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Will Tax Credits and Infrastructure Speed Adoption of Electric Vehicles?

New incentives included in the Manchin-Schumer “Inflation Reduction Act” could help overcome range anxiety and cost concerns. Meanwhile, states are submitting plans to spend millions of federal dollars on EV charging networks.

Multiple vehicles charging at a public EV charging station.
Along with cost, one of the biggest obstacles to widespread adoption of electric vehicles in the U.S. is what researchers call “range anxiety”: The fear that you’ll be stranded somewhere on your journey without access to a charging station.

It’s an anxiety rooted in a real concern. The U.S. does not have a fully connected network of EV charging stations in the same way that gas stations serve the entire roadway system. But for most drivers, the 234-mile median range of a 2021 model electric car is more than enough for day-to-day use, says Gil Tal, director of the Plug-in Hybrid and Electric Vehicle Research Center in the Institute of Transportation Studies at the University of California, Davis.

“We want to know that we can drive the car from San Francisco to New York,” Tal says. “We’re not going to do it, but when we buy the car, we want to know that it can be done.”

New financial incentives in the proposed Inflation Reduction Act of 2022 — the deal struck suddenly by Sens. Joe Manchin and Chuck Schumer late last week — could offset some of the cost concerns. The bill proposes a $7,500 tax credit for purchases of new electric vehicles and a $4,000 credit for used ones, with limits on buyers’ incomes and on the cost of the models that qualify.
A bar graph showing vehicle ranges by fuel type for 2021 vehicles.
Note: Range for EVs is based on Environmental Protection Agency (EPA) estimates for a single charge. Range for gasoline vehicles is based on tank size and EPA combined fuel economy rating.
(U.S. Department of Energy and U.S. Environmental Protection Agency)
The federal government made $5 billion available to states for charging stations through the Infrastructure Investment and Jobs Act passed last fall, with an Aug. 1 deadline for states to submit plans for where the chargers will go. Taken together, the tax credits and infrastructure funding could speed adoption of electric vehicles, with potentially significant benefits for national efforts to reduce carbon emissions in the transportation sector. But some kinks still need to be worked out.

States looking to take advantage of federal infrastructure money were required to submit plans for building charger networks by this week. Federal guidance said that states should plan to place chargers no more than 50 miles apart on designated EV corridors. It also said their plans should seek to equitably distribute the benefits of the funding in underserved and disadvantaged communities, through the physical placement of chargers and hiring and contracting practices for construction and planning. States with sparsely populated areas — like Wyoming or Montana — are able to apply for exceptions to the 50-mile guideline. The federal government plans to review and approve the plans by the end of September.

“It’ll be interesting to see how they do use the money, because not all states are alike. What may work in Maryland is not necessarily going to work in Montana, which has a very different geography,” says Timothy Johnson, a professor of the practice of energy and the environment at Duke University’s Nicholas School of the Environment. “What you’ll have in a way are 50 different experiments.”

In Arizona, which has a relatively low ratio of charging stations to electric vehicles, the state is planning to deploy its electric vehicle charging corridor along the National Highway System. It will have up to $76.5 million to implement the plan.

“The biggest challenge is going to be getting these located,” says Doug Nick, a spokesman for the Arizona Department of Transportation. “We have some ideas where we want to put them: truck stops are the low-hanging fruit, and shopping malls in urban areas that are close to the interstate. Places like that already have a lot of the infrastructure in place — in other words, parking lots.”

Densely populated areas have challenges with charging infrastructure, too. In 2017, Philadelphia passed a moratorium on new permits for residential charging stations. The reason was that individual homeowners in the city’s crowded residential streets, where parking spaces are at a hard-fought premium, were using electric vehicle chargers to claim street spaces as their own.

“Essentially what they were doing was making electric-vehicle-only spots and then only people who could afford EVs had the ability to park there. It was an affordability thing,” says Dominic McGraw, the city energy manager for Philadelphia.

Since then, the city has moved forward with a Municipal Clean Fleet Plan and added EV chargers for city vehicles at some of its publicly owned fueling stations. There’s been no resolution to the residential parking question, McGraw says, though there have been discussions about possibly connecting EV chargers to other types of on-street infrastructure, such as street lighting. The potential for more people to buy electric vehicles with the proposed incentives makes the question more urgent.

“With the federal government’s movement on this, now everyone is very interested in bringing the conversation back and moving faster,” McGraw says.

The Manchin-Schumer deal — which is still not certain to become law — also includes requirements for domestic production of batteries and other parts for cars that qualify for the rebate. With increasing demand for electric vehicles, that could create some supply chain issues for manufacturers. But car companies now have even more incentive to work through those challenges and produce electric vehicles on a greater scale.

According to Tal, the tax credits are as important for them as they are for consumers. “Now they understand the demand is there,” he says.

Jared Brey is a senior staff writer for Governing. He can be found on Twitter at @jaredbrey.
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