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Plug-in hybrid electric vehicle (PHEV) technology has the potential to reduce operating cost, greenhouse gas (GHG) emissions, and petroleum consumption in the transportation sector. However, the net effects of PHEVs depend critically on vehicle design, battery technology, and charging frequency. To examine these implications, we develop an optimization model integrating vehicle physics simulation, battery degradation data, and U.S. driving data. The model identifies optimal vehicle designs and allocation of vehicles to drivers for minimum net life cycle cost, GHG emissions, and petroleum consumption under a range of scenarios. We compare conventional and hybrid electric vehicles (HEVs) to PHEVs with equivalent size and performance (similar to a Toyota Prius) under urban driving conditions. We find that while PHEVs with large battery packs minimize petroleum consumption, a mix of PHEVs with packs sized for ∼25–50 miles of electric travel under the average U.S. grid mix (or ∼35–60 miles under decarbonized grid scenarios) produces the greatest reduction in life cycle GHG emissions. Life cycle cost and GHG emissions are minimized using high battery swing and replacing batteries as needed, rather than designing underutilized capacity into the vehicle with corresponding production, weight, and cost implications. At 2008 average U.S. energy prices, Li-ion battery pack costs must fall below $590/kW h at a 5% discount rate or below $410/kW h at a 10% rate for PHEVs to be cost competitive with HEVs. Carbon allowance prices offer little leverage for improving cost competitiveness of PHEVs. PHEV life cycle costs must fall to within a few percent of HEVs in order to offer a cost-effective approach to GHG reduction.

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Plug-in hybrid electric vehicles (PHEVs) may become part of the transportation fleet on time scales of a decade or two. We calculate the electric grid load increase and emissions due to vehicle battery charging in PJM and NYISO with the current generation mix, the current mix with a $50/tonne CO(2) price, and this case but with existing coal generators retrofitted with 80% CO(2) capture. We also examine all new generation being natural gas or wind+gas. PHEV fleet percentages between 0.4 and 50% are examined. Vehicles with small (4 kWh) and large (16 kWh) batteries are modeled with driving patterns from the National Household Transportation Survey. Three charging strategies and three scenarios for future electric generation are considered. When compared to 2020 CAFE standards, net CO(2) emissions in New York are reduced by switching from gasoline to electricity; coal-heavy PJM shows somewhat smaller benefits unless coal units are fitted with CCS or replaced with lower CO(2) generation. NO(X) is reduced in both RTOs, but there is upward pressure on SO(2) emissions or allowance prices under a cap.