper agencies’ ability to meet the 100-percent alternative  fueling requirement: EPAct 2005 requires that alternative fuel vehicles be  fueled with alternative fuel 100 percent of the time, unless they qualify for  a waiver. In the case of flex-fuel vehicles that are fueled by ethanol (E85)  and gasoline, agencies can qualify for a waiver to use gasoline in flex-fuel  vehicles if E85 is not readily available or costs too much. DOE guidance  allows exceptions under certain conditions—for example, agencies may  use gasoline, instead of E85, to complete the mission at hand if E85 is  unavailable. According to DOE officials, similar guidance will be necessary  to address conditions when alternative fuel, specifically electricity, is  unavailable for plug-in hybrids.
The lack of guidance regarding the electricity used by neighborhood  electric vehicles could lead to inaccuracies in alternative fuel  consumption reporting: According to DOE, neighborhood electric  vehicles do not qualify as alternative fuel vehicles under EPAct 1992.  However, because neighborhood electric vehicles are fueled with  electricity, without a means of accounting for their electricity use  separately from that of plug-in hybrids and other all-electric vehicles,  agencies could be improperly counting the electricity used by  neighborhood electric vehicles as alternative fuel. Neighborhood electric  vehicles can, however, help agencies meet their petroleum reduction  targets, and DOD and GSA plan to put more of these vehicles into use.  DOE has not provided guidance to agencies on this subject. DOE’s official  responsible for fleet policy noted that because so few neighborhood  electric vehicles have been used to date, the lack of policy has not been a  problem. Now that neighborhood electric vehicles are becoming more  popular, he said, DOE has begun developing guidance specifying how to  account for the electricity used in neighborhood electric vehicles.
In addition, the various federal requirements that pertain to energy use  and vehicle acquisitions do not provide agencies with a clear way to set  priorities and effectively address conflicts between these requirements.
Until they are more affordable, plug-ins are unlikely to be the most cost- effective type of AFV for reducing petroleum consumption: EPAct 1992  requires that at least 75 percent of all new vehicle acquisitions by agencies for  EPAct-covered fleets be alternative fuel vehicles. In addition, EISA requires  agencies to reduce petroleum consumption. Acquiring plug-ins would be  helpful in meeting both requirements. However, agencies would be able to  replace more of their older, less-efficient vehicles by acquiring either less  costly AFVs or fuel-efficient gasoline-powered vehicles. Depending on the  circumstances, acquiring plug-ins could limit an agency’s ability to meet the  requirement to reduce petroleum consumption.
The new requirement to acquire low-emission vehicles creates an  additional priority that agencies must manage: EISA directs agencies to  procure only low-emission greenhouse gas vehicles, and EPA is in the process  of developing a definition for these vehicles. DOE officials noted that the  EISA requirement may be at odds with the AFV acquisition requirement  because most AFVs in use today, particularly flex-fuel vehicles, meet the EISA  emissions requirement only if they are fueled with alternative fuel, not  gasoline. In addition, the amount of emissions produced by a plug-in hybrid  depends in part on the source of energy used to generate electricity, as well as  how much gasoline it consumes. Once agencies have guidance defining low- emission vehicles, they may face similar conflicts in trying to meet the various  vehicle acquisition requirements and goals.
Finally, in our 2008 report, which addressed the extent to which agencies  were making progress toward meeting federal fleet energy objectives, we  found several additional conflicts agencies experienced in trying to meet  all of the current regulations. For example, we found that while agencies  were able to meet the alternative fuel vehicle acquisition requirement, they  were highly unlikely be able to meet the alternative fuel use requirement  because of a limited supply of alternative fuel and an inadequate  alternative fuel infrastructure. These issues were also factors in some  agencies’ inability to meet the petroleum requirements for fiscal year 2007.  Accordingly, we suggested that Congress consider aligning the federal  fleet AFV acquisition and fueling requirement with current alternative fuel  availability and revising those requirements as appropriate.
section_title: Conclusions
paragraphs: As federal agencies work to cost-effectively comply with requirements and  goals for conserving energy in their facilities and vehicle fleets, a number  of uncertainties hinder their efforts. Although, by making statutory  requirements, Congress signified the importance of acquiring alternative  fuel vehicles, using alternative fuel, decreasing petroleum use, decreasing  greenhouse gas emissions, and improving energy efficiency in facilities,  the requirements can be costly and are sometimes in conflict. As a result,  agencies are uncertain about setting priorities and struggle to meet the  overall intent of these requirements and goals. Executive Order 13423’s  directive to incorporate plug-in hybrids into fleets adds to the agencies’  struggle to balance requirements and goals within their budgets. Without  having clear priorities for the patchwork of requirements that compete for  funding, agencies may miss opportunities to effectively use new  technologies and maximize petroleum reduction. Alternatively, agencies  may opt to meet the requirements that are most feasible for them,  regardless of whether the actions match the priorities of Congress.
In the past, agencies chose among vehicles with internal combustion  engines, which simplified the process of comparing the cost of vehicles  and making cost-effective choices. With the advent of plug-in hybrids and  all-electric vehicles, as well as new requirements such as reducing  greenhouse gas emissions and petroleum consumption, the process has  become more complicated. For several reasons, agencies lack information  critical to making informed vehicle acquisition decisions that will meet  energy-conservation requirements in a cost-effective manner. Specifically,  agencies lack (1) data on how the different configurations of plug-ins will  affect the costs of the vehicles over their life cycles, (2) strategic plans for  how they will incorporate plug-in vehicles, and (3) guidance on how to  account for the electricity plug-ins will use.
Plug-ins will be expensive relative to other vehicles until battery costs  come down and challenges such as achieving economies of scale are met.  These high upfront costs will prevent agencies from including plug-ins in  large numbers in their fleets without additional funding. Furthermore,  agencies will also be hindered from incorporating plug-ins because of  uncertainties regarding their performance, the maintenance and reliability  associated with the vehicles’ batteries, and the resale value of the vehicles.  Exploring the option of leasing the vehicles directly from manufacturers  could help mitigate these risks and allow agencies to experiment with how  well the vehicles perform within their fleet.
section_title: Recommendations for Executive Action
paragraphs: To enable agencies to more effectively meet congressional requirements,  we recommend that the Secretary of Energy, in consultation with EPA,  GSA, OMB, and organizations representing federal fleet customers such as  INTERFUEL, FEDFLEET, and the Motor Vehicle Executive Council,  propose legislative changes that would resolve the conflicts and set  priorities for the multiple requirements and goals with respect to reducing  petroleum consumption, reducing emissions, managing costs, and  acquiring advanced technology vehicles.
We recommend that the Secretary of Energy begin to develop guidance for  when agencies consider acquiring plug-in vehicles, as well as guidance  specifying the elements that agencies should include in their plans for  acquiring the mix of vehicles that will best enable them to meet their  requirements and goals. Such guidance might include assessing the need  for installing charging infrastructure and identifying areas where  improvements may be necessary, mapping current driving patterns, and  determining the energy sources used to generate electricity in an area.
We also recommend that the Secretary of Energy continue ongoing efforts  to develop guidance for agencies on how electricity used to charge plug- ins should be measured and accounted for in meeting energy-reduction  goals related to federal facilities and alternative fuel consumption. In  doing so, the Secretary should determine whether changes to existing  legislation will be needed to ensure there is no conflict between using  electricity to charge vehicles and requirements to reduce the energy  intensity of federal facilities, and advise Congress accordingly.
We recommend that the Administrator of the General Services Administration  consider providing information to agencies regarding total cost of ownership  or life-cycle cost for vehicles in the same class. For plug-in vehicles that are  newly offered, the Administrator should provide guidance for how agencies  should address uncertainties about the vehicles’ future performance in  estimating the life-cycle costs of plug-ins, so agencies can make better- informed, consistent, and cost-effective decisions in acquiring vehicles.
We also recommend that, once plug-in hybrids and all-electrics become  available to the federal government but are still in the early phases of  commercialization, the Administrator of GSA explore the possibility of  arranging pass-through leases of plug-in vehicles directly from vehicle  manufacturers or dealers—as is being done with DOD’s acquisition of  neighborhood electric vehicles—if doing so proves to be a cost-effective  means of reducing some of the risk agencies face associated with  acquiring new technology.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to DOD, DOE, EPA, GSA, OMB, and  USPS for review and comment. The audit liaisons from DOD, EPA, and  USPS each provided comments via e-mail, and each agreed with the report  findings and recommendations. In addition, EPA and USPS provided  technical comments, which we incorporated into the draft. The Acting  Administrator of GSA provided written comments and agreed with the  findings and recommendations pertaining to GSA. The Deputy Associate  Administrator for Procurement and Senior Budget Analyst responded  orally on behalf of OMB and stated that OMB had no comment on the  report’s findings and recommendations. DOE did not provide comments  on our report within the 30-day review period.
We are sending copies of this report to interested congressional committees  and the Secretary of Defense, the Secretary of Energy, the Administrator of  the Environmental Protection Agency, the Acting Administrator of the  General Services Administration, the Director of the Office of Management  and Budget, and the Postmaster General and Chief Executive Officer of the  United States Postal Service. In addition, this report will be available at no  charge on GAO’s Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  Susan Fleming at flemings@gao.gov and (202) 512-2843 or Mark Gaffigan  at gaffiganm@gao.gov and (202) 512-3841. Contact points for our Office of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix III.
section_title: Appendix I: Scope and Methodology
paragraphs: The scope of our work included all of the various plug-in hybrid electric  vehicle designs as well as the full range of plug-in electric vehicles that are  currently in development or already on the market. We defined this set of  vehicles as “plug-ins” since they derive part or all of their energy from  plugging into an electricity source. Although the United States Postal  Service (USPS) is not subject to Executive Order 13423 as are other  federal agencies, our review encompassed the fleet operations of USPS  because of its size, its past experience in testing electric vehicles, and the  potential of that fleet to utilize plug-in technologies. In addition, USPS  officials indicated that they will try to comply with the executive order  even though they are not required to do so. To inform each of our  objectives, we conducted nine site visits with organizations that have test  fleets of plug-in hybrids and all-electric vehicles (see table 5).
To identify the potential benefits and trade-offs of plug-ins, we interviewed  officials from power companies and other entities, such as the National  Laboratories, currently testing plug-ins. We also reviewed data from these  organizations on the performance of plug-ins when it was available. We  analyzed the results of published studies from academic research centers  and others that evaluated the potential benefits plug-ins can offer with  respect to issues such as reducing fuel consumption and greenhouse gas  emissions and identified trade-offs plug-ins could require compared to  other alternative fuel vehicles and conventional gasoline vehicles. In  addition, we used these articles to identify changes in current conditions— such as shifting power sources used to produce electricity from fossil fuels  to low carbon energy sources—that would be needed to ensure that plug- ins realized their potential.
To determine the current status of plug-ins, in February 2009 we obtained  information directly from Chrysler, Ford, General Motors, Phoenix  Motorcars, and the Association of International Automobile Manufacturers.  We also reviewed published material on Web sites of a variety of smaller  manufacturers, such as Tesla Motors, Fisker Automotive, and others about  the plug-ins that those manufacturers plan to bring to market. To understand  the development of plug-in vehicle and battery development and identify any  potential challenges to the development and commercialization of these  technologies, we interviewed a wide variety of stakeholders, and reviewed  documents from diverse stakeholders, including auto manufacturers, battery  manufacturers, Department of Energy (DOE) and Environmental Protection  Agency (EPA) officials, National Laboratory researchers, power companies,  charging infrastructure equipment companies, and others. We reviewed  published research related to plug-in technology, such as studies on vehicle  and battery performance and consumer acceptance of plug-in technology. In  addition, to examine the impact of rising or falling gasoline prices relative to  electricity prices, different battery costs and prices of vehicles, and different  assumptions regarding maintenance expenses and resale values, we  developed a model to attempt to estimate the life-cycle and cost-effectiveness  of plug-ins relative to conventional hybrids and conventional gasoline- powered vehicles. While our modeling effort highlighted the importance of  certain variables, such as battery cost, because of the significant uncertainties  regarding the estimates used in these models, we do not report specific  results. We also tracked and analyzed developments related to the current  economic crisis and financial stress facing the auto industry and the potential  impact this crisis could have on plug-in vehicle development. In addition, we  reviewed programs and incentives the federal government is using to assist  auto manufacturers in developing and commercializing plug-ins, as well as  incentives offered to consumers to purchase plug-ins.
To determine the options that exist for the federal government to address  challenges in the development, manufacture, and commercialization of plug- ins, we analyzed and synthesized the views of a wide range of stakeholders  from interviews, published studies, and analyses regarding options for federal  involvement. To ensure the studies we considered were of sufficient scientific  rigor, we limited our review to articles published in well-respected peer- reviewed journals or those provided by experts or organizations because of  their level of expertise in this area. Articles using cost-benefit analysis to  describe the relative benefits of plug-ins were reviewed by an economist. The  options selected for discussion represent those supported by many of these  experts. In addition, we considered the potential costs the options could pose  to the federal government as well as what role the government might play  relative to other stakeholders who also stand to benefit from this technology.
Inherently there are certain limitations and variances in the quality of  information available about these options. Therefore, we used professional  judgment in identifying the relative benefits and limitations of these options.  In addition, we identified steps already taken by DOE and others to hasten the  development of plug-ins and reviewed recent legislation, including the  Recovery Act, to describe the most recent actions taken by the government to  forward this technology.
To describe how agencies are addressing the requirement to integrate  plug-in hybrids into the federal fleet, we reviewed and analyzed plans and  analyses prepared by the Department of Defense (DOD), DOE, EPA, the  General Services Administration (GSA), USPS, and other agencies in order  to represent a mixture of large and small fleets, vehicle use patterns, and  types and conduct interviews with fleet managers from those agencies. We  also interviewed officials from the Office of Management and Budget to  understand their role in overseeing agency compliance with federal energy  and fleet requirements and goals, including Executive Order 13423. To  identify challenges related to integrating plug-in hybrids or all-electric  vehicles into federal fleets, we interviewed fleet managers from DOD— including those of the Army, Navy, Air Force, and Marines—DOE, GSA,  and USPS. We also attended and held discussions with those attending  federal fleet manager meetings (FEDFLEET) organized by GSA.  Furthermore, we used in-depth discussions with fleet managers from the  selected agencies and our discussions at the FEDFLEET meetings to  examine the life-cycle costing methodologies used by fleet managers to  select vehicles for their fleets. To understand how alternative fuel vehicles  and others are priced and made available to the federal fleet, we reviewed  GSA’s procurement process. We also analyzed and compared the  requirements contained in various legislative mandates and executive  orders related to (1) federal fleet use of alternative fuels, (2) reductions in  agencies’ overall energy consumption, and (3) increased reliance on  renewable energy sources to identify how integrating plug-ins might help  or hinder agencies’ efforts to meet these requirements. Because we did not  interview managers from all of the agencies operating vehicle fleets, our  findings are not be applicable to all federal agencies.
section_title: Appendix II: GSA Procurement Process
paragraphs: Federal agencies are required by regulation to purchase all nontactical  vehicles through the General Services Administration (GSA), which  leverages its status to procure vehicles at significant discounts. The United  States Postal Service (USPS) is not subject to GSA’s purchase restrictions  as USPS can purchase its own vehicles or use GSA’s services to do so.  Motor vehicle supply activities are largely carried out by two units within  GSA’s Federal Acquisition Service—GSA Automotive, which is responsible  for contracting with manufacturers and other suppliers for nontactical  motor vehicles, and GSA Fleet, which leases a broad range of vehicles to  federal customers and other eligible entities.
Using the previous year’s purchase as a baseline, GSA Automotive  contracts with auto manufacturers and other suppliers to procure vehicles  for federal customers. This annual process begins each winter with  discussions between GSA and auto manufacturers about anticipated  federal needs, future vehicle availability, and any changes that have been  made to federal vehicle standards. The purpose of the standards is to  establish a practical degree of standardization within the federal fleet. The  standards are organized by class of vehicle––such as sedans, trucks, and  buses––and outline minimum criteria for vehicle characteristics such as  engine horsepower, cabin space, and safety features. GSA publishes the  standards and encourages the manufacturers to identify models they could  offer at a competitive price to the government that meet or exceed the  standards. If GSA modifies the standards to address, for example, new  federal mandates or goals, GSA publishes a draft version and provides a  comment period for stakeholders before finalizing them. Once the  standards are finalized, GSA Automotive issues at least five solicitations in  the FedBizOpps, the government portal for federal procurement  opportunities to cover specific types of vehicles, such as sedans, trucks,  buses and ambulances, reviews proposals, and awards contracts in time  for the beginning of the fiscal year on October 1. The contracts are  typically indefinite quantity/indefinite delivery contracts.
Although federal motor vehicle procurement has not been limited to  purchasing vehicles made by domestic manufacturers by the Federal  Acquisition Regulations, historically, only domestic automakers have  submitted proposals. According to GSA officials, the agency may contract  with auto manufacturers from any country with which the United States  has a trade agreement if the order is greater than $194,000. However,  foreign manufactures have not submitted proposals in the past, citing  franchise and licensing agreements with their domestic dealers as  preventing direct sales of vehicles to the government. Nonetheless, some  foreign manufacturers have encouraged their dealers to contract with  GSA, which has allowed GSA to procure vehicles made by foreign  manufacturers in limited numbers through domestic dealers.
GSA is required by law to recover all costs it incurs in providing vehicles  and services to federal customers. Since neither GSA Automotive nor  GSA Fleet receives appropriations through the annual budget cycle, boththe procurement and the leasing activities operate out of revolving funds  that are reconciled each year. GSA Automotive awards contracts for  vehicles, provides information to agencies on pricing for evaluation, an places orders against the awarded contracts using their agency funds Automotive applies a 1 percent surcharge to the final purchase price of  each vehicle ordered. Similarly, GSA Fleet obligates money to GSA  Automotive from its revolving fund to purchase the vehicles it leases to  federal customers and recovers purchase and maintenance costs through  lease fees and the resale of vehicles at the end of their life cycle.  According to GSA Fleet officials, approximately 20 percent of the leased  vehicles are replaced each year. GSA Fleet replaces the leased vehicles  using several criteria, among which age and mileage are foremost. Since  GSA Fleet needs to recover its costs to maintain the solvency of its  revolving fund, it auctions off most of its sedans, for example, within 5  years of their purchase. Agency-owned vehicles are usually retained for  longer periods, as are larger vehicles such as trucks and buses.
section_title: Appendix III: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: In addition to the contacts named above, Andrew Von Ah, Assistant  Director; Karla Springer, Assistant Director; Lindsay Bach; Nabajyoti  Barkakati; Charles Bausell; David Hooper; Joah Iannotta; John Johnson;  SaraAnn Moessbauer; Madhav Panwar; and Crystal Wesco made key  contributions to this report.