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The Biggest Driver Of Electric Vehicles Isn't Who You Think

The U.S. military is funding and taking risks on EV technology in a way that the private sector simply can’t.

Maybe the Obama Administration is revving up the engine for electric vehicles in the wrong place. Amid the furor (ultimately exaggerated) over public dollars invested in emerging green companies such as Telsa and Solyndra, one set of government agencies is quietly forging ahead with one of the country’s largest, most ambitious investment program for a new generation of electric vehicles and renewable power. It’s not the DOT, EPA, or even the DOE. It’s the U.S. military.

John Gartner, a senior analyst at Pike Research, says the military’s Advanced Vehicle and Power Initiative (PDF), a push to electrify about 200,000 non-tactical vehicles during the next 20 years, is perhaps the most cost-effective way to jump-start the manufacturing of vehicle-to-grid-ready cars. For less than the $4.6 billion the Department of Energy has spent on transportation loans and EV research during the past three years, the Initiative will electrify its massive (non-combat) fleet, perhaps offering a greater return on investment in commercializing clean transportation than today’s supply-side financing.

At least, says Gartner, on a dollar-per-dollar perspective. As the nation’s largest single consumer of energy, the Department of Defense provides long-term funding for basic research, and rapidly pushes forward technologies toward commercialization with massive, predictable orders.

In the (much larger) private vehicle market, the federal government is on track to spend about $7.5 billion on electric vehicles through rebates, loans, and other incentives by 2019, reports the Congressional Budget Office. Despite surging sales of Chevy’s all-electric Volt, we’re not on track to meet the ambitious target to put 1 million EVs on the road by 2015, and bankruptcies continue to roil the clean-tech landscape.

In the military, the economics work out just fine. The military doesn’t just buy the cheapest energy off the coal-fired power grid. Its cost equation must account for eliminating blackouts on military bases, easing soldiers’ fuel loads in the field, and saving dollars and lives now lost defending fuel lines in war zones. The military estimates security for gasoline in combat zones pushes its gasoline prices up to $100 per gallon, while at least 3,000 soldiers have died defending fuel supply lines since 2001.

"In a military environment," says Gartner in an interview, "the relative returns can be exponentially higher."

But where the effectiveness of renewable energy investment calculus really diverges may be how the military spends its money: Rather than invest strictly in R&D or incentives, it buys tons of actual hardware (although plenty of R&D money is spent as well). The military represents one massive, reliable customer that needs its hardware now. Technologies such as fuels cells (for NASA) and the Jeep originated from this relationship with industry.

Yet it’s almost certainly not an either-or argument. The Department of Energy must focus where it has influence: priming the research community and private sector players to commercialize renewable technologies and expand into the (much, much) bigger private market.

Meanwhile public financing of emerging technologies is nothing new—we’ve done it with coal, gas, and nuclear before. In fact, it’s as old as the Republic. Despite the political hysteria surrounding it, the U.S. spends less today (adjusted for inflation) on new energy sources than "at any previous point in our history" going back at least to the first taxes on British coal imports in 1789.