How do you reduce your crippling dependence on a powerful, long-entrenched monopoly energy supplier? That’s the question the U.S. auto industry found itself facing in 2008, when the price of gasoline topped $4 per gallon. Those prices were good news for the oil industry (which recorded record profits in 2008), but bad news for auto makers and dealers. By the end of the year, new vehicle sales were down by over 33 percent, and manufacturers were pleading for their life in front of Congress.

Four years later, how have U.S. automakers responded to that near-death experience? By resolving to radically reduce their products’ dependence on oil.

Fundamentally, there are only two ways an automaker can do that: (1) increase fuel efficiency, or (2) enable alternative fueling. Vehicle electrification allows a maker to do both simultaneously, while also creating new product categories with attractive customer features.

As illustrated below, the benefits of widespread vehicle electrification justify the investment of public time and resources to support this important transition. But let’s start with the basics. What is an electric vehicle? Is there really a market for them? How much do they cost, and are they a practical choice for American families and businesses? What about the need for all that electricity and infrastructure? Our Energy 101 answers these questions and more.

What is an electric vehicle?

It’s a good question, because each automaker seems to have a different definition. At a basic level, an electric vehicle (EV) is simply a hybrid like the Toyota Prius with a bigger battery and a plug that allows you to “refuel” and drive some distance on electricity alone.

Some models keep a small gasoline engine to reinforce the battery-powered motor or extend the vehicle’s driving range. You could call these “plug-in hybrids.” Other models remove the gasoline engine (and gas tank and tailpipe) entirely, reducing vehicle complexity and maintenance costs at the expense of range. Some call these “battery” or “pure” EVs, to emphasize that the battery is doing all the work.

How many miles can EVs travel before needing to recharge?

It depends on the vehicle. The Nissan LEAF is a pure EV that’s able to travel an average of approximately 75 miles per charge, while the Chevy Volt has a 40 mile all-electric range (AER), after which a gasoline engine kicks in. Models coming to market in 2012 offer a broader range of AER options, with bigger AERs generally corresponding to higher price premiums.

According to the U.S. Department of Transportation, 68 percent of Americans have a commute of less than 15 miles each way, a distance well within the range of both vehicles. For drivers with a longer commute, forward-looking communities like St. Paul and Minneapolis have already installed numerous workplace charging stations.

Will people buy EVs?

Automakers seem to think so. Retooling even a fraction of their manufacturing lines to produce battery-powered vehicles will be a -multibillion-dollar undertaking. And yet, world automakers are stepping up to the challenge. Spurred by upstarts like Tesla Motors, which sold the first production EV in 2008, Nissan Motor Company has invested over $5 billion in developing its own line of plug-in vehicles.

A total of 12 automakers, including global giants like General Motors, Toyota, Ford, Mitsubishi, Daimler, BMW, and Honda, are racing to keep up, with collective plans to sell some 20 plug-in models by the end of 2012. For comparison, within five years of the first hybrid car sale going on sale (the Honda Insight in 1999), there were only four car makers selling a total of six hybrid models in the United States.

Another point of comparison: first-year sales of both the Chevy Volt and the Nissan LEAF easily exceeded the first-year sales for the Toyota Prius (despite the fact that U.S. auto sales have shrunk by over 25 percent since the Prius was launched in 2000). And Pike Research, a market-research firm, expects U.S. EV sales to quadruple in the next year alone.

Is an EV practical for my business?

Quite possibly. Especially for high-mileage users, the lower fueling and maintenance costs may make EVs an attractive alternative to conventional vans and trucks. For this reason, a number of local governments and commercial operators have already begun adding plug-in vehicles to their fleets.

The Ford Transit Connect Electric is a light-duty commercial van released in 2011 with a range of 60-80 miles (depending on vehicle load), 135 cubic feet of storage, and a payload of up to 1,000 pounds, albeit with a price tag of $57,400 before state and federal tax incentives. Smith Electric Vehicles offers electric-powered trucks that have a range of about 100 miles and a payload of up to 16,280 pounds. Other models are on the way. General Motors has invested $5 million in Indiana-based Bright Automotive to produce a plug-in hybrid electric commercial van that will get 100 miles per gallon with a range-extending gas engine.

While initial purchase price may be a challenge, commercial EVs deliver the same performance as traditional vans and trucks with lower operating costs and environmental impacts.

What does the future hold for the cost of EVs?

With the level of competition we’re seeing in the market, combined with economies of mass production, it’s no stretch to say that the price of EVs will come down over time. This is good news, because today’s models carry a high price premium compared to gasoline-powered cars.

While it’s impossible to say how fast prices will come down, there are some promising signs. The sticker price for the Tesla S, the maker’s second-generation EV, is approximately 50 percent less than its first model—despite being bigger, having more seats, and having a longer driving range. The large number of makers entering the EV market is another good sign, because each will have to compete with one another on price.

Beyond glancing at the sticker price, potential buyers will also want to consider total cost of ownership. Considering the low and stable prices of electricity compared to gasoline, reduced maintenance costs, and special financing, you might find that an EV is cheaper to own that its oil-burning equivalent.

Can our electric grid handle EVs?

Yes. Assuming that we adopt the necessary policy changes, for example, policy that supports and promotes off-peak charging and utility distribution upgrades. Smart policy will also help us transition to electric vehicles in a way that doesn’t necessitate building additional coal or nuclear power plants. For example, a study by the Pacific Northwest National Laboratory has determined that America’s existing capacity could support the electrification of nearly three-quarters of our cars, pickup trucks, SUVs, and vans. In the long term, batteries in electric vehicles may even help reduce the need for conventional power plants by enabling higher levels of wind and solar generation.

Are EVs good for Minnesota?

Yes, because they reduce our state’s expensive dependence on imported oil. Minnesota typically exports $6 to $11 billion a year to buy oil from other states and nations. At the high end, that’s more than four percent of Minnesota’s total Gross Domestic Product, or $1,500 per person. When the price of oil shoots up, as it did in 2011, this dependence becomes a real drag on our economy.

Electricity, on the other hand, is made right here in Minnesota and exhibits significantly less price volatility than oil. Minnesota manufacturers also benefit from the trend towards EVs, with home-state companies like Diversified Plastics, Dynamic Air, and Product Development Services all contributing to EV supply chains. Considering the health and environmental benefits noted below, Minnesota has plenty of reasons to embrace electric vehicles.

Are EVs good for health and the environment?

Yes, on a number of counts. Minnesota’s transportation system is responsible for more than a quarter of the state’s overall greenhouse gas emissions, two-thirds of its petroleum consumption, and the majority of its air toxics and particulate matter (which can cause increased cancer rates and childhood asthma).

Plus, the oil we use is getting dirtier. In recent years, Minnesota has started getting up to 80 percent of its motor fuels from environmentally destructive tar sands. Meanwhile, thanks to smart policies like Minnesota’s Renewable Electricity Standard, our electric grid keeps getting cleaner and cleaner. Even better, electric vehicles are much more efficient than internal-combustion models, which mostly generate waste heat. A March 2007 report by the Minnesota Pollution Control Agency found that emissions per mile from plug-in vehicles are 30 to 60 percent lower than emissions from similar conventional cars.

While driving in all-electric mode, EVs have zero tailpipe emissions—exposing pedestrians and residents to lower volumes of dangerous car pollution. The Natural Resource Defense Council has linked vehicle emissions to 64,000 premature deaths per year, and a study published in the peer-reviewed medical journal The Lancet found that exposure to traffic-related air pollution may shorten life expectancy. Power plants, on the other hand, typically produce their electricity further away from population centers and are subject to emission limits under the Clean Air Act. Add the possibility of running plug-in vehicles on 100 percent renewable electricity, and the environmental superiority of electric vehicles is clear.

How do you reduce your crippling dependence on a powerful, long-entrenched monopoly energy supplier? That's the question the U.S. auto industry found itself facing in 2008, when the price of gasoline topped $4 a gallon.