New National Research Council Study Delivers Roadmap to Put Electric Cars into Fast Lane

Our country faces the important challenges of overcoming our oil dependency and cutting carbon pollution. Fortunately, as confirmed by a new National Research Council (of the National Academies of Science) study which I was a committee member, electric cars can be a key part of moving America forward. The study concludes that the Federal Government can and should do more to accelerate the market.

Specifically, the committee recommends extending the current purchase tax credits beyond the current production volume limits and to launch a new public education campaign through its Ad Council program. Perhaps the single most important finding is that electric utilities have a compelling business model to support public charging infrastructure.

Adoption of these recommendations would help spur the mainstream adoption of electric vehicles by overcoming the known barriers of cost, lack of information and so-called range anxiety.

KEY RECOMMENDATION: Extend federal tax credits beyond current production volume limits

A key challenge to plug-in electric vehicle (PEV) adoption is that consumers must pay a higher purchase cost but save money over time. As with any new technology, this barrier is particularly acute because the technology has not had a chance to take advantage of the massive economies of scale necessary to compete with gasoline cars. In addition, many of the benefits of PEVs accrue to the public good, rather than just the private good.

Perhaps the single most important recommendation of the study is for the federal government to extend the tax credits (worth up to $7500 to PEV purchasers) beyond the current volume limits. Since the current tax credits are limited to 200,000 total per manufacturer, they could expire as early as 2017 or 2018 for the EV market leaders, potentially stalling the market just as it is poised to hit its tipping point. The committee recommends:

Federal financial incentives to purchase PEVs should continue to be provided beyond the current production volume limit as manufacturers and consumers experiment with and learn about the new technology. (pages 9 and 169)

There is strong, bipartisan support for tax incentives for clean energy. For example, a recent national poll found 80% of Americans support tax incentives for producers of clean electricity, including 74 percent of Republicans.

KEY FINDING: Electric utilities have strong business case for investing in public charging to address the "infrastructure gap"

Lack of publically available charging infrastructure is another key barrier to deployment. The committee's finding supports the notion that the infrastructure gap is in large part a "financing gap". Unfortunately, the committee found, besides automakers and utilities, it "has not been able to identify any private sector entities that have an attractive business case for absorbing the full capital costs of investments in public charging infrastructure." (page 130)

The most promising source of investments the committee identified are electric utilities. The committee found that "utilities that can capture the entire residential electricity consumption of PEV owners appear to have a viable business model for investing in public charging infrastructure." A very important finding of the committee is:

If public charging infrastructure drives greater eVMT and greater deployment of vehicles, capital and variable costs for public infrastructure might be covered by the incremental revenue from additional electricity that PEV drivers consumer at home, where roughly 80 percent of the charging takes place. (page 127)

This finding is supported by a recent decision at the California Public Utilities Commission where PEV charging companies, utilities, auto, and NGOs all supported an expanded role for utility investment in publically available infrastructure.

This creates a rare "win-win-win" situation where PEV drivers, utilities and all utility customers can benefit from increased investments in electrification. In fact, a recent California study estimated that large-scale commercialization of PEVs could yield $2.26 to $8.11 billion in net revenues, sufficient to allow utilities invest both in infrastructure and returning benefits to customers in the form of lower rates. In California, the three largest utilities have applied to invest $1.1 billion in infrastructure deployment to support 60,000 publically available charging ports. Other utilities across the country are also moving forward with investments, including Southern Company and Kansas City Power and Light.

Regarding the role of the federal government specifically, the committee concluded that since other entities - vehicle manufacturers, utilities, and private companies - are actively deploying or planning to deploy infrastructure, there currently is not a strong need for direct federal investments in infrastructure. The committee suggested a better role for the federal government is to assess the "relationship between infrastructure availability and PEV adoption." (pages 10 and 130) The committee found that "Given the strain on federal resources, the suggested research should help to ensure that limited federal funds are spent so that they will have the greatest impact." (page 10)

KEY RECOMMENDATION: Federal government should assist in targeted education of consumers to address "information gap"

Another important barrier to greater PEV adoption is simply lack of consumer awareness and knowledge. The committee found that "Lack of consumer awareness and knowledge about PEV offerings, incentives, and features is a barrier to mainstream adoption of PEVs." (page 69) To address this gap, the committee recommends:

To provide accurate consumer information and awareness, the federal government should make the use of its Ad Council program, particularly in key geographic markets, to provide accurate information about federal tax credits and other incentives, the value proposition for PEV ownership, and who could usefully own a PEV. (pages 4 and 74)

KEY FINDING: Electric Cars are the cleaner than cleanest gasoline cars (and getting cleaner over time)

Despite numerous studies, there remains confusion over whether PEVs are actually good for energy security and carbon pollution. Though hardly a man-bites-dog story, after weighing the evidence, the study concludes that EVs are indeed good for the country:

The committee concludes that the premise for the statement of task - that there is an advantage to the United State if a higher fraction of the miles driven here is fueled from the U.S. electric grid - is valid now. The advantage becomes even greater each year that the United States continues to reduce the GHGs that it produces in generating electricity. [page 22]

In fact, not only are EVs the cleanest cars out there, the study makes the important point that EVs are actually get cleaner over time as the grid transitions to cleaner sources of generation:

The average GHG emissions for which PEVs are responsible are currently lower than the emissions from even the cleanest gasoline vehicles and will be further reduced as the electricity for the U.S. grid is produced from the lower carbon sources. (page 22)

NRC Study a Roadmap to Move America Forward

Reducing our nation's dependency on oil is critical to our energy and climate security. With oil prices in a temporary down cycle, consistent, sustained public policy support is more critical than ever. Fortunately, the new National Research Council study provides such a roadmap for moving electric cars into the mainstream.