Driving Out Pollution: How Utilities Can Accelerate the Market for Electric Vehicles

In this June 2016 report, the Natural Resources Defense Council (NRDC) writes that with more than 450,000 modern EVs in the United States alone, policymakers and utilities need not rely upon conjecture to place transportation electrification on the right path to meet air quality, climate, and equity goals while supporting the grid and facilitating progress toward other clean energy goals. If regulators and the utilities under their jurisdiction fail to take timely action, the expansion of the EV market could stall and EV charging could strain the grid, necessitating otherwise avoidable costs. However, with the right policies and programs, utilities could provide widespread benefits to all customers, reduce exposure to dangerous air pollution and the worst effects of climate change, and provide consumers with a viable alternative to the volatile world oil market.

Regulatory directives will be crucial to this effort, but simply commanding utilities to do the right thing is not always sufficient; the utility business model for transportation electrification should be aligned with societal interests. This has been proved repeatedly with respect to energy efficiency; states in which regulators have decoupled the recovery of authorized expenditures from actual volume of electricity sales in order to remove the disincentive for utility investments in energy efficiency consistently triple their efficiency savings, reducing bills for all customers. But removing disincentives does not go far enough. Regulators should consider performance-based earnings opportunities to encourage utilities to accelerate transportation electrification in a manner that supports the grid and facilitates the integration of renewable energy, in addition to the three phases of utility EV market acceleration policy outlined in the report.

While they are generally aware of the potential benefits associated with widespread transportation electrification, many utility executives remain focused on other, short-term issues that go straight to today’s bottom line. Consequently, even in utilities with robust transportation programs, EVs remain a secondary priority. Funding for transportation teams can be erratic and is often dependent on the particular interests of company executives. Regulatory incentives should be realigned to ensure that the most profitable option for utility shareholders minimizes adverse system impacts, facilitates the integration of renewable generation, and maximizes system benefits and consumer savings relative to gasoline. This would provide a clear and durable signal to utility leadership to accelerate the pace of transportation electrification.