Edison International, the parent company of electric utility Southern California Edison (SCE), is joining forces with Ford Motor Co. to develop a complete vehicle, home and grid energy system that hopefully will spur wider use of plug-in hybrid vehicles (PHEVs).

“The challenges of reducing greenhouse gas emissions and increasing our nation’s energy security reach across industry boundaries and unite us in a common cause,” said John Bryson, chairman & CEO of Edison International. “We are combining resources to explore ways to make PHEVs more accessible to consumers, reduce petroleum-related emissions and improve the cost-effectiveness of the nation’s electricity grid.”

“This unique partnership with SCE will allow us to explore new solutions for our customers’ growing need for energy conservation,” added Alan Mulally, Ford president & CEO. “By combining strengths, ours in hybrid technology, theirs in energy management, we can consider transportation as part of the broader energy system and work to unleash the potential of plug-in technology for consumers.”

The main challenge to increasing PHEV usage is that hybrid electric vehicle technologies are not yet price-competitive, due primarily to the high cost of advanced batteries. According to the Institute for Analysis of Global Security (IAGS), the difference in price depends on the size of the battery as every additional 10 miles of vehicle range in electric mode adds about $1,000 to the vehicle’s overall cost.

Battery costs are the primary reason for this incremental cost and battery prices are likely to fall with increased production, the IAGS added. Also, the price difference is partly offset by lower operating costs of plug-ins as fuel costs for conventional vehicles stand at 6 cents per mile, while for plug-ins the cost is only 3 cents per mile including the cost of electricity. The remaining difference can be covered by federal and state tax credits, such as the one-time $2,000 Clean-Fuel Vehicle Federal tax deduction.

Ford and SCE plan to explore ways to make PHEV batteries more cost-effective, said Ford’s Mulally. For example, a popular vision of plug-in hybrid automotive technology is the potential for owners to charge their vehicles in the evening when the cost to produce electricity is low, and then store and use that energy during peak hours of the day, when electricity costs are high

Also, hybrid vehicle batteries currently have no residual value priced into the purchase cost, so Ford and SCE believe it might be possible to develop a market for the untapped value present in used plug-in hybrid electric vehicle batteries at the end of the vehicle’s life cycle.

The key advantage to PHEVs is that electricity, as a transportation fuel, is 50% to 75% less expensive than the equivalent cost of a gallon of gasoline, noted Bryson, and its pricing is more stable than the cost of petroleum. Using off-peak electricity could also increase grid productivity and help bring down the price of electricity for utility customers, he added, pointing to a recent study by the U.S. Department of Energy study that estimated that if every light duty car and truck in America today used plug-in hybrid technology, 73% of them could be plugged in and fueled by excess capacity in the electricity grid without constructing a single new power plant.

Mulally said Ford and Edison intend to undertake a multi-million dollar, multi-year PHEV evaluation and demonstration program, with Ford providing SCE with a demonstration fleet of 2008 Ford Escape Hybrid SUVs that will be benchmarked for performance characteristics, with some of them evaluated in typical customer settings in order to model overall home and grid values this technology could tap.

Additional project funding may be sought from participants such as the Electric Power Research Institute, the U.S. Department of Energy, the California Energy Commission and the South Coast Air Quality Management District, Ford and Edison noted.