Plug-in hybrids are exciting not only because they can reduce the cost (financial and environmental) of driving, but also because they could potentially lower the cost of powering a home and strengthen the power grid.

This "vehicle to grid" (V2G) application of plug-in hybrids was a frequent subject of discussion during the first day of the Rocky Mountain Institute's Smart Garage charrette (workshop). The V2G scenario enables consumers to lower their utility bills by "time shifting" (somewhat like a digital video recorder) power from when it is cheap to produce to when it is more costly to consume. Enacting V2G when the first PHEVs hit the street requires that the lithium ion batteries being developed now will be ready to both store and share energy.

RMI -- as well as many charrette participants -- believes that using a vehicle's battery outside of providing power for locomotion can create positive value for vehicle owners and grid operators, whereas the "dumb" connecting of PHEVs to only receive power from the grid may not benefit owners and could increase electricity prices for everyone.

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The V2G model of intelligently storing and using energy makes plug-in hybrids more attractive to consumers, according to Mujeeb Ijaz, Director of Automotive Applications engineering at battery maker A123 Systems.

I asked Ijaz if it would be best for lithium ion batteries -- which are currently in their first PHEV road tests with automakers -- to be used initially as a grid resource, or if it would be better to limit their use to transportation. He emphatically said that the batteries will be ready to go for the full V2G application when PHEVs start shipping in 2010.

"The more we can add value the easier it is for them to justify the purchase," he told me. PHEVs may cost $10,000 more or higher than today's comparable hybrids, so even paying 75 cents per gallon of gas equivalent when riding on battery power may not provide a fast enough payback.