Electric Vehicles: The Case for (and Against) Incentives

Fortnightly Magazine - April 15 1996
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Electric vehicles (EVs) hold interest for utility companies around the world. According to John Dabels from General Motors Corp., air-pollution regulations in the United States could translate into production of 300 to 400 thousand EVs per year, once requirements in states like California mandate a 10-percent market penetration for zero-emission vehicles (ZEVs).

California utilities have been working vigorously on a combination of research and incentive programs to meet the EV production levels implied by ZEV targets. Utility proposals have included vehicle acquisition for company fleets, RD&D projects, residential infrastructure development, as well as battery incentives (See bibliography: Pacific Gas & Electric 1992; Southern California Edison 1993; San Diego Gas & Electric 1993) .

The utilities conceived these proposals after the California Public Utilities Commission (CPUC) encouraged PG&E to use ratepayer funds to achieve "substantial market penetration of motor vehicles fueled by compressed natural gas" (Cross 1995). But the CPUC has moved to a more restricted approach with the passage of Assembly Bill 3229. Phillip Cross explains in the May 1, 1995, issue of Public Utilities Fortnightly that A.B. 3229 was introduced to define narrowly the interests of ratepayers and to specifically ban rate hikes as a method of funding programs to promote EVs or other low-emission vehicles (LEVs).

Regulatory policy has also seen changes at the California Air Resources Board (CARB). The CARB initially set ZEV goals to take effect in 1998. Two percent of the vehicles produced and delivered for sale in California by the seven largest auto manufacturers would fall in the ZEV category. That percentage would climb to 5 percent in 2001 and 10 percent by 2003. But the CARB has recently decided to suspend the percentage requirements for 1998 to 2002, and to ask for memoranda of agreement with each of the seven major automakers for the near term. The CARB retains the 10-percent ZEV production requirement in the 2003 model year and beyond (CARB 1996).

The CARB's recent decision eases the pressure on California utilities to work aggressively toward the ZEV targets for 1998. California utilities now have the chance to take a fresh look at how their role vis á vis EVs will complement actions taken by the government and auto manufacturers. Utilities in Eastern states will have a similar opportunity to rethink their policy toward EVs. (Several have proposed implementing the California air-pollution rules, including the ZEV requirement.)

This article summarizes findings from a major research project I helped conduct on EVs and their impact on Southern California Edison (SCE).1 The project began by assessing how SCE would change its use of existing generators, and whether it would have to expand its resource plan to serve the EV loads. The project concluded with an analysis of incentives to

promote the sale of EVs. The research did not focus on the "rush to EVs in 1998." Rather, the focus concerned the long-term impact of EVs on utilities, and the best combination of utility and state incentives to promote EV sales.

EV Scenarios for SCE

The project began by reporting the impact of EV loads