CEO Policy & Research Team : Samantha Reifer
Where do you live? Fort Collins? Pueblo? Denver?
More likely than not, you have seen more and more electric vehicles (EVs) in your area, which are steadily being adopted by Colorado consumers at a rate that is expected to continue increasing over the next few years. The combination of state programs and initiatives with uninhibited technological development by the private industry has led to unprecedented advancements within the market: i.e. a rapidly growing number of publicly available charging stations and a wide range of low-cost vehicle models. Utilities nationwide are beginning to see load growth and customer demand for EV charging at the same time that this nascent industry is beginning to attract larger monetary investments and media attraction.
Colorado presents a unique opportunity for electric vehicle growth by promoting their adoption through the most enticing tax credit in the nation, by facilitating programs to fund the installation of charging stations, and by creating programs such as the Group Power Purchase Program to lower costs through bulk purchase pricing pressures. These groundbreaking steps are meant to inspire EV adoption among Colorado consumers, but the market and policy that regulate it remain largely uncharacterized, and therefore are perceived as risky by car purchasers. So, let's clear some of the smoke.
New EV registration numbers in Colorado and nationwide have been growing in recent years. This has been supported by decreased vehicle costs from tax incentives and a localized Group Power Purchase Program which have shown to incite excitement over EVs. Some 248 of the 1,922 new Colorado EV registrations in 2015 came during the last four months of the year from a single dealership, Boulder Nissan. Boulder Nissan joined forces with Sunrun and the City of Boulder to construct a Group Power Purchase Program. The program was designed to offer bundled and highly discounted deals for vehicles and solar panels based on the idea that the price would be sustainable and profitable due to a high engagement rate from consumers, which exceeded expectations.
This EV plus solar model has started to gain momentum within private industries as well, as shown by the recent proposal from Tesla to purchase its cousin entity, SolarCity. These programs are a direct response to the argument that EVs are not better for the environment when largely powered by coal (which mostly powers Colorado’s grid), by allowing customers to ensure that their vehicles are powered by a pollutant-free resource, solar PV.
Promotions like these and legislation such as the newly passed modification to the Colorado tax credit (takes $5,000 off of electric passenger cars) helps bring down the price of these products to attract consumers. Only some of whom (28 percent), as shown by a survey conducted by SWEEP about the Group Purchase Power Program, had initially intended to purchase an EV previous to the program launch. Indicating that this cost-cutting initiative encourages new consumers to enter this market.
Though adoption rates in Colorado are growing (in 2015 the new EV registration growth rate since 2014 was an astounding 43 percent) electric vehicles still only made up less than 1 percent of total new vehicle sales in Colorado for 2015. This is reflective of the nation as well as EV market penetration for the United States for all operable on-road vehicles registered at .75 percent as of September 2014. (EV Pamphlet)
This number is growing though, as EVs only made up a half of a percent of the new vehicle sales in Colorado in 2012. Recently, the stiff competition from low gasoline prices has been tied with an increase in light-duty truck purchases. In addition, range anxiety, otherwise known as the consumer fear of running out of fuel, (in this case electricity), is cited as the number one reason for potential buyers’ wariness of purchasing an EV. This powerful fear is in stark contrast to the reality that the average person only drives 16 miles a day, around one-sixth of the distance that the average EV can travel in one charge. In addition, due to this prominent fear, car makers have been hustling to create longer range vehicles that will come into full production within the next couple of years, essentially nullifying the anxiety.
Since 2013, Charge Ahead Colorado has been working to alleviate range anxiety by funding charging stations. This program has been incredibly successful in developing a holistic web of charging locations at key areas within the transportation network. Denver alone has more than 150 charging locations.
As mentioned previously, utilities in Colorado and nationwide also have been taking note of the growth in load that an integrated EV charging infrastructure can provide and the resulting consequences, including characteristics such as flat load requirements, off-peak energy usage, and battery storage. But shaping the utilities’ role in regulating and funding this structure has been heavily disputed among stakeholders and is still in the early stages of development.
Currently, time of use (TOU) rates have been a focal point for many EV proponents. TOU rates vary prices of electricity based on the time of day the consumer decides to charge. Therefore, if you charge right after work during peak demand times, your rate will be higher than if you choose to plug in your vehicle later in the evening or in the afternoon when more people are disengaged with their electronics. Renewable energy generation is also highest in the afternoon (from solar) and in the late evening (from wind), which creates an added value by creating demand when the production of renewable sources is usually largest, therefore decreasing curtailment.
Xcel Energy, Colorado's largest utility, is working on a new rate design that will attempt to accurately charge their customers for their energy use and infrastructure costs. This proposal has a mix of TOU and demand charges for Xcel's pilot program to test. Demand charges price a customer's bill for the entire period based on their most expensive energy charge during that time (i.e. if you charge during peak hours once, you will be charged as if you are always charging at peak hours, no matter what time you charge, until the end of the designated period). Many stakeholders point out that this will send incorrect price signals to the market and will effectively encourage these consumers to charge at peak demand hours for the rest of a period if they have to charge at a high- priced period once. Keep in mind, Xcel is still at the beginning of the ratemaking process, and their program is highly likely to change due to feedback from stakeholders and from their pilots.
Overall, Colorado’s continued advancement in its EV market has the potential to position the state as one of the largest and most sophisticated EV communities in the nation. Moving ahead, important steps will include the continued implementation of key charging infrastructure, forward-thinking legislation, and fair utility rates, while continuing to educate the public on the sophistication of Colorado's infrastructure and available incentives. In short, Colorado is still in the beginning of launching an electrified transportation market and is tasked with building on the important groundwork to continue progressing.