Pity the utility company. For decades, electricity demand just went up and up, as surely as the sun rose in the east. Power companies could plan ahead with confidence. No longer. Recently, the Tennessee Valley Authority scrapped its 20-year projections through 2035, since it was clear they had drastically underestimated the extent to which cheap renewable energy and efficiency measures would depress demand for electricity from the grid.
But there is a bright spot for utilities: electric vehicles (EV), which make up 1% of the US car market. For years, that market barely registered on utilities’ radar. As EVs find growing success, utilities are building charging infrastructure and arranging generous rebates. Pacific Gas and Electric, Southern California Edison, San Diego Gas & Electric, and New Jersey’s PSE&G have partnered with carmakers to offer thousands of dollars in rebates for BMW, Nissan, and other brands.
Now utilities are asking Congress for help as they attempt to keep tapping into EV demand. A collection of 36 of the nation’s largest utilities wrote a letter (PDF) to congressional leadership on March 13, asking for a lift on the cap on EV tax credits. The signatories’ include California’s Pacific Gas & Electric, New York’s Consolidated Edison, the southeast’s Duke Energy Company, and others covering almost every state.
At the moment, Americans who buy electric vehicles receive a $7,500 federal tax credit (along with some state incentives) for each vehicle. That full credit begin to phase out after the first 200,000 EVs sold by each carmaker in the US. Six months after that threshold is crossed, tax incentives begin to decline, and disappear entirely after about a year.
Tesla’s customers will likely see their tax credits sunset this year, followed by GM and Nissan. Tesla CEO Elon Musk has said that puts them at a disadvantage to foreign automakers such as Germany’s Volkswagen and China’s Volvo, which are just starting to sell EVs in the US. That would also dampen sales of EVs just as utilities need customers to plug their cars into the grid. Electrifying US cars and non-commercial trucks would add 774 terrawatt hours of electricity demand, nearly the same as the entire US industrial sector, Bloomberg estimates. Globally, EVs are expected to drive electricity consumption up 300-fold by 2040 (pdf), to about 5% of total consumption.
Politicians, as well as energy analysts, agree that the current arrangement is not ideal (paywall). Options range from lifting the cap entirely to sunsetting the credits for all automakers at the same time, so no company is at a competitive disadvantage. Utilities are lining up behind an effort led by Oregon senator Jeff Merkley to eliminate the cap if Congress passes a spending bill to keep the government open by next week.
Their letter argues that the EV market can help support grid services, integration of renewable energy and enhanced efficiency of the electric grid. “It will also allow the utility industry to enable an electrified transportation future that creates and sustains more American jobs, reduces our reliance on foreign oil, makes our air cleaner, and our communities more sustainable,” the letter states.