Tag: EVs

Tax Credits in the Inflation Reduction Act Aim to Build a More Equitable EV Market

In February of this year, it was high time for me to buy a new car. I had driven the same car since 2008, and getting this-or-that replaced was costing more and more every year. As a first-time car buyer, I had two criteria: I wanted to go fast, and I wanted the car to plug in.

Like many prospective purchasers, I started my search online and by speaking with friends and who drove electric vehicles, or EVs for short. I settled on a plug-in hybrid sedan, reasoning that a plug-in hybrid electric vehicle (PHEV) was the best of both worlds: the 20-mile electric range was perfect for my short commute and getting around Houston’s inner loop, and the 10-gallon gas tank offered freedom to roam. In the eight months since I’ve had the car, I’ve bought less than ten tanks of gas. As the price of a gallon in Texas soared to $4.69 in June, the timing of my purchase seemed miraculous.

When it was time to transact, the dealer made vague mention of rebates and tax credits, but didn’t have a comprehensive understanding of the details. Enter Texas’s Light-Duty Motor Vehicle Purchase or Lease Incentive Program (LDPLIP). Administered by the Texas Commission on Environmental Quality (TCEQ), the program grants rebates of up to $5,000 for consumers, businesses, and government entities who buy or lease new vehicles powered by compressed natural gas or liquefied petroleum gas (propane), and up to $2,500 for those who buy or lease new EVs or vehicles powered by hydrogen fuel cells.

Rebates are only available to purchasers who buy or lease from dealerships (so some of the most popular EVs in the U.S. don’t qualify). There is no vehicle price cap, nor is there an income limit for purchasers. In June of 2022, the average price for a new electric vehicle was over $66,000, according to Kelley Blue Book estimates. But the median Texan household income (in 2020 dollars) for 2016-2020 was $63,826.

According to the grant specialist to whom I initially sent my application, the TCEQ has received “a vigorous response” from applicants, however, the TCEQ is limited in the number of rebate grants that it can award: 2,000 grants for EVs or vehicles powered by hydrogen fuel cells, and 1,000 grants for vehicles powered by compressed natural gas or liquefied petroleum gas (propane).

The grant period in Texas ends on January 7, 2023, but on July 5, 2022, the TCEQ suspended acceptance of applications for EVs or vehicles powered by hydrogen fuel cells. As of the writing of this post, the total number of applications received and reservations pending on the program’s website is 2,480.

In comparison with Texas’s rebate program, the EV tax credits in the Inflation Reduction Act of 2022 demonstrate a commitment to building a more equitable EV market. While EVs may be cheaper to own than gas-powered vehicles—especially when gas prices are high—a lot of lower and middle-income families have historically been priced out of the EV market. The IRA takes several meaningful steps towards accessibility and sustainability for a more diverse swath of consumers:

  • Allows point-of-sale incentives starting in 2024. Purchasers will be able to apply the credit (up to $7,500) at the dealership, and because sticker price is such an important factor for so many purchasers, this incentive will make buying an EV more attractive up front.
  • Removes 200,000 vehicle-per-manufacturer cap. Some American manufacturers are already past the maximum. Eliminating the cap means bringing back the tax credit for many popular and affordable EVs, which should attract new buyers.
  • Creates income and purchase price limits. SUVs, vans, and pickup trucks under $80,000, and all other vehicles (e.g. sedans) under $55,000, will qualify for the EV tax credit. For new vehicles, purchaser income will be subject to an AGI cap: $150,000 for individuals and $300,000 for a joint filers.
  • Extends the tax credit to pre-owned EVs. As long as the purchase price does not exceed $25,000, purchasers of pre-owned EVs (EVs whose model year is at least two years earlier than the calendar year in which the purchase occurs) will receive a tax credit for 30% of the sale price up to $4,000. The income cap for pre-owned EVs is $75,000 for individuals and $150,000 for a joint filers.

A purchaser who qualifies under both programs can get both incentives. Comparing Texas’s state government-level incentives and those soon to be offered at the federal level reveals a few telling differences—new vs. used, income caps, purchase price caps, post-purchase rebates vs. up-front point-of-sale incentives—but the differences all fall under the same umbrella: equity. The IRA’s tax credits are designed, among other things, to make purchasing an EV more attractive to a wider audience.

Of course, the EV incentive landscape has greatly changed since the Energy Improvement and Extension Act of 2008 first granted tax credits for new, qualified EVs. The LDPLIP wasn’t approved by the TCEQ until late 2013, so the U.S. government has arguably had more time to get it right. Some might say that the fact that Texas’s program offers the purchaser of the $150,000+ PHEV the same opportunity to access grant funds as the purchaser of the $30,000 EV means that the LDPLIP is even more “equal.”

It is worth noting that the IRA also sets a handful of production and assembly requirements. For instance, to qualify for the credit, a vehicle’s final assembly must occur in North America. Further, at least 40% the value of the critical minerals contained in the vehicle’s battery must be “extracted or processed in any country with which the United States has a free trade agreement in effect” or be “recycled in North America”—and this percentage increases each year, topping out at 80% in 2027. There is also a rising requirement that 50% of the vehicle’s battery components be manufactured or assembled in North America, with the requirement set to hit 100% in 2029. It is unclear whether automotive manufacturers and the U.S. critical mineral supply chains will be able to meet these targets—and that uncertainty may cause a potential limiting effect on the options a purchaser would have for EVs that qualify for the tax credit.

Time will tell whether the intentions behind the EV tax credits in the IRA have the effect that this particular blogger and PHEV owner is hoping for. While we wait to see whether this bid at creating an equitable EV market bears fruit, we can at least admire this attempt at, as the saying goes, “giving everyone a pair of shoes that fits.”

Article By Dania Abbasi of Foley & Lardner LLP

For more energy and environment legal news, click here to visit the National Law Review.

© 2022 Foley & Lardner LLP

Reinventing the American Road Trip: What the Inflation Reduction Act Means for Electric Vehicle Infrastructure

The Inflation Reduction Act of 2022 (“IRA”) signifies a turning point in domestic efforts to tackle climate change. Within the multibillion-dollar package are robust investments in climate mitigation initiatives, such as production tax credits, investment tax credits for battery and solar cell manufacturers, tax credits for new and used electric vehicles (“EV”)1, automaker facility transition grants, and additional financing for the construction of new electric vehicle manufacturing facilities.2 One thing is abundantly clear, the IRA’s focus on stimulating domestic production of electric vehicles means that the marketplace for electric vehicles will see a dramatic change. The Biden Administration has set an ambitious target of 50% of EV sale shares in the U.S. by 2030. However, if electric vehicles are going to achieve mass market adoption, a central question remains — where is the infrastructure to support them?

Addressing gaps in EV Supply and EV Infrastructure

As it stands, the shortage of charging infrastructure is a substantial barrier in the push for mass consumer adoption of EVs.3 Experts estimate that in order to meet the Biden Administration’s EV sale target by 2030, America would require 1.2 million public EV chargers and 28 million private EV chargers by that year.4 Department of Energy data shows that approximately 50,000 EV public charging sites are currently operational in the United States.5 In comparison, gasoline fueling stations total more than 145,000.6 However, federal legislation such as the Bipartisan Infrastructure Law (“BIL”) passed earlier this year signifies a clear commitment to remedying this disparity. The BIL establishes a National Electric Vehicle Infrastructure Formula Program (“NEVI”) to provide funding to States and private entities to deploy EV-charging infrastructure and to establish an interconnected network to facilitate “data collection, access and reliability.”7 The Federal Highway Administration, the federal agency charged with implementing NEVI, proposed minimum standards and requirements that states must meet to spend NEVI funds:

  • Installation, operation and maintenance by qualified technicians of EV infrastructure

  • Interoperability of EV charging infrastructure

  • Network connectivity of EV charging infrastructure

  • Data collection pertaining to pricing, real-time availability and accessibility8

The goal of the proposed rule is to secure EV charging infrastructure that works seamlessly for industrial, commercial and consumer drivers. Combining the historic investments in clean energy and climate infrastructure in the BIL and IRA, the federal government has jumpstarted what will be a fundamental shift in how consumers use transportation. Earlier this week, the Biden Administration announced more than two-thirds of EV Infrastructure Deployment Plans from States, the District of Columbia and Puerto Rico have been approved ahead of schedule under NEVI.9 With this early approval, these states can now unlock more than $900 million in NEVI funding from FY22 and FY23 to help build EV chargers across highways throughout the country.10

Section 13404’s Alternative Fuel Refueling Property Credit

Building up the U.S. capacity to build EVs, and then ensuring people can use said vehicles more easily by shoring up EV infrastructure is a crucial facet of the Inflation Reduction Act. Section 13404 of the IRA provides an Alternative Fuel Refueling Property Credit that targets the accelerated installation of EV charging infrastructure and assets.11 Section 13404 extends existing alternative fuel vehicle refueling property credit through 2032, and significantly restructures the credit by allowing taxpayers to claim a base credit of 6% for expenses up to $100,000 (for each piece refueling property located at a given facility) so long as the property is placed in service before Jan. 1, 2033.12 However, the alternative fuel property must be manufactured for use on public streets, roads and highways, but only if they are (1) intended for general public use, or (2) intended for exclusive use by government or commercial vehicles and (3) must be located in a qualifying census tract (i.e., low-income communities or non-urban areas).13 From a job creation standpoint, the IRA also provides an alternative bonus credit for taxpayers that meet certain wage requirements during the construction phase.14

The Future of EV Infrastructure

EV stations in city streets, parking garages and gas stations will become a prominent part of the nation’s infrastructure as it moves towards a green future. The effort will require coordination among municipal, state and federal policymakers. Even more, electric utilities must ensure that local infrastructure can support the additional strain on the grid. Utilities also have a direct interest in a cleaner, efficient, and less overburdened grid. Federal tax incentives, like the IRA, and subsides from states and local ordinances are integral to the implementation and construction of these networks. The private sector has already taken steps to do its part. In a recent study conducted by consulting company AlixPartners, as of June 2022, automakers and suppliers expect to invest at least $526 billion to fund the transition from gasoline powered vehicles to EVs through 2026.15 This is double the five-year EV investment forecast of $234 billion from 2020-2024.16 Even more, according to Bloomberg, not including deals that have disclosed financials, more than $4.8 billion has already been invested in the EV charging industry this year in the form of debt financing and acquisitions.17 Driven by fast growth and robust availability of government funds, financiers and large companies seeking to acquire EV charging companies, sense immense opportunity.18

FOOTNOTES

1“Electric Vehicle” is used interchangeably with the acronym “EV” throughout this article.

2 Isaacs-Thomas, I. (2022, August 11). What the Inflation Reduction act does for green energy. PBS. https://www.pbs.org/newshour/science/what-the-inflation-reduction-act-do…

3 Consumer Reports (2022, April). Breakthrough Energy: A Nationally Representative Multi-Mode Survey. https://article.images.consumerreports.org/prod/content/dam/surveys/Cons…

4 Kampshoff, P., Kumar, A., Peloquin, S., & Sahdev, S. (2022, August 31). Building the electric-vehicle charging infrastructure America needs. McKinsey & Company. https://www.mckinsey.com/industries/public-and-social-sector/our-insight…

5 U.S Department of Energy. (2022). Alternative Fueling Station Locator. Alternative Fuels Data Center: Alternative Fueling Station Locator. https://afdc.energy.gov/stations/#/find/nearest?fuel=ELEC&ev_levels=all&…

6 American Petroleum Institute. (n.d.). Service station FAQs. Energy API. https://www.api.org/oil-and-natural-gas/consumer-information/consumer-re…

7 U.S. Department of Transportation/Federal Highway Administration. (n.d.). Bipartisan Infrastructure Law – National Electric Vehicle Infrastructure (NEVI) formula program fact sheet: Federal Highway Administration. U.S. Department of Transportation/Federal Highway Administration. https://www.fhwa.dot.gov/bipartisan-infrastructure-law/nevi_formula_prog…

8 The Office of the Federal Register of the National Archives and Records Administration and the U.S. Government Publishing Office. (2022, June 22). National Electric Vehicle Infrastructure Formula Program. Federal Register. https://www.federalregister.gov/documents/2022/06/22/2022-12704/national…

9 United States Department of Transportation. (2022, September 14). Biden-Harris Administration announces approval of First 35 state plans to build out EV charging infrastructure across 53,000 miles of Highways. United States Department of Transportation. https://highways.dot.gov/newsroom/biden-harris-administration-announces-…

10 See Id.

11 As a note, “refueling property” is property used for the storage or dispensing of clean-burning fuel or electricity into the vehicle fuel tank or battery.  Clean-burning fuels include CNG, LNG, electricity, and hydrogen.

12 Inflation Reduction Act of 2022, H.R. 5376, 117th Cong. § 13404 (2022); See also Wells Hall III, C., Holloway, M. D., Wagner, T., & Baldwin, E. (2022, August 10). Nelson Mullins tax report–Senate passes Inflation Reduction Act. Nelson Mullins Riley & Scarborough LLP. https://www.nelsonmullins.com/idea_exchange/alerts/additional_nelson_mul…

13  Id.

14  Id.

15 AlixPartners, LLP. (2022, June 22). 2022 Alixpartners global automotive outlook. AlixPartners. https://www.alixpartners.com/media-center/press-releases/2022-alixpartne… See also Lienert, P. (2022, June 22). Electric vehicles could take 33% of global sales by 2028. Reuters. https://www.reuters.com/business/autos-transportation/electric-vehicles-…

16 Id.

17 Fisher, R. (2022, August 16). Electric car-charging investment soars driven by EV Growth, government funds. Bloomberg. https://www.bloomberg.com/news/articles/2022-08-16/car-charging-investme…

18 Id.

Article By Lawrence L. Ostema and Jeffrey E. Joseph of Nelson Mullins

For more utilities and transportation legal news, click here to visit the National Law Review.

Copyright ©2022 Nelson Mullins Riley & Scarborough LLP

Electrification of the Fleet is on the Horizon, Preparing Now is Key

While we often hear how EVs will revolutionize the lives of the average consumer, commercial fleet owners are starting to take note of the impact these new powertrain systems will have on their own business and operations. As OEMs find creative ways to increase aerodynamics, extend battery range, and increase charging speeds, the zero emission and lower long-term cost of EVs compared to ICE (internal combustion engine) vehicles makes a compelling argument for adoption, at least on paper. What really matters is how those factors play out as the rubber hits the road, which OEMs are starting to see play out in real time. Over the past few years, there has been an explosion of commercial fleet platforms from existing and new entrants in the commercial vehicle space. From light to heavy trucking to fleet platform automobiles, EV technology is looking to capture every corner of the commercial fleet sector. Coupled with a slow reduction in the number of ICE vehicles produced in future years, the market may start pushing fleet operations towards EVs, whether they like it or not.

According to the Department of Transportation, over eight million vehicles made up commercial fleets in the US in 2020, which includes a mix of trucks and automobiles used in commercial and government operations. Even more make up commercial vehicles on the road that are not considered part of a fleet. As consumer demand drives most traditional OEMs toward EV dominated fleets, commercial fleet owners and operators need to start to prepare now for the same shift in their vehicle suppliers, or risk playing catchup once the market does turn from ICE to EV. This isn’t to say that failure to be an early adopter will be the death-knell to commercial fleet businesses; it likely won’t be. What businesses with commercial fleets should consider is their own business needs and their timeline for their own fleet replacement as EV technology and infrastructure support continues to evolve. Establishing a process and plan for upgrading existing fleets, training personnel, upgrading infrastructure, and understanding available programs for conversion will be key.

The switch from an ICE to EV fleet isn’t as simple as flipping a switch or plugging in a car – EVs bring a new powertrain and new sources of information. EVs in their current state are expensive, new vehicle supply is constantly in question, current operators are unaware of the nuances involved with operating an EV, and the infrastructure necessary to support a commercial fleet of EVs isn’t universally robust. For the average fleet operator, there also is a need to focus on route optimization, installing and maintaining new hardware capable to supporting charging on-site, revamping their maintenance and care procedures, and working with their local energy providers to understand how power demands in their local market may impact their own energy costs and needs. Additionally, although data analytics has improved existing fleet operations over the past few years, expect to see more nuanced data availability to the benefit of fleet operators.  As commercial and consumer EVs come out with ever more connectivity to the web and each other, coupled with the ability for “smart cities” to increase data available to drivers and vehicles, expect future fleet operators to get even more granular and predictive understanding of traffic patterns to optimize commercial routes. Managing these dynamics and capitalizing on new sources of information will better enable operators to adapt to the changing landscape. The ability to adapt to this new frontier will be a key trait for successful fleet operations in the Auto-2.0 operated environment.

Article By Christopher R. Boll of Foley & Lardner LLP

For more infrastructure and transportation legal news, click here to visit the National Law Review.

© 2022 Foley & Lardner LLP

State Investments in Electric Vehicle Charging Infrastructure

Various studies indicate that an overall lack of charging infrastructure serves as an impediment to the widespread adoption of electric vehicles (EVs). However, the road to transportation electrification is officially under construction following several major state investments.

At the end of May, in the largest single state-level investment in EV charging infrastructure, the California Public Utilities Commission (CPUC) approved more than $760 million worth of transportation electrification projects by the State’s three investor-owned utilities. The CPUC’s Decision, See A.17-01-020, Proposed Decision of ALJs Goldberg and Cook (May 31, 2018),  authorized Pacific Gas and Electric Company (PG&E) and Southern California Edison (SCE) to install vehicle chargers at more than 1,500 sites supporting 15,000 medium or heavy-duty vehicles. The FD also approved rebates to San Diego Gas & Electric (SDG&E) residential customers for installing up to 60,000 240-volt charging stations at their homes. Moreover, PG&E was authorized to build 234 DC fast-charging stations.

Besides the total spend and resulting emissions reductions represented by the Commission’s action, the Proposed Decision is also notable for the policy priorities it advances.  For instance, it clearly prioritizes the creation of electrification-related benefits for California’s disadvantaged communities (DACs).  (The authorizing legislation, SB 350, found that “[w]idespread transportation electrification requires increased access for disadvantaged communities . . . and increased use of [EVs] in those communities . . . to enhance air quality, lower greenhouse gases emissions, and promote overall benefits to those communities” § 740.12(a)(1)(C) (De Leon)).  Accordingly, the CPUC focused on promoting construction of charging infrastructure in DACs.   For example, the PG&E fast charging program will target construction in DACs by providing up to $25,000 per DC fast charger in rebates to cover a portion of the charger cost for sites located in DACs.

The CPUC also prioritizes the survival of non-utility charging competition.  For example, the Proposed Decision eliminates utility ownership of the charging infrastructure on the customer side of the meter in the SDG&E residential charging program. Additionally, for the PG&E and SCE’s medium and heavy-duty programs, the utilities will own make-ready infrastructure, but not the Electric Vehicle Supply Equipment (EVSE). Instead, the utilities will allow customers to choose their own EVSE models, EVSE installation vendors, and any network services providers.

The CPUC noted several benefits of allowing the utility to own electrification infrastructure only up to the point of the EVSE stub.  First, the Commission found that “[u]tility ownership of the charging infrastructure dramatically drives up costs, in comparison to alternative ownership models.” Instead, restricting utility ownership of charging equipment will allow more charging infrastructure to be built at the same (or lower) cost to ratepayers. Second, it allows private parties to compete and innovate, which will improve charging technology and lower costs. Lastly, non-utility competition addresses “stranded cost” fears, since private parties will bear the risks of nascent charging technologies.

While California has made the largest commitment, other states have also joined the effort to pave a national road toward the widespread adoption of EVs.

In New Jersey, utility company PSE&G recently proposed spending $300 million to set up a network of up to 50,000 charging stations. This investment would constitute a massive upgrade to New Jersey’s charging infrastructure, which currently consists of less than 600 charging stations according to U.S. Department of Energy data. The proposed investment is part of a larger $5.4 billion expansion in PSE&G’s five-year infrastructure plan, and represents the first major proposal of New Jersey’s largest utility to invest in EV infrastructure.

In New York, Governor Andrew Cuomo announced a $40 million commitment (that could grow to $250 million by 2025) by the New York Power Authority for its EVolve NY initiative. The new funding will be used to build fast chargers and to support EV model communities. EVolve NY is a part of the broader Charge NY 2.0 initiative, which advances electric car adoption by increasing the number of charging stations statewide. The new funding will aid New York as it aims to meet its particularly ambitious goal of 800,000 electric vehicles on the road by 2025.

Late last year, the Massachusetts Department of Public Utilities approved a $45 million charging station program by local utility, Eversource. The program includes investments to support the deployment of almost 4,000 “Level 2 Stations” and 72 DC Fast Charging stations. Even more investment could be on its way to Massachusetts as utility company National Grid has also proposed investing in charging station infrastructure.

And in Maryland, utility companies have proposed spending $104 million to build a network of 24,000 residential, workplace and public charging stations. The program, currently before the state’s Public Service Commission, would be a major part of Maryland’s effort to reach 300,000 electric vehicles on the road by 2025.

On the federal level, energy-related projects could be eligible for the $20 billion “Transformative Projects Program” announced by the Trump administration in February.  However, President Trump recently remarked that his infrastructure plan will likely have to wait until after this year’s midterm elections.  In the meantime, states have shown that they are more than willing to take the lead in investing in transportation electrification infrastructure.  (In related news this week, Colorado’s decision to move toward adopting California’s greenhouse gas emissions standards for light-duty vehicles represents a parallel and noteworthy development, further indicating leadership and action from states focused on developing advanced vehicle technology.)  It’s also notable that in addition to utility commission activity, states are also expressing support for advanced vehicle technology While the states have certainly taken a lead, their investments also complement significant action in the private sector, including the recent effort to stand up the Transportation Electrification Accord.  See our recent post on that subject, and continue to follow Inside Energy and Environment for continued updates on this subject.

© 2018 Covington & Burling LLP

This post also includes contributions from Michael Rebuck, a summer associate.

This post was written by Jake Levine Covington & Burling LLP.