Spring 2020 Journal: Evaluating California’s Electric Vehicle Policy

April 10, 2020 bppj California, Environment 0

This article is the third article featured in our Spring 2020 journal. For the complete journal, please see the “Journal Archive” tab above.

by Jake McDermott

Edited by: Randy Clopton, Fiona McBride, and Althea Lyness-Fernandez

This paper collects, summarizes, scores, and analyzes the electric vehicle policies of California, Massachusetts, and New York. Examining three different jurisdictions illuminates how state policy impacts the relative success of an electric vehicle market. The National Association of State Energy Officials (NASEO) have developed a useful rubric that offers a framework for scoring these states’ policies. The rubric allows users to score electric vehicle policy along several different metrics including upfront purchase incentives, subsidies for charging stations, and statewide commitments to vehicle electrification. Through the scoring process, I then propose that California shift how it implements its electric vehicle policies, in particular by restructuring its subsidies to provide drivers an upfront point-of-sale rebate rather than rebate-by-mail.

Introduction

Transportation Electrification to Reduce Greenhouse Gases

The recent Intergovernmental Panel on Climate Change’s (IPCC’s) Special Report on Global Warming showed that limiting global temperature rise to 1.5°C will require “rapid and far reaching” transformations in land use, energy, cities, and transportation [1]. To meet this urgent imperative, former California Governor Jerry Brown signed SB 100 into law in September 2018 [2]. SB 100 increases the state’s renewable portfolio standard (RPS) to 60 percent by 2030 and requires that 100 percent of all retail electricity originate from eligible RPS or zero-carbon resources by 2045. The RPS requires that utilities and other load-serving entities provide an annually increasing percentage of their energy from renewable resources. While California has made progress in implementing SB 100 and will make additional advancements in decarbonizing its electricity sector, the state must make further strides to reduce its greenhouse gas emissions. The electrification of transportation will be a key piece of the carbon reduction puzzle. It is in the state’s best interest to understand the impact that its electric vehicle (EV) policies have had on the state-wide market. It is also necessary to compare California’s electric vehicle policies with that of other states in an effort to evaluate existing programs and to recommend further improvements.

In November 2018, the California Air Resources Board (CARB) issued a progress report with stark findings: California is not on track to meet its legislatively mandated climate goals. In fact, while the report recognizes that the state will achieve its 2020 climate goals through reductions in greenhouse gas emissions from the electric power sector, it also indicates a net increase in transportation emissions. Even if EV sales grow enormously over the next 12 years, the state would still need to reduce vehicle miles traveled (VMT) to meet 2030 goals. Neither electrification nor reductions in miles traveled alone will suffice for the state to reach its goals; California will need to rely on both.

California’s path forward has the potential to serve as a blueprint for other emissions reduction policies in other states. While California’s EV policy is strong measured across many indicators, particularly in comparison to other jurisdictions, there is still great opportunity for improvement, especially if the state is to lead the way for others. To that end, California should:

  1. Reform its upfront vehicle purchase incentive, including how the incentive is applied and how annual funding is allocated;
  2. Reform electric vehicle infrastructure funding programs to allow third party developers to understand with certainty the annual levels of funding; and
  3. Improve upon its existing customer education resources like the DriveClean Buying Guide.

California Leads the Way in Electric Vehicle Policy

California Programs

California has made substantial progress in driving EV-forward programs through three central agencies: the California Energy Commission (CEC), the California Public Utilities Commission (CPUC), and CARB. Analyzing these programs and state-level policy commitments, alongside other state’s EV policy, provides insights into California’s progress to date as well as future opportunities for improvement.

The Low Carbon Fuel Standard (LCFC) through CARB provides EV drivers with credits for using “low carbon fuel” (i.e., electricity). Investor Owned Utilities (IOUs) receive the credits on behalf of drivers using their meters and sell them on the market. Part of the revenues are then given back to drivers in the form of a rebate. Annual rebates can range from $200 to $500. As a result of the enactment of SB 350 in 2015 [3], IOUs must now file transportation electrification proposals with the CPUC. The initial proposals included 15 pilot projects intended to electrify transportation of buses, trucks, and other transit vehicles in historically disadvantaged communities. A second round of proposals approved SDG&E to install up to 60,000 chargers at single family or multi-unit dwellings and PG&E to install “make ready” infrastructure for the eventual deployment of 234 fast charge stations. The CPUC also approved a new EV charging rate for the state’s smaller utilities to pilot [4].

CARB offers the Clean Vehicle Rebate Project (CVRP) [5], which provides rebates of up to $7,000 ($9,000 for low-income drivers) for the purchase or lease of new zero-emissions vehicles (EVs or fuel cell vehicles). Approximately 75 percent of eligible vehicles sold or leased within the first five years of the program have taken advantage of the purchase incentive. Since 2010, over 250,000 eligible vehicles received a rebate through the program. Each year, CARB undergoes a public input process which informs the annual budget for the CVRP [6]. This annual budget process also determines the annual funding levels for other programs offered by CARB. CARB offers a similar CVRP for public fleets [7] and hosts the Drive Clean [8] guide which helps individuals and organizations find incentives for the purchase or lease of a new EV in California and provides information about incentives for charging infrastructure.

The CEC funds the Electric Vehicle Charging Station Financing Program [9], which provides loans for the installation of EV charging stations. As noted in the section above, the CEC administers the ARFVTP which involves funding opportunities for electric vehicle charging infrastructure [10].

Other California Initiatives

California’s additional commitments to improving EV policy build on these agency programs. In 2016, former Governor Brown issued the Zero Emissions Vehicle (ZEV) Action Plan [11], which serves as a roadmap for how state agencies and the IOUs should plan to meet the state’s long-term goals for transportation electrification. The priorities outlined by the report include: consumer awareness and customer education, access to EVs for more Californians, the competitive and commercial viability of other non-traditional transportation sectors, and EV market growth and penetration beyond California. With respect to the light-duty EV market, the plan outlines several long-term strategies needed to advance the market. These include reducing the upfront cost of purchasing or leasing an EV, helping auto dealers promote additional leases and sales, and maintaining existing non-monetary incentives. Regarding upfront costs, the plan recognizes the need to implement a long-term funding plan for the CVRP as the state anticipates total sales will increase. Finally, while non-monetary incentives are important and can help push drivers towards EVs at the margin, they likely will not be as critical for EV adoption as reducing upfront costs, educational awareness, and ensuring adequate charging infrastructure across the state. Even still, the plan discusses maintaining ZEV access to high occupancy vehicle (HOV) lanes and establishing preferential parking policies and discounted fees.

California is also one of the original signatories of the Zero-Emissions Vehicle Memorandum of Understanding (ZEV MOU), a signed agreement between several states to incentivize the purchase or lease of 3.3 million EVs by 2025 and provide incentives to ensure that charging infrastructure is deployed. As a party to the ZEV MOU, California has committed to getting 1.5 million EVs on the road by 2025, 5 million EVs on the road by 2030, and 250,000 charging stations by 2025. Through the MOU, the states have agreed to create and participate in a task force to coordinate on reaching the collective EV goals and building out the charging infrastructure needed to support this transition.

Finally, California is a recipient of settlement funding from the 2015 Volkswagen Emissions Fraud Settlement [12]. The implementation of the $432 million from the Environmental Mitigation Trust is administered by CARB. Funding is meant to mitigate the nitrogen oxide (NOx) emissions resulting from Volkswagen’s usage of a “defeat device” in certain diesel vehicles. Funds can be used on a variety of projects initially outlined in the settlement consent decree.13 Eligible actions including the repowering, replacement, or electrification of medium and heavy duty vehicles and associated infrastructure.

Programs in Massachusetts & New York

Both Massachusetts and New York have pursued their own bold energy and environmental programs. California may be able to learn from the successes of these states as it looks to improve its own policies and programs.

Massachusetts

Taken as a whole, Massachusetts has a broad but shallow set of policies that incentivize the transition to EVs. The policies cover a range of areas including upfront financial incentives, incentives for the buildout of electric vehicle infrastructure, and a long-term goal of putting 300,000 EVs on the road by 2025.

The Massachusetts Offers Rebates for Electric Vehicles (MOR-EV) [14] program provides rebates of up to $1,500 for the purchase or lease of light-duty electric vehicles. The program is funded by the Department of Energy Resources (DOER). The Massachusetts Department of Environmental Protection (DEP) offers the Massachusetts Electric Vehicle Incentive Program (MassEVIP) [15], an open grant that provides funding for employers to install charging stations. DEP will provide 50 percent of the installation cost (up to $25,000 total) for hardware related costs. DEP also offers an additional program, the MassEVIP Fleets Incentive [16] which provides incentives for municipalities, state agencies, and public colleges to electrify their fleets by reducing the upfront cost of an EV and an incentive for installing certain charging stations. Massachusetts is another of the initial 9 signatories of the Multi-State ZEV Task Force [17] and has committed attaining 300,000 EVs by 2025.

Massachusetts has also received $75 million in settlement funds through the 2015 Volkswagen emissions fraud case, which it has invested in electrifying transportation. In Year 1, MA DEP intends to use the funding to purchase electric transit buses and expand EV charging infrastructure, among other goals.

New York

New York has similar policies to Massachusetts and California. The New York State Energy Research and Development Authority (NYSERDA) is a state level executive agency that is responsible for the implementation of many of New York’s policies. Charge NY is an ongoing effort by NYSERDA in partnership with the New York Power Authority (NYPA), and the NY Department of Environmental Conservation (DEC) [18]. Charge NY acts as a platform to explore existing rebates and incentives for a wide range of transportation electrification initiatives. Charge NY also includes Governor Cuomo’s goal of building at least 10,000 charging stations by 2021. Programs include Drive Electric, which offers an upfront $2,000 rebate for the purchase or lease of EVs through the Drive Clean Rebate, and the New York Truck Voucher Incentive Program (NYT-VIP) [19].

NYSERDA also offers incentives for the installation of EV charging infrastructure [20]. Charge Ready NY offers rebates of $4,000 per port for certain chargers across different use cases [21]. Stations can be sited at public parking structures, workplaces, and multi-unit dwellings . The New York Department of Taxation and Finance also offers a $5,000 tax credit for charging infrastructure [22].

Like Massachusetts and California, New York is a signatory to the ZEV MOU. Pursuant to the state’s participation, New York has set a goal of 843,000 EVs in the state by 2025. Like Massachusetts and California, New York is a party to the Volkswagen emissions fraud settlement. NY DEC issued the final mitigation plan under the settlement which provides funding for a variety of replacement and repower projects [23]. New York has been allocated a total of over $127 million and eligible projects include the electrification of buses and electric vehicle charging stations.

Methodology and Evaluation

The PEV Policy Evaluation Rubric, issued by the National Association of State Energy Officials (NASEO), offers a tool to evaluate California, Massachusetts, and New York’s state-wide vehicle policy [24]. Table 1 below shows the scores for each state, broken down by subcategory. The scores indicate that across most sub-categories, each state tends to perform similarly. It is possible that this is a function of relatively aggressive electric vehicle promotion across all three jurisdictions.

While there are several categories that contribute to a jurisdiction’s score, the analysis below will only focus on the stark differences in “Vehicle Purchase Incentive.” This is due in part to the oversized role that that category plays in overall scoring—30 percent of all possible points—and because of the relatively large differences in each state’s performance.

Despite California’s $7,000 rebate being much higher than New York’s $2,000, California’s purchase incentive score is significantly impacted by the type of incentive and the longevity of the funding. The New York Charge NY program was funded upfront by the state, with funds disbursed over time. While there is a set limit in the overall funding levels for Charge NY, drivers do not need to be concerned about the availability of funding for the vast majority of the program length. This gives New York a score of five out of five for longevity. California’s CVRP is subjected to an annual budget process whereby CARB determines annual budgets. Other programs like the CVRP often will need to compete with the CVRP for the very limited funding available. The annual budget process provides little to no funding certainty which nets California a score of one out of five for longevity. CARB hosts a website that details the availability of funds [25], but there is still a large amount of annual funding uncertainty. These scores are not directly awarded to the states but are rather a critical piece of the formula that determines a state’s vehicle purchase incentive score. This is also true for the type of incentive.

Charge NY and the CVRP also differ in their incentive structure. Charge NY is an incentive applied directly at the time of purchase, while the CVRP is a rebate that is mailed to drivers after they have made their purchase. EV purchasers in New York are able to drive out of a dealership with the incentive directly taken off of the sticker price. According to the CA CVRP frequently asked questions, drivers can wait up to 90 days prior to receiving their check [26]. This is not helpful for many middle or lower income drivers interested in switching to electric vehicles. That $7,000 rebate value (or $9,000 if you are a low-income driver) can be significant for drivers on a fixed income, but not if drivers are unable to immediately access it. New York is given 10 points out of 10 for their type of incentive, while California is given seven points.

Moving Forward

On the Horizon

During the summer of 2018, the nine signatory states of the ZEV MOU issued a new multi-state action plan for 2018-2021 which “presents 80 market-enabling action recommendations for states, automakers, dealers, utilities, charging and fueling companies, and other key partners to rapidly accelerate mainstream consumer adoption of zero emission vehicles, including plug-in hybrid, battery electric, and hydrogen fuel cell vehicles [27]”. Strategy recommendations fall into one of five categories: consumer education and outreach, charging and hydrogen fueling infrastructure, consumer purchase incentives, light-duty fleets, and dealerships. Given the relative importance of upfront financial incentives in the overall evaluation of state EV policy, it’s important to highlight here the overarching strategy and recommendations for states as they relate to consumer purchase incentives. The report outlines three high priority recommendations for the 2018-2021 period: advocating for maintaining the availability of the federal PEV and FCEV tax credits, continuing to provide state-level rebates, tax credits, and tax exemptions while expanding the program to include more low- and moderate-income drivers, and share information with each other on how to sustain predictable funding levels. While the action plan provides additional lower priority recommendations for states, the high priority recommendations above should directly translate into a higher state evaluation score from the NASEO rubric, which should be indicative of overall stronger electric vehicle policy. As could be expected, many of the policy recommendations outlined below closely mirror those from the multi-state action plan. This is evidence of the robustness of the results presented below and of the efficacy of the NASEO rubric; state level jurisdictions do understand the policy levers at their disposal to better create and structure EV markets.

Recommendations

Several key ideas and trends have emerged from the above evaluation that can help California craft and implement more effective electric vehicle policies. Ultimately, the goal of these policies is to decarbonize the transportation sector by building a stronger and more resilient marketplace. If building a market for EVs is the main method for decarbonizing transportation, the market construct must be customer-focused. The hodgepodge of incentives is confusing and unfriendly for drivers looking to make the switch. While certain programs and policies have visual aids or platforms to educate prospective drivers, the sheer number of state agencies, actors, and programs makes the task daunting. The following recommendations would simplify and enhance California’s existing EV policies.

First, California should reform the CVRP to ensure adequate and predictable annual funding and change the rebate from a post-purchase check to a point-of-sale incentive applied directly at the auto dealer. Providing a clear and predictable level of annual funding allows the EV market to function without seemingly random starts and stops in purchasing behavior. The problem with shifting amounts of annual funding is that market behavior (i.e., consumer purchasing decisions incumbent upon access to funding) can become fractured over time. Consider year one, where funding runs out 7 months into the fiscal year. As a result, purchasing decisions essentially fall off completely until the subsidy levels are restored in the following fiscal year. Additionally, a point of sale incentive is a much more effective policy compared to a post-purchase rebate check. Many lower income drivers do not have access to capital that would allow them to essentially front the cost of the subsidy to then get repaid by the state. As noted earlier, the CVRP subsidy is $7,000—no small amount of money for the average prospective buyer to front. Instead, if the CVRP was structured as a point-of-sale rebate, the subsidy would be taken off the sticker price that the purchaser pays. After a sale is registered, the seller could file a form with the state to recoup the subsidy.

Second, California should use existing marketing platforms and email lists to spread CARB’s DriveClean buying guide to any and all interested individuals or organizations. Similarly, ensure that the DriveClean buying guide is the most up to date and authoritative state-wide database for electric vehicle incentives. Customer education remains a top priority for EV market adoption. While many existing educational efforts have focused on getting prospective drivers to test-drive an EV or on the mechanics of re-fueling, understanding the types of subsidies available to drivers and how to take advantage of them remains a challenge. While the CARB DriveClean is already a good resource, it isn’t marketed as heavily as it should be. To that end, ensuring that the CEC and CPUC are constantly marketing the guide as the most authoritative guide on buying EVs will ensure that the public is aware of it. Additionally, using other local government partners (i.e., the regional air quality districts or city-wide transit departments) to spread and market the guide will help the information reach a wide range of Californians. While the guide is marketed to prospective drivers, it will be incumbent upon CARB to ensure that the guide is maintained to the highest levels of accuracy and can truly serve as an authoritative and exhaustive purchasing guide.

Finally, California should reform existing EVSE programs to ensure adequate and highly predictable annual funding. California should also ensure that all EVSE programs are included in the DriveClean buying guide and should note which incentives are “stackable” (i.e., which rebates can be combined for one single project or application). Similar to the reforms to the CVRP, third party providers of EV charging infrastructure need to have clarity into annual funding levels for EV charging related subsidies and programs. Additionally, CARB should include a new area on their DriveClean Buying guide on EV charging programs to give third party providers a clear place to search for relevant incentives. Moreover, the state should clearly detail which incentives are stackable to allow providers to build out infrastructure as efficiently as possible.

Qualitatively, each of these policy changes will have a positive impact on EV market development in California by ensuring a far greater level of market stability for prospective drivers and for organizations wishing to electrify fleets or install local charging infrastructure. From a quantitative perspective, these recommendations will also have a positive impact on California’s NASEO score.


Conclusions

Overall, there is considerable work at the state level that needs to be accomplished if California is serious about meeting its own legislatively-imposed climate goals. California’s national and worldwide reputation as an energy and environmental powerhouse means that it often will take the charge in driving forward new, cutting edge policy. California has historically implemented a wide range of EV incentives meant to spur adoption of new EVs and the buildout of much needed charging infrastructure. By using NASEO’s rubric and comparing California to Massachusetts and New York, California’s strengths and weaknesses in electric vehicle policy become apparent. To take the next step and ensure a robust market for EVs and EV infrastructure, the state would do well to prioritize new legislation and regulatory updates that ensure programs have stable annual funding and feature incentives that are given to customers as soon as logistically possible (i.e., point of sale) to ensure more EV drivers will participate in the market. These policy changes, while crucial, will be insufficient to ensure that the state meets its climate goals. Further research and policy recommendations are needed to understand the best ways to drive down total VMT which can be used to reduce overall state emissions.

Jake McDermott is a second-year Master of Public Policy student at the Goldman School of Public Policy

Endnotes

  1. Intergovernmental Panel on Climate Change. “Global Warming of 1.5 ºC.” Accessed December 6, 2019. http://www.ipcc.ch/report/sr15/.
  2. California Legislative Information. “SB-100 California Renewables Portfolio Standard Program: emissions of greenhouse gases.” September 10, 2018. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180SB100.
  3. California Energy Commission. “Clean Energy and Pollution Reduction Act – SB 350.” https://www.energy.ca.gov/sb350/.
  4. Pacificorp. “Application of PacifiCorp (U901E) for Approval of its 2017 Transportation Electrification Programs.” September 27, 2018. http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M231/K030/231030113.PDF.
  5. California Air Resources Board. “Vehicles and Eligibility.” California Clean Vehicle Rebate Project. https://cleanvehiclerebate.org/eng
  6. California Air Resources Board. “Center for Sustainable Energy.” Clean Vehicle Rebate Project. Clean Vehicle Rebate Project. Accessed December 6, 2019. https://cleanvehiclerebate.org/eng.ps://www.arb.ca.gov/msprog/aqip/fundplan/fundplan.htm
  7. California Air Resources Board. “Fleet Vehicle Rebates.” Clean Vehicle Rebate Project. Accessed December 3, 2019. https://cleanvehiclerebate.org/eng/fleet.
  8. DriveClean California. “DriveClean California Incentive Search.” DriveClean. Accessed December 6, 2019. https://www.driveclean.ca.gov/Calculate_Savings/Incentives.php.
  9. California Department of the Treasury. “Electric Vehicle Charging Station Financing Program.” CPCFA EVCS. Accessed December 6, 2019. https://www.treasurer.ca.gov/cpcfa/calcap/evcs/summary.asp.
  10. California Fuel and Transportation Division. “Electric Vehicles & Charging Infrastructure.” California Energy Commission. Accessed December 6, 2019. https://www.energy.ca.gov/transportation/altfueltech/electric.html.
  11. California Fuel Cell Partnership. “2016 ZEV Action Plan for the State of California.” Accessed October 10, 2016. https://www.gov.ca.gov/wp-content/uploads/2017/09/2016_ZEV_Action_Plan.pdf.
  12. California Air Resources Board. “Volkswagen Environmental Mitigation Trust for California.” Volkswagen Environmental Mitigation Trust for California. Accessed December 6, 2019. https://ww2.arb.ca.gov/our-work/programs/volkswagen-environmental-mitigation-trust-california.
  13. United States District Court Northern District of California San Francisco Division. “Volkswagen ‘Clean Diesel’ Marketing, Sales, Practices, and Products Liability Litigation.” October 25, 2016.
  14. Massachusetts Department of Energy Resources. “Massachusetts Offers Rebates for Electric Vehicles (MOR_EV).” MOR-EV. Massachusetts Department of Energy Resources. Accessed December 6, 2019. https://mor-ev.org/.
  15. Massachusetts Electric Vehicle Incentive Program. “Apply for MassEVIP Workplace Charging Incentives.” Mass.gov. Accessed December 6, 2019. https://www.mass.gov/how-to/apply-for-massevip-workplace-charging-incentives.
  16. Massachusetts Electric Vehicle Incentive Program. “Apply for MassEVIP Fleets Incentives.” Mass.gov. Accessed December 6, 2019. https://www.mass.gov/how-to/apply-for-massevip-fleets-incentives.
  17. Multi-State ZEV Task Force. “About Us.” ZEV Task Force. Accessed December 6, 2019. https://www.zevstates.us/about-us/.
  18. Charge NY. “Charge NY Programs.” NYSERDA. Accessed December 6, 2019. https://www.nyserda.ny.gov/All-Programs/Programs/ChargeNY.
  19. Charge NY. “Drive Electric in New York State.” NYSERDA. Accessed December 6, 2019. https://www.nyserda.ny.gov/All-Programs/Programs/ChargeNY/Drive-Electric.
  20. Charge NY. “Charging Station Programs.” NYSERDA. Accessed December 6, 2019. https://www.nyserda.ny.gov/All-Programs/Programs/ChargeNY/Charge-Electric/Charging-Station-Programs.
  21. Charge NY. “Charge Ready NY.” NYSERDA. Accessed December 6, 2019. https://www.nyserda.ny.gov/All-Programs/Programs/ChargeNY/Charge-Electric/Charging-Station-Programs/Charge-Ready-NY.
  22. New York Department of Taxation and Finance. “Alternative Fuels and Electric Vehicle Recharging Property Credit (for Tax Years Beginning on or after January 1, 2013).” Alternative fuels and electric vehicle recharging property credit (for tax years beginning on or after January 1, 2013). Accessed December 6, 2019. https://www.tax.ny.gov/pit/credits/alt_fuels_elec_vehicles.htm.
  23. New York Department of Environmental Confirmation. “VW Settlement Information.” VW Settlement Information – NYS Dept. of Environmental Conservation. Accessed December 6, 2019. https://www.dec.ny.gov/chemical/109784.html#view.
  24. National Association of State Energy Officials. “PEV Policy Evaluation Rubric: A Methodology for Evaluating the Impact of State and Local Policies on Plug-in Electric Vehicle Adoption.” PEV Policy Evaluation Rubric: A Methodology for Evaluating the Impact of State and Local Policies on Plug-in Electric Vehicle Adoption. National Association of State Energy Officials, n.d.
  25. California Air Resources Board. “CVRP Funding Status.” California Clean Vehicle Rebate Project. Accessed on January 8, 2020. https://cleanvehiclerebate.org/eng/rebate-funding-status.
  26. California Air Resources Board. “FAQs.” California Clean Vehicle Rebate Project. Accessed on January 8, 2020. https://cleanvehiclerebate.org/eng/faqs.
  27. NESCAUM. “Nine-State Coalition Releases New Zero-Emission Vehicle Action Plan.” June 20, 2018. https://www.zevstates.us/wp-content/uploads/2018/07/ZEV-Press-Release_6-20-18.pdf.