In many of the discussions at all levels, one word seems to come up ubiquitously: “electrification.” The answer to a warming world, by many who are concerned, — from technical and policy experts, to rabid activists, to casual observers — is to convert the majority of sources of energy that come from oil, gas, coal to electricity. Replace those cars, trucks, and buses to run on electric power (preferably from solar and wind generation). Scrap oil or gas home heating systems for heat pumps. Get rid of that fancy, six-burner natural gas or propane-fueled range and install an induction cooking solution.
But maybe it isn’t all that simple and straight forward? In a working paper for University of California Berkeley’s Energy Institute at Haas, “The Electric Ceiling: Limits and Costs of Full Electrification,” two University of California at Davis suggest that that a single-minded approach to electrification is misleading.
David Rapson and James Bushnell argue, “Electrification is a centerpiece of global decarbonization efforts. Yet there are reasons to be skeptical of the inevitability, or at least the optimal pace, of the transition.”
Rapson and Bushnell write, “As GHG reduction goals grow more ambitious, the strategies for achieving these reductions are coalescing around a two-stage strategy known as ‘electrification.’” Electrification, they point out, is a two-step process. “The first stage involves elimination of GHG emissions in the production of electricity,” they write. “The second stage involves converting almost all residential and transportation (if not industrial) energy use to electricity. In practice, the stages are not sequential. Many steps are being taken to electrify transportation, for example, even though electric systems in much of the world produce significant CO2 emissions.”
So far, the rise of electric vehicles defines the case for electrification. Since 2016, the U.S. market share for EVs has grown by a factor of five, constituting 3% in 2021. California, ever the leading edge in vehicle emissions reductions, has barred the sale of new vehicles with internal combustion engines by 2035, and other states are likely to follow. Major automakers – “Ford, GM, Volvo, Mercedes-Benz and others have all declared a goal to sell only EVs by 2035 in ‘leading markets’ and 2040 worldwide.”
But skepticism “of the inevitability, or at least the optimal pace, of the complete electrification of passenger transportation and residential energy uses. Research is beginning to acknowledge the idea that, absent significant technological advancement, the complete decarbonization of electricity production may be extremely costly in terms of material costs or quality of service.” The impact of Russia’s war against Ukraine and its limiting natural gas deliveries to Europe “confirm both the continued centrality of natural gas to the electricity system, and the profound economic impacts of unreliable energy supply.”
Rapson and Bushnell analyze private and public costs are barriers to an electrification tsunami. “We first discuss various cost-barriers that could impose sharply rising costs to increasing EV market-shares. We have labeled these ‘private costs’ in the sense that they represent real physical barriers or private consumer preferences that could in theory be overcome with increased public funding (or taxation of alternatives). In the following section we discuss various external costs associated with a complete reliance on electricity. We have labelled these ‘public’ costs in the sense that each represents an erosion of a public good, and are not overcome but are instead exacerbated by the types of policies designed to overcome private barriers to adopting electrification.”
Private costs that can limit EV penetration start with the basic price of the vehicles. The average cost for a new ICE car is $48,000, while the average cost of an EV is $66,000, “unaffordable to most Americans.” The reason for the price disparity is the cost of EV battery: “Whereas an ICE requires a polyethylene gasoline tank that costs less than $100 to produce, a typical EV sedan battery costs several thousand dollars, and high-capacity batteries well over ten thousand dollars.”
Government has been dealing with cost discrepancy with subsidies, most recently those in the Biden administration’s “Inflation Reduction Act.” They observe, “Recently, eligibility for U.S. federal EV subsidies includes means tests and MSRP conditions on the purchased vehicle. These will improve progressivity of the programs at the expense of failing to address the EV cost disadvantage among potential buyers who are subsidy-ineligible. Moreover, as the scale of EV adoption increases, so too will the burden on government budgets.”
Then there are “public costs.” Rapson and Bushnell argue, “Beyond the barriers private costs and preferences present on the road to mass electrification, there are several public goods, or externality considerations which, rather than delaying electrification, reduce the benefits of that transition.” They point to the mammoth and often uncoordinated U.S. electric system, including legacy generation and the transmission grid. “To the extent that the electric system continues to produce CO2 emissions in the generation of power, electric vehicles and other electric appliances will not be truly ‘zero emissions’ products,” they write. The two economists add that generation is getting cleaner, thanks to the retreat of coal and the advance of renewables, but a grid close to zero remains problematic. “The prospect for a low-carbon grid will almost certainly continue to be dependent upon policies forcing or accelerating a transition,” they conclude.
The Rapson and Bushnell analysis is what the Haas Institute calls a “working paper.” It notes, “Energy Institute at Haas working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to review by any editorial board.”