10 Principles for an Electric Vehicle Revolution that Benefits All Consumers

As battery technology improves and car companies start to invest in a line-up of attractive electric vehicle (EV) models, many states and utilities are wondering how they can position themselves to both propel and prepare for the EV revolution. Based on TURN’s experience with a multitude of utility proposals and legislation (both proposed and passed), we present below some principles state policy makers and utilities should keep in mind to ensure all consumers reap the benefits of EV adoption.

  1. The transportation sector and state funds must be primarily responsible for reducing transportation emissions. If the right policies are implemented, EVs can benefit all of society with cleaner air and lower electric bills. On the other hand, misguided programs and investments, particularly unnecessary, wasteful, or ill-conceived electric utility proposals, burden low and middle-income consumers to pay for subsidies to wealthy corporations and individuals with minimal or no benefit to the environment. Thorough vetting of the facts and assumptions underlying all proposals is necessary to determine which track a particular program is on. If ongoing funding is required to support EVs, states may consider use of carbon tax revenues and/or fees on new car sales of the most polluting vehicles (e.g. SUVs) to raise revenue for EV rebates.

 

  1. Pilot programs can help limit risk where key facts are unknown. Before jumping in to full-scale programs with little factual basis or historical data, pilots and/or “phased” programs can help illuminate on-the-ground reality and allow for better understanding of fundamental assumptions, with the ability to fine-tune later. Broad claims of benefits with little factual support must be challenged. States should also look to California and others where pilots may have already occurred in order to avoid duplication.

 

  1. Accountability measures and data collection should ensure programs result in intended benefits. Investments should be targeted to achieve the greatest amount of environmental benefit at least cost. Clear quantitative targets tied to penalties and/or rewards can help align public benefits with private investment. For example, TURN has proposed accountability measures for utilities, including shareholder risk-sharing mechanisms, if certain measurable targets are not met. These have not yet been ruled on by the CPUC but serve as good examples of strategies to ensure accountability that program goals are met.

 

  1. Subsidy programs should not hinder competition in the private market. The overturning of our oil-based transportation sector, including charging stations and supporting infrastructure, will not gain sufficient scale or innovation without the capital and know-how of private companies including charging station providers and automakers. Subsidies should be primarily focused on the areas of the market that are critical to EV adoption but lack private investment, with the goal of phasing out public investment when it is not necessary. State programs should provide a level playing field for private companies to compete on price and value without favoring some entities over others.

 

  1. Public funds should be “matched” by private entities that receive the direct benefits of subsidy. The previous principle should not be interpreted as giving private entities a free ride off public dollars. Instead, each public or ratepayer dollar can go further by leveraging the private market. For example, the California Energy Commission (CEC) requires an approximately 50% “match” for most of the charging infrastructure it supports throughout the state. Private entities should pay as much as possible while still fostering greater uptake in new technology – a nuanced approach to various markets is therefore needed.

 

  1. Subsidies should decline over time and ultimately be phased out. The purpose of EV subsidy programs should be to support a market transition where necessary (see number 4) but ultimately for the risk and reward of investment to be competed for by private entities. In coming years there will be aspects of EV markets that require greater public subsidies and others where little to no public assistance is required.

 

  1. Utilities should reform commercial and residential rate design to better incorporate EV charging.
  • Commercial fleets and fast charging sites can be disproportionately impacted by traditional rate structures, namely demand charges. These charges, however, are not the only way to equitably and fairly collect grid costs – greater utilization of time-of-use (TOU) volumetric charges and peak adders (distribution and generation) can incent optimal charging behavior and equitably collect the costs charging imposes on the system.

 

  • Residential customers should have the opportunity to opt-in to an EV TOU rate if they purchase or lease an EV. In particular, it is critical that the off-peak price (usually overnight) provide significant savings over gasoline, which also incents customers to charge at the right times. Consumers who take advantage of these off-peak prices save more money and avoid expensive electricity purchases and potential distribution upgrades to the benefit of all ratepayers.

 

  1. Anticipate EVs in new building design, starting now. It’s easier to change buildings in the planning stage rather than through retroactive upgrades. For example, updating building codes to ensure there is sufficient space and electrical capacity for charging stations will save many headaches down the line when tenants wish to buy an EV, and allows the purchase decision to be made more easily. This is particularly critical for apartment buildings and townhomes, which do not traditionally have access to charging infrastructure creating barriers to adoption.

 

  1. Very risky technologies should be the responsibility of private companies or the government. All investment in new sectors carry some risk, but certain EV investments are riskier than others. For example, at this time fast charging stations, usually 50kW or greater, contain significant risk due to the fact that there are three different charging standards and power levels will increase as consumers demand faster speeds. This type of investment risk is best borne primarily by private entities or the federal government; in the absence of federal policy, states and private entities should bear the risk of this technology, not utility ratepayers. One example is the EPA’s settlement with Volkswagen because it allows the cost and risk of fast charging stations to be borne by a private company, to the benefit of the public. This should not be considered charity – automakers like Volkswagen may be poised to reap the financial rewards of electric vehicles in future years.

 

  1. Future electricity production must be cleaner than it is today. Last but certainly not least, as the electric grid gets cleaner so too do the EVs that charge off of it. Given that solar and wind costs are increasingly competitive with fossil fuels, there is little excuse to continue favoring coal and gas over renewable sources of electricity.