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Where should we be going with Electric Vehicles?

Where should we be going with Electric Vehicles?

Fred Fastiggi, Shoreline Energy Advisors, LLC

 

I wonder how many recall the technical evolution of home entertainment recording medium.  While I’m probably missing a step or two in its evolution, I believe home entertainment recording started in earnest with the introduction of VHS/Betamax, followed by Video 8, Mini Cassettes, DVD’s and now, home streaming.  Streaming seems to have emerged to become the favorite medium with wide-spread market acceptance offering technological efficiency, quality, consumer convenience and economy.  For those like me who made investments in early stage home entertainment equipment, you too probably have a hallway closet full of obsolete recording equipment, tapes, cassettes and video disks that can’t even be sold on eBay.  

That type of rapid technological obsolescence experienced in home recording, is a haunting forewarning of where we may be heading with current head-long forays into electric vehicle (EV)charging and public funding of their installation. Although the environmental benefits of electrifying the transportation sector are indisputable, a sober evaluation of where the technology is today, and where it is likely to be going, in terms of design, functionality and cost, has yet to occur.

At the risk of defiling the punchbowl, perhaps our legislators should consider a pause in the rush to promote electric vehicles, slowing down until the market has evolved to where both batteries and charging protocols have a universal standard.  

By my count there are at least seventeen manufacturers selling electric vehicles in the U.S. today making fifty-three models.  These vehicles have over a dozen different charging rates, and over a dozen different battery sizes that accept charges from several different voltage levels.  Even the most energetic proponent of electric vehicles would have to concede that this stage of development indicates an extremely fragmented vehicle battery and charger market in need of significant consolidation before a definitive convention takes hold that is universally accepted, utilized and practical, while also being economically viable.  

A Regressive Policy that Accelerates a Dwindling Public Funding Source

With electric vehicles in general, we may be falling into a trap, whipped into an emotional feeding frenzy by varied special interests who are the only ones benefiting from early and reckless public investment in early stage EV technologies.  

In my home state of New Jersey, current plans for EV subsidies are as regressive as anything we have seen in recent memory.  As proposed, the uniform electric rates each electric customer pays will have a single mother who is struggling to feed, shelter and clothe her family, subsidizing an electric Range Rover driven by the teenage children of a hedge fund manager!   We may want to give this more thought. 

Complicating this are competing demands for public subsidy on clean and reliable energy initiatives which are at an all-time peak.  Currently there are initiatives on the table (or already in practice) for solar, wind, biogas and nuclear generation, battery storage, resiliency and a long list of commercially viable energy efficiency options.  Logical questions are how much of these initiatives can ratepayers afford and what are our priorities?  Do we really want to utilize scarce public resources on early-stage technology likely to be quickly supplanted with evolving developments, or is taking a deep breath and waiting a short time for a standard to emerge, a more prudent course of action?

A Different Vision

There are a lot of visions on how Electric Vehicles will develop to transform our society.  Here’s one we might want to consider: 

  • Batteries and charging conventions (voltage, connections, etc.) will become standardized across all vehicle manufacturers
  • Ultra-fast charging capable of fully recharging an EV in ten to fifteen minutes will become the widely used standard 
  • Batteries will be capable of accepting higher voltage from ultra-fast chargers as well as slower chargers that may be more affordable for home installations 
  • Ultra-fast chargers will be too expensive to install at private homes but will instead become an available option at traditional gas stations
  • Today’s integrated fossil fuel companies will emerge to take a larger role in ownership of recharging stations, distributed generation and battery manufacturing      

Electric Convergence with Oil and Gas Companies

With exploration and production and refining and marketing investment for fossil fuel products becoming less attractive, companies like Exxon-Mobil, BP-Amoco, Chevron-Texaco and other multinationals who own and operate retail gas stations, will make the investment in ultra-fast charging stations at existing station locations.  Their investment alternative in ultra-fast charging technology and perhaps even batteries and power generation, will provide a hedge to their expected loss of gasoline and diesel market share as the use of electric vehicles increases.  This investment in charging infrastructure can be made on the backs of their shareholders without public subsidy and is a logical extension of convergence and forward integration with electric generation, transmission and distribution interests that has been expected for decades.       

Re-Calibrate our Thinking on Per-Mile-Cost of Driving

While current financial justifications for EV market penetration have been based on an assumed advantage in their per-mile-cost for driving versus that of gasoline vehicles, this justification is based solely on variable cost and ignores the required cost of capital recovery for new investment in both the charging station and inevitable electric utility distribution system upgrades. Utility upgrades will be required to handle increased capacity demand that result from growing electric vehicle charging and the higher voltages required to facilitate more rapid charging. 

The future value proposition of EV’s will be based on:

  • Equality in refueling convenience (availability and time) with the current gasoline norm;
  • Parity to gasoline vehicles in the full cost-per-mile-driven;
  • Providing for a decidedly cleaner environment;
  • Better vehicle performance, and;
  • Lower vehicle maintenance costs.  

With these significant competitive advantages, the per-mile-cost of driving an EV needn’t be less than the comparable cost for a gas vehicle, but it shouldn’t have to be more. 

What is Attainable in New Jersey?

Today’s gasoline costs for a mile-driven is approximately thirteen cents and at that level there is plenty of room in the pricing of EV recharging to cover the larger capacity charges in electric utility rates required to renovate the local distribution system.   There is also enough headroom to provide acceptable margins for the recharging station operator after covering both their variable costs and capital recovery.

Pricing for ultra-fast charging at thirteen cents per-mile-driven can accommodate a buildup to New Jersey’s goal of 300,000 new electric vehicles and development of 2,300 ultra-high-speed recharging stations over a short five-year period.   At that pricing level, utilities will be provided with over $300 million in new capacity payments while station owners will have enough profit to recover their investment in ultra-fast chargers in only two years.  

The regressive nature of current plans for financing both vehicles and charging stations is hard to reconcile.  Should early adopters who are likely to be more affluent have their vehicles and charging infrastructure subsidized by the less affluent? Why should a single mother, pay for your car and charging infrastructure when you will be benefiting from lower maintenance costs, better performance and a contribution to a cleaner environment by only paying what you would be paying today if you drove a gasoline vehicle? I don't have a good answer for that question.

The very real probability that today's charging stations will be obsolete when charging that facilitates a "full tank" in 15 minutes or less becomes widespread, is another cause for rethinking our approach. If that happens, we'll have many public charging stations, paid for with ratepayer dollars, that will be sitting idle. 

Shouldn’t EV owners who want to install lower voltage charging at their homes have a separate meter installed, solely used to measure vehicle charger demand and consumption?  That, in conjunction with new tariffs designed to address the load characteristics of residential EV charging places the burden of home charging, and any required residential utility system upgrades, on EV owners, eliminating the regressive nature of our current plans (although ultimately high speed charging widely available at gas stations should make the need for at home charging less necessary).  

Under this scenario there are no public subsidies but rather affordable bootstrap financing by users and charging station operators who will make rational economic decisions to invest in the technology. 

Fortuitously this scenario is not decades off into the future.  The technology for both ultra-fast charging and batteries that can accept higher voltage from ultra-fast charging exists and is in use today.

More Appropriate Legislation and Program Development at the Federal Level

If government views a transition to electric vehicles as a worthy public policy objective as most of us do, we should be capable of mounting a national effort on a scale similar to our former space program, with a goal of achieving commercial viability in the very near term.  It is that important.  Local initiatives by multiple state government only confuse the issues and naively spend scarce public money.  Impediments represented by the absence of universal standards on the type of charging and batteries used by vehicle manufacturers can be easily addressed through national legislation, programs and regulation.   

A deliberate and expedient effort to consolidate fragmented markets which impede market acceptance of electric vehicles should precede investment of local (i.e. state) public resources. Today’s EV equivalent of “VHS” technology is certain to experience rapid obsolescence and with it, our future regrets on the squandering of diminishing public funding, an inevitable fate of our current trajectory.

Fred Fastiggi's picture

Thank Fred for the Post!

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Discussions

Matt Chester's picture
Matt Chester on Jan 13, 2020 4:45 pm GMT

Complicating this are competing demands for public subsidy on clean and reliable energy initiatives which are at an all-time peak.  Currently there are initiatives on the table (or already in practice) for solar, wind, biogas and nuclear generation, battery storage, resiliency and a long list of commercially viable energy efficiency options.  Logical questions are how much of these initiatives can ratepayers afford and what are our priorities?  Do we really want to utilize scarce public resources on early-stage technology likely to be quickly supplanted with evolving developments, or is taking a deep breath and waiting a short time for a standard to emerge, a more prudent course of action?

This is an interesting issue, and I think the unmentioned elephant here is that perhaps this should be less of a scarce public resource. EV subsidies have helped the commercial viability-- both in purchases of the cars and in installation of public charging. But that said, EVs are only going to be as beneficial as we decarbonize the grid. Those goals need to go hand in hand and not pitted as competitors, which would be more viable if the pot we were pulling from was wider. Raising taxes is never popular, nor is taking money from other important/popular programs. But the rock is going to hit the hard place soon enough and prioritizing clean energy and clean tech is less about futurism and more about now than ever before. 

Do you see that public pot of resources increasing any appreciable amount in the coming years?

Fred Fastiggi's picture
Fred Fastiggi on Jan 13, 2020 6:30 pm GMT

Matt, I do agree with you about the importance and timeliness of clean energy programs.  With regard to EV's and charging stations my opinion is that a targeted and concerted effort on the national level to develop and implement ultra-fast charging and to standardize batteries in different vehicles would be more effective than having each state take a guess as to what is the right way to incentivize.  Here in New Jersey the proposals on the table are grasping at straws and are heavily influenced by "special interest" lobbyists and others who aren't focused on the interests of the public in general.  Despite a decidely liberal bent, the people of New Jersey seem to be violently opposed to any type of tax increase that effects them personally.  Many want the benefits of a cleaner environment but don't want to pay for it and are afraid to give carte blanche to politicians.   In the past governors who have gone out on the increase-tax bandwagon, have been quickly and unceremoniously dumped by voters. Despite good intentions, in some cases, politicians are far less prudent when using other peoples money to fund pet programs and many are unfortunately suceptible to influence from those who fund their campaigns (i.e. those special interests I referred to earlier).  I think the EV market would be easier to develop with incentives and programs at the federal level, particularly if the resources of a national R&D network and private investment are leveraged. 

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