"The challenge is not just introducing an alternative-fuel vehicle," said Jeroen Struben of the MIT Sloan School of Management. "Consumer acceptance, the fueling infrastructure and manufacturing capability all have to evolve at the same time."
Consumer acceptance of such vehicles is slowed by lack of exposure to them, in a classic Catch-22 scenario. Similarly, fuel suppliers won't build alternative-fuel stations until there's sufficient demand, but consumers won't buy the cars until they're sure fuel will be widely available. And production costs won't fall until volumes are high, but large volumes won't be required until prices are low.
On the plus side, policy incentives could boost adoption to a level at which the market will begin to grow on its own. These incentives may need to be in place for a long time, perhaps even many decades, say the researchers. Measures could include carbon-emission taxes and providing incentives to scrap current vehicles and build alternative-fuel stations, particularly in remote areas.
Struben and colleague John Sterman developed a system dynamics model to simulate how markets for alternative-fuel vehicles may proceed. The pair looked at technologies such as conventional and advanced internal-combustion engines, hybrids, plug-in hybrids, hydrogen fuel cells and biofuels, inputting decisions from consumers, fuel suppliers and auto manufacturers.
"Our model doesn't assume that everybody is a perfectly rational economic agent," said Sterman. "Instead, we try to model how people actually make decisions such as which cars to buy and when and where to drive them. Emotion and social status matter, along with the economics."
For example, drivers concerned about finding an alternative-fuel station might refill their tanks early, reducing the vehicles' effective range and potentially causing crowding at filling stations.
The analysis found that a key factor slowing adoption of alternative-fuel vehicles is the long lifetime of today's vehicles. Concern about finding fuel also hinders take-up. In a simulation representing California, entrepreneurs opened alternative-fuel stations in urban, but not rural, areas. This meant that urban alternative-fuel car drivers had to avoid the rural areas, reducing the appeal of the vehicles and slowing sales.
The model also showed that tripling a vehicle's fuel efficiency may actually decrease take-up. That's because drivers need less fuel, and so energy suppliers build fewer alternative-fuel stations, which lowers the appeal of the cars.