Utilities have begun offering direct rebates for electric vehicles in an effort to jump-start sluggish sales in an emerging car market that stands to benefit them financially.
Electric companies in Vermont and California have offered customers $450 to $1,200 off their electric bill if they buy a plug-in car. Others have partnered with Nissan to offer $10,000 in rebates.
With sales of electric vehicles barely cracking 1 percent nationally, it's a sign that proponents are increasingly willing to sweeten the deal for prospective owners. A $7,500 federal tax credit and a constellation of state and local incentives, from rebates to access to carpool lanes to free parking, already lower the cost of purchasing one of the clean cars.
The trend also marks an expansion of efforts by electric companies to boost the market. Many have offered special rates for charging up the cars or financial help when building charging stations, but direct rebates to motorists are new.
That could open the door to criticism from conservatives and consumer advocates who could resist using ratepayer money to subsidize the purchase of what they see as a car for the elites.
For now, the rebates remain rare. No investor-owned utility has yet dipped into its pool of ratepayer funds to subsidize the vehicles, which stand to increase electricity sales. And they may be hesitant to do so.
Offering a rebate is motivated primarily by climate goals rather than the bottom line. Electric companies are making the move to meet emissions reduction legislation or as one-off special deals with automakers.
“There are a lot of levers we could potentially pull here,” said Kellen Schefter, manager of sustainable technology at the Edison Electric Institute, a trade group that represents 70 percent of the electricity industry.
The group is urging members to get ready for 7 million plug-in EVs on the road by 2025 by building out charging stations and designing special rates. Direct rebates remain rare, Schefter said.
“Education, outreach, infrastructure — that's what our companies are comfortable addressing, because they are infrastructure companies,” he said.
The utility rebates largely dovetail with wider state initiatives to lower emissions.
California's three major investor-owned utilities — Pacific Gas and Electric Co., Southern California Edison Co. and San Diego Gas and Electric Co. — offer credits of between $200 and $500 to customers who drive an electric vehicle. They are paid for by the sale of California Air Resources Board credits aimed at lowering the carbon intensity of fuels.
Vermont's utilities are setting up direct rebates to comply with 2015 legislation to boost clean power. The state renewable energy standard requires electric companies to meet emissions targets by investing ratepayer money into programs that green the grid and electrify vehicles and buildings, or else pay into a state fund at the end of the year.
The Vermont Electric Cooperative is offering customers a $250 credit for the purchase of a new or used plug-in electric vehicle. The Burlington Electric Department, a municipal utility, started offering a $1,200 rebate on the purchase or lease of a new EV or a $600 rebate for the purchase or lease of a new plug-in hybrid EV last month.
About half a dozen people have taken advantage of the rebate, said Chris Burns, BED's director of energy services. Around 60 to 70 more would need to buy an electric vehicle for the utility to meet its goal under the renewable energy standard to reduce the use of fossil fuels, he said. The funding comes straight out of the utility's cash reserves.
It's unclear if the utility would have made the same investment without the legislative requirement, but Burns cites other commitments: The city of Burlington has vowed to go zero-emissions, for example.
“As a rural state, we drive well above the national average in miles per car, so it's a big part of the climate problem,” he said. “We're going to give it the old college try.”
The utility is also partnering with dealers to offer a special promotion to customers: With an added $10,000 rebate provided by Nissan, Burlington Electric customers can get a new 2017 Nissan Leaf for as low as $11,300.
It's a more common tactic. Kansas City Power & Light Co. and the Hawaiian Electric Co. have also partnered with Nissan in the past to offer their clients the $10,000 special rebate.
States running out of funds
Automakers, regulators, legislators and utilities are increasingly working together to boost sales of the clean cars. Often, they are facing stringent regulations. States with climate goals, like the 11 states that abide by California's zero-emission vehicle mandate, must expand sales by seven to 15 times to meet requirements.
“I'm not sure we could say there are enough incentives out there to give the market enough of a jump-start,” said Dan Gage, a spokesman for the Alliance of Automobile Manufacturers. The rebates paid for by utilities are “a big deal, and that should be continued to be encouraged and applauded,” he said.
States offering tax credits, ranging from $1,000 to $5,000, have regularly had to deal with shortfalls. California is set to again run out of funds in its rebate program, which hands out up to $7,000 for new purchases, before fiscal 2017-18 funds are appropriated.
In May, Maryland legislators extended their state's tax credit, which provides up to $3,000, for three more years. It had run out of funds six months early. An Oregon tax credit for charging stations ran out six months early in September 2016, as well.