[Scott] Coming up on "Energy Switch," we'll talk about the benefits and challenges of electric cars.

[Beia] It takes time for transformation.

It takes time for the vehicle fleet to turn over.

Right now, it's only five percent.

That's really low economies of scale.

And so prices are high, yes.

But as we push for more electric vehicles to come into the market as they learn and figure out new manufacturing processes, those costs will come down.

- If the goal of the electric vehicle revolution is to reduce transportation emissions, then it's not about getting electric vehicles on the road.

It's about getting gasoline cars off the road.

[Scott] In this discussion, part one of electric cars, pros and cons.

[Narrator] Funding for "Energy Switch" was provided in part by the University of Texas at Austin, leading research in energy and the environment for a better tomorrow.

What starts here changes the world.

And by EarthX, an international nonprofit working towards a more sustainable future.

See more at earthx.org.

[upbeat music] - I'm Scott Tinker, and I'm an energy scientist.

I work in the field, lead research, speak around the world, write articles, and make films about energy.

This show brings together leading experts on vital topics in energy and climate.

They may have different perspectives, but my goal is to learn, and illuminate, and bring diverging views together towards solutions.

Welcome to the "Energy Switch."

Electric cars are quiet, fast and efficient.

You can fill them up in your garage overnight, and they produce no local emissions, but they're expensive and their subsidies have gone mostly to the wealthy.

And the critical minerals for their batteries are controlled by foreign powers unless we begin more domestic mining.

We'll look at all this and much more with my expert guests.

Beia Spiller is a fellow at Resources for the Future where she directs their transportation program.

Before that, she was lead senior economist at Environmental Defense Fund.

David Rapson is also an energy economist for the Federal Reserve Bank of Dallas and the Chancellor's Leadership Professor of Economics at the University of California Davis.

In this episode of "Energy Switch," electric cars, pros and cons, part one.

So welcome everybody.

Really glad you're here with us.

Most of us in the U.S. are driving gasoline cars or maybe diesel.

Why do we care about EVs?

- Well, EVs have a huge environmental benefit, right?

They remove all tailpipe emissions from the road.

And one of the biggest reasons why I think electric vehicles are so exciting is the potential for them to really reduce the harm that transportation pollution has on disadvantaged communities.

These communities tend to live closer to highways and major roadways as well as depots.

And so if we begin to electrify that, we can start to improve the health and wellbeing of these communities who have been so historically damaged by transportation pollution.

- That's a big environmental justice piece to it.

[Beia] Absolutely.

- Yeah.

David?

- Well, the first thing I have to say, I work for the Federal Reserve, and so all of the opinions I have today are my own and not the Feds.

We care about electric vehicles because we care about climate change.

You know, climate change is real, it's an urgent problem.

And decarbonizing transportation is one of the most difficult aspects of that.

And we have this technology that offers us a pathway where we decarbonize the grid and we switch from liquid fuels to electric vehicles.

At least that's the vision.

- Yeah, let's start with kind of the market.

How deeply have EVs penetrated the market so far?

U.S. at least.

- It's about 5, 5.5%.

And that's grown really rapidly over the past few years.

- Right.

U.S. sells about 15 million cars a year.

So we're looking at- [Beia] Right.

It's about 750,000.

- Approaching a million cars.

- Absolutely.

- EVs a year.

Big number.

- And we expect that number to go up a lot over the coming years.

[Scott] Right.

- You know, there really has been a rapid increase in the adoption of this technology.

- Yeah.

- On the other hand, it's a very specific segment of the market that has taken of.

Most of the consumers are very wealthy and they're driving around cars that cost, you know, 60, 70, 80, sometimes thousand, you know, more dollars.

So these are not inexpensive cars and they're not accessible to the vast majority of the market at this point.

- Yeah.

- Well- - That's interesting.

[Beia] Can I push back on that a little bit?

- Sure.

- First of all, the great thing about Tesla was that they made these cars cool.

Beforehand, everybody was thinking about these EVs as sort of horribly ugly as, you know, lacking in horsepower, lacking in performance.

And so now all of a sudden, people are thinking about EVs as, "Wow, this is a really cool car."

We can have environmentally friendly driving, but also have it be really fun to drive, right?

I mean, Prius is pretty ugly.

- Well, you know.

- And that was- - My kids are all beautiful.

- That was like the main way that people were able to, you know, improve the environmental impact of their driving.

- How do we see that globally?

EVs?

- EVs have really taken off in China and in Europe.

So in places where they want to signal that they're taking climate change seriously, electric vehicles are, you know, the pathway to signal that.

I think it's worth noting though, that even as they increase in the market share of new vehicles, it's a lot smaller as a share of the cars on the road.

And, you know, I think we're gonna come back to this a few times because if the goal of the electric vehicle revolution is to reduce transportation emissions, then it's not about getting electric vehicles on the road, it's about getting gasoline cars off the road.

[Scott] That's interesting.

In addition, China and the EU, China consumes five times more petroleum than it produces.

So there's a practical driver here too.

We don't have oil.

We need something else for our vehicles.

And so it's climate, but it's also, particularly in China, really practical.

Let's electrify this stuff, right?

- Well, sure.

But I mean, they're gonna have to get inputs for electricity as well.

So, you know, we saw what happened with Europe's electricity sector in 2022 when Russia cut off the flows of natural gas.

You know, what happened to Germany as they shifted towards coal and China is also importing a lot of coal and building a lot of coal fired plants.

- Correct.

It's not good for climate, but it's good for transportation security.

- That's exactly right.

And if we as economists could, you know, wave our wand and do this efficiently, I think we'd have a lot more grid decarbonization happening before there's deep penetration of EVs in the market- [Scott] Interesting.

- Because, you know, our grid worldwide is about 60% fossil fuels.

Forty percent of that is coal worldwide.

And you flip those numbers in the U.S., we're about 60% fossil fuels on the electric grid in the U.S. where it's 40% natural gas, so it's a little bit cleaner, but still, you know, these cars have been branded, particularly in California, as zero emissions vehicles.

And you know that's true at the tailpipe, but that's not true if what you care about is climate change.

[Scott] Right.

You agree?

- The idea that we need to wait until the grid is decarbonized to make this transition, I think that's a fallacy because it takes time for transformation.

It takes time for the vehicle fleet to turn over.

Right now's only five percent, that's really low economies of scale.

And so prices are high, yes.

But as we push for more electric vehicles to come into the market as they learn and figure out new manufacturing process, those costs will come down.

Another thing that I wanna point out is there needs to be learning on the side of the customers, right?

So understanding when's the right time to charge?

How can we charge in a way that minimizes our emissions?

Understanding, how do we deal with range anxiety, right?

And so if charging stations are well networked and we have a lot of them everywhere, then, right?

Range anxiety can decrease.

People can understand that they're gonna be able to use these vehicles appropriately.

So if we wait, we're adding extra decades to that whole learning process, which we really should be accelerating right now.

- I agree with everything that Beia just said.

And what she's really pointed out is the beginning of what's a really long list of obstacles.

So, you know, maybe we go a little bit slower, we learn, maybe not at as fast a rate, but we allow other technologies to be innovated as well.

For example, battery storage technology which will help decarbonize the grid, or hydrogen fuel technology which will make electric vehicles, you know, maybe not 100% of the vision.

And so, you know, I think foreclosing these other technology options by going all in on EVs, it's a little risky.

[Beia] Hold on, let me push back on that for a second.

[David] Sure, sure.

- Because if we were going to try to make the vehicles on the road be both hydrogen and electric, we will need a massive infrastructure investmeent.

Not just the charging stations that we're currently investing in, but also the fueling stations for these hydrogen vehicles, for these fuel cell vehicles.

The billions of dollars that that would cost society to make parallel investments in charging and fueling stations is massive.

[Scott] Yeah.

Let's just touch on where electricity, batteries make sense, vehicle size, that kind of thing.

What are your thoughts on that?

We'll come back over here, David.

- You know, within the medium heavy duty vehicle sector, there's a lot of use cases that can do very well with electric, particularly, you know, smaller vehicles right now, delivery vehicles, garbage trucks, school buses, and even transit buses.

Right now, the cost is quite a bit higher.

How can we bring it down?

And it's not just gonna be through subsidization of the vehicle purchase because there's so many other different challenges within the medium heavy duty vehicle sector that we're not going to be able to just throw money at the purchaser and think that that's gonna be able to reduce the cost.

- Yeah, I mean, a electric motor is so efficient, combustion engine not, but gasoline is so efficient, dense per unit volume as compared to a battery, so you get this kind of strange trade-off.

Your thoughts on the bigger vehicles?

- Yeah.

Well, I mean, I think that electric vehicle technology is most promising in light vehicles because batteries are so heavy and because liquid fuels like gasoline and diesel are very energy dense, and so they make sense for these bigger applications.

For urban driving, I think electric vehicles are great and you don't even necessarily need batteries as big as the ones that Tesla is putting in, you know, or the ones that are being mandated under subsidy thresholds in current policy.

I think, you know, we should be- - When you say big, give me a feel for weight in a car of a battery, like a four door sedan.

- Well, a typical electric vehicle can be, you know, 500 to 1,000 pounds more heavy than its non-battery counterpart, so- - Whereas 20 gallons of gasoline weighs about 100 pounds.

- Yeah, exactly.

And you're putting it in a, you know, $100 like polyethylene tank, you know, you don't have to build this extremely expensive battery.

And so I think the first thing is the use case.

And the second thing is, where's the grid clean?

Because, you know, I'm sorry, I care about carbon emissions and I think it does matter.

It's not just about, you know, going down this cost curve.

It's about do we want to be putting electric vehicles in places where there's a lot of coal on the grid?

I think the answer is no.

And right now there's not enough of a nuanced conversation about where the EVs are going.

- Let's come back and talk a little bit about cost.

Where are we now?

Where do you see that heading?

- So electric vehicles obviously cost more than gasoline vehicles, but that's coming down and it will continue to drop in part due to the inflation reduction act subsidies requirements that, you know, in order to be able to be eligible for a subsidy, the vehicle price can't exceed a certain threshold.

And as the numbers come up, as more and more people purchase these vehicles, prices will continue to drop.

- Right, and subsidies go away, or?

- Yeah, even when subsidies go away, I mean, we can achieve cost parity within, you know, several years as manufacturers innovate and are able to take advantage of these large scale demands.

- Right, right.

How much do they cost on average?

What are we looking at?

- So last year, the average MSRP for a electric vehicle was about $66,000.

But I think we need to keep two main things in mind when we think about EV costs.

One is they've got these big batteries and the batteries are expensive.

And they're expensive because they have all these metals that go into them.

And you know, that's instead of having a plastic gasoline tank, right?

So we've made incredible progress bringing those prices down, they've come down about 90% in the last decade, so batteries are a lot less expensive.

And I think one of the things we're about to see is a proliferation of choice in EVs.

The vehicle manufacturers are going to create many more models, introduce many more models, including ones that are gonna be less expensive.

[Scott] Right.

Are they cheaper to operate, maintain?

- It depends entirely upon a few different things.

One, where you live, so what's the price that you're facing in the utility service territory?

Number two, what the gasoline price is in your neighborhood and in your region.

And then three, what time you charge, because there's a lot of time-variant pricing.

And so depending on what kind of rates you're facing, and some people are facing real time prices even, you can manage the charging to take advantage of the low cost time.

So just thinking about an average price, oh, electricity prices are, you know, on average X and gasoline price on average Y is a total fallacy because what that's gonna mean for you is something completely different.

- Right.

- You know, maybe we don't want to just focus on averages, but electric vehicles are really efficient.

And so the cost to drive a mile is typically a little bit lower.

But I think that might have been a bit overplayed because in the places where there are a lot of electric vehicles, like in California and in the Northeast, electricity prices are also very high.

So if you're paying, you know, 30 to 40 cents a kilowatt hour, then probably you're not saving much money driving an EV.

- Right.

- Now, EVs have a lot fewer moving parts.

You asked about maintenance.

And so yeah, we think that EVs are not gonna require as many service appointments, so they'll be less expensive in that way, but at some point you're gonna have to replace the battery and that's gonna be kind of equivalent to replacing a transmission in a gasoline car.

So you know how this all plays out, you know, honestly, I don't think that people should be buying these based on whether they're cheaper or not.

I think people have many more important factors that go into their car choice.

- Absolutely, I agree.

When people go to purchase vehicles, regardless of the fuel type, what they're looking for is comfort, safety, aesthetics.

We want horsepower, we want performance, more than how much it costs to drive.

I also have that issue.

[Scott] Right.

- One of the things that they care least about is the cost of fueling and that has been true with respect to the gasoline market.

And that's why the efficiency standards were so highly important.

- We've been kind of spoiled by cheap gasoline for a long time too.

- Absolutely.

[Scott] Everybody's mentioning subsidies.

How do they work?

- Well, I mean, we've got really big subsidy programs from the federal government and from many state governments.

And so when you buy an electric vehicle, you can get a credit on your taxes that, you know, the federal credit right now is about $7,500, but there are lots of complexities that are, you know, being woven into that around means testing where if you're very wealthy, you don't get the subsidy and the type of car you're buying.

But I really want to focus in on these subsidies for a minute because I think this is one of the areas where I think we're getting it wrong.

These subsidies are being offered with a vision that the EVs are displacing gasoline cars.

And I think there's two really important pieces of evidence that that's not happening.

First, when you look at the vehicle portfolios of households that are buying these EVs, they're not getting rid of a gasoline car nearly as frequently as is being assumed.

- They're just adding an EV.

- They're just adding an EV.

And you know, a lot of the time they're not driving it as much.

So kind of there's dipping the toe in this market.

- Right.

- But the other reason why I think we know that these subsidies are expanding the number of cars overall in the country is because vehicle manufacturers love these subsidies.

All right?

Why do they love them?

Because now they're selling a lot more cars because they're subsidized.

So, you know, I think if what we care about is reducing the pollution, then we need to shift our focus back to removing gasoline cars from the road, making it more expensive to drive gasoline cars, and a little bit less on how many EVs are being purchased.

Because you know, these are not doing one-to-one what we- - How do you make it more expensive to drive gasoline cars?

- Oh, well I think we need to put a price on carbon.

I mean, we keep on crying this from the hilltops and it's out of favor politically right now.

But if we really genuinely want to tackle climate change, we need to make it expensive to pollute.

[Scott] Is that regressive?

I mean, the people that have to drive to service industries and gasoline's going up like in Europe, they can't even afford to go to work.

- Yeah, it could be and we really need to care about addressing that, but I think we need to separate these issues a little bit.

We need to make it more expensive to pollute if we care about climate change and we need a tax transfer system that is, you know, making it easier on the low income households if we were to do that.

But we're gonna look back 10 years from now and we're gonna see that these subsidies didn't work the way that we expected them to.

- Yeah, that's interesting.

- Just on the point of gasoline taxes being aggressive, that money that comes in from the taxes, it could be used, you know, in part to fix up our infrastructure, but part of that could then be sent back to households based on their characteristics so we can make these gasoline taxes not regressive.

And I also want to respond to what Dave had said about which vehicles are being replaced.

I actually really think it depends on the data set you're looking at.

So we have this really great data set in Massachusetts where we're able to track households over time.

We know all the vehicles that they have in their household.

We know when they purchase new vehicles, which vehicles they get rid of, and which ones they hold onto.

And what we find is that households who purchase an EV are just slightly more likely to purchase that as an additional vehicle.

And the second thing I wanna point out is that we're not finding that households are driving these vehicles less, we're finding very similar types of patterns of driving when they purchase an electric vehicle.

And in fact, one of the benefits of the household getting the EV is that as gasoline prices go up, they're able to shift the miles to the EV.

- Will that vary by density of population, denser cities and denser places like Massachusetts, EVs, because you don't go that far, rural areas, harder?

- Possibly, but we have data from all over Massachusetts.

- I still think of the whole state as little, but we're in Texas, you know, everything is little, except for Alaska.

So what percentage of the EV cost, let's say unsubsidized is the battery, what percentage plus or minus?

- This is a really good question.

First of all, there's a lot of variation in the size of batteries.

- Right.

- And since the costs have been coming down so rapidly, that number has been changing a lot.

But you know, I have as my heuristic that a Tesla has about $10,000 worth of battery in it.

- Right.

[David] But, you know, I could be off by a couple thousand, but- - Plus or minus.

[David] It's a major cost.

And again, you're relating that to a plastic gasoline tank.

- Yeah, so- [Beia] Yeah.

And I just wanna stress the point that there's been so much technological innovation on the battery side.

Look at Ultium Cells.

Ultium Cells is a collaboration between General Motors and LG Electric.

And what they've done is they're creating these gigafactories that are creating this new technology of battery that are modular and what it allows for is a much longer life of a battery that also uses a lot less cobalt, one of the main critical minerals.

There isn't one technology of battery, a lot of different batteries have different types of minerals and quantities that go into each.

And so with technological innovation, we could expect them to live longer, rely upon less critical minerals and price comes down.

- So let's say we do get to 50% of the current vehicle fleet in the planet, which is 1.4 billion, electrify half that, you know, 700 million EVs.

You know, there's one to 5,000 actual lithium-ion battery cells in an EV.

You start to get into trillions and this is a big deal, you know, how do we see this happening?

How do we see the supply and price and minerals as we look out in the future?

What's it look like?

- Well, we started seeing the effects of this even last year in lithium prices that went up about 10X and one of the risks- - 10X, 1,000%?

[David] 1,000%.

And they've come down a little bit, but there's still, you know, we have a scarcity of lithium and I think this is one of the risks that as we expand demand for EVs and batteries, that the input prices for the batteries, you know, reverses this trend of declining battery costs and then, you know, it becomes harder to stimulate EV adoption.

- Yeah.

[Beia] The extent to which the supply chain restrictions on the critical minerals is going to affect EV prices is still sort of an unknown.

But as critical minerals go up, we will begin to innovate.

And part of the innovation in terms of mining is, for example, where are we getting these critical minerals?

One really promising option is coal ash, you know, being able to find it from a waste products of, you know, electricity generation.

[Scott] Gotcha.

So Maine has spodumene, it's a mineral, lithium rich mineral.

A lot of it actually.

Their legislature overrode their governor's veto, 35 to nothing, they won't mine it, yet they're gonna mandate EVs.

So here's one of the great challenges.

Are we gonna mine in the U.S.?

How do you see it?

- I think so, yes.

[Scott] You think so?

- I think though it's challenging.

There's three or four different agencies' regulations that determine where we can and can't mine.

And so I think it is a question of how do we go about taking a look at all these regulations and thinking, you know, what can we loosen, make sure that that mining's done in a responsible manner in a way that's not affecting local communities.

- Right, it's where they come from, but also then who processes it.

China processes a lot of these things now, and good for them, they got out in front of it.

[Beia] We have one processing plant in this country.

- Right.

[Beia] So the question is, what does the permitting process look like to put in these processing plants here?

From what I hear is pretty challenging.

- Yeah.

- So we need, you know, that sort of processing plant capacity within the United States will need to grow.

- Yeah, how do you see it?

- Well, this is something I've been thinking about recently in the context of China.

So China has a larger market share in battery processing than OPEC does in oil.

But I'm much less worried about it in this context.

This is actually one of the areas where I think, you know, it makes sense to keep an eye on that concern.

But let's say that they decided to, you know, withhold supply in the same way that say OPEC did in the 1970s.

There are lots of margins of adjustment there.

You know, we can allow the existing EVs to stay on the road longer.

So instead of scrapping them when we get in an accident, maybe we fix them.

Or we can, you know, buy gasoline cars and you know, I think we need to be aware of pressure relief valves for situations like that.

And you know, when somebody cuts off the electric grid, there's really no substitute.

When somebody cuts off the supply of gasoline, you know, you're stuck without being able to go anywhere.

It's not exactly the same with battery minerals.

[Scott] In the U.S., electric cars now make up five percent of new cars sold.

They're expensive though, and their subsidies have gone mostly to the wealthy.

But EV choices are increasing and costs are decreasing, which could help further adoption.

Eighty-five percent of global EVs are sold in Europe and particularly China, including many scooters.

They use domestic electricity rather than imported oil, helping with energy security.

But their electricity still comes mostly from coal, which partially offsets CO2 reductions.

Our guests disagreed on the pace of EV adoption, with David advocating for preserving fuel optionality and allowing time for the grid to decarbonize, and Beia pressing for acceleration of EVs, concerned about the cost of other options.

And there will be challenges with the supply, politics, price volatility, and security of the critical minerals needed to make the batteries.

We'll talk more about subsidies and mandates in part two of electric cars, pros and cons.

♪ ♪ ♪ ♪ ♪ ♪ [Narrator] Funding for "Energy Switch" was provided in part by the University of Texas at Austin, leading research in energy and the environment for a better tomorrow.

What starts here changes the world.

And by EarthX, an international nonprofit working towards a more sustainable future.

See more at earthx.org.