May/June 2021 | Vol. 26 No. 3
by Fred Ashton, Senior Economist, NEMA
From passenger vehicles to commercial fleets to rail, the transportation sector is thought to have the most significant potential for increased electricity demand, according to the Annual Energy Outlook 2021 from the U.S. Energy Information Administration.1
The prospect of transportation electrification has prompted state and local governments to adjust regulations, and corporations to reconfigure product lines and invest in the necessary infrastructure to promote electric vehicles’ adoption.
In September 2020, California grabbed headlines when Governor Gavin Newsom signed an executive order banning the sale of new combustion-engine vehicles by 2035. Similar plans followed this first-in-the-nation policy in New Jersey and Massachusetts. Internationally,
the U.K. plans to stop the sale of gas- and diesel-powered cars and vans by 2030.
After seeing changes in policy and consumer demand, several traditional motor vehicle manufacturers recently committed to phasing out internal combustion engines in favor of electric vehicles (EVs).
- GM announced that their light-duty vehicles will be fully electric by 2035, and they plan to release 30 EV models by 2025.
- Volvo will sell only EVs and hybrids by 2025.
- Bentley plans to manufacture only EVs by 2030.
The EIA forecasts electricity as a percent of transportation sector fuel consumption will grow glacially from 0.1 percent in 2020 to nearly 1.5 percent by 2050. As a percentage of total electricity consumption in the economy, transportation will account
for just under 3 percent by 2050. According to the projections, among alternative fuel sources, electricity is expected to be one of the fastest-growing through mid-century.
The underwhelming uptick of electricity in the transportation sector seems counterintuitive to the policy and manufacturing changes expected over the next 20 years. The EIA notes that “current laws and regulations are not projected to induce much
market growth.” They add that “both vehicle sales and utilization (miles driven) would need to increase substantially for EVs to raise electric power demand.” The EIA acknowledges that its estimates are based on current law and provides
alternative scenarios based on economic growth rate assumptions, not hypothetical policy changes. Increased incentives to purchase EVs and tighter tailpipe emissions regulation could speed transportation electrification. According to a study by Boston
Consulting Group, continued technology-driven declines in battery costs will likely propel EV demand by the end of the decade.2
According to The New York Times,3 fewer than 1 percent of vehicles on the road are electric. By 2035, that number is expected to increase to 13 percent. Even by 2050, when the Times predicts EVs will make up 60 percent of sales, most
vehicles on the road will still use gasoline as a fuel source. Despite increased investment in charging infrastructure and improved EV technology, the shift to electric and alternative fuel sources will take decades. ei
2 https://www.bcg.com/en-us/publications/2020/drive-electric-cars-to-the- tipping-point
3 https://www.nytimes.com/interactive/2021/03/10/climate/electric-vehicle- fleet-turnover.html#:~:text=Vehicles%20on%20the%20road%20in%202021&text=Fewer%20than%201%20percent%20are,the%20road%20would%20 be%20electric.