California Dreaming, Or How I Banned Gasoline Car Sales
“California Governor Gavin Newsom has banned the sale of gasoline-powered cars in the state by 2035. This will send electricity demand up, necessitating adding generation capacity. What does it mean? Will it work? ”
California Governor Gavin Newsom recently signed an executive order banning the sale of gasoline-powered automobiles in the state beginning in 2035. This was part of his push to further embed a ‘really green’ agenda within the state’s economy. The car-sale ban ignores the challenge that will face the state’s electric utilities in meeting the power needs for all the new electric vehicles (EV) that will be sold. But, that’s a detail, and we have 15 years before the ban goes into effect. Not to worry. However, 15 years isn’t the longest runway when one is talking about developing, permitting and building substantial new power supply sources, especially when existing natural gas-powered and nuclear plants are scheduled to be retired in the foreseeable future.
The first point of the executive order stated:
“It shall be a goal of the State that 100 percent of in-state sales of new passenger cars and trucks will be zero-emission by 2035. It shall be a further goal of the State that 100 percent of medium- and heavy-duty vehicles in the State be zero-emission by 2045 for all operations where feasible and by 2035 for drayage trucks. It shall be further a goal of the State to transition to 100 percent zero-emission off-road vehicles and equipment by 2035 where feasible.”
According to the California New Car Dealers Association’s most recent report, California Auto Outlook Second Quarter 2020, new vehicle sales are projected to reach 1.63 million in 2020, a 22% decline from 2019’s sales, but exceed 1.8 million units next year. During the recent boom years, new vehicle sales reached, or slightly exceeded, 2 million units annually. The state is the largest automobile market in the nation, and the largest EV market, too.
Counting vehicle sales by state and type is challenging, as reflected by the difference between the EV sales data from two respective monitors of that market – EVAdoption.com and InsideEVs.com. According to EVAdoption.com, California sold nearly 95,000 EVs in 2017, which jumped to 153,400 units in 2018. Those sales compare against US sales of 188,000 and 328,000, respectively, for those same years. California’s EVs represented just over 5% of total vehicle sales in 2017 and 7.8% in 2018. National EV market shares, however, were only 1.2% and 1.96% in 2017 and 2018, respectively. InsideEVs.com estimates about 2,000 more EVs being sold in 2017 and 33,000 additional units in 2018 than EVAdoption.com. InsideEVs.com posted 2019 sales data suggesting 329,500 units were sold, a decline of nearly 9%. We estimate, by reading off its charts, that the national EV market share was approximately 1.2% in 2017, 2.2% in 2018, but down to 1.9% last year.
Based on the California data from EVAoption.com, assuming the new vehicle market remains roughly a two-million unit per year market, then between 2018 and 2035, annual EV sales will need to increase 13-fold to reach 100% of vehicle sales. That is a very significant growth rate over the 17-year period. Can it happen? Will it happen? The answer to the first question is “Maybe.” There remain lots of questions about the cost of EVs, especially for their batteries, versus internal combustion engine (ICE) vehicles. There are also questions about the ability of the minerals markets to develop and deliver the required volumes to manufacture the necessary EV batteries. What about the environmental issues with battery disposal?
The answer to the second question is “Only if there is an enforcement aspect to Gov. Newsom’s executive order,” assuming it remains in place. California may also experience the greatest auto sales boom in 2034 as citizens seek to avoid the mandate. Not considered is what happens if there isn’t enough gasoline, especially for lower-income families who can’t afford EVs and are priced out of the gasoline market?
Potentially the greatest hurdle for California reaching the target for all new vehicle sales to be zero-emissions is having sufficient power available to charge its rapidly expanding EV fleet. A recent article suggested energy consultants and academics are predicting the switch to an all-electric vehicle fleet could boost California’s electricity demand by up to 25%. Of course, those same forecasters want all that power to come from renewable sources, which means, given the intermittency of wind and solar power, that the state’s electricity utilities will need to build two to three times that amount of power in new generating capacity.
Some clean energy proponents see the EV growth as an opportunity to revolutionize the delivery of electricity. Renewables, however, create a serious challenge for managing the power grid when the sun is setting and solar power drops off quickly, especially if the wind is not blowing. They see the future being a “smart” grid that will enable EV batteries and battery backup units at homes to release their stored electricity to supplement the grid. With respect to EVs, it is known as “vehicle-to-grid,” also expressed as “V2G,” and it is being explored in the U.K. and Denmark. According to Matt Petersen, chairman of the Transportation Electrification Partnership, a public-private effort in Los Angeles working to accelerate the deployment of EVs, “We end up with rolling batteries that can discharge power when needed. The more electric vehicles we add to the grid, the more renewable energy we can add to the grid.”
To gain a better understanding of what is involved in V2G, we turned to the web site of Virta, a Finland-based EV charging company. Virta was founded in 2013 following discussions among Finnish energy utilities about the future of transportation. Based on their belief that the future will be electric, these 18 utilities founded Virta to build up a national charging network. Even before it could set up a network in Finland, the company secured work in foreign markets. Today, Virta operates in 28 countries.
The concept of V2G is relatively simple. It is similar to regular “smart” charging, also known as “V1G,” in which the charging of EVs can be done in a way that allows the charging power to be increased and decreased as needed, i.e., to take advantage of lower-cost power when demand is otherwise low. V2G goes one step further by enabling the charged power to be momentarily pushed back into the grid from the EV’s battery to balance variations in energy production and consumption.
Electricity flowing in the grid always takes the shortest possible path to the nearest location where it is needed. A V2G charging device absorbs electricity from the EV battery and simply pushes it back to the grid where it continues its journey to the nearest location where it’s needed. Virta provided an example of how such a system works.
“At Virta Headquarters, we currently have two V2G charging stations in use. These stations are located in the office building garage, next to regular, publicly available smart charging points. When the V2G station is discharging, the electricity here at Virta HQ transfers directly to the nearby car batteries charging at the regular stations — they are the nearest locations where the demand for electricity is continuous. If no cars are being charged, the discharged electricity will be used on garage lighting or air conditioning. This reduces the total energy consumption of the building, which balances the energy system around our office.”
Virta suggests that V2G can become a core grid management tool, enabling EVs to be used to balance electricity supply and demand in the short-term, and to store energy for longer periods. The key is having the capability to control individual charging devices from the cloud via the internet. Bidirectional charging features enable the electricity to be taken back from the EV battery. Just as the charging device can be controlled by an algorithm to ensure optimal charging times by using local total charging loads, using the price of electricity, solar energy production or the grid frequency as signals, the EV battery can shift from storage to electricity supplier. Importantly, the programming of the bidirectional charging device will ensure that the EV battery is charged to 70%-90% of capacity at the time the user wishes to drive the EV.
This technology all seems straight-forward, but it depends on a number of changes to the existing grid, EV hardware and charging installations. Virta has two tests underway – one involves the 9,000 buses in London and the second is with a utility vehicle fleet in Denmark. The algorithm employs both machine learning and artificial intelligence to adjust the timing and pace of charging and discharging of EV batteries. A key point is that EVs need to be built to allow for bidirectional charging. Not everyone is so equipped. Nissan’s Leaf models appear to be the only vehicles currently equipped with this bidirectional capability, although the company is now adding such a capability to a second EV model. Mitsubishi has also announced plans to commercialize V2G with its Outlander plug-in hybrid EV (PHEV). We don’t know if adding this technology will increase the vehicle’s cost, which could become another issue.
One aspect of V2G that Virta addressed is the issue of battery life. As a result of how V2G works, EV batteries will be discharged more frequently than they would during normal driving. The company does not believe shortening of battery lives is an issue, but we suspect the more frequent discharging will have a cumulative impact on battery life, but maybe it will not materially diminish the battery’s performance at a rate in excess of its normal deterioration. We also do not know what adjustments and/or upgrade investments grid operators will need to make to deploy V2G technology outside of concentrated recharging stations, which are the subject of the current tests. In other words, is this truly feasible technology for home installation, or only for commercial fleets?
The significance of utilizing EV batteries for backup power is the plan of clean energy proponents to offset the huge increases in electric power necessitated by a shift to an all-electric transportation system. Bloomberg New Energy Finance forecasts global electricity demand to rise 300-fold due to the growth of EV’s. That means an increase from 6 terawatt-hours (TWh) in 2016 to 1,800 TWh in 2040. In 2040, electric transportation would represent 5% of global electricity demand. In Europe, the share of electric vehicles is assumed to reach 80% by 2050. This would require an additional 150 gigawatts (GW) of electrical capacity. The share of total electricity demand just for charging EVs varies between 3% and 25%, depending on the number of EV’s assumed in each country.
In another assessment, the International Energy Agency (IEA) suggests EVs will add over 30 TWh of installed battery storage capacity by the 2040’s. This means EVs would become a cheap way to deploy energy storage, with no extra capital cost and relatively low operating costs.
Will California actually end up banning ICE vehicles in 2035? It is one thing to sign an executive order dictating a radically different vision of the future than currently assumed, but it is quite another thing to see such a vision become reality. That is especially true when one realizes how quickly 15 years passes. Not everyone thinks Gov. Newsom’s plan is that radical. The Union of Concerned Scientists calculated that under the plan, ICE vehicles could still make up almost half the cars on California’s roads in 2035, something it still considers unacceptable.
To appreciate the work needed to transform California’s power grid, as well as increase it to meet EV charging demand, here are some numbers from the California Energy Commission. Last year, California’s in-state and imported electricity generation totaled 277,704 gigawatt-hours (GWh). Nearly 28% of that total was imported. While total electricity generation has declined in the past few years, it showed a steadily increasing trend from 1983 until the financial crisis in 2008. In our accompanying chart, we show the history of in-state generation, as well as imported generation. The most interesting point of the chart is imported generation’s share of total generation. When we fit a linear trend line, it was absolutely flat at about 30%.
Using 2019 data, and assuming no change due to different population and/or economic conditions, the estimated 25% increase in power needs to satisfy EV charging requirements would add 69,400 GWh to the total. With the state moving toward a grid powered completely by clean energy, its ability to import power from neighboring regions will be challenged since those states increasingly will need all their currently surplus power, as they pursue similar clean energy agendas. If we assume California must replace all its imported generation, in addition to meeting the EV power growth, the state will have to expand its in-state generation by 73%. We would also point out that 9% of current power comes from nuclear power plants destined to be shut down, besides natural gas plants. We would describe the future California power market as walking on a treadmill set to its highest slope.
Exhibit 25. California Electricity Depends On Imports SOURCE: California Energy Commission, PPHB
With the backdrop of wildfires, banning ICE vehicles would seem to be a logical move. The reality is that this governor will not be around when the fallout from the execution of his executive order comes into play. It also assumes people shift into gear immediately to implement it. Our belief is that few utilities, regulators or governments are ready to move. Does anyone remember what another California governor ordered 15 years ago?
In 2004, via executive order, former Gov. Arnold Schwarzenegger ordered preparation for the arrival of zero-emission, hydrogen-powered cars, buses and trucks. This was an early blow against climate change, but the revolution never followed, despite the state having spent more than $300 million in the past 10 years funding rebates for those who buy or lease hydrogen cars, construction of refueling stations, and the purchase of transit buses, as well as subsidizing development of hydrogen-fueled heavy-duty trucks.
Today, California represents the hydrogen car market. All but a handful of the 7,800 hydrogen-powered cars in the United States are there. The state is also home to most of the nation’s 43 hydrogen refueling stations. All of a sudden, people are beginning to wonder if the hydrogen age will finally blossom in California. EVs have more momentum, and their economics, although still disadvantaged even with subsidies, are better than hydrogen. However, the environmental fallout from battery materials may become a greater concern down the road, restricting the growth of EVs. Without sufficient power, EV buyers will not buy them, even if alternatives are banned. They will travel outside of the state to buy new ICE vehicles elsewhere and register them in California, as their use is not banned by the executive order. This will also provide a huge lift to the used car market. Those of a certain age remember California dreaming, but they also remember Hotel California. The former is happy. The latter a horror. Which will characterize the California of 2035?