Transforming Transportation with Electricity

By Kristy Hartman and Jaime Rall | Vol . 22, No. 3 / January 2014

NCSL NewsDid you know?

  • Two-thirds of all oil consumed in the United States is used for transportation.
  • Since electric generation sources are domestic, electric vehicles can diversify transportation fuels, reduce dependency on imported oil and promote economic growth.
  • At least 40 states and the District of Columbia have implemented incentives to increase use of hybrid and plug-in electric vehicles.

Transporting people and goods affordably is vital to the nation’s economy, yet the transportation sector faces risks due to uncertain oil supplies and price volatility. According to the U.S. Energy Information Administration, approximately two-thirds of all oil consumed in the United States is used for transportation. In 2011, 93 percent of transport fuels came from petroleum—making the nation’s transportation energy system far from diverse. Many states are working to increase the use of alternative fuels such as electricity, natural gas and biofuels to diversify the fuel mix, reduce dependency on imported oil, promote economic growth and decrease emissions.

Electricity could play a significant role in meeting these goals. Plug-in electric vehicles are powered by electricity produced by domestic sources such as coal, natural gas, nuclear and renewable energy. By tapping into domestic energy sources, these vehicles help states diversify the transportation fuel mix and increase the use of local energy resources. Total emissions from an electric vehicle are typically less than those from a conventional car, and can be significantly lower in regions where wind, hydropower and natural gas make up a higher proportion of energy sources. Also, although the purchase cost of electric vehicles may be higher, long-term operating costs may be lower due to the low price of electricity relative to gasoline. The U.S. Department of Energy estimates that it costs $1.23, on average, to drive an electric vehicle as far as a conventional car travels on $3.22 worth of gasoline. Since the cost of electricity is more stable than oil, using more electricity for transportation also can reduce the economic effects of fluctuating oil prices.

Access to affordable, convenient charging stations at home, at work or in public areas is gaining traction as consumers and fleet drivers increasingly use electric vehicles. Public charging stations are less common than gas stations, but manufacturers, automakers, utilities, and state and federal agencies are rapidly expanding the network. More than 8,000 charging stations now exist nationwide, more than half of which have been built since 2012.

As electric vehicle sales increase, concerns have arisen about possible challenges to the nation’s electric grid. Overall, it has been estimated that the grid has enough excess capacity to support more than 150 million electric cars—nearly 75 percent of the vehicles driven in the nation today. Some solutions to help maintain grid reliability in more vulnerable regions include using smart grid technologies that charge vehicles during off-peak hours, allowing a utility to limit charging when demand is high, and increasing electric rates during peak hours and lowering them at night.

State Action

States are exploring policies to support using alternative fuels in an effort to increase energy security, reduce greenhouse gas emissions and provide price stability. In October 2013, governors in California, Connecticut, Maryland, Massachusetts, New York, Oregon, Rhode Island and Vermont signed an agreement to put 3.3 million zero-emission vehicles (ZEVs) on the road by 2025. That’s more than 15 times as many ZEVs as are projected to be on the road in the U.S. by 2015. These states, which account for 23 percent of the nation’s automobile market, anticipate that by working together, they can increase demand for ZEVs and reduce the cost to consumers of purchasing such vehicles. Goals of the agreement are to coordinate incentives, infrastructure efforts and other actions to promote ZEVs so they are consistent and can be more quickly implemented.

Many states also are considering various incentives to promote the use of hybrid, plug-in electric or zero-emission vehicles. At least 40 states and the District of Columbia now provide high occupancy vehicle lane exemptions, monetary incentives, exemptions from vehicle inspections or emissions tests, and free or reduced parking fees. Monetary incentives—including tax credits and lower registration fees—are among the most popular. State rebates or tax credits range from $1,000 in Maryland to $6,000 in Colorado. At least 109 bills in 26 states that encourage purchasing and increasing use of low- or zero-emission vehicles were introduced in 2013. In New Jersey, at least 38 bills were introduced last session that encourage developing charging stations, providing monetary incentives for alternative fuel vehicle purchases, and establishing additional parking for hybrid and electric vehicles.

States also are actively addressing concerns about how electric vehicles may affect funding for transportation infrastructure, which relies heavily on gasoline taxes. Colorado, Nebraska, North Carolina, Virginia and Washington now have special fees for electric vehicles. In 2015, Oregon will embark on a 5,000-vehicle program that allows drivers to pay a fee based on miles driven rather than on gallons of fuel purchased—an approach that potentially could unlink transportation revenues from gasoline consumption.

Federal Action

Many federal incentives support developing and deploying alternatives to conventional transportation fuels. For example, a $7,500 federal tax credit for electric vehicles is available in addition to state incentives. Once 200,000 qualified vehicles have been sold by each automotive manufacturer, the credit will expire. Another federal tax credit—covering up to 30 percent of equipment costs, not to exceed $30,000—is available to offset the cost of installing alternative fueling equipment. Other alternative fuel incentives include tax credits for vehicle purchases, federal grants to convert older vehicles to new technologies, research grants, alternative fuel technology loans and requirements for federal fleets.

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