Navigant Research Blog

Costa Rica Plans for Sustainable EV Future

— January 4, 2018

Up until now, plug-in EVs (PEVs) have been about as popular as snowshoes in Latin America due to the higher cost of the vehicles and lack of governmental focus on reducing transportation carbon emissions. However, in Costa Rica, government agencies are developing policies and infrastructure to lure automakers to send PEVs and to get consumers excited about the technology.

A Small but Ambitious Market

Costa Rica may not seem like the ideal location to grow a PEV market. The country has a gross national income per capita of just over $10,000 per year (as of 2015, per World Bank statistics), whereas most PEVs cost north of $40,000 and would be out of realistic reach for most consumers. The vehicle market is also small (just 154,000 vehicles sold annually), so it is not a top priority market for automakers to support PEV sales.

Nevertheless, with tourism to its sandy beaches and internationally renowned rain forest contributing 5% of Costa Rica’s gross domestic product, the government wants the country to project an eco-friendly image and participate in global efforts to combat climate change.

The country has set a goal of getting 37,000 PEVs on the road by 2022. On December 15, 2017, Costa Rica passed its first incentives for EV purchases, which include exemptions on the sales, consumption, and customs import taxes. According to a report from Nacion.com, this would reduce the final cost of a PEV by about 24%.

Growing Support for PEVs

Federal organizations in Costa Rica are also planning support for PEVs. The state-run utility led by Grupo ICE and Costa Rica’s integrated ministry of energy and environment (MINAE) both shared steps they are taking to promote EVs at the Third Annual Latin America Clean Transport Forum, which was held in San Jose, Costa Rica on September 20, 2017.

ICE said that with 76.6% of its power generation coming from renewables, the carbon savings of switching transportation from liquid fuels to electricity can be significant. Since 92% of residents live in private homes, pervasive access to home EV charging should smooth the introduction to PEVs. Also, the mild climate (an average temperature of 25°C) would enable PEV batteries to provide greater range and durability than in places with harsher weather. The utility is now investigating the barriers to PEV adoption and infrastructure requirements (such as charging levels and standards for collecting data) to prepare for their introduction.

EV Policy Development and Logistical Challenges

MINAE is developing a national policy for transportation electrification that will be released as part of the annual Oficializado Plan Nacional de Energía, which was due at the end of 2017 but does not appear to have been published yet. The national EV policy will set achievable goals for reducing emissions in transportation, including light and commercial vehicles as well as mass transit. These goals will align with the country’s overall climate change targets.

Despite these efforts, getting automakers’ attention to prioritize Costa Rica and other Latin American nations as PEV markets will be a challenge. With no local manufacturing plants, PEVs currently have to be imported into Latin America, and the higher cost of shipping the vehicles will need to be offset by local incentives. Consumer education in places where PEVs are rarely seen will require concerted effort from both the public and private sectors. Importing used PEVs, which have low resale values and could be used in fleets, is an effective method of introducing target customers to the capabilities of PEVs and building buzz around the technology.

 

Indirect Land Use Change from Biofuels Explained

— December 27, 2017

Full decarbonisation of transport will be hard without biofuels, but sustainability concerns have made policymakers weary of stimulating crop-based biofuels. The debate on the indirect impacts from biofuels in particular has increased recently. For example, on December 2, 2017, a group of Dutch scientists called on the Dutch cabinet to stop the use of food crops for biofuels. The lead argument refers to the GLOBIOM report, though it mainly follows the interpretation by the non-governmental organization Transport & Environment.

What Is ILUC?

Indirect land use change, or ILUC, is the rippling effect that an increasing demand for biofuels feedstock can have on global agriculture. This could lead to land expansion and deforestation elsewhere, with the subsequent effect of increased CO2 emissions.

ILUC is not measurable, as it takes place via complex economic interactions and is manifested only in small variations in the large dynamics of the global agriculture system. It can only be analysed through detailed modelling. In 2015 and 2016, the European Commission contracted Ecofys, a Navigant company, and the International Institute for Applied Systems Analysis (IIASA) to assess ILUC with the GLOBIOM model.

What Do We Know About ILUC?

From this study, we see that ILUC effects depends on the type of biofuels crop, among other factors:

  • ILUC impacts from sugar- and starch-based ethanol are small. The contribution of these types of biofuels can be increased without ILUC risks.
  • The same holds for wood- and straw-based biofuels.
  • Higher ILUC values are found for European oil crop-based biofuels, but ILUC is paid back within a few years by the savings resulting from replacing fossil fuels.
  • ILUC emissions are very large for soybean and palm oil. It is advised to decrease the volumes of biofuels based on these crops unless they are produced (certified) without ILUC.

It is crucial to be aware of the ultimate sources of ILUC emissions in tropical countries: mainly deforestation and peatland drainage caused by sectors that are not held accountable to EU biofuels standards. Top policy priority should therefore be to stop deforestation (globally) and agricultural expansion into peatland (mainly in Indonesia).

How to Avoid ILUC

From the biofuels production perspective, ILUC can be avoided in several practical ways:

  • Produce additional crops on abandoned agricultural or degraded land so that it does not interfere with normal crop production.
  • Use investments in biofuels to innovate in agriculture, to sustainably increase EU yields, and to bridge yield gaps in developing countries.
  • Produce additional crops within the current agricultural land; for example, through sequential cropping.

What Does This Mean for Biofuels in General?

It is important to remember that crop-based biofuels can contribute to the greening of transport in a sustainable way. The ILUC concept should not be used to categorically decrease their contribution. Other aspects should be considered in addition to ILUC. Specific considerations can put impacts in perspective and certain solutions can make the challenges manageable. This does not mean we should give carte blanche to increasing the levels of any and all biofuels. But it is possible to govern the sustainability performance and limit the ILUC impact. A generic call for the phaseout of all crop-based biofuels is ultimately counterproductive in the fight against climate change.

 

Mountain West States Buy In on Regional EV Fast Charging Network

— December 14, 2017

To support the growth and adoption of EVs on their regions’ roadways, governors of eight Mountain West states signed a memorandum of understanding (MoU) to work collaboratively on a regional EV fast charging network spanning across 5,000 miles of freeway. They will also work on a plan for the EV charging infrastructure to link their states together. The states that have signed on so far are Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, and Wyoming.

Anticipating EV Population Increases

These states have recognized the growth of EV populations and anticipate EVs will continue to penetrate the markets. As discussed in our Market Data: EV Geographic Forecasts report and illustrated in the following chart, Navigant Research expects sales of over 1.6 million plug-in EVs (PEVs) by 2026 in North America.

Historic and Projected Sales of PEVs, Base Scenario, North America: 2012-2026

Source: Navigant Research

Pursuing Goals

The goals of the MoU are to accomplish the following:

  • Coordinate station locations to maximize use and minimize inconsistency between charging infrastructure.
  • Develop practices and procedures to encourage the adoption of EVs and address range anxiety.
  • Develop operating standards for charging stations.
  • Incorporate EV charging stations in the planning and development process.
  • Encourage automotive OEMs to stock a variety of EVs in participating states.
  • Collaborate on funding and finding opportunities for the network.

Direct current (DC) fast charging stations will cost between $150,000 and $200,000 each. It would require 50 to 60 stations to electrify the key travel corridors in Colorado, according to officials.

Following in Their Footsteps

Unsurprisingly, West Coast states have already tackled a similar project. In 2013, California, Oregon, Washington, and British Columbia signed on to the Pacific Coast Action Plan on Climate and Energy. They committed to the creation of an electrified highway corridor connecting the three states and the province. In the years since, the governments have been able to install a network of DC fast chargers along Interstate 5, Highway 99, and other major roadways dubbed the West Coast Electric Highway.

Tackling the Funding Puzzle

The Mountain West states are looking for sources of funding as they move forward with their own plans for a regional highway. While the West Coast Electric Highway project was able to capitalize on federal grants and funding to capture investments, the current administration and majority party seem less keen on assisting the adoption of EVs, meaning the Mountain West states may have to look elsewhere. Colorado has identified and is already planning on using some of the funds received from the Volkswagen settlement, Electrify America, to drive interest in public-private partnerships to develop its electrified highway infrastructure. That being said, the MoU does not specify funding requirements or timeframes for the project or any of the states.

Absent the support of the federal government, the success of this regional project rests on the political will of the state governments and continued support from elected officials, automakers, utilities, and planners.

 

Could New Trade Deals Create a Cloudy Forecast for the US Solar Market?

— November 1, 2017

After a lengthy investigation, the US International Trade Commission (ITC) unanimously voted in favor of pursuing protectionist policies on imported solar equipment. The panel found that imports of crystalline silicon PV cells and modules have caused serious injury to the US solar industry, rendering some firms incapable of competing in the global market. To insulate US solar companies from the practices of foreign producers, the ITC agreed to grant President Trump the authority to implement trade protection policies.

Renewable Energy Often Needs Government Support

As cost structures do not always reflect the environmental benefits of green technology, the integration of renewable energy (RE) often requires some form of government aid such as tax incentives, customs duties, or import tariffs to support nascent industries. For instance, Germany’s feed-in tariff scheme under the German Renewable Energy Act created financial security for investors, allowing for healthy market competition within the region to thrive.

Subsidies and tax breaks can also assist solar producers and manufacturers in their efforts to vertically integrate themselves along the value chain, especially when market prices become volatile. For example, a company producing solar cells may want to vertically integrate upstream by manufacturing polysilicon, or integrate downstream by installing PV equipment.

Government support can help alleviate cost impediments associated with integration along the value chain. The spillover effects from German policies, along with other market forces, have created an economic environment suitable for solar technology innovation and deployment. This has allowed Europe to represent 80% of global demand for solar panels for much of the 2000s.

A Global Trade

However, the efficacy of protectionism for the US solar market is up for debate, as the preferential treatment of domestic manufacturers may end up doing more harm than good. Comparative advantages and market imbalances within the RE industry have led to an increasingly globalized supply chain and a growing reliance on international trade. In fact, 87% of all US solar installations use foreign-assembled panels, which means that restrictions on solar imports would increase costs for US consumers. This could severely limit the integration of solar energy and US adoption of clean energy practices as a whole.

US Solar Market

The size of the US solar market at stake within the broader RE industry is grounds for concern. A substantial tariff could lead to the loss of 88,000 US solar energy jobs out of an estimated 250,000. US-based manufacturers have even spoken out against the use of trade sanctions due to the detrimental impact it would have on the entire solar industry.

In fact, researchers at the University of Chicago found that the primary driver of solar industry growth in the United States has not been manufacturing, but rather the increase of installations caused by decreasing costs of solar products. This study highlights the fact that solar employment in the United States is not dependent on manufacturing but on several other subsectors within the market such as installation, sales and distribution, and project development. The US decision to invoke protectionist policies may end up protecting cell and module manufacturing at a great expense to these subsectors.

Policy Ripple Effects

The ripple effects from these new tariffs would be far reaching. Many US businesses depend on competitive pricing along the entire value chain, not just in manufacturing. The solar industry represents one of the fastest growing industries in the country. Consequently, the decision to implement such policies could darken what was once a bright future for a critical industry.

 

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