Four Trends That Could Accelerate The U.S. Electric Vehicle Market In 2019
- Jan 9, 2019 7:00 pm GMT
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Electric vehicle (EV) policies helped the U.S. pass 1 million total salesin 2018 and electrification is on the minds of most forward-looking utilities—but despite this momentum, four major trends will determine if EVs accelerate or slowdown in 2019.
California will continue setting the national pace on EV policies and deployment, and consumers will have more EV choices in 2019, although federal EV incentives will be at risk. Utilities will continue playing a key role in EV deployment by building charging infrastructure, providing incentives to increase consumer demand, and ensuring that charging is a grid benefit. Last but not least, the Trump administration will fight policies and programs promoting zero emissions vehicles (ZEVs).
While EVs have accelerated across the U.S., transportation remains the country’s largest source of emissions and EVs are the most promising technology to decarbonize this sector. With climate change impacts becoming more serious and roughly a decade left to avoid dangerous global warming, continued EV deployment is key to a safe climate future.
California will drive U.S. EV deployment even further in 2019
California will drive EV deployment even faster across the country in 2019. California constitutes half the U.S. EV market, primarily due to state policies which are only strengthening.
In 2018, Governor Jerry Brown signed Executive Order B-48-18 to boost state electrification goals to 5 million ZEVs on the road by 2030, and 250,000 EV chargers in the ground by 2025. Governor Brown also signed six electric vehicle bills during the Global Climate Action Summit to promote EV adoption and heavy-duty vehicle electrification. Governor-elect Newsom’s strong EV record as San Francisco’s Mayor indicates he is keen to assume this mantle starting in 2019.
- California will continue battling the federal government to preserve its clean car standards, which create stricter vehicle emissions limitations than those required by the U.S. EPA. Thirteen states and the District of Columbia (most recently joined by Colorado) now follow these standards, comprising approximately 55% of the U.S. vehicle market, meaning automakers can’t avoid following the state’s strict compliance standards. Automakers also benefit from stringent standards through global competitiveness – rolling back standards could cost Detroit-based manufacturers $1.08 billion.
- The California Air Resources Board (ARB) will drive electric bus adoption through the Innovative Clean Transit (ICT) rulerequiring all public transit agencies fully convert fleets to ZEVs by 2040. Twelve state transit agencies have already committed to zero-emission bus fleets, and the ICT will require agencies without commitments to make 25% of transit purchases emission-free starting in 2023, and ramping up to 100% in 2029.
- California’s CALGreen building code, includes an EV readiness measure requiring 6% of parking spaces in commercial buildings and 3% in multi-unit dwellings (likely increasing to 10% effective 2020) be electrified. This highly cost-effectivepolicy saves up to $8,000 per parking space in multi-unit dwellings and has been emulated by dozens of cities, states, and provinces across North America.
- The California Governor’s Office of Business and Economic Development (GOBiz) will streamline charging station permitting by releasing a guidebook in 2019 to help local jurisdictions improve permitting, which currently varies greatly across the state by ease and price. The permitting guidebook will be the first of its kind and will likely be followed by jurisdictions outside California.
Electric vehicles will get bigger and better
EVs will get bigger and better in 2019. Automakers’ steady drumbeat of electrification announcements is promoting a wider range of vehicles to consumers. Most of the EVs currently available to consumers are sedans, with few exceptions (e.g. Tesla Model X and Chrysler Pacifica).
But not only will more EV options be available for consumers, the options will be better. 2019 will be the first year the average range of battery range for all models will be greater than 200 miles. As consumer choices increase, attitudes towards EVs continue evolving. The National Renewable Energy Laboratory reports 46% of peoplethink EVs were better than or as good as conventional gasoline vehicles in 2017.
2019 won’t be the inflection point for cheaper cars, but costs will continue dropping steadily. Lithium-ion battery prices have decreased an estimated 80% since 2010, and will fall another 45% by 2021—as battery prices plunge, vehicle prices decline, since battery costs currently compose nearly half the price of an EV. Cost is often a major consumers barrier—60% of surveyed consumers say they won’t pay a premium for an EV, but adoption is becoming more equitable: California’s state EV rebate recipients have household incomes greater than $100,000 and 72% are male, but only 56% percent identify as white or Caucasian.
Lower costs and more vehicle models for medium and heavy duty applications mean 2019 will also be a big year for transit agencies to electrify their fleets. More and more transit agencies are converting to electric bus fleets, and additional medium duty EV models are available. Transit agencies are saving money on electric buses compared to conventional due to lower operational and fuel costs – the Chicago Transit Authority is saving $25,000 annually per bus.
Utilities will increase their transportation electrification role
Utilities are key players in transportation electrification since they provide EV “fuel,” making them necessary partners to create adequate infrastructure and a vested interest in EV adoption. Energy Innovation modeling forecasts EVs will compose 60%-75% of total new light-duty vehicle sales in the US by 2050, representing 13%-15% of national electricity demand.
Utilities are rolling out programs to meet EV demand. In addition to rebate programs, many utilities are creating time-of-use (TOU) programs to shift charging times toward beneficial times for the grid, as well as demand response programs to manage charging behavior, reducing peak load when the day-ahead wholesale market signals stress on the grid.
Utilities will debut more EV programs in 2019, particularly municipal utilities (“munis”) and electric cooperatives ("co-ops"), including EV incentives and TOU rate pilots. One-third of all U.S. electricity customers are served by munis and co-ops, so the impact of EV programs at these entities is significant. Large investor-owned utilities (IOUs) have legislative and regulatory mandates requiring them to create EV programs, so as IOUs create best practices and realize benefits of EVs, smaller publicly owned utilities (POUs) will follow suit.
Federal tax credit under threat, other incentives more plentiful
Unfortunately the $7,500 federal consumer EV tax credit, currently limited at 200,000 tax credits per original equipment manufacturer (OEM), will be hotly contested and severely threatened in 2019 – but it could be counterbalanced by state and utility incentives.
Many automakers lobbied aggressively for the federal EV credit during the 2017 tax overhaul, and it avoided the chopping block. Since then, competing EV tax credit proposals have sprung up —Trump proposed eliminating the tax credit for all automakers and a Senate bill proposed lifting the 200,000 vehicle cap with a 2022 phase-out . General Motors proposed its own nationwide EV incentive program, but was quickly criticized for undercutting existing EV goals. GM and Tesla are nearing their caps and are lobbying for extension with the message that incentives must exist until EVs reach price parity.
Meanwhile, many states and utilities are expanding incentives. Oregon created a statewide EV rebate in 2018, and California is expected to reform its Low-Carbon Fuel Standard EV program in 2019 from a utility rebate to a point-of-purchase rebate to help consumers drive EVs off dealership lots. Dozens of utilities have created EV incentivesand charging infrastructure, which will continue to boost the market, and hopefully spur others to follow suit.
An EV milestone – and a fork in the road – in 2019
2019 marks ten years since the federal EV tax credit was created. This important milestone comes with an uptick in demand and a nearly complete reversal in automaker interest in EVs. Utilities see EVs as a smart business investment, and consumers are changing their fueling behaviors as EVs become bigger and better.
This year promises California leadership, heightened consumer choice, more sophisticated EV utility programs, and changing incentives. While federal policy threats loom, the market is taking off and prices are plunging – EVs will grow dramatically in 2019 as consumer demand climbs.