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Electric Vehicles And Building Electrification Can Recharge California’s Post-COVID Economy

COVID-19 has roiled California, threatening 18% unemployment in 2020 and forcing policymakers to recharge the world’s fifth-largest economy, even as they face a $54 billion budget deficit stemming from the crisis. In response, Governor Newsom convened a Recovery Task Force, which co-chair Tom Steyer says could leverage clean energy as a “huge job creator.” 

He’s right. Clean energy can be the economic engine for California. We already lead the U.S. in solar energy and electric vehicle deployment, and rank fifth in wind power. These industries, plus energy efficiency, have made our clean energy workforce the nation’s largest and attracted many of the world’s most innovative clean tech companies. Much of this success is because California climate policy is America’s most ambitious, targeting 40% fewer emissions by 2030 and net zero emissions by 2045.

While the Golden State is an international clean energy leader, modeling by Energy Innovation finds California is not yet on track for our 2030 target. Strengthening state policies can meet our climate goals, and in doing so, create an additional $22 billion in economic and social benefits by 2030.

LA AUTO SHOW
The Tesla Inc. Model 3 vehicle is displayed during AutoMobility LA ahead of the Los Angeles Auto Show in Los Angeles, California, U.S., on Thursday, Nov. 29, 2018. With two of the world's biggest carmakers under harsh scrutiny, the Los Angeles Auto Show will be a welcome chance for the industry to generate some positive publicity.  © 2018 BLOOMBERG FINANCE LP

Decarbonize the grid, electrify vehicles and buildings

The path is clear: Decarbonize the electric grid, then electrify everything—creating good jobs and thriving clean tech industries along the way. California has gotten off to a great start with the power grid, as more than half our electricity already comes from carbon-free sources, and this should reach almost 80% by 2030.  

This creates further benefits: Cleaning up the grid will automatically clean up transportation and buildings, which are the state’s first and fourth biggest carbon polluters. Wringing the carbon out of these sectors has huge climate implications: California’s transportation emissions have risen every year since 2012, and building emissions rose every year since 2014. It is time to reverse that.

The capital stock turnover problem means timing matters, too. New cars last an average of 17 years, so if we want to have clean cars in 2035, we better sell clean cars now. The same goes, with modest variations, for trucks, water heaters, appliances, and of course factories. Use this moment—or lose it. 

Fortunately, investing in these sectors creates good blue-collar jobs that can’t be outsourced, and which offer higher-than-average wages. And that investment produces a sweet byproduct: clean air.

In contrast, out-of-state interests receive a larger share of spending from the production and delivery of natural gas and petroleum products. Switching from fossil fuels to renewable electricity means more of California’s energy spending stays in-state, insulating local economies from volatile global commodity markets. 

Gas Prices Continue To Rise, Inching Up Over Last Two Weeks
A car drives past the Chevron refinery on January 25, 2011 in Richmond, California. Gas prices continue to rise and have gone up 14% or $.39 a gallon over the past year. Crude oil is currently trading at just under $90 a barrell and some analysts speculate that it could skyrocket up above $150 a barrell in the coming year.  2011 GETTY IMAGES

Electrification policy saves money and creates economic growth

Our modeling shows transportation electrification saves $54 per ton of emissions reductions, while building electrification saves $65 per ton. Saves money, not costs money, because the benefits of free fuel (sunshine and wind!) outweigh upfront switching costs. The Union of Concerned Scientists finds electric vehicles save Californians up to $1,100 annually, while E3 reports newly-constructed electrified homes save up to $540 annually compared to those that are gas-heated.

Next 10 estimates the state’s goal of deploying 5 million EVs by 2030 will create 500,000 jobs and increase real income by $300 billion. UCLA’s Luskin Center reports building electrification could support up to 104,100 jobs statewide annually, even after accounting for gas industry losses. This adds up!

So how can policymakers tap this economic and environmental potential to build a cleaner, stronger California – in both the short- and long-term?

For transportation, California could increase its EV target to 7.5 million by 2030. Strengthening the state’s zero-emissions standard for passenger vehicles would be a powerful step toward that goal, and is the same policy at the heart of the state’s Advanced Clean Trucks proposal, which would add 8,000 jobs and $1.4 billion in income by 2040.

While this policy requires U.S. EPA approval, and thus would depend upon electing a more environmentally and economically informed president, California could take immediate action to spur consumer adoption through a budget-neutral feebate, setting a fee on inefficient vehicles to fund EV rebates. This can be complemented by empowering the state’s utilities to work with independent companies and build a comprehensive statewide EV charging network

Tesla Supercharger
At dusk, Tesla Motors electric cars are plugged in and charging at a Tesla Supercharger electric vehicle charger in Pleasanton, California, March 12, 2018.  GETTY IMAGES

For buildings, California should aim to have 100% of new buildings use electricity for heating, cooling, and hot water, hitting half that target by 2030. Advanced electric heating technology—heat pumps—mean that it is now possible to get four units of heat into a house for every unit of electricity consumed. And they can cool too.  

To support the necessary market transformation, the state will need to stand up workforce training programs. Establishing a building electrification research center at a state university could use applied research to improve electrification technologies.  

Smart government investment can spur serious private investment

Although Governor Newsom’s proposed Climate Catalyst Fund has been tabled, once budget normalcy returns it could stimulate serious private investment, and thereby minimize use of state funds.

Similar federal programs have created long-lasting economic benefits, particularly the Obama administration’s American Recovery and Reinvestment Act (ARRA), which raised GDP up to 3% from 2009-2011. The Congressional Budget Office concluded clean energy investments created ARRA’s biggest macroeconomic benefits and supported roughly 900,000 job years from 2009-2015, showing how favorable government loans attract capital to spur economic growth.

Equity must be central to electrification. To ensure disadvantaged communities benefit from transportation electrification, California could expand successful EV car-sharing and electric bus programs in low-income communities through revenue from its cap-and-trade program, while expanding building electrification benefits through community-level initiatives that employ grants, favorable loans, and technical support.

Proterra Electric Bus Demonstration.
Proterra Electric Bus Demonstration. Photo by Eric Wheeler, Metro Transit.  ERIC WHEELER, METRO TRANSIT VIA FLICKR

The upshot is clear: A combination of smart policy and modest state support can ensure that California is at the forefront of the next energy revolution, and that economic recovery investments benefit our workers, our budget, and our environment.

Original post.

Discussions

Matt Chester's picture
Matt Chester on Jun 23, 2020 4:06 pm GMT

I hope this approach isn't restricted to just California-- but unfortunately timing is key so it's not like other states can wait to see if CA's clean energy stimulus works and then decide to do the same. The jobs, the economic activity, and the carbon reduction all can't wait for that!

Jim Stack's picture
Jim Stack on Jun 26, 2020 3:35 pm GMT

The Tesla Semi and Cyber trucks will be rolling out soon. They already make the best more efficient vehicles. They can charge Off Peak or anytime there is an excess in the GRID. They can EVen provide power using V2G. It's a whole new world with plugin vehicles. The Tesla Power Wall for homes can shave off the demand charges and loads during Peak Hours, the Power Pack is sold by the Mega Watt and Giga Watt and help balance the GRID in milli seconds. 

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