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Starting April 18, fewer EVs will be eligible for the new $7,500 tax credits unveiled last year.
If you’ve been considering a new electric vehicle or hybrid these past few months, and you think you’ve gotten a pretty good handle on how the revised EV tax credits work, the U.S. Treasury Department and the IRS have an unspoken message for you: Do it soon. The rules are about to change.
Again.
Today, federal officials announced changes to the EV tax credit plan around minerals and batteries. As esoteric and complicated as it sounds (and in fact, is) the headline for prospective buyers is that starting April 18, fewer EVs will be eligible for the new $7,500 tax credits unveiled last year as part of President Biden’s Inflation Reduction Act.
In short, these changes are being made today to guarantee that the full $7,500 EV tax credit goes toward not just cars built in North America, but cars containing battery components made on this continent as well. Moreover, it seeks to guarantee that certain critical minerals in those batteries come from countries with which the United States has a free trade agreement. Each requirement is worth up to $3,750.
Granted, “Where are your minerals from?” doesn’t quite have the same ring as “How much horsepower are you putting down?” to car aficionados. But these changes to the EV tax credits will reverberate through the car market and the entire auto industry.
In the short term, this means fewer EVs will qualify for the tax credits, even if they are made in North America. But in the longer term, it could create a major battery ecosystem here as well.
It’s worth keeping in mind the two car-related goals of the IRA when you consider these changes. One was to reduce carbon emissions by modernizing the EV tax credit scheme and spurring wider electric car adoption (which the incentives seem to be doing).
The other goal is to build a localized, North America-centric supply chain for batteries and EVs so that China — a peer state with whom U.S. tensions are quickly rising — cannot dominate the industry. Given China’s own aggressive EV industry push, things were certainly trending that way before.
“We need to build a clean energy supply chain that is not dependent on China,” a senior Treasury official said on a press call with reporters on Thursday. The official said that the revised guidance will reduce the number of vehicles that qualify in the short term, but will create incentives to bring supply chains and manufacturing to the U.S. These requirements will significantly increase the number of EVs made in North America over the next decade, officials believe, with more qualifying over the next decade than under the admittedly outdated pre-IRA policy.
The clear downside to all of this is that it could mean fewer EV sales for now if more cars lose the full $7,500 credit. That decision does run counter to the IRA’s goals of cutting car emissions, and it could dampen the hopes of car companies looking to make big EV product pushes in the coming years. Battery plants and mineral processing facilities will likely take years to get up and running. Ford, for example, is building a $3.5 billion Michigan battery plant but it isn’t projected to start making batteries until 2026.
As a result, some urgency may be warranted for EV buyers who want to take advantage of the full $7,500 tax credit. Until April 18, those rules mean that regardless of battery sourcing or minerals, cars like the Tesla Model 3, Chevrolet Bolt, Ford F-150 Lightning, Mustang Mach-E, Volkswagen ID.4, and multiple U.S.-made hybrids from BMW, Audi, and Volvo qualify for some or all of those credits, depending on the car’s price and the buyer’s income.
But automakers have said, correctly, that it takes years to set up local EV production, not to mention the local battery manufacturing and approved mineral sourcing. Hyundai and Kia, for example, make stellar EVs but they are made in South Korea, so they will no longer qualify for any EV tax credits — much to those automakers’ vocal chagrin. Other automakers may make their EVs locally but don’t meet the mineral sourcing requirements after April 18.
Moreover, the battery component requirement increases every year. Starting this year, to secure $3,750 of the tax credit — half of $7,500 — 50% of the battery components must be manufactured or assembled in North America. That rises 10% each year until 2029 when the battery must be entirely made on this continent to qualify for the full tax credit.
(Furthermore, starting next year, no EV will be eligible for any tax credit if its battery was made by “a foreign entity of concern,” which generally refers to China; in many ways, this cuts China’s battery industry out of the American auto supply chain because car companies won’t sacrifice their tax incentives to competitors just to use Chinese batteries.)
So what does this mean for car prices, exactly? That’s the tricky part. As with past changes to the IRA, it’s hard to say right now — automakers are currently sourcing batteries from a variety of places as they seek to ramp up local production.
Heatmap reached out to multiple automakers to determine if their car prices would be impacted.
General Motors indicated it’s waiting to learn more from the federal government before making a determination. “We believe GM is well-positioned because we were already actively pursuing opportunities to localize as much of the supply chain as possible,” a GM spokesperson said.
Ford thanked the Biden administration in an upbeat note from its CEO Jim Farley for clarifying the “important details” of the IRA. “Ford continues to accelerate our investment in America thanks to this important policy initiative,” Farley said, noting Ford would help its customers understand their eligibility for the tax credits.
In a statement sent to Heatmap, Volvo said it was reviewing the rules but remains “concerned that the consumer tax credit is overly complex and contains several immediate limitations.” It also pushed for a trade agreement with the European Union, saying “open markets and overall free trade policies lead to an increase in global economic prosperity, innovation, and higher living standards for people around the world.”
Officials from Toyota did not return a request for comment. (Toyota further declined to comment on the effects of a new trade deal on EV battery minerals signed between Japan and the U.S. this week that could potentially impact some of its cars.)
Federal officials said that on April 18, a revised list of eligible vehicles will be posted to FuelEconomy.gov, and it will also include the amount of credit available.
But that’s still a few weeks away. EV and hybrid buyers may do well to make a purchase before the rules change — that is, if they can find a car to buy. Many new EVs remain tough to find thanks to supply chain challenges and are on average pricier than ICE counterparts.
The answer is clear: Like a Mustang Mach-E using launch control, move fast before things change.
This article was updated at 10:55AM ET on March 31, 2023.
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What if, instead of maintaining old pipelines, gas utilities paid for homes to electrify?
California just hit a critical climate milestone: On September 1, Pacific Gas and Electric, the biggest utility in the state, raised natural gas rates by close to $6 due to shrinking gas demand.
I didn’t say it was a milestone worth celebrating. But experts have long warned that gas rates would go up as customers started to use less of the fossil fuel. PG&E is now forecasting enough of a drop in demand, whether because homeowners are making efficiency improvements or switching to electric appliances, that it needs to charge everyone a bit more to keep up with the cost of maintaining its pipelines.
Shortly after the rate increase went into effect, however, Governor Gavin Newsom signed a bill aimed at addressing this exact problem. The new law gives PG&E and other utilities permission to use money they would have spent to replace aging, leaky pipelines to pay for the electrification of the homes served by those pipes — as long as electrifying the homes is cheaper. Instead of investing millions of ratepayer dollars into the gas system, utilities can start to decommission parts of it, shrinking gas use and fixed costs in tandem.
PG&E actually already has the freedom to do this, and has even completed a fair number of projects. But the utility has had limited success, mainly because of an anti-discrimination law that gives building owners the right to stick with natural gas. It only takes one gas stalwart to thwart a whole neighborhood’s prospects for free electric appliances, since in order to keep delivering gas to that one household, the utility has to invest in the entire section of pipeline serving the area. A 2023 report showed that while PG&E had completed more than 100 projects, it hadn’t been able to convince clusters of customers larger than five at a time to convert.
The new law doesn’t fundamentally change the anti-discrimination rule, known as a utility’s “duty to serve,” but it does relieve PG&E and others of this duty if at least two-thirds of the homeowners served by a given section of pipeline consent to getting off gas. For now, the legislation limits utilities to executing 30 such projects. But for those 30, as long as two-thirds consent, the utility can now tell the holdouts that it is retiring the pipeline, and that they have no choice but to get on the electric bandwagon.
“If a supermajority wants it, it can move forward,” Matt Vespa, a senior attorney from Earthjustice who worked on the legislation, told me. “Which I think is probably a good place to start from. You want to have a place where there’s significant buy-in.”
This strategy, sometimes called “zonal decarbonization” or “targeted electrification,” is one that many climate groups are advocating for as a way to achieve an orderly and equitable transition off of natural gas. The approach most states have taken so far — providing subsidies that gently prod consumers into going electric — results in a random pattern of adoption that can benefit some homeowners while harming others. It also does nothing to deter gas utilities from investing hundreds of millions of dollars in maintaining, replacing, or building new pipelines each year — investments that are set up to be recouped from ratepayers over the course of decades.
California isn’t the first place in the world to experiment with targeted electrification. The Swiss city of Zurich began systematically shutting down sections of its gas system in 2021, giving affected users about a decade of warning and offering partial compensation for the cost of new equipment. In Massachusetts, the utility Eversource is piloting a unique neighborhood-scale electrification project. The company hooked up 32 residential buildings and a few commercial businesses in the city of Framingham to a new underground network of pipes that carry water rather than natural gas, which in turn connect to geothermal heat pumps that use the water to heat or cool the air inside. There are more than a dozen such “thermal energy network” pilot projects in various stages in Massachusetts, New York, Colorado, Washington, Vermont, Maryland, and Minnesota.
But the new California program is unique in its scale and approach. For one thing, it applies to all gas utilities in the state. Beginning next summer, they will each need to submit maps to the utility commission that identify potential pipeline replacement projects; then, in 2026, regulators will use those maps to designate priority areas, giving precedence to low-income communities and households that lack heating or cooling. By July of that year, the commission must establish the rules of the pilot program, including a methodology for utilities to determine when electrification is more cost-effective than pipeline replacement, and rules for how utilities can pay for the projects and recover costs.
PG&E supported the bill and worked closely with its authors on the language. The utility declined an interview, but emailed me a statement saying the legislation “enables cost-effective, targeted electrification projects which will help avoid more expensive gas pipeline replacements, reducing gas system operating costs, and support the state’s and PG&E’s decarbonization goals.”
Utilities will still be spending ratepayer money on the electrification projects, but far less than they would have spent on pipeline infrastructure. For the remaining gas customers, it’s still possible rates will go up, though by less than they would have otherwise. Mike Henchen, a principal in the carbon-free buildings program at RMI, told me these pilot projects alone are not going to pull so many customers away from the gas system that it will put upward pressure on rates. The law caps the program at no more than 1% of a utility’s customers.
Vespa, the Earthjustice attorney, told me he originally worked on a more ambitious version of the bill that would have required utilities to avoid any new investments in the gas system when electrification was a cheaper alternative. But it was pared back and made voluntary in order to get it through the legislature. “The hope is that we'll get projects off the ground, we’ll get proof-of-concept,” he said. “I think there was a need to demonstrate some successful stories and then hopefully expand from there.”
While these pilots make sense, economically, for a dual gas and electric company like PG&E, one big question is whether the state’s gas-only utilities like Southern California Gas will take the initiative. (SoCalGas did not respond to my inquiry prior to publication, but the company did support the legislation.)
Looking ahead, even if lawmakers do expand the program to authorize every cost-effective project, this model can’t transition the entire state away from gas. These projects are more likely to pencil out in places with lower housing density, where a given section of pipeline is serving only a handful of homes. A fact sheet about the bill published by its lead sponsor, state senator David Min, says that “zero emissions alternatives” to pipeline replacement are only technically feasible and cost effective for about 5% of PG&E’s territory. “Gas customers won't be able to pay for the decommissioning of the whole gas system, or even 50% of it,” said Henchen.
In the meantime, however, there’s lots of low-hanging fruit to pluck. Targeted electrification of just 3% to 4% of gas customers across the state could reduce gas utility spending by $15 billion to $26 billion through 2045, according to an analysis by Energy and Environmental Economics.
“It’s a modest step,” said Vespa of the new law. “But I do think it’s meaningful to start moving forward and developing the frameworks for this.”
Revoy is already hitching its power packs to semis in one of America’s busiest shipping corridors.
Battery swaps used to be the future. To solve the unsolvable problem of long recharging times for electric vehicles, some innovators at the dawn of this EV age imagined roadside stops where drivers would trade their depleted battery for a fully charged one in a matter of minutes, then be on their merry way.
That vision didn’t work out for passenger EVs — the industry chose DC fast charging instead. If the startup Revoy has its way, however, this kind of idea might be exactly the thing that helps the trucking industry surmount its huge hurdles to using electric power.
Revoy’s creation is, essentially, a bonus battery pack on wheels that turns an ordinary semi into an EV for as long as the battery lasts. The rolling module carries a 525 kilowatt-hour lithium iron phosphate battery pack attaches to the back of the truck; then, the trailer full of cargo attaches to the module. The pack offers a typical truck 250 miles of electric driving. Founder Ian Rust told me that’s just enough energy to reach the next Revoy station, where the trucker could swap their depleted module for a fresh one. And if the battery hits zero charge, that's no problem because the truck reverts to its diesel engine. It’s a little like a plug-in hybrid vehicle, if the PHEV towed its battery pack like an Airstream and could drop it off at will.
“If you run out of battery with us, there's basically no range anxiety,” Rust said. “And we do it intentionally on our routes, run it down to as close to zero as possible before we hit the next Revoy swapping station. That way you can get the maximum value of the battery without having to worry about range.”
To start, a trucker in a normal, everyday semi pulls up to a Revoy station and drops their trailer. A worker attaches a fully charged Revoy unit to the truck and trailer—all in five minutes or less, Revoy promises. Once in place, the unit interfaces seamlessly with the truck’s drivetrain and controls.
“It basically takes over as the cruise control on the vehicle,” he said. “So the driver gets it up to speed, takes their foot off the gas, and then we actually become the primary powertrain on the vehicle. You really only have to burn diesel for the little bit that is getting onto the highway and then getting off the highway, and you get really extreme MPGs with that.”
The Revoy model is going through its real-world paces as we speak. Rust’s startup has partnered with Ryder trucking, whose drivers are powering their semis with Revoy EVs at battery-swap stops along a stretch of Interstate 30 in Texas and Arkansas, a major highway for auto parts and other supplies coming from Mexico. Rust hopes the next Revoy corridor will go into Washington State, where the ample hydropower could help supply clean energy to all those swappable batteries. Happily, he said, Revoy can expand piecemeal like this because its approach negates the chicken-and-egg problem of needing a whole nation of EV chargers to make the vehicles themselves viable. Once a truck leaves a Revoy corridor, it’s just a diesel-powered truck again.
Early data from the Ryder pilot shows that the EV unit slashed how much diesel fuel a truck needs to make it down the designated corridor. “This is a way we can reduce a path to reduce the emissions of our fleet without having to buy anything — and without having to have to worry about how much utilization we're going to have to get,” Mike Plasencia, group director of New Product Strategy at Ryder, told me.
Trucking represents one of the biggest opportunities for cutting the carbon emissions of the transportation sector. It’s also one of the most challenging. Heatmap has covered the problem of oversized SUV and pickup truck EVs, which need larger, more expensive batteries to propel them. The trucking problem is that issue on steroids: A semi can tow up to 80,000 pounds down an American highway.
There are companies building true EV semi trucks despite this tall order — Tesla’s has been road-testing one while hauling Pepsi around, and trucking mainstays like Peterbilt are trying their hand as well. Although the EV model that works for everyday cars — a built-in battery that requires recharging after a couple hundred miles — can work for short-haul trucks that move freight around a city, it is a difficult fit for long-haul trucking where a driver must cover vast distances on a strict timetable. That’s exactly where Revoy is trying to break in.
"We are really focused on long haul,” he told me. “The reason for that is, it's the bigger market. One of the big misconceptions in trucking is that it's dominated by short haul. It's very much the opposite. And it's the bigger emission source, it's the bigger fuel user."
Rust has a background in robotics and devised the Revoy system as a potential solution to both the high cost of EV semis and to the huge chunks of time lost to fueling during long-distance driving. Another part of the pitch is that the Revoy unit is more than a battery. By employing the regenerative braking common in EVs, the Revoy provides a redundancy beyond air brakes for slowing a big semi—that way, if the air brakes fail, a trucker has a better option than the runaway truck lane. The setup also provides power and active steering to the Revoy’s axle, which Rust told me makes the big rig easier to maneuver.
Plasencia agrees. “The feedback from the drivers has been positive,” he said. “You get feedback messages like, it felt like I was driving a car, or like I wasn't carrying anything.”
As it tries to expand to more trucking corridors across the nation, Revoy may face an uphill battle in trying to sell truckers and trucking companies on an entirely new way to think about electrifying their fleets. But Rust has one ace up his sleeve: With Revoy, they get to keep their trucks — no need to buy new ones.
On the DOE’s transmission projects, Cybertruck recalls, and Antarctic greening
Current conditions: Hurricane Kirk, now a Category 4 storm, could bring life-threatening surf and rip currents to the East Coast this weekend • The New Zealand city of Dunedin is flooded after its rainiest day in more than 100 years • Parts of the U.S. may be able to see the Northern Lights this weekend after the sun released its biggest solar flare since 2017.
The Energy Department yesterday announced $1.5 billion in investments toward four grid transmission projects. The selected projects will “enable nearly 1,000 miles of new transmission development and 7,100 MW of new capacity throughout Louisiana, Maine, Mississippi, New Mexico, Oklahoma, and Texas, while creating nearly 9,000 good-paying jobs,” the DOE said in a statement. One of the projects, called Southern Spirit, will involve installing a 320-mile high-voltage direct current line across Texas, Louisiana, and Mississippi that connects Texas’ ERCOT grid to the larger U.S. grid for the first time. This “will enhance reliability and prevent outages during extreme weather events,” the DOE said. “This is a REALLY. BIG. DEAL,” wrote Michelle Lewis at Electrek.
The DOE also released a study examining grid demands through 2050 and concluded that the U.S. will need to double or even triple transmission capacity by 2050 compared to 2020 to meet growing electricity demand.
Duke Energy, one of the country’s largest utilities, appears to be walking back its commitment to ditch coal by 2035. In a new plan released yesterday, Duke said it would not shut down the second-largest coal-fired power plant in the U.S., Gibson Station in Indiana, in 2035 as previously planned, but would instead run it through 2038. The company plans to retrofit the plant to run on natural gas as well as coal, with similar natural-gas conversions planned for other coal plants. The company also slashed projects for expanding renewables. According toBloomberg, a Duke spokeswoman cited increasing power demand for the changes. Electricity demand has seen a recent surge in part due to a boom in data centers. Ben Inskeep, program director at the Citizens Action Coalition of Indiana, a consumer and environmental advocacy group, noted that Duke’s modeling has Indiana customers paying 4% more each year through 2030 “as Duke continues to cling to its coal plants and wastes hundreds of millions on gasifying coal.”
The Edison Electric Institute issued its latest electric vehicle forecast, anticipating EV trends through 2035. Some key projections from the trade group’s report:
Tesla issued another recall for the Cybertruck yesterday, the fifth recall for the electric pickup since its launch at the end of last year. The new recall has to do with the rearview camera, which apparently is too slow to display an image to the driver when shifting into reverse. It applies to about 27,000 trucks (which is pretty much all of them), but an over-the-air software update to fix the problem has already been released. There were no reports of injuries or accidents from the defect.
A new study published in Nature found that vegetation is expanding across Antarctica’s northernmost region, known as the Antarctic Peninsula. As the planet warms, plants like mosses and lichen are growing on rocks where snow and ice used to be, resulting in “greening.” Examining satellite data, the researchers from the universities of Exeter and Hertfordshire, and the British Antarctic Survey, were shocked to discover that the peninsula has seen a tenfold increase in vegetation cover since 1986. And the rate of greening has accelerated by over 30% since 2016. This greening is “creating an area suitable for more advanced plant life or invasive species to get a foothold,” co-author Olly Bartlett, a University of Hertfordshire researcher, told Inside Climate News. “These rates of change we’re seeing made us think that perhaps we’ve captured the start of a more dramatic transformation.”
Moss on Ardley Island in the Antarctic. Dan Charman/Nature
Japan has a vast underground concrete tunnel system that was built to take on overflow from excess rain water and prevent Tokyo from flooding. It’s 50 meters underground, and nearly 4 miles long.
Carl Court/Getty Images