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* This chaper appears in the 2009 Brookings Institution book, "Plug-In Electric Vehicles: What Role for Washington?"

Plug-in electric vehicles, or PEVs, represent one of the most promising near-tern technologies to reduce U.S. dependence on oil and cut the carbon footprint of our transportation sector. Yet despite their enormous potential, progress toward mass commercialization has been slowed by a variety of roadblocks, primarily related to technology, risk, and cost.

This chapter identifies a number of obstacles to commercialization of PEVs, with a specific focus on how automakers’ concerns over battery safety, durability, and longevity, and cost have slowed adoption of this technology and delayed deployment across the U.S. fleet. The chapter then discusses in detail three complementary federal policy options to reduce financial and technology risk for early adopters; diminish automakers’ concerns over moving toward mass production; alleviate consumer anxiety about battery safety, durability, and longevity over the life of the vehicle warranty; and provide a controlled testing environment in which to monitor battery performance. These options are as follows:

• Adopt a federal fleet purchasing agreement to ensure a stable market and controlled testing environment for the first massive deployment of PEVs.
• Create the "Federal Battery Guarantee Corporation," which would underwrite insurance on battery life for the duration of the vehicle warranty.
• Guarantee a secondary market for used battery assemblies, which have reduced efficacy in vehicles but generally retain 80 percent of their energy storage capacity.

In the near term, these policies are intended to reduce risk and address industry and consumer fears about battery obsolescence enough to get the first wave of PEVs on the road. Ultimately, the goal is to help the PEV industry mature to the point that government support is no longer necessary, achieve economies of scale required to make PEVs affordable for the average consumer, and move rapidly to mass commercialization of this promising technology.

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