Houston aims to be electric car capital

Traffic flows at dusk with the downtown Houston skyline in the background as night falls on America's fastest growing large city October 3, 2008. E

Credit: Reuters/Richard Carson

HOUSTON (Reuters) - Houston, nicknamed the Petro Metro for the profusion of oil and gas companies that dot its skyline, is an unlikely host for an electric-car revolution.

But the fourth-biggest U.S. city that claims the title of the "Energy Capital of the World" is competing with cities like San Francisco to be the nation's electric car capital.

"We are the Petro Metro but we are also a car city," said newly elected Mayor Annise Parker, speaking at an event on February 5 to promote the Nissan LEAF, an all-electric, five-passenger vehicle that can travel 100 miles on a single charge. "To have an electric vehicle that appeals to a car culture will make the real difference for market penetration."

Cities like Houston and San Francisco are forging partnerships with automakers and power companies to make the vision a reality.

In Houston, for instance, Japanese-based Nissan Motor Co Ltd has signed a deal where the city and power provider Reliant, a unit of NRG Energy Inc, will build a handful of public-charging stations to allow electric car drivers to recharge their cars.

Nissan has signed agreements with other cities like San Diego, Seattle and Orlando and states like Tennessee and Oregon to ensure that public-charging stations are built.

Such agreements are key to easing skeptical consumers' fears of running out of juice if their car batteries run low before they can reach their garage charging stations.

For beleaguered U.S. auto makers like General Motors Co and Ford Motor Co, electric cars could be a way to boost shrinking market share.

"Detroit needs something to be exciting and new," said William Hederman, a senior vice president at Concept Capital's Washington Research Group.

General Motors' highly-anticipated battery-powered Chevy Volt hits showrooms in November, about the same time that Nissan begins U.S. sales of the LEAF.

LOVE OF BIG CARS

Texas drivers have a well-established affinity for over-sized cars, but the case for electric cars is strong.

Even if a small percentage of Texas drivers switch to electric cars, the payoff could be substantial. The Houston area alone is home to 4.5 million vehicles that travel 86 million miles a day, according to state statistics.

And Texas leads the nation in producing clean, carbon-free electricity from windmills. But the state must build billions of dollars worth of transmission lines needed to channel the wind power to urban centers.

For U.S. utilities that have seen electric demand slump 5 percent over the last two years due to a recession, the electric car is a godsend, said Kevin Book, managing director of research at ClearView Energy Partners LLC.

"What a salvation the electric car revolution would be for generators that are well below their capacity margins and trying to figure out how to make money," Book said.

In a strange bedfellows story of sorts, U.S. utilities have moved in recent months to cement ties with automakers.

"We've worked very closely together," said Tony Earley, chief executive of a Detroit utility and chairman of the U.S. electric industry's main lobbying group who also sits on Ford's board of directors.

Such coordination has helped utilities fend off clean-car competition in the form of natural gas-powered vehicles promoted by Texas oil man T. Boone Pickens, Hederman said.

Utilities see electric cars as a perfect market for spare electricity that is generated by power plants in off-peak hours that could be sold to consumers who will recharge their electric cars during late-night and early-morning hours when power is the cheapest.

"If it works the way utilities envision, it's growth that fills in the valleys of their demand patterns, and that would be a wonderful thing," Hederman said.

Utilities must build or buy generation to meet the one day of the year when electricity demand is the highest. "The other 364 days of the year our system is under-utilized," said Earley, also chief executive of DTE Energy Co. in Detroit. "There is a lot of capacity that is unused."

UNDER PRESSURE

For utilities and auto companies watching climate change legislation advance on Capitol Hill, electric cars are a useful tool to reduce heat-trapping carbon dioxide emissions to comply with looming first-ever U.S. greenhouse gas restrictions.

"We know that our utility partners face the same pressures that we do to reduce emissions," said Mark Perry, Nissan's director of product planning.

About one-quarter of U.S. carbon dioxide emissions are linked with cars. U.S. President Barack Obama wants to put 1 million electric vehicles on the road by 2015 to cut greenhouse gas emissions.

And even without climate change legislation, smog-enveloped cities like Houston are already under the gun from federal regulators to reduce smog-causing pollutants like nitrogen oxide, which comes mainly from vehicles.

One big question mark for utilities is how they will be compensated for building charging stations. One study by the University of California Berkeley pegged the cost of building U.S. charging stations at $320 billion in coming decades.

State public utility commissions will have to give utilities permission to recover infrastructure costs via higher rates, but won't approve electric charging stations until they are widely used, Hederman said.

Buck