February 9, 2023

EV Inevitability: What the 2035 Auto-Manufacturer Commitment Means for Utilities

9 Min. Read

 

The Infrastructure Investment and Jobs Act was created to improve the U.S.’s aging infrastructure, jumpstart the economy, and ultimately change the way Americans live, work, and travel. The act creates incentives for electric vehicle (EV) charging stations, local energy and parts production, and helps fund the switch for Americans as they transition to more energy-efficient appliances. With the push to increase EV adoption, thereby lowering gas usage, utilities, as well as the auto industry and material suppliers are sure to benefit. The auto industry worldwide is also responding to modern needs, revamping product lines to manufacture electric vehicles (EVs). For utilities, it is time to determine the impact the EV revolution will have on demand patterns and integrate EV charging and load-shifting capabilities into grid planning. Major automakers were a key part of this act, committing to reduce carbon emissions by producing only hybrid and EV cars by 2035. Several “Rust Belt” states are already seeing an economic revival as a result of this shift, with many companies now producing EV batteries in this newly dubbed “Battery Belt.” Utilities will be required to adapt as a result of this widespread adoption, supporting the EV charging infrastructure deployment as electric vehicles continue to replace traditional internal-combustion engine (ICE) vehicles.

The Infrastructure Investment Act’s key provisions and accompanying changes are already underway, but it’s important to recognize the impacts they will have on the grid, utility electrification, and local, regional, and federal economies.

Key Provisions Spur Transition

Signed in 2021, the $1 trillion Infrastructure Act was touted as a once-in-a-generation federal effort to shore up and modernize the country’s infrastructure and includes billions of dollars in funding for roads, bridges, passenger rail, drinking water, and high-speed internet. The bipartisan infrastructure act also features funding to deploy public EV transit and charging stations across the country, including electric buses and other replacements for ICE vehicles.

• $7.5 billion to provide EV purchase incentives and create a national network of EV charging stations. Most EV charging to date has been at single-family homes and work sites. To facilitate the full transition to EVs, the act seeks to install public charging stations, as well as the networks to keep them running, along highways, in rural areas, and in dense urban areas with rows of multi-family dwellings. The administration’s goal to install 500,000 public chargers by 2030 is a start, but some estimate that more chargers will be needed, particularly DC fast chargers that require higher voltage connections but offer the benefit of an 80% charge in as little as 30 minutes. All fifty states have now announced their deployment plans.
• $5 billion for nonprofits, states, and local governments to adopt low-zero emission buses. The legislation will deliver thousands of electric school buses nationwide, which will help protect millions of children and bus drivers from continual exposure to pollution from aging ICE buses.
• $65 billion for a clean, renewable energy grid. The goal is to upgrade our aging power infrastructure. It includes funds for building miles of new, resilient transmission lines to expand access to renewable energy. The measure also created a Grid Deployment Authority, which will invest in the development of better electric transmission and distribution technologies and promote smart grids that offer greater energy resilience.

The 2022 Inflation Reduction Act also included provisions and savings for a variety of industries seeking to reduce carbon emissions. For example, it boosts EV adoption by offering financial incentives for EV purchases and charger installation. Additional tax inducements to install energy-efficient appliances in homes, particularly for removing furnaces, stoves, or other equipment running on fossil fuels and replacing those with appliances that operate via electricity, will help to modernize homes across America with newer, greener appliances, reducing the strain on our electric grid and reducing household energy costs.

The 2035 EV Commitment from the Auto Industry

When people first began discussions on phasing out new ICE cars by 2035, the goal seemed aspirational at best. Now, the transition to a U.S. where all new cars and trucks sold are electric, or at least hybrid appears to be feasible. The transition to an electric-fueled future was further boosted by a 2035 EV commitment made by major automakers. All U.S. auto manufacturers have EVs in production or on the way, and several have announced their intentions to stop producing new vehicles that run on gas or diesel by 2035 – General Motors, Nissan, Volkswagen, and Ford are just a few of the firms have announced their commitment to an all-electric lineup.

While new-car demand still favors ICE autos and trucks, that preference is changing as consumers take note of ever-rising gas prices, greater EV model availability, and the increasing visibility and accessibility of charging stations. Legislation at the state level is helping make electrification inevitable. California, which has its own emission standards, drove the change by banning the sale of ICE vehicles after 2035. The California Air Resources Board has established gradual milestones, beginning with a plan that 35% of new passenger vehicles and light-duty trucks sold in the state must be zero-emission versions by 2026. The target increases to 51% in 2028 and grows each year until it reaches the 100% 2035 EV commitment.

Other states, including New York, New Jersey, and Massachusetts, have followed California’s lead. By mid-2022, 12 states had proposed similar standards, and others are considering them.

How has the public reacted? In California, auto sales may reach the goal ahead of the 2026 model year. In 2022, 5% of all U.S. new auto sales consisted of electric vehicles, whereas, in California, 18% of all new vehicle sales for 2022 were electric cars.

Gridlock or Not?

Utilities need to consider the impact of the growing number of EVs on the power network and evaluate load projections that are built on calculations of EV charges happening simultaneously. Currently, off-peak rates encourage those with overnight access to chargers to take advantage of off-peak times, but once EVs dominate the highways and parking lots, there will likely be more drivers charging during the day as well. It’s important to consider these charging behaviors and work to mitigate the risk of grid overload through proper management and intentional planning.

Estimates vary on the impact EVs will have on grid capacity and utility electrification, with some anticipating that energy demands could increase by as much as 30%. While these numbers may sound intimidating, actual statistics collected in the four states with the with highest electric vehicle adoption rates have not experienced these drastic changes in energy demand and consumption. While these states do have the highest EV usage, they have also realized increased renewable production and benefited from the ability to charge EVs in off peak hours. Studies show that even at 100% EV use, energy demand will not increase as significantly as when other  electrification innovations are adopted, such as installing home air conditioning.

The infrastructure act also budgeted $7.5 billion for nationwide grid upgrades and a national network of charging stations. Many utilities are also taking advantage of this opportunity to invest resources in efficiency improvements. While the energy grid is due for a major overhaul, this is more in part due to aging than from growth in demand due to EVs and electrification. Regardless of the reasons, utilities will need to upgrade their grids and create new business models to support EV rollouts.

Some estimates forecast that the additional load on the U.S. power grid will increase by 2-3% annually over the coming decade. Currently, much of the electricity consumed is comprised of natural gas and coal but as the energy transition continues to expand, this will shift to larger amounts of renewable energy generated from wind, solar, and hydroelectric wherever feasible, as well as from the use of battery storage and bidirectional capabilities. More EVs are now being produced with bidirectional charging capabilities, essentially creating a fleet of portable battery storage units that can be incorporated into grid plans to provide supplemental electricity during peak demands and outages.

Employment and Health Benefits

Growing EV deployment will also have economic ramifications. Utilities and communities need to join in planning for the economic effect EVs will have, particularly in areas dominated by declining industries such as oil production. Auto plants can be retooled to make EV models, new developments are underway, and old factories are being revitalized for a bright and resilient future with renewable resources.

Rapid transportation electrification, charger installation, and grid changes are estimated to increase employment by two million. Additionally, the domestic production aspects of federal incentives are leading many factories to reconfigure production, to bring plants for batteries, EVs, energy storage, and related devices state-side. In the last two years alone, more than 15 large US lithium-ion battery factories have been built or expanded in the corridor between Michigan to Tennessee and Georgia to New York, breathing new life into the area now known as the Battery Belt. These facilities are also conveniently located near auto-production plants, which will mitigate future supply chain bottlenecks.

Another economic advantage of the move to EVs includes lower operating costs for drivers. Researchers found that the transition to 100% EV new car and truck sales by 2035, coupled with an increase in clean energy, could deliver $2.7 trillion in savings for consumers through 2050, or about $1,000 per household annually, in lower refueling and maintenance costs.

More importantly, studies estimate that the EV transition’s main goal — reducing greenhouse gas emissions — will save lives. Their predictions state that premature deaths due to ground-vehicle pollution will decline 56% by 2035 and 96% by 2050. To accomplish this sooner, utilities should focus EV charger deployment plans on heavily trafficked corridors. As people see more charging stations along their routes, they will be increasingly confident about making the EV transition.

Leading the Way

The electrification of autos and appliances is accelerating and it is vital for utilities to anticipate the growing needs of their customers. By working together, we can ensure that our utilities are prepared for the rapid deployment of EVs and the infrastructure and capabilities required to support EVs and other electrification technologies. The auto industry is changing to promote electric vehicle adoption, the world is transitioning to a cleaner future, and utilities need to prepare for the impact that this thriving demand for electric vehicles and other electric-powered appliances will have on infrastructure.

Qmerit is the North American leader in the electrification movement, helping more than 261,500 homeowners and businesses shift away from fossil fuels and toward a more sustainable, electric-powered future. We make it easier to go electric by providing installation and integration services nationwide, as communities pair with local governments and utilities to implement energy solutions that benefit us all.

As a trusted partner to leading brands in the electrification movement, our goal is to simplify the switch and provide a seamless experience. To learn more about how we can help accelerate your electrification program and ease the transition for you and your utility customers, contact Qmerit today.