The outline of the Biden administration’s new infrastructure investment plan promises a bright future for EVs, even if many of the details remain unknown. The plan sets out a vision in which EV adoption is rapidly accelerated beyond the approximately 1% market share of vehicles currently in operation and about 2% share of new sales.
This is welcome news to those who believe that mass-market EV adoption is critical for enabling the U.S. to reduce carbon emissions. While everyone has their own opinion on what is needed to drive EV growth, we applaud the boldness of the plan.
Sagewell’s data demonstrates that a focus on marketing the vehicles directly would likely offer a better return on investment than building public EV charging infrastructure, if the goal is to increase the number of EVs in operation. Greater EV adoption is achieved by encouraging those for whom EVs are a perfect fit to buy them, and that is a notable percentage of the population.
One of the key target audiences are drivers who do not need public charging infrastructure because they can charge at home or at work. These people do not need expensive charging assets that are very rarely used, and the near-term EV sales goals can therefore be met without large investment in public charging infrastructure.
Using the Electrify America settlement data, the average DC fast charger in California is in use about 1% of the time, or about 15 minutes a day. And this is in the state where EV penetration is highest. The vast majority of driving miles are local trips for commuting, school runs, grocery store visits, etc. The data shows that EV drivers charge their vehicles at home; that is the place where we need to deploy smart EV charging solutions.
But, the primary goal is to get more EVs on the road, and we must start making faster progress. An imperfect plan is better than no plan at all. With the specifics of the infrastructure bill still unknown, and the path from bill-to-law fraught with challenges, utilities and communities can take action now to get a head start on their EV future.
Regardless of where charging happens, utilities have much to gain from EV revenue. If EVs can reach 20% to 50% market share, electric utility revenues will grow significantly, and margins may grow even more (since much of grid maintenance is fixed cost). Our analysis has shown that even a modest 5% increase in off-peak revenue can increase total margins by 50%.
We also recognize that such growth comes with some significant risks for utilities and grid stability. As we have discussed at length previously, costs from on-peak charging can erode much of the revenue and margin benefits that come with charging energy revenues.
The need for charging load management arises from EVs plugged in at homes in the afternoons and evenings. Additionally, if too many EVs come online in the same neighborhood, investments in new infrastructure assets may become necessary.
Utilities should be putting EV load management strategies in place now to mitigate those risks. Playing catch-up once EVs are already widespread will be difficult.
Stay tuned: This blog post is the first in a series of posts on the Biden administration’s infrastructure plan. Future posts will delve into the potential implications for utilities, the EV industry, heat pump growth, and grid management. Of course, many of the details may change as the prospective bill navigates the halls of Congress. We will be following its progress closely and will bring you updates as we learn more about the potential impacts for utilities.