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March 08, 2023

Utilities: Start Your Engines

What’s new in February — The EU’s new policy bans the sale of new cars powered by fossil fuels after 2035.

Utilities preparing their capital spending programs need to prepare for an inevitable major influx of EVs onto their grids.

What makes this more powerful - The EU, California, and 17 additional US states have now passed legislation that bans the sale of new fossil fuel powered cars after 2035.  This means that 70% of the total combined market is covered by these new bans, making it all but inevitable that automakers will transition their fleets wholesale to EVs, driving a ticking timeline on the need to increase power generation. Exceptions include zero-emissions fuels for use in classic and high-performance cars, but the costs of these fuels make them out of reach for the mass market.

Automakers design cars to meet the strictest standards. The auto industry will have no incentive to continue selling gas cars anywhere after 2035. By 2035, every new car sold will be zero-emissions, and almost every car on the road will be zero-emissions by 2050. Utilities will need to increase power generation to handle the increased number of EVs. 

The average American drives 40 miles per day, using about 16 kWh of electricity per day to charge their EV. As more EVs hit the road, charging will take up a greater portion of the electricity generated.

When will this become an issue? We calculated when the electricity used by EVs makes up more than 15% of the total power delivered in 2020. 

  • Why 15%?

    Utilities usually have a 10-20% generation margin, which is a measure of how much more generation capacity exists compared to average demand. We selected the midpoint.

  • What does the graph show?

    When the entire margin will be taken up by EV charging demand - the Power Generation Cliff. 

  • Note: When you reach the Cliff will depend on various factors - generation capacity, peak load, interconnections, and the efficiency of local EV fleets. 


Graph: Data analysis by Actual. Data from EIA/KU,Forbes More insight: 

  • 10-year capital plans: Utilities in states that will hit the Power Generation Cliff by 2033 must take immediate action to accommodate more EVs on their roads. For many utilities, the Cliff will occur within the next capital spending cycle. Immediate planning and spending will be required.

  • The EV transition is inevitable: In addition to building generation, reducing energy consumption can help you avoid the Cliff. These measures can include driving end-user efficiency upgrades and more efficient EV standards and working with local municipalities to increase the use of alternatives to EVs like e-bikes and transit.

Building a long-term capital plan that can accommodate the rapid growth of EVs is critical. Visualizing the interconnectedness of large and complex infrastructure and performing detailed analysis of various investment pathways can be performed on Actual’s platform.

The Federal government has already passed significant incentives for this transformation through bills such as the IRA. The Biden Administration also recently announced the Made-In-America plan to build 500,000 EV chargers by 2030. The EU is also working on its version of the IRA, building momentum worldwide.

Until next time, Actual

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