This article is part of Utility Dive’s 2023 U.S. Power Sector Outlook series. A roundup of all the articles is available here.
Electric vehicles made up more than 5% of new vehicle sales in the United States last year, and experts say rapid growth in transportation electrification is likely to continue. Federal funds will help to develop a national charging network and incentivize consumers to purchase from dozens of new models that automakers are bringing to market.
EVs as a percent of new vehicle sales have risen from around 2% in 2020 to more than 6% in the third quarter of 2022.
“There's an incredible amount of opportunity and momentum,” Electrification Coalition Executive Director Ben Prochazka said. The group advocates for policies to speed the adoption of plug-in vehicles, and sees the bipartisan infrastructure law of 2021 and last year’s Inflation Reduction Act as key accelerators in the industry.
Among other investments, the infrastructure law provided $7.5 billion for a national network of 500,000 electric vehicle chargers while the IRA extended federal tax credits for vehicle purchases.
It appears EVs “are on the verge of a tipping point,” Prochazka said. “But I do think we have challenges,” including working out the details of how federal incentives will be structured.
“The transition takes time,” said Joe Britton, founder and former executive director of the Zero Emission Transportation Association. The group’s members include utilities and charging companies, Tesla, Lucid, Sunrun and other technology companies.
EV sales in the U.S. could reach 10% this year, he said, though Britton doesn’t expect sales to continue growing at such a rapid pace.
President Joe Biden wants half of all new passenger vehicle sales in the U.S. to be electric vehicles by 2030. Experts say the goal is aggressive and will hinge on the easing of constrained supply chains and how federal incentives are implemented.
Stephen Engblom, senior managing director of commercial real estate firm CBRE, says he is “optimistic” the president’s goal can be achieved if challenges in locating charging stations are met and the grid can support the new demand. “You have to have the energy and you have to have the real estate,” he said.
Building out the EV charging network “is actually a real estate challenge,” Engblom said, requiring automotive and charging companies, utilities and commercial real estate owners, to work together. “I think, inherently, real estate will be the biggest challenge, and I would say that that's where I would watch over the next year as these partnerships work themselves out.”
In New York City, electric utility Consolidated Edison has seen “tremendous growth, just in the last several months,” said Director of E-mobility & Demonstrations Raghusimha Sudhakara.
The transition to electric vehicles is “something we think about every day,” Sudhakara said. “So far it’s been very smooth,” with ConEd able to meet every new service request for electric chargers. But the utility is also looking to proactively build out areas of its grid where there are large fleets that may want to electrify.
The Edison Electric Institute, which represents investor-owned utilities, expects there will be 26.4 million EVs on U.S. roads in 2030, with annual sales of nearly 5.6 million vehicles in 2030, or about 32% of the light-duty total.
“In the last year we doubled sales, from 3% to 6%,” Britton said. “Obviously I don't know that we can keep doubling every year, but we're going to see a ton of growth. ... I think [in 2023] we’ll probably sell 1.5 million units.”
Industry observers say keys to accelerating EV adoption in the next year include the details of vehicle tax credit implementation, the rollout of $5 billion in funds for the president’s National Electric Vehicle Infrastructure formula program, and addressing potential utility bottlenecks in electrifying charging stations.
Vehicle credit rules
The Inflation Reduction Act contained $369 billion for clean energy investments, including reviving tax credits for EVs. But the new tax credit is not simple: It is split into portions, and qualifying depends on where the vehicle was assembled and what percentage of critical minerals used were extracted or processed in the U.S.
“I think the changes to the tax credit right now are probably challenging for the average consumer to figure out and understand what vehicles are eligible,” Prochazka said. “With any new policy like this, that has nuance that consumers have to try and sift through, it’s going to take a little bit of time.”
Some of that uncertainty surrounds which vehicles qualify for credits, which depends on mineral content and whether it meets domestic assembly requirements.
The U.S. Department of the Treasury and Internal Revenue Service issued some clarifying information in December for new vehicle purchases, and Prochazka said proposed guidance on the new sourcing provisions for the clean vehicles credit is expected in March, along with a notice of proposed rulemaking.
The implementation details will be “a challenge for everybody,” Britton said. “We're all going to be struggling, in the short term, to figure out who's eligible, are they attainable standards and what benchmarks do we use. There's a ton of implementation that we're going to be working on.”
Charging network funds roll out
Another major factor this year will be the disbursement of billions of dollars to states for the development of a national charging network.
To access the first $5 billion, states, the District of Columbia and Puerto Rico were required to file charging plans and the Federal Highway Administration announced in September that all have been approved.
The first tranche of funding has been rolled out to states, Prochazka said, setting the stage for developers to propose charging solutions. States are already in the process of creating the requests for proposals to develop new stations “so that they can get the companies ready and contracted to be able to build out the infrastructure network,” he said.
“I think that's going to be also really important for consumers, to start to see that infrastructure developing and the stories associated with that infrastructure developing,” Prochazka said. ”But it's not going to happen overnight. It's going to take a lot of effort.”
“How quickly the states move, I think some of that will be determined by their sophistication and experience doing this. But with this bipartisan infrastructure bill money, we’re probably building charging going gangbusters for the next three to five years,” said Britton.
Issues in utility connections
Beyond vehicle sales and charger development, is the utility interconnection — and here delays are already being witnessed.
“With network upgrade queues backing up into the 2030s,” utilities may look to solar and energy storage options to serve charging stations in some areas, Jeffrey Douglass, markets and research manager at Invinity Energy Systems, said in an email. The company is a developer of utility-scale storage.
Managing the power loads associated with transportation electrification will help in “maintaining grid stability and accelerating the world’s transition to net zero,” he said.
Electricity demand from electric vehicle adoption is unlikely to lead to generation or capacity constraints, said Britton, though substation upgrades may be required in some areas.
“Some of the biggest limitations in the market will be limits on the utility grids,” said CBRE’s Engblom. “Upgrading the grid to be able to handle all of this new high-speed charging is going to be a big challenge.”
It takes charging company EVgo about 4-8 weeks to construct a new charging station, CEO Cathy Zoi said during the company’s third quarter earnings call in November. But the end-to-end time, from station conception to energizing stalls, now takes about 18 months, she said. That time had been about 12 months, but delays on the utility side are stretching development times.
There is a “utility work backlog associated with transformer shortages,” Zoi said. “When we're building the configurations that we're building now, which are ultrafast 350-kW chargers with more stalls, that almost always requires a transformer upgrade.”
The utility sector warned federal lawmakers last year that a shortage of distribution system transformers is depleting replacement equipment stockpiles and delaying or canceling some electrification projects.
“Persistent utility labor shortages and transformer supply chain constraints exacerbate utility work backlogs at the front and back end of the charger development process,” Zoi said. “We expect utility-related delays will continue to be an issue as power companies gear up for transportation electrification and work to make power systems resilient to the effects of climate change.”
There were about 2,300 level 2 chargers and 140 DC Fast Chargers installed in Consolidated Edison’s territory at the end of last year, said Sudhakara. The utility expects its Power Ready make-ready program to help bolster those numbers quickly, reaching 18,500 level 2 chargers and more than 450 DCFC by 2025. To meet the state’s EV adoption goals, the utility expects 400,000 chargers in its territory by 2035.
“With the current growth we are experiencing, we’re providing service relatively smoothly,” he said. “But it would be helpful to work out a construct where we reinforce the grid, build out areas where there are high levels of fleets.”
ConEd’s queue of chargers requesting service already includes more than 1,000 DCFCs, said Sudhakara.
“The timing for utilities to meet the demand is challenging,” Prochazka said, in particular for utilities that may not have preauthorizations from regulators for necessary system buildouts. Those types of approvals, along with streamlined permitting processes, can help utilities to “clear the deck a little faster,” he said.