Duke Energy Teams Up With Toyota For Electric Car Pilot Project

Duke Energy (NYSE:DUK) recently announced that it will collaborate with Toyota Motor Corp. and Energy Systems Network for a pilot program on electric cars. ^[1] The primary objective of the program is to make electric transportation convenient and affordable for customers. The move seems reasonable given that electric vehicles are gaining traction in the U.S. These efforts could help in increasing the popularity of such vehicles in the U.S., which may, in turn, help Duke garner an additional source of revenue.

Duke Energy produces electricity for residential, commercial, and industrial use and serves more than 7 million customers. We have a $70 price estimate for Duke, nearly 10% ahead of the current market price.

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The program is aimed at testing the systems for hassle-free and affordable charging. The vehicles will be put on charge at nights when the electricity cost is the lowest instead of day time when the cost is relatively high as consumption is at its peak. So, the collaboration intends to put together a system which will reduce the overall cost of using an electric vehicle.

The electric-driven vehicles come in 3 different categories – plug-in hybrid electric vehicle (PHEV), hybrid electric vehicle (HEV) and battery electric vehicle (BEV). HEV is, by far, the cheapest among the vehicles while BEV is the costliest. As far as the markets for the three vehicles in the U.S. are concerned, all are expanding rapidly. According to Pike Research, PEV market, which includes PHEV and BEV vehicles, will grow from below 25,000 units in 2012 to 300,000 units by 2019. The research house, however, estimates the HEV market to grow relatively slowly compared to PEV market, with unit sales reaching 250,000 by 2019 from sub-25,000 levels in 2012. So, collectively, the market for electric vehicles is emerging and could result in a significant source of incremental revenue for Duke, going forward.

The pilot project will be conducted on two different models of electric cars designed by Toyota. Toyota’s Prius Plug-In Hybrid is a PHEV while Prius 2 Hybrid is an HEV. Prius Plug-In Hybrid costs nearly $32,760 while Prius 2 Hybrid starts at $24,000. The higher prices of these vehicles compared with their gas-fired counterparts could pose a threat to the proliferation of electric cars in the U.S. However, considering the savings on fuel costs associated, the electric cars could gain ground over other kinds of clean, fuel-based locomotives.

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1. Duke Energy, Toyota team up to test plug-in Prius, indystar.com, August 22, 2012 [↩]