Cleantech Investor

First published in Cleantech magazine, February 2011. Copyright Cleantech Investor 2011

Electric vehicle incentives from around the world

By Arthur Girling

According to many electric vehicle sceptics, there is a critical stumbling block in the path to widespread EV ownership. In their opinion, consumers will not buy electric vehicles without the charging infrastructure being in place: conversely, infrastructure companies will not install charging stations without enough customers on the roads.

This chicken-and-egg deadlock can be broken by governments, which have the resources and the inclination to overcome our addiction to oil with both carrots and sticks. And it seems that governments across the world have decided to break through this barrier in a variety of ways.

Despite the economic downturn in many countries, governments seem keen to pour money into EVs. For example, US-based manufacturers are being supported to the tune of $1.5 billion in grants to produce highly efficient batteries and battery components, as well as up to $500 million for the production of other EV components. China is also manoeuvring for pole position, with multiple incentives for manufacturers (rumoured at around $1.5 billion) in the push towards turning out one million cars a year from 2012.

Some of the policies being employed are set out below. There are plenty more, but those described should give a flavour of the diversity of approaches, big and small, around the world.

Support for research and innovation

One of the first major trials is taking place in the UK. The Technology Strategy Board and the Department for Transport are investing £25 million ($39.5 million) in the Ultra Low Carbon Vehicle Demonstrator programme. The scheme aims to deploy around 350 vehicles in real-world trials across eight regional hubs over the coming 18 months. Initial results from partner CABLED (Coventry and Birmingham Low Emission Vehicle Demonstrators) showed that car usage in the area is broadly suited to the technology. Vehicles from manufacturers including Jaguar/Land Rover, Mitsubishi/Colt, Mercedes Benz/Smart, Tata Motors, LTI and Microcab Industries are being trialled. The universities of Coventry, Aston and Birmingham are playing major roles in the scheme, including providing access to hydrogen fuelling stations.

The Australian state of Victoria launched a trial in late 2010, which will involve around 60 vehicles from Toyota, Mitsubishi, Nissan, Blade Electric Vehicles and EDay Life. The public charging infrastructure will be supplied by Better Place, ChargePoint and ECOtality, and these companies will provide additional household charging together with DiUS Computing.

The US Office of Energy Efficiency and Renewable Energy's Vehicle Technologies Program undertakes the plug-in hybrid electric vehicle research programme, led by Argonne National Laboratory in partnership with the Idaho National Laboratory. The U.S. Department of Energy's FreedomCAR and Vehicle Technologies Program is evaluating PHEV technology and researching technical barriers to commercialising PHEVs. The Vehicle Technologies Program is closely linked to the US Clean Cities Coalition, which encourages the adoption of EVs by local governments in their procurement programmes and which maintains a HEV Inventory.

A slightly different approach to hot-housing innovation has been taken by the US Patent and Trademark Office (USPTO), which has a programme to speed up patent applications “pertaining to environmental quality, energy conservation, development of renewable energy resources, or greenhouse gas emission reduction”. The USPTO Green Patent Pilot Program will run until December 2011 and aims to consider such applications out of turn, potentially cutting by around a year the average time taken to obtain final approval.

Large scale R&D is supported in Europe by the EU Green Cars Initiative, which is part of the European Economic Recovery Plan. The Initiative will offer €4 billion ($5.4 billion) in loans from the European Investment Bank, plus a further €500 million ($678 million) via the Seventh Framework Programme, which will be matched by an additional €500 million from public private partnerships with member states and industry.

Deploying charging infrastructure

Portugal provides an interesting case study. The Portuguese Government has entered into an agreement with the Renault-Nissan Alliance to construct ‘MOBI-E’, as it calls the first country-wide charging network. The partnership aims to complete the 1,300 standard battery charging points and 50 quick-charging stations by July of this year, with some charge points as far afield as the Azores and Madeira. The consortium received the first European delivery of the Nissan Leaf, with one car going to each of the nine companies participating, while the tenth was collected by Portuguese President Jose Socrates. Malta has recently announced that it intends to develop a charging network following this example.

Such infrastructure deployment may be relatively easy in a small country like Portugal, but what policies would be needed to roll out a charging infrastructure in the US?

The Electrification Coalition is a US-based group of business leaders “representing the entire value chain of an electrified transportation system”. The group includes CEOs from California utility Pacific Gas & Electric, Japanese automaker Nissan, smart grid start-up GridPoint, battery companies A123Systems and Johnson Controls-Saft, and venture capital firm Kleiner Perkins Caufield & Byers.

The Coalition predicts that by 2040, after the implementation of policies set out in their Roadmap document published in November 2009, 75% of vehicle miles travelled could be using EVs.

To achieve this aim, it recommends the creation of ‘ecosystems’, or “communities in which each of the elements necessary for the successful deployment of grid-enabled vehicles is deployed nearly simultaneously in high concentrations”. Such policies could put 7 million grid-enabled vehicles on US roads by 2018, the Coalition argues, in stark contrast to the US target of one million electric cars on the road by 2015.

In the UK, the Plugged in Places programme aims to build 11,000 vehicle charging points in streets, car parks, outside supermarkets and shopping centres, with London, Milton Keynes and the north east of England as the first three pilot areas.

A slightly different tack is emerging in Vancouver, Canada, which is prioritising the roll-out of private charging infrastructure in homes. The municipality has made charge points compulsory in all new family homes and 20% of parking places in new apartment blocks.

Incentives for sales

Several countries have launched subsidies on sales prices, as listed in the table below.

Other countries have created tax breaks for owners – for example, EVs are exempt from acquisition tax in Norway, while Japan grants exemption from both acquisition tax and road tax for PEVs, PHEVs and HEVs. In Germany EVs are not subject to road tax for the first five years after registration.

Preferential driving conditions may also be a good reason to buy an EV in some countries. In London, EVs are exempt from the inner-city Congestion Charge, while Norway allows access to bus lanes, free parking and toll-free driving. Italy permits EVs in some city centres which have been shut off for petrol-driven equivalents.

Public transport procurement policies may also drive up sales. For example, Montreal, in Canada, has stated that all 1,300+ buses in the city will be electric by 2025. The municipality, which will start buying the buses in 2012, is considering a range of options, including electricity from overhead cables and hybrids.

Removing subsidies for fossil fuels

The International Energy Agency (IEA) made an obvious, but nonetheless politically difficult, point in its World Energy Outlook report last year: countries must stop subsidising fossil fuels which “undermine the competitiveness of renewable and more energy efficient technologies”. The report estimated that governments subsidised fossil fuels by $312 billion in 2009 and $558 billion in 2008.

In the 2011 State of the Union Address on 25 January, President Obama said his next budget will switch subsidies from the oil industry to clean energy technologies: "I'm asking Congress to eliminate the billions in taxpayer dollars we currently give to oil companies,” he said. “I don't know if you've noticed, but they're doing just fine on their own." Such a move could provide a considerable boost to the EV industry – the US Government estimates that it pays subsidies to the oil industry worth around $4 billion, before the fuel even reaches the pumps. However, an attempt by Democrats to cut the support for cheap oil failed in 2007, so it remains to be seen whether Obama will be any more successful.

Ready for EVs?

Only time will tell which of the above incentives prove the most successful for investors, manufacturers, consumers and the environment. Indeed, policymakers may learn a lot from the successes and failures of others. To this end, there are several global-scale initiatives which could utilise the information generated by the outcomes of these incentives.

One example is the Electric Vehicle Initiative (EVI), coordinated by the IEA and involving China, France, Germany, Japan, South Africa, Spain, Sweden and the United States. These eight countries have committed to a joint target of 20 million EVs and PHEVs on the road by 2020. According to the IEA, this would put the world on a trajectory to reach 200 million by 2030, and one billion EVs (out of a projected total of more than 2 billion vehicles) on the road by 2050.

The EVI commitment, launched at the Paris Motor Show last year, included plans to create pilot programmes in cities and share information and best practice. The first findings of these partnerships are due to be announced in April 2011.
 
In a similar vein, 14 cities (Bogota, Buenos Aires, Chicago, Copenhagen, Delhi, Hong Kong, Houston, London, Los Angeles, Mexico City, Toronto, Sao Paulo, Seoul and Sydney) have formed the C40 Electric Vehicle Network to address areas of municipal action that are critical to the successful introduction of electric vehicles. Car companies BYD, Mitsubishi, Nissan and Renault are also involved in the network, and will advise the cities on issues including procurement, pricing, specifications and parameters.

In the US, GE, in conjunction with Deloitte, compiled a list of US cities "best positioned" for electric cars. The 'winner' was Dallas followed by Houston, Detroit, St. Louis and Atlanta. The GE data was based on cities with most car commuters, cross-tabbed with cities where commuters typically live within a 50 mile radius of their work. In contrast, the 'EV-Ready Cities Index' released by EV manufacturer THINK last year ranked Los Angeles first, followed by San Francisco and then Chicago and New York in a tie for third place. The different conclusions appear to be based on the fact that the GE data doesn't take into account the efforts being made by a city to create an EV infrastructure. It does point, however, to the enormous opportunity presented by electric vehicles.