President Biden's recent Jobs Act proposal includes $174 billion to "win the EV market." This money will go towards supporting domestic supply chains for EVs, updating factories, and building batteries and EVs, replace 50,000 diesel transit vehicles and electrify 20% of school buses. Interestingly, it will "establish grant and incentive programs...to build a national network of 500,000 EV charges by 2030."
First some facts. There are currently 1.8 million EVs on US roads, and 100,000 charging points at 41,000 public locations. This does not include the primary way EV owners charge their car, at home. 80% of car charging takes place at the driver's home. EVs make up less than 1% of the 276 million cars in US.
Granted, EVs make up a larger percentage (3%) of annual, new car sales, and a percentage that is expected to grow. Some experts predict there will be 35 million EVs on the road by 2030.
There's no question that there will be a need for additional charging stations as the decade progresses, but there's a huge question as to why it's necessary for the federal government to spend money to build them. To begin with, there's no market failure here; the market can solve this problem and it's done so before. There's another type of vehicle that can transport 1-5 people across roads which requires periodic replenishments of a fuel source. Unlike an EV, though, the fuel source it runs is not available in everyone's home, but must be obtained at special stations that are designed to supply it.
There are more than 100,000 gas stations in the United States. These gas stations were built by private companies across the country to satisfy the demand for gasoline. They were a natural evolution of market forces. As more people bought cars, more people needed gasoline, so more gasoline stations were built. The stations weren't distributed evenly across the 50 states, but were distributed according to demand for them so that the current network provides enough gasoline at just the right places so that drivers can drive as they please.
This was all done without a $174 billion dollar jobs plan providing incentives and grants. There is no reason one is needed for electricity charging stations. This is contrary to Noah Smith who claims that there's private companies cannot do on their own.
The only reason one may be needed is because the market won't solve this problem as fast as some people want. I would quibble with whether that is a need, but that at least is a rationale. In fact, one could make the case that it's a good idea to front money that we know will be spent anyway, but that's only under very narrow circumstances. The fronted money must be allocated in a way to ensure that it is merely accelerating what would have already happened and not direct funds wastefully.
EVgo's Levy, who has held positions at the Department of Energy and in the Obama White House, says there are risks to building too many charging stations too quickly. Charging infrastructure needs to stay just ahead of EV ownership and demand, not drastically outpace it, he says.
That's because overbuilding can crater the economics of the charging business, he said, leading to large numbers of stations that are underutilized and unprofitable to operate.
It's a mistake that's been made in the past — with significant consequences. As part of the 2009 Recovery Act, the Department of Energy allocated $100 million in grants to a company named Ecotality to construct more than 10,000 charging stations. Four years later, Ecotality filed for bankruptcy. An audit from that year found that demand for EVs hadn't grown as quickly as anticipated, and that the majority of the commercial charging stations Ecotality had built suffered from low usage.
No one can predict the future, especially ten years out. Perhaps there will be this much demand for electric cars, but it may be significantly lower or higher. Different areas of country will have different levels of take-up. Different areas will have different propensities for short-distance travel versus long-distance travel. The former can be accommodated through at-home charging. There are a thousand questions that must be answered to know how many charging points will be needed and where they will be most beneficial. The market answers those questions. Government cannot possibly simultaneously consider all of these factors and evolve as rapidly. This is why there must be a high bar for government involvement and someone needs to consider carefully whether the benefits will outweigh the costs.
To ensure alignment with demand and supply considerations, the best way to structure this money is in the form of loans, not grants. With loans, the borrowers have a much stronger incentive to choose carefully. As the above shows, even with loans, many companies went bankrupt. Does anyone believe that throwing money at companies will lead to better results than loans? Does anyone have confidence that the government has learned from its mistakes and that it won't let political considerations cloud investment decisions?
$174 billion comes out to more than $500 for every American. If money had to be allocated by asking each American to put in $500 to achieve these goals, how many would vote yes? What lesson should we learn from the idea that Democrats want to pass something that a majority of Americans wouldn't pay for themselves if they had to? To be sure, Americans don't think the costs will come out of their pocket; they support the proposal because the benefits are $500 and the perceived costs to them are much lower.
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