A group of Bates White energy experts recently published a policy paper on electric vehicles (EV) that was featured at summer regional conferences of the National Association of Regulatory Utility Commissioners. The paper addresses factors that developers, investors, and regulators need to consider as they make electric transportation-related decisions about the future.
Partner Nick Puga, one of the paper's authors, answers some questions about EVs and the transportation sector.
Q. Is there an emerging consensus among policy makers and regulators that America should move forward with the electrification of the transportation sector?
A. Yes, consensus is emerging on this due to the need to reduce greenhouse gas emissions (GHG) and the benefits of EVs, including new investment in and modernization of grid infrastructure, growing electricity sales in an otherwise stagnant market for utilities, and perhaps helping pave the way for autonomous vehicles.
Q. How big an impact can transportation electrification have on GHG?
A. In 2017, about 29% of GHG emissions in the United States originated in the transportation sector—the largest of any sector. Due to greater demand from parcel delivery, diesel trucks, and air travel, these emissions are growing.
Q. What are the biggest barriers standing in the way of EV deployment?
A. The two biggest barriers have been the higher short-term cost of EVs relative to internal combustion engine vehicles and a lack of definitive answers to policy maker's questions about how the EV business should work.
Q. Will limited model choices and higher cost of EV ownership continue to be barriers?
A. Yes, but the limited selection of utility EVs will slowly ease as multiple manufacturers introduce SUVs and pickup trucks in the 2020–2023 model years, and more choices of passenger buses and cargo trucks thereafter. Further, the availability of tax and other financial incentives may help broaden EV adoption by individuals and fleet operators.
Q. What are some unanswered questions about how the EV business will work?
A. The biggest unanswered questions about the EV business are related to the roles that various EV market participants should play and the reasons potential buyers hesitate to acquire EVs. For example, though both utilities and non-utility firms can help build EV charging networks, only non-utility firms prevent ratepayer exposure to additional business risk or cross-subsidization, while only utilities can ensure that the distribution grid can accommodate the additional load.
Ultimately, the goal should be to give incentives to participate in developing an extensive charging network, to allay the main reason to hold off in buying an EV: range anxiety. Having answers to these questions will empower policy makers and regulators to adopt effective policies to entice EV car and truck buyers to choose EVs over conventional ICE vehicles.
Q. Who are the most likely EV buyers?
A. Potential EV buyers extend beyond personal and ride-share vehicle owners to operators of public transportation and commercial distribution fleets.
Q. Is “range anxiety” still a barrier to EVs?
A. It is, but this is being addressed with larger, cheaper batteries and rapidly expanding charging networks, both publicly and privately operated.
Q. How can public service commissions (PSCs) spur faster adoption of EVs?
A. PSCs are responsible for setting electric rates and can ensure that utilities offer reasonably priced, time-variant rates to give incentives to charge EVs during cheaper off-peak periods, They can also ensure that charging with renewable energy is favored, to maximize the decarbonization effect of EV transportation. PSCs can also protect their ratepayers by helping determine the proper level and timing of investment in charging infrastructure and associated grid modernization. Regulators can apply time-tested regulatory principles to ensure prudent investment and only allow appropriate returns on used-and-useful investments. The appropriate combination of policies, incentives, and regulations, and the pace of their deployment, must be tailored to each state’s unique socioeconomic circumstances.