Economic Impact Study Finds Grid-Enabled Vehicle Policies in Electrification Coalition Roadmap Would Result in Substantial Economic Benefit for US
|Effects of Electrification Coalition Policies. Click to enlarge.|
The Electrification Coalition (EC) has released a long-term macroeconomic analysis of the policy proposals put forward in its November 2009 Electrification Roadmap (earlier post). The Roadmap proposes completely transforming the US light-duty vehicle fleet into one in which grid-enabled mobility (grid-enabled vehicles, GEV) is the new conventional standard. By 2040, the report proposed, 75% of the light-duty vehicle miles traveled in the US should be electric miles.
The new paper, Economic Impact of the Electrification Roadmap, finds that the US economy would benefit substantially over the long term from implementation of the EC policy package, including the significant generation of jobs, reduction of the Federal deficit, increase in typical households’ annual income and increased income available for consumption or saving.
In short, the economic modeling shows that the electrification policy proposed by the Coalition offers significant and widespread benefits to the American people, including reducing our federal budget and trade deficit. I believe we are on the cusp of the next great tectonic shift in our economy, one that will transform the way we use energy both in our homes and on the road.
—Electrification Coalition member David Crane, President and CEO of NRG Energy
The Electrification Coalition is a group of business leaders representing the entire value chain of an electrified transportation sector. The Roadmap called for the creation of localized concentrations of electrification (electrification ecosystems): geographic areas in which all of the elements of an electrified transportation system are deployed, thus providing a crucial first step toward moving electrification beyond a niche product into a dominant, compelling, and ubiquitous concept.
Shortly after releasing the Roadmap, the Coalition commissioned the Interindustry Forecasting Project at the University of Maryland and Keybridge Research to study the long-term economic effects of their policy proposals. The analysts used the University of Maryland Inforum LIFT model to perform a detailed examination of the Electrification Coalition (EC) recommendations as proposed in the Roadmap.
The Inforum LIFT model is a detailed economic forecasting model, which captures, among other things, the effects of purchases and sales between industries. It is especially suitable for a study of this kind, the study authors said, because it models the interaction between detailed industry flows in the economy (such as energy use) with macroeconomic aggregates (such as GDP, consumption, employment and the trade balance).
A‘business-as-usual’ outlook for the US economy served as the base case, which was used as a control against which the effects of the various elements of the Roadmap policy package were evaluated. This comparative simulation was carried out over the period 2010 to 2030. For the purposes of this modeling exercise, the primary measurable components of the EC policy initiatives are:
Targeted incentives for the purchase of electric vehicles and plug-in hybrid electric vehicles in electrification ecosystems;
Targeted incentives for the deployment of charging infrastructure in electrification ecosystems;
Targeted incentives for utility IT upgrades needed to support electrified transportation in electrification ecosystems;
Incentives for accelerated domestic production and purchase of batteries for electric vehicles; and,
Government financial support for automakers to retool and re-equip automotive production facilities needed to manufacture electric vehicles.
The main findings of the study are:
Employment. By 2030, total employment would increase by 1.9 million jobs. There would be 560,000 more manufacturing jobs; 276,000 more jobs in travel and tourism; and 73,000 more jobs in professional services. Employment in the motor vehicle industry (including motor vehicle parts) would be about 106,000 jobs higher than the base. Employment in the industries that supply key electric and electronic components to electric vehicles would increase by 112,000 jobs.
Federal Revenues. Over time, the federal budget deficit would improve as a result of the policies in the Roadmap. Because of the higher levels of income and GDP resulting from the policies, the US federal budget deficit would improve by a cumulative (2010 to 2030) $336 billion, net of policy costs.
Annual Household Income. By 2030, the typical US household’s annual income would rise by $2,763 (2008 dollars). This represents an increase of about 2.2%.
Cumulative Household Income. Cumulatively, during the 2010-2030 period, households would experience an increase of $4.6 trillion (2008 dollars) in aggregate income—money that can be saved or spent on other goods and services.
Transportation Costs. By 2030, the typical US household would spend less per year directly on energy for transportation. The combination of higher income and less spending on energy means that the typical household would be able to enjoy about $3,687 (2008 dollars) more in consumption of goods and services (or personal savings).
Oil Imports. US crude oil and petroleum product imports would fall sharply, by 3.2 million barrels per day by 2030. Cumulatively, between 2010 and 2030, the United States would import nearly 11.9 billion fewer barrels of foreign oil. This compares to estimated reserves of 4.3 billion barrels for Prudhoe Bay, and slightly less than 30 billion barrels for total US proved reserves.
Trade Deficit. By 2030, the US trade balance would improve by about $127 billion dollars (2008 dollars).
Global Demand for Oil. World demand for oil would fall, leading to lower world oil prices. Outside commodity price experts have estimated that the price of oil would be almost 7% lower by 2030 than it would be without the EC policy package.
Resilience to Future Price Shocks. The US economy will be stronger and more resilient. The Electrification Coalition policies—once fully implemented—would mitigate roughly one-third of the economic losses caused by a future oil price shock. By 2025, the EC policies would prevent the loss of 1.4 million jobs in the first year alone of a price shock-induced recession.