This is the first in a three-part series examining some of the key business, policy and workforce challenges in the U.S. transition to cleaner power and transportation sectors.
Transitioning transportation, the nation's biggest source of carbon emissions, to clean electricity is urgent, but will not be easy, according to charging companies, auto industry analysts and others.
President Joe Biden's Aug. 5 Executive Order calls for 50% of annual U.S. new car sales to be zero emission vehicles (ZEVs) by 2030. But of the estimated 14.5 million U.S. new car sales in 2020, only about 306,000, or 2.1%, were ZEVs, and only about 2 million of the nearly 290 million registered vehicles on U.S. roads are EVs.
Newer numbers, however, suggest "an exponential ZEV uptake" has started, said Garrett Fitzgerald, electrification principal at the Smart Electric Power Alliance (SEPA). "New ZEV sales increased from 1.5% in H1 2020 to 2.5% in H1 2021" and "were 3.6% of Q2 2021 new car sales."
Ford, General Motors and Stellantis are planning a total of over 50 new ZEV models "because they see they will lose market share if they don't," Commissioner Tremaine Phillips of the Michigan Public Service Commission said. "Those automakers have committed to a decades-long, billion-dollar transition, which tells me the vehicles are coming."
Private sector investments by automaker and charger providers and some state policies approving utility investments recovered from ratepayers have already seed-funded the transportation electrification transition, automakers, analysts, and charger providers said. They now have White House backing and are likely to soon get a boost from federal infrastructure legislation, they added.
But while those forces grow the numbers of EVs on the road, power system providers and their regulators need to face the challenge of unprecedented amounts and types of electricity demand, they said.
Policy to the rescue
The new Biden ZEV goal and other policies, like infrastructure bill provisions and stronger fuel efficiency standards, emphasize White House support for the transportation electrification transition.
Backed by major automakers and labor groups, the administration wants to build a national charging station network and provide incentives to drive zero emission vehicle and charger sales.
California's U.S.-leading 10.4% ZEV adoption is due to "strong fiscal and non-fiscal policies" like rebates, mandates, and a low carbon and other emissions standards, said SEPA's Fitzgerald. States with similar policies are building to higher adoptions, but "tremendous coordination and push at all levels of government and the market will be needed" to reach the Biden goals, he added.
That alignment is emerging, Ford Motor Company President and CEO James Farley, Jr., told a Sept. 23 Columbia University webinar, in describing his company's efforts to bring a battery electric version of its F-150 pickup truck to market in 2022.
Ford already has 150,000 orders, Farley said. There are supply chain and labor force issues and "this transition will be tough," but the F-150, the nation's top selling vehicle, could move transportation electrification "into the mainstream," he added.
Provisions in federal legislation will be one key.
The pending $1.2 trillion Infrastructure Investment and Jobs Act (HR 3684) offers $30.7 billion in EV-eligible funding, according to Atlas EV Hub. That includes $7.7 billion in ZEV funding, $12.7 billion for other "clean" vehicles, and $10.3 billion to support battery manufacturing and recycling and power system infrastructure, Atlas said.
There are also grants for charging and zero emissions fueling infrastructure, for deploying renewable energy generation and efficiency improvements at schools, and for advanced vehicle manufacturing innovations, Atlas reported.
Proposed programs in the bill would study electrification impacts on the power grid and impacts of critical minerals mining outside the U.S. Studies would also be funded to identify the best charging station standards for interoperability between providers and to identify strategies for moving medium- and heavy-duty vehicles to electrification, it added.
But the infrastructure bill is not the only piece of legislation currently under consideration on Capitol Hill with the potential to inject billions of dollars into the clean transportation sector.
The House's more ambitious Build Back Better Act has provisions similar to those in the infrastructure bill, but funded at higher levels, Atlas reported. Importantly, it also includes funding to continue the federal $7,500 tax credit for purchases of all-electric and plug-in hybrid vehicles and allows the buyer to receive the credit when buying the vehicle rather than waiting for it on their federal tax return. Depending on a vehicle's domestically- and union-made content, bonuses could increase the benefit to as much as $12,500.
Stakeholders are generally satisfied with HR 3684, though many would like to see the House bill's removal of the current tax credit cap, which limits each manufacturer's use of the credit to the first 200,000 vehicles it sells.
A September 2021 Edison International (EI) white paper called for similar policies as proposed in the federal bills, including higher national ZEV targets, bigger charging infrastructure investments, and expanded tax credits.
Exelon, however, specifically supported the Senate infrastructure bill in a letter to House representatives in its territories asking them to vote for it "because its charging infrastructure funding is huge for utilities," Exelon Utilities Vice President of Utility Oversight Denise Galambos said.
Both bills' proposals "are ambitious but needed," Alliance for Transportation Electrification (ATE) Executive Director Phil Jones, a former Washington utilities commissioner, said. But the investments are only "a down payment" on the billions of dollars needed for the U.S. to compete in world markets.
Even before the new federal policy initiatives were under consideration, customer demand and private sector investment were driving transportation's transition to electrification.
The Michigan Public Service Commission's 2017 "Barriers Report" found 25 significant barriers to transportation electrification, but many are being resolved by utility pilots, Commissioner Phillips said.
Similar studies by other states leading in ZEV adoption show "barriers are being removed," agreed North Carolina Clean Energy Technology Center Senior Policy Program Director Autumn Proudlove. "Some states are lagging, but they are not actively trying to stop electric vehicles."
There are now eight ZEV models, from automakers Ford, Lucid, Rivian and Tesla, with single charge ranges of 300 miles or greater, according to a Green Car Reports Sept. 19 market assessment.
"Growth in the top eight states is doubling, and tripling, and private investment will follow to avoid missing the opportunities," Rocky Mountain Institute (RMI) Carbon Free Mobility Global Program Managing Director Britta Gross said.
The optimism in the private sector was reinforced by an April 2021 paper by the Alliance for Automotive Innovation reporting automakers "are planning $330 billion in electrification by 2025." The Alliance represents manufacturers that account for "nearly 99%" of cars and light trucks sold in the U.S., its website said.
Progress is good, but "it will take an ecosystem for this to succeed," Edison Electric Institute (EEI) Director of Electric Transportation Kellen Schefter cautioned.
Coalitions of automakers, charger providers, utilities and ratepayer advocates are growing that ecosystem, Proudlove and other stakeholders responded. They are accelerating customer education work, reaching agreements on ZEV registration fees, and expanding pilots for medium and heavy-duty ZEV use, they said.
Ratepayer funding has begun supporting charger infrastructure deployment and state commissions are becoming more aware of the opportunity it represents, they also agreed.
Time to charge up
There will be 26 million U.S. ZEVs by 2030, but 2030's projected 5.9 million new ZEV sales will be only 36% of all new vehicle sales, according to a July 2021 analysis from the International Council on Clean Transportation (ICCT).
To charge those ZEVs, the estimated 216,000 U.S. public and workplace chargers in 2020 will need to grow to 2.4 million by 2030, ICCT estimated.
For comparison, only 20 million ZEVs would impose power demand and peak load increases that would require power system investments of at least $75 billion, a June 2020 Brattle Group study estimated. The more ambitious Biden administration goal would significantly increase that cost, added Brattle study co-author and Group Principal Sanem Sergici.
But public charger deployment costs could be lower as people realize "it is more convenient to charge at home at night or when the car is parked than going to a gas station," Craig Lawrence, partner/co-founder of electrification start-up investor Energy Transition Ventures, said. That would increase the use of customer-owned home chargers and reduce the immediate need for utility expenditures for public charger deployments.
HR 3684 would boost public charger infrastructure deployment, but the overall costs for that component are likely to be $28 billion from 2021 to 2030, ICCT estimated. And that only meets charging needs when ZEVs represent 36% of new car sales in 2030, which is short of the Biden 50% goal, ICCT added.
"EV adoption is absolutely headed in the right direction," but "more charging station investment is of paramount importance," EV Connect Senior Vice President, Energy and Utilities, Ram Ambatipudi said.
Many are asking what the cost for transportation electrification to be shared by ratepayers, taxpayers and private sector automakers and charging providers will be, but some sector advocates said that is the wrong question.
It's not how much
The right question is whether the benefits of transitioning to zero emissions transportation would outweigh the costs, ZEV advocates said.
The transportation electrification transition can reduce drivers' costs over the long term because owning an electric vehicle and powering it with electricity is less expensive that owning a gasoline-powered vehicle, they said.
For drivers, fuel and maintenance cost savings over an average gasoline-powered vehicle can be as high as $1,600 per year, depending on electricity and gasoline prices, ATE's Jones and SEPA's Fitzgerald estimated.
That is only the beginning, according to Ford's Farley. If technologies allowed and compensation was available, ZEVs could provide grid services to reduce system and owner costs, he said. Ford is marketing the F-150 for its ability to provide home backup power during system outages.
Making the transition to a system that can accommodate transportation electrification comes with costs, stakeholders acknowledged. The options are distribution system upgrade costs, investments in distributed resources to reduce loads, or managed charging to shift loads, venture investor Lawrence said. "None are free, which means this transition could raise the price of electricity." ATE's Jones agreed.
"The more charging is moved away from peak demand, the less distribution system infrastructure and generation is needed to meet peak, which lowers the cost to serve."
Director of Resource and Environmental Planning, Southern California Edison
But two features of ZEV charging will eventually allow its expected high loads to "put downward pressure on rates," according to Southern California Edison's 2018 application for the second and territory-wide phase of its charger deployment. First, a larger volume of kWh sales reduces each customer's share of the utility's fixed costs. Second, the ZEV load is flexible, which means price signals can move it away from high-cost peak demand periods.
"The more charging is moved away from peak demand, the less distribution system infrastructure and generation is needed to meet peak, which lowers the cost to serve," said SCE Director of Resource and Environmental Planning and Strategy Erica Bowman.
But building utilities' capability to manage charging has costs which could increase rates in the near term, she and others acknowledged.
Affordability is becoming a concern for utilities and regulators, Brattle's Sergici said. But "it would be shortsighted for regulators to press the brakes on investment." The Biden administration and automakers are giving "clear signals" that "should give charging companies confidence to invest," she said. But "if one player hesitates, the whole thing could collapse."
State utility commissions have approved $3 billion in utility charger deployments and utilities' role is "absolutely critical," EEI's Schefter said. But ratepayer investments "should be leveraged with other investments."
Though some utilities build and own chargers, utility-private sector partnerships are the "best practice" for deployment, a recent SEPA paper concluded. Exelon is "willing to work with either regulatory model, but it will take time to prove which works best," Exelon's Galambos said.
Beyond cost, effective managed charging will also require more work on rate design, technologies and policy, Strategen Senior Director and Vehicle Grid Integration Council policy consultant Edward Burgess told Utility Dive.
Time of use rates are a blunt tool, ATE's Jones said. "If everybody starts charging at the moment the rate changes, it could create an unexpected demand spike," he said. More advanced, software-based managed charging solutions can stagger charging, but that is more expensive, and "the best approach has not yet been determined," Jones added.
Rate design to manage larger fleet and medium- and heavy-duty ZEV loads is different because businesses already manage electricity costs through TOU rates, Jones said. But utilities are testing strategies for transitional Demand Charge relief "by increasing per-kWh charges and lowering demand charges" until the charging provider's usage reaches levels where demand charges are cost-effective.
Bet your life on ZEV
The many uncertainties are putting the transportation sector "through a transformation and there is anxiety about the new world," Audi of America Director, Government Affairs and Sustainability Spencer Reeder said. "But we will evolve."
Automakers' commitments have put the pressure on policymakers and regulators to prepare the power system "to handle the demand and load," Michigan Commissioner Phillips acknowledged.
General Motors "has bet its life on zero emissions, and if we guessed wrong, we are bankrupt and the government will not bail us out this time," GM Technical Fellow for Automated and Electric Vehicle Commercialization and Industrialization Rob Kleinbaum told a Sept. 21 Energy Thought Summit 2021 webinar. "It is a brand new world" and "we are learning as we go."