Economic Benefits of EVs for Communities
Electric vehicles offer a range of benefits to their owners and the communities that house them. Unfortunately, many of these benefits are unfamiliar to most, and some can be difficult to quantify. As electric vehicles increasingly become the mainstream option for drivers, a full accounting of the economic opportunity afforded by the transition will be important to track.
Following is an overview on how to begin thinking about those benefits and their value for communities. While this work can be informed by, to date, over a decade of experience and hundreds of studies, the following piece provides a valuable reference point:
Sevier, Isaac, Ignacio Mendez, Eesha Khare, and Ken Rider. 2017. Preliminary Analysis of Benefits From 5 Million Battery Electric Passenger Vehicles in California. California Energy Commission. Publication Number: CEC-999-2017-008.
This study was selected as a basis for comparison due to its desirable combination of being relatively clear, comprehensive, balanced, and contemporary. Other useful studies showing economic benefits of electric vehicles are also listed in Appendix A.
Economic Benefits of EVs Summary Overview
Benefit Annual Value Per Car
The Case for Adjusting the Summary Total…Up or Down
Weighing the Impact of Gasoline Prices
Just over half of the economic benefits listed above come from fuel savings. This number will of course vary based on gas and electricity prices, as well as average vehicle efficiency and the number of miles traveled each year per vehicle. The 2017 study above assumed $3 per gallon gasoline, though we know that gasoline prices can vary dramatically given a number of factors. Using current US averages results in annual fuel savings of roughly $658, although this number will vary a great deal based on location and even the exact day/time it is calculated. Appendix B provides a framework for developing a more location-specific calculation.
What Other Factors Could Increase the Economic Benefit?
We note that the study’s benefit accounting did not attempt to be exhaustive. Other EV benefits noted in the study but not quantified include:
- lower maintenance costs
- energy storage savings from lower battery costs as the industry scales and innovates
- savings from switching larger vehicles, such as buses and trucks, to electricity for fuel
- fuel independence
- fuel price stability
- national security
- US leadership in major industrial technological changes
- backup power benefits
- reduction in urban heat island effects
- noise reduction
- disproportionately high health and cost benefits for disadvantaged communities
Even though it might be difficult to assign a specific dollar value to these types of benefits, they are significant and will clearly increase the economic value of switching to electric vehicles. The reduced maintenance costs for EVs alone can add hundreds of dollars in benefit per year to EV owners.
What Other Factors Could Lower the Economic Benefit?
Since our reference is a state-based study, some of the data reflect the relative sophistication of and costs associated with the California power market in particular. The total includes $240 for peak shavings and $6.60 for grid resource and regulation services. While some of these benefits can be realized immediately with current vehicle technology (known as “V1G”), to fully realize these benefits the next generation of technology (“V2G”) will be required. While the technology to support that next generation approach is available today, a number of industry and regulatory factors will need to be addressed before it becomes more widely available. While we expect those benefits to likely be realized in the future, given that they are not commonly available today the present value of the benefit should be lower. Those benefits can also vary depending on a particular state and how its local electricity market is managed, which is informed by a number of factors.
The total also anticipates $400/year for behind-the-meter storage services that are still under development and not widely available in the marketplace. That said, realizing the promise of these options is less related to technology challenges than resolving outstanding industry and regulatory frameworks. Once again, while these numbers will likely be realized in the future, the present value of the benefit should be lower. Those benefits will also likely vary from place to place given local market dynamics.
Refining the Exact Benefit for Your Community
…is left as an exercise for the reader.
Developing a universal, single precise number on the economic benefits of EVs is impossible given that the exact number will vary by location and over time. Moreover, certain benefits may be valued differently in different areas. That said, finalizing a precise number is less important than simply beginning to weigh the many significant economic benefits EVs bring to the communities where they are adopted.
To help people new to EV benefits better understand their value, we simply say:
On average, every EV in a community delivers
over $1,000 per year in local economic development benefit.
Appendix A: Relevant Studies
Detailed studies showing economic benefits of electric vehicles include:
Sevier, Isaac, Ignacio Mendez, Eesha Khare, and Ken Rider. 2017. Preliminary Analysis of Benefits From 5 Million Battery Electric Passenger Vehicles in California. California Energy Commission. Publication Number: CEC-999-2017-008. https://ww2.energy.ca.gov/2017publications/CEC-999-2017-008/CEC-999-2017-008.pdf
Stroo, Hans. 2015. Bills to Advance Electric Vehicles Make Good Economic and Environmental Sense. Plan Washington. http://planwashington.org/blog/archive/bills-to-advance-electric-vehicles-make-good-economic-and-environmental-sense/
Shepard, Michael. 2016. The $100B prize: Why EVs are the opportunity of the century for utilities. Utility Dive. https://www.utilitydive.com/news/the-100b-prize-why-evs-are-the-opportunity-of-the-century-for-utilities/416373/
Wescott, Robert, Katie Archer, Cameron Egan. 2015. Impact of Eliminating the Zero-Emissions Vehicle Tax Credit on the Georgia State Economy. Securing America’s Future Energy and The Electrification Coalition. http://secureenergy.org/wp-content/uploads/2016/02/Georgia_Keybridge_Study_FINAL.pdf
Crabtree, George, Elizabeth Cocs, Bryan Tillman. 2019. Midwest States Would Save $12 Billion Annually by Switching to Electric Vehicles. Midwest EVOLVE. https://www.midwestevolve.org/midwest-states-would-save-12-billion-annually-by-switching-to-electric-vehicles/
Conlon, Brian, Nancy Ryan, Eric Cutter. 2019. Benefit-Cost Analysis of Electric Vehicle Deployment in New York State. New York State Energy Research and Development Authority. https://www.nyserda.ny.gov/-/media/Files/Publications/Research/Transportation/19-07-Benefit-Cost-Analysis-EV-Deployment-NYS.pdf
Roland-Holst, David. 2012. Plug-In Electric Vehicle Deployment in California: An Economic Assessment. https://are.berkeley.edu/~dwrh/CERES_Web/Docs/ETC_PEV_RH_Final120920.pdf
Hatzopoulou, Marianne, Laura Minet, et al. 2020. Clearing the Air: How Electric Vehicles and Cleaner Trucks Can Reduce Pollution, Increase Health and Save Lives in the Greater Toronto and Hamilton Area. Environmental Defence and Ontario Public Health Association. https://clearingtheair.ca/
Appendix B: Calculating Fuel Savings
U.S. Averages (local values can also be used for the equation below):
- Cost per kWh of electricity: $0.1319 (https://www.electricchoice.com/electricity-prices-by-state/, April 2020)
- Cost per gallon of gas: $2.329 (https://www.eia.gov/dnav/pet/pet_pri_gnd_dcus_nus_m.htm, March 2020)
- MPG: 25.1 (https://nepis.epa.gov/Exe/ZyPDF.cgi?Dockey=P100YVFS.pdf, March 2019)
- MPkWh: 3 (https://www.fueleconomy.gov/feg/PowerSearch.do?action=noform&path=1&year1=1984&year2=2020&vtype=Electric&pageno=1&sortBy=Comb&tabView=0&rowLimit=100, April 2020)
- Miles traveled per year: 13,476 (https://www.fhwa.dot.gov/ohim/onh00/bar8.htm, March 2018)
The cost of gasoline is miles/year / miles/gallon * dollar/gallon = dollars/year
Plugging in the averages, we get 13,476 / 25.1 * 2.329 = $1,250.42
The cost of electricity is miles/year / miles/kWh * dollar/kWh = dollars/year
Plugging in the averages, we get 13,476 / 3 * 0.1319 = $592.49
Using this framework, we find that the average annual fuel savings per year is $657.93, given current US averages (April 2020).
Of course, as gasoline prices rise the savings become more pronounced.