March 22, 2024

2035 Electric Cars & Utilities: The Impact of Auto Manufacturers' Commitment on Energy Providers

11 Min. Read

This article was originally published February 9, 2023 and was updated March 22, 2024

The Infrastructure Investment and Jobs Act was created to improve the U.S.’s aging infrastructure, jumpstart the economy, and ultimately change the way Americans live, work, and travel.

The act creates incentives for electric vehicle (EV) charging stations, local energy, and parts production, and helps fund the switch for Americans as they transition to more energy-efficient appliances.

With the push to increase EV adoption and thereby lower gas usage, utilities, the auto industry, and material suppliers are sure to benefit. The auto industry worldwide is also responding to modern needs, revamping product lines to manufacture electric vehicles (EVs).

In this article, we’ll explore the impact of auto manufacturers’ commitments to the current initiative for 2035 electric car production goals and how this shift in transportation will impact utilities and energy providers as more EVs begin to hit the roads.

Planning for 2035 Electric Car Adoption Rates as a Utility

For utilities, it is time to determine the impact the EV revolution will have on-demand patterns and integrate EV charging and load-shifting capabilities into grid planning.

Major automakers were a key part of this act, committing to reduce carbon emissions by producing only hybrid and EV cars by 2035. Several “Rust Belt” states are already seeing an economic revival due to this shift, with many companies now producing EV batteries in this newly dubbed “Battery Belt.”

Utilities will be required to adapt as a result of this widespread adoption, supporting the EV charging infrastructure deployment as electric vehicles continue to replace traditional Internal Combustion Engine (ICE) vehicles.

The Infrastructure Investment Act’s key provisions and accompanying changes are already underway. Still, it’s important to recognize their impacts on the grid, utility electrification, and local, regional, and federal economies.

How the Legislative Framework Supports the 2035 Electric Cars Commitment

Signed in 2021, the $1 trillion Bipartisan Infrastructure Deal was touted as a once-in-a-generation federal effort to shore up and modernize the country’s infrastructure and includes billions of dollars in funding for roads, bridges, passenger rail, drinking water, and high-speed internet.

The Bipartisan Infrastructure Law (BIL) also features funding to deploy public EV transit and functional EV charging stations across the country, including electric buses and other replacements for ICE vehicles.

• $7.5 billion to provide EV purchase incentives and create a national network of EV charging stations.
  
  To date, most EV charging has been at single-family homes and work sites. To facilitate the full transition to EVs, the act seeks to install public charging stations, as well as the networks to keep them running, along highways, in rural areas, and in dense urban areas with rows of multi-family dwellings.
  
  The Bipartisan Infrastructure Law created the National Electric Vehicle Infrastructure Program (NEVI), a $5 billion program administered by the Federal Highway Administration. This program aims to distribute BIL funding at the state level to support the development of a charging infrastructure.
  
  As of Q1 2024, 33 states have received NEVI funding, and 16 states have begun deploying charging projects. NEVI also recently awarded $150 million in grants to repair or upgrade existing EV charging stations to create a more reliable infrastructure.
• $5 billion for nonprofits, states, and local governments to adopt low-zero emission buses under the Clean School Bus Program.
  
  This program will help protect millions of children and bus drivers from continual exposure to pollution from aging ICE buses. So far, the Clean School Bus Program has awarded $2 billion in funding to support the purchase of 5,000 electric buses for 600 schools.
• $65 billion for a clean, renewable energy grid.
  
  The goal is to upgrade our aging power infrastructure. It includes funds for building miles of new, resilient transmission lines to expand access to renewable energy.
  
  The measure also created a Grid Deployment Office, which will invest in the development of better electric transmission and distribution technologies and promote smart grids that offer greater energy resilience.
  
  The Grid Deployment Office recently oversaw a historical investment of over $71 million to develop the country’s hydroelectric infrastructure.

The 2022 Inflation Reduction Act also included provisions and savings for a variety of industries seeking to reduce carbon emissions. For example, it boosts EV adoption by offering financial incentives for EV purchases and charger installation.

Additional tax benefits to install energy-efficient appliances in homes, particularly for removing furnaces, stoves, or other equipment running on fossil fuels and replacing those with appliances that operate via electricity, will help to modernize homes across America with newer, more sustainable and energy-efficient appliances, reducing the strain on our electric grid and reducing household energy costs.

The 2035 Electric Cars Commitment from the Auto Industry

When people first began discussions on phasing out new ICE cars by 2035, the goal seemed aspirational at best. Now, the transition to a U.S. where all new cars and trucks sold are electric, or at least hybrid, appears to be feasible.

The transition to an electric-fueled future was further boosted by a 2035 EV commitment made by major automakers. All U.S. auto manufacturers have EVs in production or on the way, and several have announced their intentions to stop producing new vehicles that run on gas or diesel by 2035 – General Motors, Nissan, Volkswagen, and Ford are just a few of the automakers that have announced their commitment to an all-electric lineup.

While new-car demand still favors ICE autos and trucks, that preference is changing as consumers take note of ever-rising gas prices, greater EV model availability, and the increasing visibility and accessibility of charging stations.

Legislation at the state level is also helping to make electrification inevitable. California, which has its own emission standards, drove the change by banning the sale of ICE vehicles after 2035. The California Air Resources Board has established gradual milestones, beginning with a plan that 35% of new passenger vehicles and light-duty trucks sold in the state must be zero-emission versions by 2026. The target increases to 51% in 2028 and grows annually until it reaches the 100% 2035 electric cars commitment.

Other states, including New York, New Jersey, and Massachusetts, have followed California’s lead. As of 2023, a total of nine states had adopted legislation to follow in California’s footsteps and either ban or limit ICE vehicle sales.

How has the public reacted? In California, auto sales may reach the goal ahead of the 2026 model year, with recent sales numbers breaking records.

Between 2022 and 2023, EV sales increased by 29% in California and currently represent more than 26% of all new vehicle sales in the state. California also represents 37% of national EV drivers, making the Golden State the top state for EV adoption by far, highlighting the strong impact of the state’s 2035 electric cars commitment.

How Does the 2035 Electric Cars Commitment Affect Utilities?

Utilities need to consider the impact of the growing number of EVs on the power network and evaluate load projections that are built on calculations of EV charges happening simultaneously.

Currently, off-peak rates encourage those with overnight access to chargers to take advantage of off-peak times, but once EVs dominate the highways and parking lots, there will likely be more drivers charging during the day as well. It’s important to consider these charging behaviors and work to mitigate the risk of grid overload through proper management and planning.

Estimates vary on the impact of EVs on grid capacity and utility electrification, with some anticipating that energy demands could increase by as much as 38%. However, early studies suggest that utilities could offset this increase by rolling out Time-of-Use programs and increasing renewable energy production.

For instance, a pilot program launched by MCE Community Energy Choice in California found that implementing a Time-of-Use billing model could reduce EV charging loads by 12% by aligning low energy rates with peak renewable energy production hours.

Renewables are playing a pivotal role in increasing energy production capabilities worldwide, with 507 GW of capacity added in 2023 globally. Projections show that the U.S. could increase its energy production capacity by 36.4 GW thanks to solar projects alone.

States and utility providers are investing in grid-scale projects to supplement the energy grid, with 4.1 GW added in 2023, thanks to these large projects. However, residential solar installations also have an important role to play.

Utility providers are increasingly moving toward a modern power infrastructure that leverages local resources, including solar arrays owned by families and businesses. Thanks to new technologies such as virtual power plants, integrating these smaller local energy resources into the grid is possible, and owners can benefit from uploading clean energy to the grid through net metering programs.

The development of local energy resources will go a long way in meeting the growing demand for EV charging and other electrification projects as communities benefit from a more resilient energy infrastructure with lower costs linked to transporting energy.

The Infrastructure Act also budgeted $7.5 billion for nationwide grid upgrades and a national network of charging stations. Many utilities are also taking advantage of this opportunity to invest resources in efficiency improvements.

While the energy grid is due for a major overhaul, this is more due to aging than growth in demand due to EVs and electrification. Regardless of the reasons, utilities will need to upgrade their grids and create new business models to support EV rollouts.

Experts believe U.S. power consumption will reach 4.1 billion kWh in 2024 and continue increasing in 2025. Currently, much of the electricity consumed is comprised of natural gas and coal, but as the energy transition continues to expand, this will shift to larger amounts of renewable energy generated from wind, solar, and hydroelectric wherever feasible, as well as from the use of battery storage and bidirectional capabilities.

Bidirectional charging is an increasingly common feature, and almost every EV model could support bidirectional charging by 2026. Making bidirectional charging widely available would turn the national EV car park into a source of energy that could support the grid as needed, providing supplemental electricity during peak demands and outages while creating value for EV owners.

Employment and Health Benefits of the 2035 Electric Cars Commitment

Growing EV deployment will also have economic ramifications. Utilities and communities need to join in planning for the economic effect EVs will have, particularly in areas dominated by declining industries such as oil production. Auto plants can be retooled to make EV models, new developments are underway, and old factories are being revitalized for a bright and resilient future with renewable resources.

The Bureau of Labor Statistics estimates that the total number of jobs linked to the EV industry could exceed 166 million by 2031. Additionally, the domestic production aspects of federal incentives are leading many factories to reconfigure production to bring plants for batteries, EVs, energy storage, and related devices state-side.

In the last two years alone, more than 15 large US lithium-ion battery factories have been built or expanded in the corridor between Michigan to Tennessee and Georgia to New York, breathing new life into the area now known as the Battery Belt. These facilities are also conveniently located near auto-production plants, which will mitigate future supply chain bottlenecks.

Another economic advantage of the move to EVs includes lower operating costs for drivers. Researchers found that the transition to 100% EV new car and truck sales by 2035, coupled with an increase in clean energy, could deliver $2.7 trillion in savings for consumers through 2050, or about $1,000 per household annually, in lower refueling and maintenance costs.

More importantly, studies estimate that the EV transition’s primary goal — reducing greenhouse gas emissions — can help save lives. A recent study found that achieving a 30% EV adoption rate could save more than 1,000 lives and more than $10 billion annually. Adopting heavy-duty EVs could help save more than $5 billion annually in health costs.

Research also suggests that EV adoption will have a more substantial impact in low-income areas and communities of color that are disproportionally affected by air pollution. Recent changes to incentives such as the Alternative Fuel Vehicle Refueling Property Credit have been supporting the development of EV charging in low-income areas. This decision could help maximize the health benefits of EV adoption and electrification as a whole.

Leading the Way for Electrification in Your Community

The electrification of autos and appliances is accelerating, and it is vital for utilities to anticipate the growing needs of their customers. By working together, we can ensure that our utilities are prepared for the rapid deployment of EVs and the infrastructure and capabilities required to support EVs and other electrification technologies.

The auto industry is changing to promote electric vehicle adoption, the world is transitioning to a cleaner future, and utilities need to prepare for the impact that this thriving demand for electric vehicles and other electric-powered appliances will have on infrastructure.

Qmerit is the North American leader in the electrification movement, helping more than 269,000 homeowners and businesses shift toward a more sustainable, electric-powered future with safe and professional EV charger installations. We make it easier to go electric by providing installation and integration services nationwide as communities pair with local governments and utilities to implement energy solutions that benefit us all.

With the largest network of certified, professional electrical contractors with the training and experience to ensure your customer’s electrification projects are safely delivered and successfully installed, we’re here to support your program every step of the way.

As a trusted partner to leading brands in the electrification movement, our goal is to simplify the switch and provide a seamless experience. To learn more about how we can help accelerate your electrification program and ease the transition, visit our utility services page to contact Qmerit today.