Why Texas may be a better electric car state than California

When power plant heavyweight NRG Energy announced yesterday that it would invest $10 million in the rollout of the nation’s first privately-financed electric vehicle charging network it also revealed that the city it would debut in would be … Houston, Texas.

Um, what?

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Houston (pictured) is known as the nation’s oil capital, and as a resident, I can’t say I disagree with that assessment. It’s also in a state where oil is still cheap compared to other parts of the country, and the same is true for electricity costs. At nearly 15,000 square miles, it’s purported to be bigger than Maryland, and is known for bad traffic and long commutes. And despite its traffic and air pollution issues, Houston has been reluctant to adopt mass transit.

But NRG president and CEO David Crane tells me the company actually believes Texas is a better market for electric vehicles than it gets credit for, which I was skeptical about after test-driving the Ford Focus Electric in Dallas. In fact, Crane says they’ve been actively talking to Nissan about allocating more of its limited-supply, all-electric Leafs to Texas, which the automaker passed over when choosing its first-launch markets. (As part of the rollout, Nissan dealerships in Texas will sell NRG’s monthly charging packages to Leaf buyers).

Keep in mind that NRG is parent to Texas-based electricity retailers, Green Mountain Energy and Reliant Energy, so it has close Texas ties. Crane says he’s interested in pursuing and developing a similar network in California — after all, NRG is in the business of selling electricity, and more electric vehicles on the road means more electricity sales for power providers. All that aside, here’s Crane’s reasoning for why Texas makes sense for an electric car network:

It’s good business

For $10 million, Crane says they can saturate a city of six million with charging stations. The amount is a pittance for NRG, which might spend hundreds of millions of dollars building a power plant.

“We think it’s a winning proposition,” he said. The company is seeking to patent the business model, which is called eVgo. It offers charging packages at $49 to $89 (for unlimited charging), a cost that’s added to a user’s monthly electric bill and would likely amount to less than what a driver pays in monthly gas costs. It will take several thousand subscribers and years before the company sees a return on investment, but Crane is confident the model will take off.

Deregulated electricity markets

One key factor for NRG: Texas is the only deregulated electricity market in the country, making it ideal for rolling out programs like this.

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“It’s easier to move more quickly when it comes to innovative technologies in the private sector than in a utility-based system,” Crane said. In California, the process will be more complicated and time-consuming, though it won’t deter NRG from pursuing opportunities there.

Sprawl and suburban commutes are not a deal-breaker

Take this with a grain of salt if you like, but Crane argues that “hub-and-spoke” cities like Houston can be a good place to launch electric car infrastructure — it may well be the key to convincing prospective buyers to take the plunge. The company had an “A-ha!” moment when it looked at case studies in Tokyo and saw it only took 60 fast chargers around the city to declare it fully wired. For Houston, it could be 50 to 150 stations.

From a competitive point of view, eVgo is selling a home charging system as part of the package, so it’s also a plus that most prospective customers live in houses in suburbs, and will likely charge from home. Cities like San Francisco and New York pose a competitive disadvantage for products like NRG’s because cars are mostly parked on streets.

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“Street solutions will come but we don’t think that’s as easy as the garage solution,” Crane said.

Change is in Texas’s interest

Houston and Dallas-Fort Worth both suffer from air quality issues, and tailpipe emissions are a contributor to that. And for the nation to become truly electrified, the cars must be adopted by a broader crowd than the usual suspects in California, Oregon, Colorado and other environmentally-conscious states, Crane points out.

Shrewd marketing?

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And heck, maybe there’s appeal in the privately-financed angle that NRG emphasized in its announcement of eVgo. It’s a conservative state where negative sentiment about government spending abounds. Texas governor Rick Perry is famous for refusing the $550 million offered to Texas in federal stimulus funds, then, notoriously, hinting that Texas could secede from the Union after becoming fed up with high taxes and the government’s stimulus spending.

“We wanted to say, ‘Look, this is a private sector initiative.’ It’s not a government giveaway,” Crane said.

Potential for the energy to be clean too, not just the car

NRG recently acquired Green Mountain Energy for $350 million, a company that sells electricity generated from renewable sources. Down the line, NRG is looking to figure out a way in which electricity that charges green cars comes from green sources. Dallas utility Oncor is also planning to build out 850 miles of transmission lines from the wind-energy region of West Texas so that electric vehicles in Dallas could presumably run on wind. (Wind blows strongest at night, and most cars will likely charge at night.)

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[Image via Flickr/SMercury98]