How Much (and How Long) Can COVID-19 Impact the Push for Transportation Electrification? Part 1 of 2

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The electric vehicle (EV) market, like much of the American economy, had been on a tear until the coronavirus arrived in the U.S.:

  • Car dealers in the Bay Area and Puget Sound saw EV sales approaching 10%-20% of new vehicles in 2018 and 2019, according to Electric Power Research Institute.
  • Seeing growing interest from customers, utilities in more than half of states proposed new EV infrastructure programs to support this burgeoning market.

 

But just as EVs started to transition from niche technology toward mass-market, the impacts of COVID-19 put the (regenerative) brakes on a sector where investor-owned utilities had just proposed more than $3 billion in investments to accelerate transportation electrification (TE).

Car sales across all vehicle types were slashed in half this past April. Over the second quarter of 2020, EVs have mostly sat idle in garages and driveways with few of us commuting to work. Public charging stations have been holstered around the world – as a great graphic from Tesla showed the pandemic’s impacts in real time.

Now what?

In the first of two blogs, I’ve gathered a range of considerations we’re seeing, based on conversations with TE experts at a number of leading utilities. In this first installment, I present the most immediate concerns; the follow-up will address more long-term impacts on TE.

 

Shifting gears in the short-term, changes in charging behavior:

As a result of stay-at-home orders around the country, utility TE programs are dealing with minor setbacks to program delivery, like rescheduled appointments for home-charger installations. PG&E, for example had planned to complete construction in late spring on its first public fast charging site under a new utility program, but due to delays, that has been extended through the fourth quarter, as recently reported to program stakeholders. Larger commercial installations for workplaces or fleets tend to have multi-month timelines, so a delay of several weeks or months for any on-site work ends up being a manageable slip in the schedule.

Program enrollment can be diminished as businesses operations are reduced. Per one program manager, fleet advisory services that use real-life vehicle driving data to estimate EV suitability face slow-downs as those fleets have been sidelined temporarily. Fleet program interest from those advisory services will slow to a trickle until those businesses can resume operations and feasibility analyses can be completed on their vehicles.

Utilities have also often funded EV education activities, hosting ride-and-drive events and other customer outreach to broaden interest in EVs. That engagement has largely been put on hold, as utilities consider other virtual ways to get “butts in seats,” so to speak.

For now, utilities that track customer charging data as part of new EV pilots have noticed a distinct drop-off in charging activity starting from the time stay-at-home directives took effect. However, according to one TE expert, despite the reduction in charging, the charging load-shape has remained consistent. Customers are sticking to scheduled charging times and avoiding higher-cost electric rate periods, a positive indication that charging management via time-of-use rates or other incentives can hold up despite external interruptions to drivers’ daily lives.

 

Expecting slowdowns in the mid-term:

Amid drastic economic uncertainty, TE programs will likely face a decrease in customer interest, particularly for programs that serve non-residential customers.

In response to pre-pandemic interest, utilities invested significantly in workplace charging infrastructure. These deployments enable EV owners to charge-up on both ends of their daily commute. However, businesses emerging from this interruption will likely have new capital priorities, and spending on EV charging projects may move to the backburner for some. In light of this shift, utility programs that cover full or nearly all installation costs for customers will likely fair better than program with smaller incentives.

Utilities have displayed similar interest in public fast charging and, in some areas, its ability to enable electric vehicles in ride-sharing services. With higher mileage and greater need for daily fast-charging, electric ride-share vehicles can provide significant revenue opportunities to fast-charging operators. But as one utility TE expert pointed out, a significant drop in ride-share trips in many cities could cause lasting harm to the economics of operating those fast chargers. Consequently, charging developers may need to reconsider their planning in light of reduced charger utilization.

The financial devastation from the pandemic on state and local budgets is one of the greatest risks to program delivery in the coming months and years. In areas where governments have sustainability plans, state facilities and local government sites have been early and eager participants in utility TE programs. With looming budget shortfalls, that participation may no longer be sustainable.

Further, states like California have played a significant role in funding grants, incentives, and R&D to speed TE deployment – funds that are often paired with utility infrastructure programs to help lower upfront costs. As governors and legislators reckon with a sharp drop in tax revenues for the next fiscal year (or longer), those clean transportation funding streams may be reduced to a trickle. That, in turn, puts more reliance on utility programs for funding at a time when regulators may be closely watching customer affordability. Compared to one- or two-year pilots, programs that have longer time horizons of three to five years and flexibility to adapt program designs to market conditions may be better-suited to ride out the bumpy road to recovery ahead.

As the pandemic drags out in the U.S., there is a greater and greater likelihood for longer-term impacts on transportation electrification initiatives. Come back for part two of this series, where I look further into the future, and share how TE experts see transportation electrification in a post-COVID-19 world.

 

And to learn how EMI Consulting is helping utility clients pave the way for successful clean transportation programs, check out our Case Study.