At the Detroit Auto Show this week, President Biden announced the approval of plans from 35 States for investment into a national EV charging system amounting to $900 million over fiscal years 2022 and 2023.
These grants come from the previously announced National Electric Vehicle Infrastructure (NEVI) Formula program that outlined $5 billion in prospective grants to states for alternative energy infrastructure from fiscal year 2022 to 2026. Funds will be provided to states that provide workable plans for developing critical infrastructure which enables EV demand to increase unhindered.
Acting Federal Highway Administrator Stephanie Pollack says they continue to review remaining plans and expect to be on track or ahead of their target date of the 30th of September.
The approval of these grants come soon after the passing of the Inflation Reduction Act (IRA) and numerous proposed investments into US EV and battery manufacturing plants from private companies like General Motors and Ford.
The United States drastically needs these investments to help spur EV demand if it is going to meet the lofty goals set by the Biden administration for half of new car sales to be electric by 2030.
A significant factor affecting EV uptake within the US are fears over the unsuitability of EVs for interstate travel, despite the average consumer driving distance reducing considerably since the Covid-19 pandemic. American consumers still drive more miles than their European counterparts.
Consumers want enough range on their vehicles to be able to travel interstate if they need to, without needing to spend a significant length of time stopping to refuel.
While EV range has progressed significantly, it is not yet at a point where interstate round trips can be accomplished on a single charge, nor is it at a point where EVs can be charged at a comparable speed as gas fueled vehicles.
The only other option to address this issue is state-funded charging systems to enable effective interstate EV travel, increasing EV uptake as more consumers feel that their concerns have been addressed.
We believe that a majority of the US’s charging infrastructure will be privately installed. America’s urban population density and love of parking lots make it an attractive inner-city investment for companies as EV uptake increases. Alongside state-level preference to outsourcing these projects we expect city-level charging infrastructure to increase considerably through this decade.
But interstate EV charging just doesn’t make sense from an investment standpoint, and that’s where state subsidies come in. Federal grants for states to address interstate charge points which are not initially profitable for private companies are among the only solutions to kickstarting EV demand in the US.
Under these plans, the Federal Highway Administration (FHWA) will be in control of regulation and standardization of these charge points. Its aim here should be to avoid a situation similar to gas stations. Fair charging rates should be implemented regardless of location, even though these interstate chargers have a captive audience. Equality between rural and urban areas could be an important benefit to EVs which accelerates adoption.
The FHWA also mentions implementing a waiver for this new infrastructure from Made in America requirements for the next 2 years, similar to requirements on manufacturing and sourcing imposed within the IRA.
While sourcing requirements may reek of protectionism, we’ve seen throughout Covid-19 the risks associated with relying on a single supplier. For businesses to localize supply chains and manufacturing incentives need to be introduced to mitigate costs and encourage domestic participation.