Electricity is a cheap energy source for cars in the UK but only because electricity for transport use is not taxed to the same degree as liquid fuels.
Domestic electricity is only taxed at 5% VAT, and a typical price for marginal domestic power in the UK (assuming the standing charge element is already paid) is around 11.6 p/kWhr. Refuelling your Tesla will cost 11.6/2.24 = 5.2 p/mile
The switch to higher cost, low carbon sources for electricity is inevitably and relentlessly going to push up electricity prices in the UK. There is every reason to suppose that prices will double or treble over the next decade or so, mostly due to the increasing reliance on expensive renewables, compounded by the problems this creates in matching supply and demand, but also due to the basic structural problems with the UK electricity supply where long term lack of investment could precipitate supply shortfalls in the next few winters.
The price of diesel is currently around 110p/litre. Of this, the fuel duty is 58 p/litre, with 20% VAT on the total selling price (another 22p/litre in tax). The margin for the petrol station is probably only around 5p litre, leaving the cost price from the refiner as around 25p. For the example of a diesel ICE at 45 mpg, the actual cost of fuel works out at 110 / 9.91 = 11.1 p/mile.
If oil prices return to recent highs then diesel prices could rise to145 p/litre, but the effect is marginal due to the extremely high tax take. At 145p/litre the fuel cost rises only marginally to 14.6p/mile.
It is hard to see how any UK government could not start to tax electricity for transport, in some way or another, if usage becomes significant. The present price advantage for refuelling electric cars is an artefact of politics, and does not reflect the actual costs. The tax take from motoring in the UK is around £36 billion per year, from a combination of vehicle excise duty, fuel tax and fuel VAT. The favoured future route for taxing cars may well be some form of road pricing.
Over the next decade or so, a combination of high cost renewable energy and increasing tax on electricity used for transport could easily wipe out the present cost advantage for refuelling an EV.
Fuel Taxes
If diesel was taxed at the same level as electricity, i.e. 5%, the price would be around 32p/litre (for example, see ref. 5), and the cost would drop to 3.2 p/mile, much less than for the Tesla.
Since the adoption of EV’s is largely argued on the basis of environmental gain with respect to reducing overall CO2 emissions, it seems reasonable that fuels for transport should be taxed equally on these terms, such that the tax should be the same per unit of CO2 released.
At present, the total tax on a litre of diesel in the UK is around 80p. At 3.128 kg CO2 (eq) /litre of diesel that makes the tax equivalent to 26p/ kg CO2 (eq).
Electricity for transport has associated CO2 emissions of 0.410 kg (eq) / kWhr. If electricity for transport was taxed on CO2 at the same rate as diesel, then the tax element should be 10.5p, compared to a typical figure of around 0.6 p. The price for electricity to the car user should therefore be raised from 11.6p to 21.5p/kWhr. The cost of refuelling the Tesla rises from 5.2 to 9.6 p/mile.
EV04
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