Too many U.S. states, and their electric utilities, think electric vehicles are linked to urgent action on climate change. They see EVs as an environmental solution to a problem that has yet to gain political consensus, at least in the U.S.
But they're wrong: Electric vehicles, like the rest of the products emerging from what I and other economists call the green economic revolution, will win mass-market adoption because they cost less. And that day is fast arriving.
Electric vehicles anchor a critical mass of technologies poised to slash transportation costs through a new business model often called mobility as a service, or MaaS.
Some posit that MaaS will win price-competitive advantage by:
MaaS innovators are not focused on improving existing car design. Instead they seek to design vehicles as consumer electronics. These five technologies will drive the redesign of vehicles into consumer electronic devices:
And California startup companies are already implementing MaaS. Firms like Veyo and Uber are pioneering the use of big data and predictive software to deliver lower-cost, real-time, door-to-door mobility solutions.
California is also implementing a renewable electricity system that will slash transportation fuel costs. Today, up to 40 percent of California’s grid supply comes from renewable energy. Most California solar plants can recapture original investment in about five or six years. The cost to produce electricity after system payback is almost zero.
Thanks to that zero incremental price, combined with a growing supply of renewable energy, California’s grid operator now charges negative prices (effectively paying generators not to operate) to curtail production.
The state plans to use this glut of lower- (zero-) cost renewable electricity to fuel 1.5 million electric vehicles by 2030. California is building out a state-wide network of 10,000 recharging stations that will make cheap renewable energy available to electric vehicles.
California also has almost 5 million homes powered with solar energy. And thousands of these homeowners are now using their system’s electricity to recharge their electric cars for free.
These California examples portend the fossil fuel industry’s competitive question: How can you compete with “free?”
The answer to that question is why the CEO of Total, a global oil company, predicts electric vehicles winning 30 to 40 percent marketshare by 2030.
MaaS raises a similar state (and national) issue. Not having lower-cost renewable electricity, and public policy supportive of autonomous driving, could be the 21st-century equivalent of not having gasoline pumps during the 20th century. Yet, at such a time of disruptive technology change, too much of our public policy has a rearview mirror focus on preserving 20th century technologies, business models and jobs.
Public policies focused in the rearview mirror will harm our economic future. While tax policy influences economic growth, it is innovation and productivity that ultimately bear economic fruit. Public policy that retards or blocks innovation and productivity also retards and blocks our country’s ability to achieve a 3 percent annual economic growth. The 21st century's public policy imperative, if we are to have an economy strong enough to fund our national interests, is to support MaaS.
The second article in this two-part series explores public policy steps our nation, states and communities must address to remain competitive in an electric vehicle economy enabled through a MaaS business model.
Image credit: Flickr/Ed and Eddie