For California's Electric-Vehicle Mandate, Charging Infrastructure Will Be Critical
In adopting a new plan to restrict the sale of new gasoline-powered cars and light trucks beginning in 2026—and to ban their sale entirely by 2035—California has redoubled its commitment to electric-vehicle transportation. A major milestone in the transition to a carbon-neutral economy, the plan has made headlines nationwide, and rightly so.
But for California to meet its ambitious emissions-reduction goals, plenty of work remains. Even as it has more registered electric vehicles than any other state—about 39 percent of the U.S. total—only about 1 in 25 vehicles registered in the state are electric. And though it has more than four times as many electric vehicle charging stations as any other state—more than a quarter of the U.S. total—it will need well over a million more to meet demand in 2030.
The encouraging news lies in the demand. Californians bought nearly 129,000 new electric vehicles during the first half of this year, 59 percent more than in the first half of 2021. And with wide-ranging incentives in the Inflation Reduction Act making electric vehicles more affordable, demand should only continue to grow.
The task now is to build out an infrastructure system for charging these vehicles—one that is robust, reliable, and ready for action. Doing so won’t come easy. But with a focus on three promising approaches to charging projects, along with major injections of capital, California can be a leading example of how to get this done.
The first approach involves stand-alone charging stations. With this type of project, a property owner grants a company a license to install charging stations on-site, and the company engages with customers through a combination of sales, advertising, pay-per-use plans, and subscriptions.
In these arrangements, the property owner generally doesn’t pay for the right to host the charging stations, nor does it grant the charging company an interest in the underlying real estate. But companies often find them attractive, because the stations are fairly inexpensive to build and maintain.
The second approach involves fleet charging, where charging companies enter into subscription-based contracts with customers that have a fleet of electric vehicles—typically large, well-established corporates with pristine credit. Having been used for decades in conventional fleet-financing deals, this approach is well understood. It should help lower the total cost of owning electric-vehicle fleets, while freeing valuable space for growing retail demand.
California’s Low Carbon Fuel Standard program should prove useful here as well. In generating a steady revenue stream when station use is still low, the program’s zero-emission vehicle infrastructure credit creates a meaningful incentive to invest in electric-vehicle infrastructure, while lowering the risk of doing so.
The third approach—municipal transport—bears many similarities to fleet charging. But here, the counterparty is a local government, not a private company. Projects taking this approach require navigating the many complex government processes set by California cities and counties, but an opportunity to electrify the state’s public transit make them well worth the effort.
Promising as these approaches are, they amount to only one side of the electric-vehicle infrastructure equation, and none can succeed at scale without the other side—capital investment. Investors are keen to enter this exciting market, and California would be wise to foster an economic and regulatory environment that makes the state the most attractive destination for them.
The U.S. Department of Transportation’s new $1.5 billion electric-vehicle infrastructure plan is boosting momentum, and optimism has never been higher. It’s time now to build, and for California to lead the way. Californians—and the planet—deserve nothing less.
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This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.