California Institute for Energy and Environment (CIEE)

Advances in electric-drive technology, including lithium-ion batteries, and strong policy drivers, such as the Global Warming Solutions Act (AB 32), have contributed to a more promising market in California for the widespread introduction of plug-in electric vehicles (PEVs)—comprised of plug-in hybrids (PHVs) and battery electric vehicles (BEVs). However, significant technological, market-related, and institutional barriers remain. High battery costs, infrastructure requirements, and consumer unfamiliarity with PEVs create hurdles to the widespread commercialization of PEVs and thus shroud the extent to which the supply of electric transportation fuel (e-fuel) will need to be scaled up to meet future demand. Institutionally, uncertainties about the rate and scale of commercialization present significant challenges for strategic and regulatory planning, coordination, and policy development that will be necessary not only to support the largest possible number of PEVs, but also to maximize benefits.

This report examines the current market and policy/regulatory setting for PEV and e-fuel in California, assesses various related costs and benefits, identifies key issues and barriers to their widespread and responsible commercialization, and makes recommendations for policy development. These efforts are suggested in the interest of improving the commercialization of PEVs, thereby: helping the state meet its energy and environmental goals, providing economic vitality, and more generally helping the U.S. and the world evolve toward a more sustainable transportation future.

An additional goal of this report is to explore the argument that electricity used for PEVs should be monitored, tracked, and in various ways accounted for differently than electricity used for other uses, stemming from the fact that e-fuel substitutes directly for petroleum use and thus has the effect of significantly reducing emissions of GHGs and other pollutants in California. Differentiating e-fuel from other electricity uses would facilitate data collection and analysis of e-fuel-related investments and benefits, may be necessary for the implementation of the Low Carbon Fuel Standard program, and, lacking alternative financing schemes, would allow for the eventual make-up of road-tax revenues should PEVs become widespread.