Navigant Research Blog

Surge of Growth for Southern California EV Charging

— February 4, 2016

Machine parkingThe Southern California electric vehicle (EV) charging market is about to get a surge of growth, as the first utility-led charging deployment programs have been approved by the California Public Utilities Commission (CPUC). Southern California Edison (SCE) and San Diego Gas & Electric (SDG&E) each received the go-ahead for their proposals to deploy thousands of EV charging stations within their service territories.

This marks a major transition in the EV charging market in California, as utilities had previously been forced to sit on the sidelines while the plug-in electric vehicle (PEV) market launched and EV charging demand grew. This meant that utilities could not directly participate in a market that could provide a significant new revenue stream over the long term. The CPUC’s December 2014 decision to allow utility ownership of EV chargers has opened a new avenue for funding charging deployments via a stakeholder with (relatively) deep pockets and a stake in the growth of electricity as a transportation fuel.

California did have something of an EV charging gold rush when the U.S. Department of Energy (DOE) funded two major public charging deployment programs in 2009. The ChargePoint America and The EV Project programs resulted in over 6,300 public and private charging station installations (excluding residential). California got around a third of these; roughly 2,000 Level 2 and direct current (DC) fast charging stations were deployed in the state from 2011 to 2013. At the same time, California saw its DC fast charging installations grow thanks to the settlement between the CPUC and NRG Energy. The company, through its EV charging arm eVgo, committed to installing 200 fast chargers under this settlement from 2012 to 2014.

Charging Stations on the Rise

This new surge of stations will target a different segment of the market. The focus on public stations is waning somewhat, as utilization rates of public Level 2 stations have been mixed and as the market anticipates long-range battery electric vehicles (BEVs) that will have little need for short-term opportunity charging. What the PEV market does still need is charging at workplaces and at condos or apartment complexes. The DOE reports that there are 5,500 charging stations deployed at office facilities operated by its 250 partner companies in the DOE Workplace Charging Challenge. Navigant Research estimates that in total there may be around 9,000 charging stations in workplaces in the United States.

While this is a good start, workplace chargers need to expand beyond early adopters, as offices are going to be key to supporting PEV charging needs. SDG&E has said it will target multifamily communities, another critical next frontier to support increased PEV demand. SDG&E notes that 50% of its housing consists of multi-unit dwellings, representing a large and relatively untapped market for PEV drivers. Through all of this, utilities will need to manage the deployment process carefully to ensure that chargers are being placed in the best locations; that their charging company partners are secure, long-term partners; and that funds are optimized to buy charging stations that provide necessary data and management capability but are not over-equipped for the job they’re asked to do.


Driving Green in India

— December 31, 2015

Beijing’s infamous smog attracts more media attention, but there’s another city that holds the title in terms of pollution. The World Health Organization (WHO) dubbed Delhi the world’s most polluted city based on data from 1,600 cities collected between 2008 and 2013. How bad is the city’s air pollution problem? The WHO found that levels of PM2.5 (particulate matter under 2.5 microns) in Delhi were 15 times the maximum advised level. Delhi is not alone; Indian cities scored 13 spots in the WHO’s assessment of the 20 most polluted cities in the world.

So why does Beijing attract more attention? It’s partly due to China’s economic power, and partly due to its emergence as a global power and its leaders’ evident interest in expanding the country’s influence in global affairs. China declared its first ever red alert warnings in Beijing in early December, right in the middle of the Paris climate change talks, where China played a central role in the agreement negotiations. The pressures on India are somewhat different, as India has not taken quite the same high profile approach to global economic, environmental, or diplomatic debates. China has also been ahead of India in monitoring its pollutants. However, Indian political leaders are increasingly feeling the need to address the problem, especially as outside agencies such as the WHO catalog the issue.

Sources of Pollution

Vehicle emissions are a major contributor to India’s pollution problem, but the country’s vehicle emissions regulations lag behind those in Europe and North America, and it has seen little adoption of cleaner fuel vehicles. We are now seeing Delhi embracing brute-force mechanisms to control vehicle emissions, including vehicle bans and driving limitations. From January 1 to 15, drivers in Delhi will only be allowed to drive on alternate days. Given the number of exceptions, the policy may have limited impact.

India is also ending its recent—and relatively short-lived—love affair with diesel. India’s favorable taxation rates for diesel meant it was cheaper than gasoline, and the country saw diesel vehicles reach 50% or higher of new passenger car sales in the past 5 years. Diesel fuel is now back closer to parity with gasoline, so gasoline vehicle sales are rising. India was also touched by the Volkswagen (VW) diesel emissions scandal. VW will have to recall over 300,000 diesel vehicles that were found to be emitting more than is allowed under Indian regulations—regulations that were already much less stringent than European and U.S. standards. This spells trouble for diesel in India, with the capital region already declaring bans or restrictions on various types of diesel vehicles.

India is going to have look increasingly to alternative fuels to help reduce vehicle emissions. In Delhi, taxis and ridehailing services like Uber must switch to natural gas. India is also looking to spark adoption of hybrid and electric vehicles.  The Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME) program provides subsidies for hybrid and plug-in cars, buses, scooters, and rickshaws through 2020. The government’s goal is to have around 6 million electric or hybrid vehicles on the road by 2020. While only the goal for passenger cars is just 8% of the 6 million, given the anemic sales of hybrid and electric cars to date, even that will be challenging. Navigant Research estimates that sales of hybrid and electric cars make up less than one-fifth of 1% of the current passenger car market in India. India will have to significantly ramp up domestic manufacturing of hybrid and electric vehicles and offer additional incentives to be able to reach this goal.


What Is the Next Frontier for EV Charging?

— December 23, 2015

We’re in the auto show time of year, and so far this one is the season of the go big or go home plug-in electric vehicle (PEV) announcement. At the Los Angeles Auto show, Audi announced that in 10 years it expects 25% of its car sales to be plug-ins. To reach this target, the company will be offering plug-ins throughout its vehicle portfolio. At the Frankfurt Auto Show in September, the company revealed a concept version of one of these future offerings, a battery-powered quattro SUV. Although not connected to an auto show, Ford’s December announcement that it would add 13 new electric options to its vehicle lineup by 2020 was noteworthy in part because it came from a non-luxury brand OEM.

When these and other new PEVs roll out from 2017 on, the PEV market will shift into a new phase, marked by real diversity of offerings across vehicle platforms. Right now, the PEV market is somewhat hampered by the limited number of segments where plug-ins are available. OEMs have focused mostly on the smaller vehicle body types for PEVs like the Nissan LEAF, the Chevrolet Volt, and the BMW i3. This isn’t a criticism of the OEMs—it made sense to roll out a new technology like EVs on a limited scale to test consumer interest. As a practical matter, the weight and cost of adding lithium ion (Li-ion) battery capacity to a plug-in vehicle in 2010 naturally led OEMs to target small vehicle platforms requiring less power. But with Li-ion battery costs dropping at a faster rate than many projected in the last 5 years and pack prices projected to decline 5%-6% annually through 2020, OEMs are well-positioned to offer plug-in options throughout their vehicle portfolios, including vehicles with larger capacity like SUVs. At a minimum, this greater variety expands the potential buyer base, and it is a critical development in a market like the United States where bigger still reigns supreme.

The Next Big Challenge

These announcements are also pointing toward the next frontier in the EV charging market: fast charging. If the PEV market is going to look more like the mainstream vehicle market, with plug-ins a common option, customers will have to be able to use them like mainstream vehicles. While many of the new PEVs will be plug-in hybrids without range limitations, many will be battery EVs with a 200-mile or longer range. This will make them a no brainer for daily driving habits but will still limit their ability to cover drivers’ long-range driving needs. The solution is likely to be the development of fast charging networks along highways, spurred by automaker investment. This is the approach being taken by Tesla with its Supercharger networks. For the broader rollout of fast charging, the auto industry players will have to grapple with how much to pay for it, how such a network would be run, and how to cooperate with each other in this effort.


Tax Incentive Uncertainty Surrounds Fuel Cell Vehicles

— December 23, 2015

It’s no secret that incentives continue to play a key role in the progress of alternative energy technologies. Witness the significant media attention given to the last-minute U.S. federal funding legislation, which included a long-term extension for solar energy tax credits out to 2020. The solar industry association is claiming that the tax credits will help solar installations in the United States reach 100 GW by 2020. What’s unusual about this extension is the 5-year timeframe. In recent years, Congress has been loathe to pass legislation establishing long-term energy tax credits. Coupled with Congress’s tendency to pass annual spending bills at the last possible hour, this has led to a constant state of uncertainty regarding energy tax credits.

A sense of certainty is critical for potential adopters or investors, and this extends to knowing whether or not tax credits will be in place. This is not what happened for fuel cell vehicles (FCVs), which are among the technologies that received yet another short-term extension of the federal tax credit through 2016. As a practical matter, this incentive will do little to truly push the FCV market, since there are very few of these vehicles currently available in the United States. The FCV market is just beginning to enter the early commercial phase, with the Toyota Mirai and Hyundai’s fuel cell crossover vehicle (called the Tucson in the U.S. market). Both are available in California, but at limited volume. Toyota has indicated its plans to sell around 3,000 fuel cell Mirai models in the United States through 2017; the Mirai had close to 2,000 pre-orders in California as of October, so Toyota could reach that goal. However, the company has also set a production cap of 3,000 units annually. Honda will be next in the U.S. market with a new commercial FCV, the Clarity, set to be introduced in 2016.

The U.S. fuel cell car market will be in limited supply mode through 2016 while the tax incentives are in effect. Any real impact would be felt closer to 2020, when the market will need to ramp up to sales in the tens of thousands, as noted in Navigant’s most recent Fuel Cell Vehicles report. This next phase of the market is when incentives will be critical, unless the price premium for a fuel cell car has dropped close to parity with a hybrid.

Setting an Example

By contrast, the South Korean government is making a major move to encourage FCV adoption in the long term, announcing a huge new subsidy of around $23,250 for purchases, around a third of the price of a Hyundai FCV in the country. The government plans to build out hydrogen stations with an eye toward building the FCV market to 630,000 vehicles by 2030. It’s surprising that it took the government this long to develop an aggressive FCV adoption strategy, given Hyundai’s commitment to fuel cells and the incentives in place in South Korea for other fuel cell technologies. Nevertheless, it looks like the country is putting in place a long-term strategy of subsidies and investment to promote FCVs domestically.


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