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Your EV options just got a lot smaller — for now, anyway.
Once upon a time, if you wanted to buy an electrified vehicle, you could qualify for a tax credit of up to $7,500 — provided that particular car manufacturer hadn’t yet exceeded the number of eligible vehicles it could sell with that incentive attached.
Sounds a bit complex, right? Today, EV buyers are probably wishing things were that simple.
The finalized EV and plug-in hybrid tax incentive rules go into effect this week. And while they do manage to modernize and refine the old program — including getting rid of the old limit on how many cars were eligible — they also significantly cut down on the number of EVs and PHEVs available for a tax break at this time.
The new rules have been in the works since late last year, but it wasn’t until this week that stipulations around battery sourcing and so-called “critical minerals” took effect as well. As The Verge pointed out Monday, only six vehicles currently on the market (that qualifier is important) are eligible for the full $7,500 tax credit. Others will only be allowed half of that. Many others, including whole brands of automakers, will be left out in the cold entirely.
In short, today’s news is great for General Motors, Ford, or Tesla. It’s tough luck for just about every other car company operating in the EV and PHEV space, like Nissan, Rivian, BMW, or Volkswagen.
The new rules, effective April 18, 2023, stipulate that an EV or PHEV (non-plug-in hybrids sadly don’t qualify at all) only gets tax incentives if its final assembly is in North America; its battery is more than 50% made in North America; and at least 40% of the battery’s “critical minerals” come from the U.S. or one of its free-trade partners. There are essentially two credits involved and each is worth $3,750: one for the car itself and one for the battery. You can see a full list at the EPA’s FuelEconomy.gov website.
The major silver lining in this situation is that customers can still qualify for a full $7,500 tax credit if they lease an EV or PHEV, as long as their dealership decides to pass on the savings.
Let’s break this down.
Come at the king, you best not miss. The worldwide leader in EV production fares very well under the new rules. Granted, the Model S and Model X are too expensive to qualify for any tax breaks, but we knew that going in.
Instead, Tesla’s mainstream, volume-selling cars — the Model 3 and Model Y — keep their full $7,500 tax credits. The only one with batteries that don’t meet the new mineral-sourcing requirement is the Model 3 Standard Range Rear-Wheel-Drive; in other words, the base Model 3.
But between the tax incentives, Elon Musk’s tendency to slash prices on a whim, and the company’s still-unmatched ability to deliver EVs at scale, the rules should keep Tesla’s lead over other automakers pretty comfortable for some time.
Tesla still made up 64 percent of the U.S. EV market last year, and nearly half of its registrations were for the Model Y crossover. In other words, as The Washington Post’s Shannon Osaka pointed out today, the new tax credits are more limited but they do incentivize the cars that make up most of the market.
GM is quick to say that “qualifying customers will have access to the full $7,500 credit across [its] entire EV fleet,” but it’s key to remember that most of the cars on its list are currently not for sale. And others are having a hard time getting there.
For example, the Chevrolet Bolt and Bolt EUV still qualify for the full credits. These two EVs, which have a range of about 250 miles, are both screaming deals — even more so with the full credits. But they’re getting a bit old and do not offer the same fast-charging options that many newer competitors do. It’s not a dealbreaker weakness for the Bolt, but it is arguably the car’s biggest drawback.
The Cadillac Lyriq luxury crossover also qualifies for the full break. But GM has struggled with production for that vehicle. The Lyriq went on sale last year, but GM only made about 8,000 of them in all of 2022, much to the chagrin of reservation-holders and Cadillac’s dealers. To date, they’re seldom seen on roads outside of Detroit. (The GMC Hummer EV is too expensive to qualify for tax credits under the new rules, but it’s also had a lot of production problems to date.)
The rest of the cars on GM’s list — the Chevrolet Equinox EV, Blazer EV and Silverado EV — also aren’t even on sale yet. And given GM’s known troubles ramping up EV output, it’s fair to ask when prospective EV buyers will really be able to take advantage of the new rules here.
Ford’s eligible offerings include the electric Mustang Mach-E, F-150 Lightning, and E-Transit van, as well as the plug-in hybrid Escape. Those cars’ fancier cousins, the Lincoln Aviator and Corsair, also qualify for the hybrid tax credit, which is rated at $3,750.
The survival of the credit is great news for buyers of the F-150 Lightning, which is already America’s best-selling electric truck (and the only one to achieve anything close to real mass production.) Unfortunately, the popular Mustang Mach-E only qualifies for half the credit it used to because its batteries don’t meet the sourcing requirements.
Eventually, Ford will be more than likely able to equip the electric Mustang with compliant batteries. It’s been on the market for a few years now, and so the way it’s designed and built pre-dates these new rules. But it’s still a bit of a bummer for anyone aiming to buy this fast electric crossover.
When the EPA’s list was first unveiled, the biggest loser seemed to be Volkswagen. The German automaker has ambitious all-electric plans and mass-adoption hopes for its ID.4 electric crossover, yet none of its cars initially made the cut. At the time a VW spokesperson said the company was “fairly optimistic" that the ID.4 would qualify for the tax credit once VW received documentation from a supplier. That optimism was not misplaced. On Wednesday, the ID.4 was added to the EPA’s list and made eligible for the full $7,500 tax credit.
Other European automakers who build PHEVs and EVs in North America now find themselves out in the cold, since their batteries may not meet the mineral-sourcing requirements at all anymore.
The cars losing their tax credits entirely include the Audi Q5 TFSI e hybrid; the BMW 330e, and X5 xDrive45e hybrids; and the Volvo S60 hybrids. Being locally built isn’t enough anymore under the new rules, and that certainly represents a setback for these automakers.
At least for now. BMW is planning a $1.2 billion battery factory in South Carolina.
This ambitious electric truck startup also loses its tax incentive qualifications entirely under the new rules. Rivian’s R1T truck and R1S SUV are both built in America, but its Samsung SDI-sourced batteries are not. Last year, the two companies abandoned plans to build a U.S. battery factory together after being unable to come to terms on the deal.
Nissan got hit especially hard on this one. The U.S.-built Leaf won’t meet the battery requirements for the new rules, and the Japan-built Ariya crossover — the star of a big marketing push featuring actor Brie Larson – also won’t be eligible. That’s a tough blow for a brand that’s trying to regain the early lead it once had in the EV space.
At the same time, Nissan is another company with a huge North American factory presence and it will expand that to meet the new tax credit demands. Nissan has said it hopes to sell six EVs in America by 2026, many of them built in Mississippi.
The rules going into effect this week don’t change anything for South Korea’s Hyundai Motor Group. It’s been known for a while that its Korean-built EVs wouldn’t qualify for any tax incentives, and now that’s official. That means critically acclaimed cars like the Hyundai Ioniq 5 and Kia EV6 lose a big advantage over some competitors.
Even Genesis, which now produces an all-electric version of its Genesis GV70 crossover in Alabama, loses out this time. It’s not clear why the Electfied GV70 doesn’t qualify; we will update this story as we learn more.
But the new EV tax credit rules are a big blow for Hyundai, which is undertaking a major EV push to challenge Tesla on the world stage and thought it had worked out a deal with President Biden. Long-term, the answer will be considerably more American EV production, but that will take time. For now, Hyundai is banking on people getting a deal by leasing these EVs instead.
The long-term goal of the new rules is to have a robust EV battery manufacturing infrastructure right here in North America so that our zero-emission future doesn’t depend so much on China. New factories are springing up left and right in the U.S. as automakers and suppliers alike pour billions into future battery power.
But those won’t go online overnight; very much the opposite. Ford’s own $3.5 billion battery plant won’t be up and running until 2026. In the immediate term, these rules so limit eligibility that they could hinder wider EV and PHEV adoption at a crucial time.
All of it begs the question: What is the bigger goal of the IRA’s car-related rules: To get emissions down and spur EV adoption as quickly as possible, or to ramp up a domestic battery manufacturing ecosystem?
If it’s the former, then these new tax credit rules are a bit of a whiff. They’re so limiting they run the risk of keeping people out of electrified vehicles for cost reasons. The average price of an EV is about $60,000 before any incentives, which is greater than the also-high $45,000 average price for most internal combustion new cars.
Cost could slow down EV acceptance right when the public charging infrastructure is finally getting a much-needed shot in the arm of its own.
To be clear, the EVs are coming. Just about every automaker on this list has announced aggressive expansion plans for locally made EVs, batteries, or both. Most automakers are global entities and have to keep an eye on the long game, which seems to be battery-centric thanks to regulations in Europe and China.
Still, this a very tough, specific set of rules to meet — and it means EV growth might just accelerate a little less quickly than it could have.
This article was updated on April 19 at 1:31pm ET after the Volkswagen ID.4 was included on the EPA’s list.
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Geothermal is getting closer to the big time. Last week, Fervo Energy — arguably the country’s leading enhanced geothermal company — announced that its Utah demonstration project had achieved record production capacity. The new approach termed “enhanced geothermal,” which borrows drilling techniques and expertise from the oil and gas industry, seems poised to become a big player on America’s clean, 24/7 power grid of the future.
Why is geothermal so hot? How soon could it appear on the grid — and why does it have advantages that other zero-carbon technologies don’t? On this week’s episode of Shift Key, Rob and Jesse speak with a practitioner and an expert in the world of enhanced geothermal. Sarah Jewett is the vice president of strategy at Fervo Energy, which she joined after several years in the oil and gas industry. Wilson Ricks is a doctoral student of mechanical and aerospace engineering at Princeton University, where he studies macro-energy systems modeling. Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap, and Jesse Jenkins, a professor of energy systems engineering at Princeton University.
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Here is an excerpt from our conversation:
Robinson Meyer: I just wanted to hit a different note here, which is, Sarah, you’ve alluded a few times to your past in the oil and gas industry. I think this is true across Fervo, is that of course, the technologies we’re discussing here are fracking derived. What has your background in the oil and gas industry and hydrocarbons taught you that you think about at Fervo now, and developing geothermal as a resource?
Sarah Jewett: There are so many things. I mean, I’m thinking about my time in the oil and gas industry daily. And you’re exactly right, I think today about 60% of Fervo’s employees come from the oil and gas industry. And because we are only just about to start construction on our first power facility, the percentage of contractors and field workers from the oil and gas industry is much higher than 60%.
Jesse Jenkins: Right, you can’t go and hire a bunch of people with geothermal experience when there is no large-scale geothermal industry to pull from.
Jewett: That’s right. That’s right. And so the oil and gas industry, I think, has taught us, so many different types of things. I mean, we can’t really exist without thinking about the history of the oil and gas industry — even, you know, Wilson and I are sort of comparing our learning rates to learning rates observed in various different oil and gas basins by different operators, so you can see a lot of prior technological pathways.
I mean, first off, we’re just using off the shelf technology that has been proven and tested in the oil and gas industry over the last 25 years, which has been, really, the reason why geothermal is able to have this big new unlock, because we’re using all of this off the shelf technology that now exists. It’s not like the early 2000s, where there was a single bit we could have tried. Now there are a ton of different bits that are available to us that we can try and say, how is this working? How is this working? How’s this working?
So I think, from a technological perspective, it’s helpful. And then from just an industry that has set a solid example it’s been really helpful, and that can be leveraged in a number of different ways. Learning rates, for example; how to set up supply chains in remote areas, for example; how to engage with and interact with communities. I think we’ve seen examples of oil and gas doing that well and doing it poorly. And I’ve gotten to observe firsthand the oil and gas industry doing it well and doing it poorly.
And so I’ve gotten to learn a lot about how we need to treat those around us, explain to them what it is that we’re doing, how open we need to be. And I think that has been immensely helpful as we’ve crafted the role that we’re going to play in these communities at large.
Wilson Ricks: I think it’s also interesting to talk about the connection to the oil and gas industry from the perspective of the political economy of the energy transition, specifically because you hear policymakers talk all the time about retraining workers from these legacy industries that, if we’re serious about decarbonizing, will unavoidably have to contract — and, you know, getting those people involved in clean energy, in these new industries.
And often that’s taking drillers and retraining some kind of very different job — or coal miners — into battery manufacturers. This is almost exactly one to one. Like Sarah said, there’s additional expertise and experience that you need to get really good at doing this in the geothermal context. But for the most part, you are taking the exact same skills and just reapplying them, and so it allows for both a potentially very smooth transition of workforces, and also it allows for scale-up of enhanced geothermal to proceed much more smoothly than it potentially would if you had to kind of train an entire workforce from scratch to just do this.
This episode of Shift Key is sponsored by …
Watershed’s climate data engine helps companies measure and reduce their emissions, turning the data they already have into an audit-ready carbon footprint backed by the latest climate science. Get the sustainability data you need in weeks, not months. Learn more at watershed.com.
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Music for Shift Key is by Adam Kromelow.
Why the new “reasoning” models might gobble up more electricity — at least in the short term
What happens when artificial intelligence takes some time to think?
The newest set of models from OpenAI, o1-mini and o1-preview, exhibit more “reasoning” than existing large language models and associated interfaces, which spit out answers to prompts almost instantaneously.
Instead, the new model will sometimes “think” for as long as a minute or two. “Through training, they learn to refine their thinking process, try different strategies, and recognize their mistakes,” OpenAI announced in a blog post last week. The company said these models perform better than their existing ones on some tasks, especially related to math and science. “This is a significant advancement and represents a new level of AI capability,” the company said.
But is it also a significant advancement in energy usage?
In the short run at least, almost certainly, as spending more time “thinking” and generating more text will require more computing power. As Erik Johannes Husom, a researcher at SINTEF Digital, a Norwegian research organization, told me, “It looks like we’re going to get another acceleration of generative AI’s carbon footprint.”
Discussion of energy use and large language models has been dominated by the gargantuan requirements for “training,” essentially running a massive set of equations through a corpus of text from the internet. This requires hardware on the scale of tens of thousands of graphical processing units and an estimated 50 gigawatt-hours of electricity to run.
Training GPT-4 cost “more than” $100 million OpenAI chief executive Sam Altman has said; the next generation models will likely cost around $1 billion, according to Anthropic chief executive Dario Amodei, a figure that might balloon to $100 billion for further generation models, according to Oracle founder Larry Ellison.
While a huge portion of these costs are hardware, the energy consumption is considerable as well. (Meta reported that when training its Llama 3 models, power would sometimes fluctuate by “tens of megawatts,” enough to power thousands of homes). It’s no wonder that OpenAI’s chief executive Sam Altman has put hundreds of millions of dollars into a fusion company.
But the models are not simply trained, they're used out in the world, generating outputs (think of what ChatGPT spits back at you). This process tends to be comparable to other common activities like streaming Netflix or using a lightbulb. This can be done with different hardware and the process is more distributed and less energy intensive.
As large language models are being developed, most computational power — and therefore most electricity — is used on training, Charlie Snell, a PhD student at University of California at Berkeley who studies artificial intelligence, told me. “For a long time training was the dominant term in computing because people weren’t using models much.” But as these models become more popular, that balance could shift.
“There will be a tipping point depending on the user load, when the total energy consumed by the inference requests is larger than the training,” said Jovan Stojkovic, a graduate student at the University of Illinois who has written about optimizing inference in large language models.
And these new reasoning models could bring that tipping point forward because of how computationally intensive they are.
“The more output a model produces, the more computations it has performed. So, long chain-of-thoughts leads to more energy consumption,” Husom of SINTEF Digital told me.
OpenAI staffers have been downright enthusiastic about the possibilities of having more time to think, seeing it as another breakthrough in artificial intelligence that could lead to subsequent breakthroughs on a range of scientific and mathematical problems. “o1 thinks for seconds, but we aim for future versions to think for hours, days, even weeks. Inference costs will be higher, but what cost would you pay for a new cancer drug? For breakthrough batteries? For a proof of the Riemann Hypothesis? AI can be more than chatbots,” OpenAI researcher Noam Brown tweeted.
But those “hours, days, even weeks” will mean more computation and “there is no doubt that the increased performance requires a lot of computation,” Husom said, along with more carbon emissions.
But Snell told me that might not be the end of the story. It’s possible that over the long term, the overall computing demands for constructing and operating large language models will remain fixed or possibly even decline.
While “the default is that as capabilities increase, demand will increase and there will be more inference,” Snell told me, “maybe we can squeeze reasoning capability into a small model ... Maybe we spend more on inference but it’s a much smaller model.”
OpenAI hints at this possibility, describing their o1-mini as “a smaller model optimized for STEM reasoning,” in contrast to other, larger models that “are pre-trained on vast datasets” and “have broad world knowledge,” which can make them “expensive and slow for real-world applications.” OpenAI is suggesting that a model can know less but think more and deliver comparable or better results to larger models — which might mean more efficient and less energy hungry large language models.
In short, thinking might use less brain power than remembering, even if you think for a very long time.
On Azerbaijan’s plans, offshore wind auctions, and solar jobs
Current conditions: Thousands of firefighters are battling raging blazes in Portugal • Shanghai could be hit by another typhoon this week • More than 18 inches of rain fell in less than 24 hours in Carolina Beach, which forecasters say is a one-in-a-thousand-year event.
Azerbaijan, the host of this year’s COP29, today put forward a list of “non-negotiated” initiatives for the November climate summit that will “supplement” the official mandated program. The action plan includes the creation of a new “Climate Finance Action Fun” that will take (voluntary) contributions from fossil fuel producing countries, a call for increasing battery storage capacity, an appeal for a global “truce” during the event, and a declaration aimed at curbing methane emissions from waste (which the Financial Times noted is “only the third most common man-made source of methane, after the energy and agricultural sectors”). The plan makes no mention of furthering efforts to phase out fossil fuels in the energy system.
The Interior Department set a date for an offshore wind energy lease sale in the Gulf of Maine, an area which the government sees as suitable for developing floating offshore wind technology. The auction will take place on October 29 and cover eight areas on the Outer Continental Shelf off Massachusetts, New Hampshire, and Maine. The area could provide 13 gigawatts of offshore wind energy, if fully developed. The Biden administration has a goal of installing 30 GW of offshore wind by 2030, and has approved about half that amount so far. The DOI’s terms and conditions for the October lease sale include “stipulations designed to promote the development of a robust domestic U.S. supply chain for floating wind.” Floating offshore wind turbines can be deployed in much deeper waters than traditional offshore projects, and could therefore unlock large areas for clean power generation. Last month the government gave the green light for researchers to study floating turbines in the Gulf of Maine.
In other wind news, BP is selling its U.S. onshore wind business, bp Wind Energy. The firm’s 10 wind farm projects have a total generating capacity of 1.3 gigawatts and analysts think they could be worth $2 billion. When it comes to renewables, the fossil fuel giant said it is focusing on investing in solar growth, and onshore wind is “not aligned” with those plans.
The number of jobs in the U.S. solar industry last year grew to 279,447, up 6% from 2022, according to a new report from the nonprofit Interstate Renewable Energy Council. Utility-scale solar added 1,888 jobs in 2023, a 6.8% increase and a nice rebound from 2022, when the utility-scale solar market recorded a loss in jobs. The report warns that we might not see the same kind of growth for solar jobs in 2024, though. Residential installations have dropped, and large utility-scale projects are struggling with grid connection. The report’s authors also note that as the industry grows, it faces a shortage of skilled workers.
Interstate Renewable Energy Council
Most employers reported that hiring qualified solar workers was difficult, especially in installation and project development. “It’s difficult because our projects are built in very rural areas where there just aren't a lot of people,” one interviewee who works at a utility-scale solar firm said. “We strive to hire as many local people as possible because we want local communities to feel the economic impact or benefit from our projects. So in some communities where we go, it is difficult to find local people that are skilled and can perform the work.”
The torrential rain that has battered central Europe is tapering off a bit, but the danger of rising water remains. “The massive amounts of rain that fell is now working its way through the river systems and we are starting to see flooding in areas that avoided the worst of the rain,” BBC meteorologist Matt Taylor explained. The Polish city of Nysa told its 44,000 residents to leave yesterday as water rose. In the Czech Republic, 70% of the town of Litovel was submerged in 3 feet of flooding. The death toll from the disaster has risen to 18. Now the forecast is calling for heavy rain in Italy. “The catastrophic rainfall hitting central Europe is exactly what scientists expect with climate change,” Joyce Kimutai, a climate scientist with Imperial College London’s Grantham Institute, toldThe Guardian.
A recent study examining the effects of London’s ultra-low emissions zone on how students get to school found that a year after the rules came into effect, many students had switched to walking, biking, or taking public transport instead of being driven in private vehicles.