Nina Chestney

LONDON (Reuters) - The cost of alternative low carbon vehicles could fall significantly in the next 15-20 years as prices of cleaner fuels drop, but they will remain pricier than conventional cars, a report by UK-based consultancy Element Energy showed on Tuesday.

The roll-out of alternative vehicles is seen by some as a crucial step in the shift to a low-carbon economy. HSBC sees the electric vehicle market growing 20-fold by 2020 to $473 billion.

They may be seen as a cleaner mode of transport but they are expensive to buy and problematic to run due to the lack of range and infrastructure.

By mid-2011, there were around 47 million vehicles using alternative fuels and advanced technology, out of more than 1 billion vehicles in use globally, experts estimate.

The report, carried out for the Low Carbon Vehicle Partnership (LowCVP), assessed total ownership expenses for both low-carbon and conventional cars, including initial purchase costs, fuel and insurance costs.

It studied all types of "alternative" vehicles, including electric, hydrogen and hybrids, which apply battery technology to use petroleum more efficiently.

The report said alternative vehicles would make a lot of progress to bridge the difference in ownership costs by 2020.

The difference between owning a hydrogen or electric vehicle and a conventional car could fall to 500-700 pounds by 2030 from the current 5,000 pounds ($8,000)a year as battery and fuel cell costs fall.

"There is, however, still a cost premium for alternative vehicles in 2030," the report said.

Although the report did not single out any vehicle type as dominating the alternative vehicle market, it said plug-in hybrid electric vehicles would probably be most cost-effective.

Pure hydrogen vehicles will likely remain the most expensive option, as fuel cell costs stay high.

"Initially there will only be a modest take-up of electric or hydrogen vehicles and most of these are likely to be plug-in hybrid vehicles with a lower electric range (10-20 miles), lower total cost of ownership and no risk of running out of charge," said Greg Archer, managing director of LowCVP.

"More significant take-up of battery electric and hydrogen fuel cell vehicles is possible after 2025, with tax incentives."

Some governments have been trying to incentivise the uptake of low-carbon vehicles. Britain currently offers a grant towards the cost of some new plug-in cars.

It also exempts from road tax cars that emit less than 100 grams per km of greenhouse gas carbon dioxide. ($1 = 0.625 British Pounds) (Editing by Anthony Barker)