|September 16, 2019|
The oil industry vs. the electric car
|The oil industry is trying to crush the booming electric car movement.|
Groups backed by industry giants like Exxon Mobil and the Koch empire are waging a state-by-state, multimillion-dollar battle to squelch utilities' plans to build charging stations across the country. Environmentalists call the fight a reprise of the "Who Killed the Electric Car?" battles that doomed an earlier generation of battery-driven vehicles in the 1990s.
Oil-backed groups have challenged electric companies' plans in 10 states, according to utility commission filings reviewed by POLITICO, waging regulatory and lobbying campaigns against the proposals. The showdown is taking place as utilities, eager to increase the demand for power, push for approval to build charging networks in locations such as shopping centers and rest stops in more than half the nation.
"Fossil fuel interests control 90 percent of the transportation fuel market in the U.S. and are really feeling threatened," said Gina Coplon-Newfield, director of the electric vehicle initiative at the Sierra Club.
The counterattack involves an array of trade associations and industry-funded political groups representing every segment of the petroleum sector.
In the Midwest, the American Fuel and Petrochemical Manufacturers, a trade group for gasoline makers, has filed comments against charging plans in Kansas and Missouri, and has opposed Colorado's new zero-emission vehicle mandate as part of a "Freedom to Drive" coalition of auto dealers and oil groups. The typical consumer, they say, should not have to pay for incentives or charging stations that mainly benefit people wealthy enough to afford cars like Teslas.
"We feel like we're on the side of the angels here in terms of wanting this to be a free market and not wanting people who don't use the service to have to pay for service," said Derrick Morgan, senior vice president at the fuel and petrochemicals group.
In Illinois and Iowa, the American Petroleum Institute joined with Americans for Prosperity --- a political group funded by the Koch oil empire --- to oppose utilities' electric vehicle investments. The owner of a large refinery joined other industrial interests to oppose utility charging and shared mobility plans in Minnesota.
In Massachusetts, API teamed with gasoline marketers and convenience stores to oppose an electric vehicle charging buildout from the utility National Grid. The Western States Petroleum Association has opposed utility charging plans in Arizona alongside AFP, as well as electric vehicle legislation in California. And in Maryland, API aligned with convenience stores, gasoline stations and truck-stop owners to oppose utilities' electric vehicle plans.
Oil groups are far from alone in critiquing the utility charging proposals. Consumer advocates and some independent charging firms argue that utilities, which operate as monopolies, are using electric vehicle infrastructure to pad their balance sheets because their captive customers will have to pay for the investments.
Utilities say the upfront cost of charging stations is minimal for ratepayers, and that customers' bills may actually drop as electric vehicle adoption grows because the cost of power grid infrastructure will be spread over a larger base of power demand. In Maryland, four utilities proposed building 24,000 chargers last year at an estimated cost of 25 to 42 cents per ratepayer per month. The proposal from three Exelon utilities and one owned by FirstEnergy would have been the largest utility plan outside California, with power companies installing chargers in homes and apartment buildings and at workplaces and public locations like grocery stores or rest stops.
So far, the oil sector hasn't seen much success combating utility plans. Though the American Fuel and Petrochemical Manufacturers celebrated a Kansas utility's decision to withdraw a charging plan last year, analysts say that in most cases where regulators scale back utility plans, they aren't doing it in response to the oil industry's pleas.
"So far, the main consequence of oil lobbying I've seen has been some delays, but I think the fight is ongoing," said Samantha Houston, a clean vehicles analyst at the Union of Concerned Scientists. "I wouldn't attribute modifications to electric vehicle programs to API, but they are certainly making a good attempt to muddy the waters in their interventions."
In Maryland, regulators scaled back the utility proposal, allowing them to build only 5,000 chargers at public sites over the next few years. But the state's head regulator said the decision largely hinged on competition and price concerns, and that the oil industry's arguments were underdeveloped.
"I personally did not find those arguments to be compelling," said Maryland Public Service Commission Chairman Jason Stanek. "There is obviously a push toward the electrification of transportation and [these are] parochial concerns pushed by the petroleum industry to preserve its market share."
Even so, Stanek, Houston and others expect oil companies to keep up the fight as the threat of electric vehicles grows.
"I think the struggle here will probably continue for a while," Houston said. "Internal combustion engines still have a pretty significant market share and the oil and gas industry doesn't want to see that go anywhere."
Whether gasoline-powered vehicles can hold on to their market is increasingly in doubt. By 2040, electric vehicles could make up as much as 40 percent of the U.S. passenger vehicle fleet and 60 percent of sales, up from 2 percent of sales today, according to Bloomberg New Energy Finance. That would erase demand for more than 3 million barrels of oil a day --- or more than 20 percent of current transportation consumption.
Oil groups are also fighting in Congress to oppose tax credits for electric vehicles, pushing lawmakers to increase electric vehicle fees --- 26 states have them today --- and supporting the Trump administration's proposed rollback of Obama-era fuel efficiency standards. Auto dealers represent one of the prime business sectors allied with President Donald Trump on the rollback.
The motivation for the lobbying push stems from an existential threat facing the global oil sector in the rise of the electric vehicle.
Electric vehicle mandates in China and many European Union nations have set a target of phasing out gasoline vehicles by 2040 or sooner. That will continue driving battery prices down in the coming years, said David Doherty, an oil specialist at Bloomberg New Energy Finance. And that, he said, should create a tipping point in the middle of the next decade as passenger electric vehicles become widely competitive with gas-powered ones --- meaning the oil industry has only a few years to stem the tide.
"Then we'll see electric vehicles really ramp up as a percentage of sales," Doherty said.
With electric vehicles increasing in competitiveness, the biggest hurdle to greater adoption is deploying enough chargers to fuel their growth. That, Stanek said, helps explain the oil sector's intensified lobbying campaign.
"People need to actually see electric vehicle charging stations and know that they exist prior to actually purchasing an electric vehicle," said the Maryland regulator, who works in a state where Republican Gov. Larry Hogan wants to see 300,000 electric vehicles in 2025 --- up from less than 20,000 today. "As more drivers see public charging pop up at gas stations, libraries and on the side of the road, it'll prompt consumers to think twice when making their next vehicle purchase."
Publicly, both sides are coy about the confrontation. Oil supporters downplay the threat presented by electric vehicles, arguing they still aren't as functional as internal combustion engine cars and pointing out that many analysts expect that global fossil fuel demand will continue to be strong mid-century.
"I actually think the internal combustion engine is going to be around a long time, barring some kind of a major breakthrough of electric vehicle technology that hasn't happened yet and doesn't look like it's likely in the near future," Morgan said. "I think internal combustion engines remain very, very competitive for decades to come."
Meanwhile, the Edison Electric Institute, a major utility trade group, says it's too early to know whether electric and gasoline-powered vehicles are headed for a collision.
"I don't think it's us and them," said EEI senior director Becky Knox. "At this point in the market, electric vehicles are still relatively new. I don't know if that is a collision course."
Even so, veterans of the power sector say it's obvious that utilities have stepped up their electric vehicle lobbying in recent years. Whereas utility electric vehicle charging was rare outside of California at mid-decade, more than 50 utilities in 25 states and the District of Columbia have now proposed charging programs. EEI and its members have also quietly lobbied Congress to extend and expand electric vehicle incentives, and they've fought directly with oil groups to defeat model legislation against utilities' electric vehicle plans at meetings of business leaders and conservative lawmakers.
"The electric utilities are not doing this out of altruism," Stanek said. "There is a benefit in terms of a return in allowing them to charge ratepayers for certain vehicle infrastructure."
Some observers say utilities' initial apprehension about pushing electric vehicles has led the power companies to overdo their requests to bill ratepayers for the charging buildout.
"They finally have worked through the blindingly obvious benefits, and having been recalcitrant, are now reaping incentives and concessions that should not have been necessary in the first place," said Karl Rábago, a former Texas utility regulator and senior policy adviser at the Pace Energy and Climate Center. "Feels a bit like rope a dope."
The utilities' shift toward electric vehicles has put environmental groups in an awkward position: After fighting utilities for years to adopt renewable energy, most have come to view them as powerful allies to cut transportation pollution.
"Sierra Club has a long and rich history of suing utilities and opposing utilities when they are propping up fossil fuels," Coplon-Newfield said. "But when it comes to the acceleration of electric vehicles, we've actually found some common ground."
Environmentalists say many of the oil sector's arguments against electric vehicles recall the 1990s, when fossil fuel groups and automakers waged a successful campaign to scale back California's ambitious zero-emission vehicle mandate --- as recounted in the popular documentary "Who Killed the Electric Car?"
Back then, California was set to mandate that an increasing percentage of cars sold in the state be non-gasoline vehicles, culminating in 10 percent in 2003. But state air regulators backed down after a dedicated lobbying campaign from car companies and oil interests, who opposed electric vehicle charging plans and argued there was no demand for the vehicles.
One key change since then is the position of the automotive sector. While U.S. automakers fought hard against the California regulations in the past, they are increasingly receptive to state electric vehicle targets, particularly when they are paired with incentives for the vehicles' purchase.
Ten other states today follow zero-emission vehicle targets set by California, which now mandate that electric vehicles make up about 8 percent of new vehicle sales by 2025. In August, the Alliance of Automobile Manufacturers, the sector's leading trade group, signed on to support a zero-emission target in Colorado because it included incentives for purchasing electric vehicles.
But like the oil sector, electric vehicles are also splitting the auto industry. Car dealerships make much of their revenue from servicing gasoline-powered engines and publicly oppose electric vehicle mandates and utility charging programs in Colorado and elsewhere.
With the automakers singing a new tune and the price of electric vehicles continuing to fall, Stanek says state regulators should be ready for the front lines of the battle between utilities and the oil industry to spread to their states soon.
"The petroleum lobby and the electric utility lobby --- I'm talking about API vs. EEI --- we are going to see a competition between them for market share like we haven't seen before," he said.