EV Club Board Member Dawn Henry will present the Climate Reality Presentation (a.k.a. the Al Gore presentation) at the Westport Senior Center on Thursday, September 20.

Dawn is a graduate of the Climate Reality Leadership Training, and the presentation will include actionable steps that anyone can take to reduce our carbon footprint. This will be followed by a short presentation on EV basics by Club Board Member Barry Kresch, and an EV showcase, courtesy of the car club. Here are the particulars:

Date: Thursday, September 20

Time: 4:00 – 5:00PM – Climate Reality Presentation

5:00 – 5:15PM – EV Basics

5:15 – 6:00PM – EV Showcase

Location: Westport Senior Center, 21 Imperial Avenue, Westport, CT

Registration: The event is free but registration is required. Anyone interested in attending, please contact WestportEVClub@gmail.com

The New Peak Oil

There was a documentary film called “Collapse,” which premiered at the Toronto International Film Festival in 2009 about a self-styled investigative journalist named Michael Ruppert who claims to have predicted the 2008 financial crisis. In this film, he purports to forecast a looming disaster caused by an insufficient supply of fossil fuels to support a growing world economy. “The mortal blow in human industrialized civilization will happen when oil prices spike and nobody can afford to buy that oil and everything will just shut down,” is how he characterized it.

Had that come to pass, it would certainly would have created some urgency to find alternatives. But that was then. Less than a decade later, we find ourselves awash in fracked oil and natural gas, and in the midst of a slow-burning (pun intended) climate crisis, where the political leadership at the Federal level in our own country, the largest country in terms of cumulative greenhouse gas emissions and the second largest in terms of current emissions, is more resistant to doing something about it than almost all other countries.

While Ruppert was wrong about “peak oil”, he made another comment that was more prescient with respect to the larger political dynamic: “It’s kind of sad because we as a species have become so disconnected from the Earth. We don’t have any real contact with the Earth. We don’t have any sense of its functions, its feeling, its seasons, its timings.”

If you would like more of a freak-out, albeit in a more soberly detailed, journalistic style, try reading The Sixth Extinction by Elizabeth Kolbert, who discusses (among other things) species adaptation in past cycles of climatic change and how this time is different. (It’s happening a lot faster, folks, too fast for evolution to keep up.)

Peak Oil and EVs

Where this fits with EVs, of course, is that transportation accounts for 40% of petroleum use globally. The meaning of the phrase “peak oil” has changed from meaning the scarcity of supply to the turning point in consumption level. The projected EV adoption rate is a big factor in determining when that occurs.

According to a survey of forecasts published by Bloomberg, the earliest this is likely to happen is shortly before 2030, as forecasted by Bank of America. The intersection point in terms of the cost curves of EVs and conventional vehicles is forecasted to be 2025. The point at which EV sales surpass ICE sales is forecasted to be 2038. Others, such as major petroleum exporters Saudi Arabia and Russia, forecast this peak oil point to be further out, more like 2050. 

The Landscape

One may be forgiven for feeling a sense of cognitive dissonance when looking at the landscape for EVs in the USA.

• We have not reached the tipping point with consumers purchasing plug-in vehicles.
• There is a Federal tax credit, flaws and all.
• Tax credit notwithstanding, the political environment at the Federal level is largely unfavorable to clean energy. Auto manufacturers have had success in persuading the current administration to back away from phase two of the Obama CAFÉ requirements.
• There is a mixed landscape across the states with some offering incentives and others that add a surcharge to EV registrations.
• Many dealers are reluctant to sell EVs. (This is a link to a 2015 NY Times articleabout this subject. This is a link to a more recent, candid, and thoughtful article by an employee at a Chevy dealership about the challenges of selling EVs, even when working for a dealer who is supportive.)
• EVs remain under-marketed.
• A recently reported study conducted by KPMGof 1000 auto industry executives reported negative sentiment for near/medium term EV prospects. To quote from Green Car Reports, “76% of executives see internal combustion engine vehicles as still more important than electric drivetrains for a very long time.” They felt the biggest hurdle is a lack of charging station infrastructure. (Strangely, they were more bullish on fuel-cell vehicles to break out, even though there is even less hydrogen infrastructure.)

And yet there have been numerous ambitious announcements by major legacy auto manufacturers.

• GM has announced the development of a modular EV platform that will be the basis for 20 or more vehicles. This flexible platform is intended to lower the cost substantially. They anticipate selling1MM EVs per year (globally) by 2026 (and “bury Tesla”).
• Ford announced an $11 billion investment in 40 plug-in vehicles by 2022.
• Volvo intends to phase out gasoline engines by 2024.
• Fiat/Chrysler announced the future of automobiles is electric. This by CEO Sergio Marchionne, the same person who several years ago asked customers not to by his Fiat 500e BEV.
• Volkswagen, in the wake of “dieselgate,” has announced a pivot to EVs and, as part of the settlement for the diesel emissions fraud, a $2 billion investment in charging infrastructure.

At least part of the reason for these plans is what is happening outside of the USA.

• The EV poster child is Norway, where 52% of new car sales are now EVs, and their goal is to phase out diesel and gasoline by 2025. They are using a panoply of carrots and sticks, including generous subsidies, to drive this result which they hope can be phased out over the next 10 years. And the price of gasoline is 15.86 krone per liter (Jan 2018), or about $7.65 per gallon (compared to $2.53 in the USA, per AAA).
• Paris plans to ban diesel by 2025 and phase out gasoline vehicles by 2030. Britain and France plan to ban the sale of gasoline and diesel vehicles country-wide by 2040.
• China has ordered the discontinuation of 553 vehicle models that are the most polluting.
• Japan now has more charging stations than gasoline stations.

Plug-in vehicle models are becoming more numerous. Electric propulsion is beginning to be incorporated into larger vehicles. The energy density in batteries is steadily improving. Prices are coming down to the point where, eventually, incentives won’t matter. The EVs on the market now have mostly been well-received, are fun to drive, and will only get better and more diverse.

While there are different forecasts about when EV sales will overtake those of internal combustion vehicles and when peak oil consumption will occur, nobody thinks it won’t happen. The Georgetown Climate Center held a webinar on February 13 regarding planning for charging infrastructure for an EV corridor in the Northeast. Just to excerpt one sentence with respect to combating carbon emissions, “Without electrification of the transportation sector, there is no clear path to meeting our goals.”

CHEAPR

States have been going their own way, whatever the direction of what may be happening Federally. Connecticut has been a consistent supporter of EV adoption and reduced emissions on a number of fronts. And with good reason, as the Department of Energy and Environmental Protection (DEEP) estimates that the transportation sector accounts for about 40% of emissions statewide.

CHEAPR, which stands for Connecticut Hydrogen and Electric Automobile Purchase Rebate, offers rebates to purchasers of plug-in or fuel-cell vehicles. The program began in May 2015. It was announced in November 2017 that another round of funding had been procured to replenish the pool, bringing the total funding since the program’s inception to $5,064,500. According to the CHEAPR website, 2,332 rebates have been issued since the program started, and the amount of funds remaining stands at $1,093,250 These numbers are as of January 11, 2018. (That website link can be used to access all details about CHEAPR.)

Unlike the Federal tax credit, CHEAPR is a rebate so it is of use to people who are not in a position to utilize a tax credit. Some dealers will do the paperwork and just deduct it from the invoice. Unlike the Federal program, there is a $60,000 cap on base MSRP for eligible vehicles. If you are aware of CHEAPR but haven’t checked lately, there were changes made in August 2017 with respect to which vehicles qualify for each level rebate. The maximum rebate was raised to $5,000 (for fuel-cell vehicles, which are expensive). Other rebate levels are $3,000, $2,000, and $500 based on car type and electric range.

There are 3 fuel-cell vehicles on the eligibility list. We’d like to ask our readers, has anyone seen any of them “in the wild” in CT?

Charging Infrastructure

Connecticut has supported charging stations as well as provided credits to municipalities to install charging stations through the Clean Energy Communities Program. In Westport, where town administrations have been supportive of the club’s efforts, there are 19 public charging stations that have been obtained in this way. They are located at the two Metro-North stations, the public library, Staples High School, and town hall. There are two other charging stations downtown that were installed by the Tri-Town Teachers Credit Union and Karl Chevrolet. Of these 21 charging stations, 17 are level 2 and 4 are level 1. In addition, there are other chargers in nearby towns as well as at certain rest stops on the expressways. The expressway chargers are level 3 fast chargers. And, of course, Tesla has built out its own proprietary charging network which spans the country.

CT is a member of the CARB consortium of states that follow the stricter California emissions requirements. CT is also one of the ZEV states, a subset of the CARB states, that mandate the sales of zero-emission vehicles.

Still No Direct Sales Bill

The other, more dubious, news is that CT remains a Tesla-free state (one of only 5 nationally, none in the Northeast), meaning that the company is not permitted to open stores in CT. In 2017, as in 2016, the “Tesla Bill” failed to make it to a vote in the legislature. Let’s keep in mind that the most widely-owned EV marque in CT is Tesla, but customers are forced to either travel out of state or transact online. It has been reported that the state is losing $15 million per year in sales tax revenue plus the revenue from the investment in facilities and employment. The bill is up for consideration again in this year’s “short session.” Contact your state legislators and tell them you support this bill.

So why do we need an “act of Congress,” so to speak, for Tesla to be able to do business here? It’s all about the dealer franchise laws. These laws were created many decades ago and the purpose was to protect dealerships (which are independently owned businesses) from predatory competition from the manufacturers they represent. There was never any Tesla-type scenario envisioned at the time these laws were written. And given the decidedly mixed reception that the dealer networks of the legacy manufacturers have given EVs, along with the fact that close to 99% of new car sales are still of the internal combustion variety, it is understandable why Tesla has a business model focused on direct sales.

The proposed compromise that was unsuccessful in CT would have carved out a narrow exception to the franchise laws that would fit Tesla (and nobody else, at least not at present. For a more detailed explanation of the bill, see our earlier blog post discussing it.) But Tesla has had some success in other states in arguing that the franchise laws simply don’t apply. Just this month, according to the Providence Journal, DMV lawyers in Rhode Island concluded that franchise laws only apply to manufacturers with franchisees. Residents of Eastern CT can pay a visit to the Tesla showroom opening in Warwick, RI later this year.

Model 3

Some people have asked us if a Tesla Model 3 is eligible for the rebate since it is not sold in the state. It is. (The only thing to watch out for with respect to the Model 3, where there is currently a lengthy lag from reservation to delivery, is that the funds don’t get applied until there is a VIN number which doesn’t happen until the vehicle is in production. CHEAPR funds have been replenished several times to this point, but the availability is not guaranteed indefinitely.)

For folks interested in supporting Tesla coming to CT, the company has set up a Facebook

page and a website has been set up by a local group of Tesla owners. Also, please sign our online petition by texting “EV CT” to 52886.

Federal Tax Credit

There is a Federal tax credit of up to $7500 for the purchase of a plug-in vehicle. The amount of the credit depends on the size of the battery. This tax credit originated in the Energy Improvement and Extension Act of 2008 (George W. Bush administration), though it was amended in the Recovery and Reinvestment Act (a.k.a. “Obama Stimulus Package) in 2009. 2018 could be “the year of the ceiling.”

There was some suspense regarding whether the credit would survive the 2017 GOP tax bill given an administration that is doubling down on fossil fuels. The House version of the bill eliminated it. The Senate version retained it, and in the end, it survived. (A proposal arising late in the Obama Administration to change the incentive from a credit to a point of sale rebate and raise it to $10,000 was not able to get serious consideration in this Congress.)

Though the survival of the tax credit may sound counter-intuitive given the current political climate, there is evidence that even though EVs are relatively new, they have established a presence economically. Fortune reports that 50 companies, including major auto manufacturers and Uber, sent a letter urging Congress to retain the credit. The Detroit Free Press reports data compiled by the US Energy Department saying that EV production in this country is responsible for over 215,000 jobs.

It also happens not to be without controversy among vehicle manufacturers, particularly Tesla and General Motors, which will feel its distorting effects first.

Unit Threshold

The credit has a ceiling of 200,000 units applied to a given manufacturer. Once a manufacturer sells unit number 200,000, the credit remains in place for the current and subsequent quarters (to service the pipeline). It is then halved (up to $3750) for the next 6 months, halved again (up to $1875) for another 6 months, and then it goes away entirely for that manufacturer. In other words, the players who jumped first into the deep water will become price-disadvantaged relative to the laggards.

Tesla and General Motors have sold 161,771 and 168,183 respectively through 2017. Both are certain to crack the 200,000 level during 2018 and lose the credit at some point in 2019. Tesla will probably get there first if it succeeds in ramping Model 3 deliveries. The YouTube Channel, Teslanomics (a relatively conservative forecaster) expects Tesla to get to this level in the second quarter. GM, at its current run rate of over 5,000 plug-in units per month, will not be that far behind. And if Nissan, another early entrant, has success with its new generation of the Leaf, it too, could reach this point in the relatively near term. Nissan has sold 114,808 Leafs to this point. These companies will face some big pricing decisions and pressure to maximize cost-control in order to stay competitive.

Importance of EVs to Forestall Climate Change

According to a report issued by the Union of Concerned Scientists, “Electric vehicles are central to reducing oil consumption and transportation-related emissions in the United States.” And incentives matter at this stage of the game. In the one instance where there was a real “light switch” test, the State of Georgia, which initially had generous EV incentives in the form of a $5,000 rebate, discontinued it in 2015 and EV sales dropped by 89% in the span of two months. In California, a state that has been among the most aggressive in deploying various incentives, EVs represent 5% of new vehicle sales (as opposed to 1% nationally).

With all of the wrangling over the EV incentives, let’s not forget that the fossil fuel industry continues to benefit from preferential tax treatment in the form of expensing of intangible drilling costs, domestic manufacturing deduction, depletion allowance, acceleratated amortization, and inexpensive Federal leases. This was estimated by the Wall Street Journal to be worth $4.76 billion per year. Also keep in mind that externalities, the effects of burning the stuff, drilling/fracking for it, transporting it, or accidentally spilling it are not taxed. There are Federal and State gas taxes, though the Federal tax hasn’t been raised since 1993. This has kept gasoline prices in the USA lower than most of the world. The average price for a gallon of gasoline domestically is 55% lower than the worldwide average (January 2018).

With respect to the Federal tax credit, what we have may be better than nothing, but we like the Obama-era proposal to turn the tax credit into a rebate. Not everyone is able to benefit from a tax credit. And we would like to see the sales-unit cap removed.

In terms of how long incentives might be needed, according to data from the Union of Concerned Scientists, it is estimated that with continuing improvements and cost reduction in the technology, the cost curve for EVs may cross that of internal combustion vehicles by about 2025.