Electrifying medium- and heavy-duty vehicles, and the transportation sector more broadly, calls for major investments in electricity infrastructure. The Inflation Reduction Act supports some of these investments, but in other ways falls short.
In the first two blog posts of this series, we discuss how the Inflation Reduction Act (IRA) affects medium- and heavy-duty electric vehicle (MHD EV) adoption and manufacturing. The federal government has shown support for electrifying the largest vehicles, though the cost and efficacy of these incentives in supporting widespread electrification still is an open question. What’s clear, however, is that electrifying the transportation sector will require significant investments in existing electricity infrastructure to ensure that the grid can charge a growing fleet of vehicles.
These investments span the entirety of the electric system. From the local distribution grid to the power plants that generate our electricity, infrastructure investments will be necessary to ensure that reliable and clean power can be supplied to vehicles when they need it. In this blog post, we outline the needed investments and discuss how the IRA supports some of the investments—but fails to address others.
Investments in the Electric System for Widespread Adoption of Medium- and Heavy-Duty Electric Vehicles
Even though MHD EVs have zero tailpipe emissions, they charge their batteries with electricity, which means that they still have the potential to produce harmful emissions indirectly if the electricity comes from fossil fuels. Renewable electricity generation, such as solar or wind power, emits little to no greenhouse gases; thus, using renewable sources to power electric trucks helps reduce the carbon footprint of the transition to MHD EVs. Both utility-scale renewables and distributed solar (particularly when paired with storage) can provide the much-needed clean electricity.
Transmission lines, which transport electricity over long distances from power plants to local distribution networks, are a key piece of infrastructure that is particularly important for integrating renewables into the grid. As more renewables come online to support the expanded demand for charging, a concomitant expansion of transmission capacity likely will be required.
MHD EVs have massive batteries; thus, even a single fleet’s depot is likely to exceed the capacity that’s available locally. Depending on the extent of MHD EV deployment, the local distribution network will need upgrading to ensure that sufficient capacity can meet the charging demand. These upgrades could involve installing additional transformers and upgrading or expanding existing distribution lines and substations.
The widespread adoption of electric trucks can challenge grid reliability, particularly if the charging of these vehicles is not properly managed. Because these trucks and buses have such massive batteries, a fleet of 100 heavy-duty trucks charging simultaneously could reach electrical loads that are similar to a sports stadium. Unless the local system is built up adequately, this type of charging could lead to grid overload and potential blackouts. Additionally, the strain on the network could lead to equipment failures and power outages.
Investing in the US Electric Grid with Funding from the Inflation Reduction Act
The IRA includes various incentives that can facilitate investment in the electric system and reduce the associated costs borne by electric utilities. Expanding and integrating renewable energy into the electric system is one area in which the IRA takes significant action.
Renewable energy credits—specifically, providing production and investment tax credits for clean energy—incentivize investments in both distributed and utility-scale generation capacity. Furthermore, the IRA increases the investment tax credit for solar and wind facilities by 10 to 20 percentage points when those facilities are located in low-income communities, in “energy communities,” or on Native American reservations.
The IRA also takes some action on integrating renewables by providing grants and financing for transmission expansion and grants for the planning, analysis, and modeling of the transmission and integration of offshore wind.
Indirectly, IRA funding that targets the expansion of generation capacity also mitigates problems with grid reliability, by ensuring that sufficient generation capacity can meet an anticipated increase in demand for electricity.
Incentives Missing from the Inflation Reduction Act
The main way in which the IRA does not support the transition to MHD EVs is by ignoring the distribution system and the massive costs involved in supporting increased numbers of these vehicles.
For example, the IRA does not provide funds to local utilities to help pay for wiring infrastructure (i.e., extending distribution-line capacity so a depot can electrify) or upgrades to the local system. Usually, a fleet is responsible for things like wiring costs (unless utility programs can socialize these costs across ratepayers, such as the EV Fleet program in California), but this expense can add millions of dollars to a fleet’s up-front cost of transitioning to electric. For broader distribution upgrades, a utility most likely will allocate those costs to the commercial class of customers instead of all ratepayers, which would increase electricity rates that the fleets would pay for vehicle charging.
In the absence of government funds for upgrading distribution systems, both the up-front and operating costs of MHD EVs may increase, thereby reducing the incentive for fleets to electrify. As detailed in our recent report, fleets already face high costs and challenges to electrify; adding more costs will further hinder the government’s goals for electrifying the transportation sector.
Furthermore, the IRA does not incentivize MHD EV fleets to mitigate their impact on the electric system. Reducing the peak demand of these fleets can help not only improve grid reliability but also reduce costs by avoiding the construction and maintenance of expensive power plants and other infrastructure to meet the highest potential demand. If fleets do not mitigate their peak demands, then the amount of needed grid investments will grow, leading to a higher total cost of ownership for MHD EVs.
One promising technology that can help manage peak demands is charging management software, which allows fleets to schedule their charging sessions optimally for both the fleet and the electric grid. For example, charging management software can alleviate pressure on the grid by reducing the speed of charging in periods of high demand and shift these charging sessions to times when the grid is less likely to experience congestion. By working within the operational requirements of the fleet, charging management software allows for real-time optimization of charging patterns, which keeps distribution costs down while providing the power that a fleet needs to conduct its operations.
Yet, nothing in the IRA incentivizes managed charging. For example, the IRA does not require fleets to adopt charging management software as a condition for receiving tax credits for vehicles or charging stations, nor does the law provide subsidies for the adoption of this software. Future policies in this direction could help reduce peak demand and ensure grid reliability while keeping electricity tariffs low.
The IRA provides significant incentives for renewable energy expansion, which can help ensure that future increases in demand for electricity by MHD EVs are met using clean electricity. The law also takes some action to help with renewables integration and transmission expansion.
However, by providing neither funds for expanding the distribution grid nor incentives for fleets to mitigate their peak demand for electricity, the IRA ignores the fact that the distribution system will require significant investments and will cost a lot of money to upgrade. Without more comprehensive government incentives and funding, the total cost of ownership for MHD EVs may increase as more electric trucks and buses enter the vehicle fleet. In that case, state governments likely will need to step in to fill that gap if they want to achieve their own MHD EV adoption goals.
Special Series: Electrifying Large Vehicles
This special blog series examines the incentives in the Inflation Reduction Act of 2022 that encourage the electrification of medium- and heavy-duty vehicles, whether through tax credits for commercial electric vehicles, charging stations, domestic manufacturing, or electricity infrastructure. To see the specifics, read other articles in the series: