Plug-in hybrid electric vehicle (PHEVs) technology has the potential to address economic, environmental, and national security concerns in the United States by reducing operating cost, greenhouse gas (GHG) emissions and petroleum consumption. However, the net implications of PHEVs depend critically on the distances they are driven between charges: Urban drivers with short commutes who can charge frequently may benefit economically from PHEVs while also reducing fuel consumption and GHG emissions, but drivers who cannot charge frequently are unlikely to make up the cost of large PHEV battery packs with future fuel cost savings. We construct an optimization model to determine the optimal PHEV design and optimal allocation of PHEVs, hybrid-electric vehicles (HEVs) and conventional vehicles (CVs) to drivers in order to minimize net cost, fuel consumption, and GHG emissions. We use data from the 2001 National Household Transportation Survey to estimate the distribution of distance driven per day across vehicles. We find that (1) minimum fuel consumption is achieved by assigning large capacity PHEVs to all drivers; (2) minimum cost is achieved by assigning small capacity PHEVs to all drivers; and (3) minimum greenhouse gas emissions is achieved by assigning medium-capacity PHEVs to drivers who can charge frequently and large-capacity PHEVs to drivers who charge less frequently.

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