North Carolina’s transportation sector is poised for electrification, but creative solutions are needed to achieve success

In 2018, North Carolina Gov. Roy Cooper issued Executive Order 80, an initiative to reduce greenhouse gas emissions, improve air quality and enhance public health statewide. It was an important step toward addressing the global climate crisis starting right here in our backyard. The governor’s order calls for the creation of a Zero Emission Vehicle Plan, which outlines a goal to get 80,000 electric vehicles on the road by 2025. This is an exciting initiative that should help push the EV market along. But North Carolina is capable of achieving far more than is laid out in the current plan — most of which the state is already on track to achieve.

North Carolina’s transportation system has long been ripe for electrification. In fact, the state will likely reach or exceed 80,000 EVs, roughly 4.5% of light-duty (passenger vehicle) sales, by 2025 under a business as usual scenario. Therefore, a more ambitious target of 15% light duty EV sales, with an additional 5% medium-duty and heavy-duty EV (large trucks and buses) sales target, is not only achievable but also better supports the state’s goal of reducing greenhouse gas emissions 40% over 2005 levels by 2025. North Carolina will need to adopt new policies to support this ambitious goal.

Financing e-buses, a ‘complicated cycle’

Fleet electrification provides what is perhaps the most significant opportunity to make inroads, and in fact, several of the state’s municipalities and transit agencies are already seeking opportunities to reduce greenhouse gas emissions by electrifying their transit bus fleets. However, even for those agencies most motivated to take action, there are significant barriers that must be addressed in order to facilitate a successful, sustainable transition away from fossil-fueled public transportation.

The greatest barrier is that despite having lower life-cycle and operational costs than their diesel counterparts, the up-front capital costs for electric buses and the supporting infrastructure is higher. Because of this, most agencies making the transition to electric buses rely heavily on grants to offset the higher upfront costs.

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It’s a complicated cycle that has kept many organizations from jumping into the fray at all, leaving early adopters to work out the kinks. For many of those early adopters grants are few and far between, highly competitive and often oversubscribed. Financing models are clunky. It’s a problem that begs a solution, not just here in North Carolina, but nationwide.

Frequently, agencies fortunate enough to receive one of these coveted grants can use the funds to cover, perhaps, one bus. Meanwhile, other buses in their fleet are at the end of their useful lives and agencies are forced to replace them with diesel buses, which cost less up front but more over the lifecycle of the vehicle — which is a minimum of 10 years for most buses. Under that timeline, dependence on fossil fuel burning buses is extended for over a decade with only one or two electrified buses being added to a fleet at any given time. Within this model, the country’s ability to transition to a cleaner transportation infrastructure is significantly hindered.

Creative finance, policy solutions are needed

Federally funded grants are unlikely to be expanded in the current political climate. It would be welcome news if more grants were available, but even that is not the most sustainable solution. We must develop creative financing models so that cities can use the funds from grants that may only cover the cost of one bus to instead help them cover the cost to electrify several buses, or even their entire fleet.

One promising model, traditionally used for financing energy efficiency projects, is an on-bill tariff for fleet electrification, which should be developed and offered as part of the ZEV Plan under Executive Order 80. In this model, a utility customizes the investment amount and cost-recovery mechanism for the customer, covering the upfront cost of batteries and charging equipment that connect them to the grid. This makes EVs more accessible for decision makers who see upfront cost as a barrier to electrification. It’s a win-win for fleet owners and utilities too, who benefit from increased electricity demand every time a new bus plugs into the grid.

We must identify the right approach on charging rates and infrastructure as well. EV specific rate designs, like time-of-use pricing that incentivizes charging when electricity demand is low or there’s abundant clean energy available, is one solution. These rates should reduce the cost of EV charging while encouraging the use of clean energy. It just makes common sense, but the Utilities Commission has so far not approved the proposal to test time-of use pricing with customers. Provisions for implementing the time-of-use pilot should be included as part of the governor’s ZEV Plan.

The possibilities are exciting, and transportation electrification has a huge role to play in helping North Carolina achieve its greenhouse gas reduction goals. In addition to the key aspects of EDF’s feedback on the current ZEV Plan draft outlined here, we’ve made recommendations on adopting the most protective vehicle emission standards and ZEV requirements for automotive manufacturers, among other ideas.

Of equal importance to how we achieve the electrification goal is what energy sources we use to fuel these new electric vehicles. Electrifying vehicles means increasing energy consumption. If that energy is generated in large part with fossil fuels, we are missing the point — and missing a huge opportunity. Clean energy generated by wind and solar is affordable and accessible. The governor’s ZEV Plan only works if executed hand-in-hand with the overall Clean Energy Plan, so look for more information on that in a future blog post.

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