Earlier this year, CNBC reported that by 2030, an expected 125 million electric vehicles will be on the road worldwide. That’s a big change for our transportation system. While electric vehicles will undoubtedly be a bigger part of our future, developing the necessary infrastructure to allow 125 million of them to readily recharge when they need to will not be easy – or cheap.
Thankfully, our nation has experience building out a nationwide transportation energy system. The key to every American having confidence today that he or she can get in a car and drive anywhere in the continental United States is a vibrant, ultra-competitive private market. We do not worry about “range anxiety” with gasoline-powered cars.
The same can be true for electric vehicles if we allow the private market to build infrastructure, sell electricity to vehicle owners – and fight for customers and market share.
Unfortunately, we are seeing city and state governments stifle the private market before it can get going. They are doing this by allowing electric utilities to charge all of their customers for the cost of not only building infrastructure but in many cases for giving away free or subsidized electricity to drivers. This means everyone’s electric bills are going up even if you don’t own an electric vehicle and have no intention of purchasing one anytime soon.
For example, the San Diego Union-Tribune broke the news last month that San Diego Gas & Electric (SDG&E), which has already spent $70 million of their customers’ funds to build electric vehicle charging stations, now wants approval to charge their residential and commercial customers $58.4 million more to construct a few thousand more EV chargers.
Wayne Winegarden, a senior fellow at the Pacific Research Institute, highlighted one issue with using ratepayers to subsidize this infrastructure: “Average ratepayers and low-income customers are just trying to pay their bills to get by the month and the utility is using it in a completely unrelated service that many of them don’t benefit from.” Wayne added, “Could you imagine if they were subsidizing gas stations?”
Not only is this unfair for consumers, but this approach gives the incumbent utility a competitive advantage over other private sector participants. The private sector knows it cannot compete with a utility that doesn’t have to compete for the funds it raises. Who would want to invest private dollars in this type of market?
This is exactly why some states, like Missouri and Kansas, have turned down utilities’ requests to build electric vehicle charging stations with customers’ money.
If state governments have the goal of expanding electric vehicle usage, their time would be better spent encouraging investment in charging infrastructure by the private sector.
There are around 168,000 gas stations in the United States, and they depend on providing the fuel that brings in customers. As the electric vehicle market expands, the private sector will fight for these customers, but government action is discouraging outside investment by allowing utility companies to unfairly price them out of the market.
Michigan State University recently released a study mapping out the ideal electric vehicle charging network across the state, making it the first of its kind. Michigan is using this information to better award their states’ utility rebate programs for publicly available, fast charging stations. A majority of the 35 charger rebates under review are at gas stations. And this makes sense, because if the long-term goal is transitioning to an electric vehicle transportation system, it will be most effective to replicate the current system that has served Americans well.
If we continue down the road of utility customers paying all the freight, two things will happen. First, the private marketplace for EV charging will never develop to mirror the competitive refueling market the U.S. has today. Meanwhile, the average American will pay an ever-increasing power bill. Second, without a competitive market, eventually those electric vehicle drivers will be higher energy costs.
We can all agree that we need to do more to reduce emissions and that electric vehicles have the potential to be a key source of pollution reduction. But undercutting the growth of a private market is the wrong approach. We need competition, which will increase the availability of charging stations at a lower cost and we need electric vehicle owners to pay for their own fuel.
Making the right choice now will determine whether the electric vehicle market can grow the way we anticipate or get stunted by short-term thinking.
W. Jesse Grady has worked with the RNC, Trump Campaign, Texas GOP, and the NC GOP. He now lives in Baltimore and studies law at the University of Maryland. He advocates for good governance and more effective federal policy.