1 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

NATIONAL VEHICLE AND FUEL EMISSIONS LABORATORY

2000 TRAVERWOOD DRIVE

ANN ARBOR, MI 48105

- 2498

OFFICE OF

AIR AND RADIATION

MEMORANDUM

From: Ari Kahan and Zoltan Jung, Assessment and Standards Division

Date: July 31, 2012

Subj: Electricity Generation Cost Analysis of Electric Vehicles i n the Integrated Planning

Model for the Light Duty Greenhouse Gas MYs 2017

- 2025 rulemaking

For the MY 2017

- 2025 rulemaking, EPA conducted an analysis of the emission impacts of

electric vehicles using the Integrated Planning Model (IPM). This analysis is discussed in RIA

chapter 4.

In addition to capturing the emissions impacts of PHEV/EV charging, the Integrated Planning

Model (IPM) also estimates the incremental cost impacts of policies that affect the electricity

generation sector. The IPM runs conducted for the LD GHG MYs 2017

- 2025 rule only examine

the impacts of increased electricity generatio n due to vehicles powered by wall electricity. The

IPM runs conducted for this analysis do not consider the potentially offsetting reductions in

electricity generation due to decreased production of refined petroleum products. The IPM runs

were also co nducted with the proposal (NPRM) level of electric vehicle demand which, as

shown in Table 1 below, is significantly larger than the final rulemaking ( FRM ) demand for

years after 2020 . The difference in demand between proposal and final rule is a result o f updated

OMEGA modeling as described in Chapter 3 of EPA’s final RIA

.

Table 1

– Comparison of FRM and IPM Electricity demand due to electric vehicles

2020 2030 2040 2050

IPM Electricity Demand (gWh) 1,265 26,126 45,558 54,971

FRM Electricity Demand ( gWh) 1,336 15,082 26,517 33,272

Ratio 106% 58% 58% 61%

These two factors

— not considering decreased production of petroleum products and use of

NPRM demand estimates that were higher than FRM estimates

— result in a potential

overstatement of costs (and emissions) in the IPM results. While incremental electricity costs

are non

- linear with demand, these costs may be considered a significant overstatement of costs

after considering these two factors. The IPM costs are shown below (Table 2)

.2 Tab le 2

– Incremental Costs associated with IPM runs (Million $2010)

Incremental Cost Category 2020 2030 2040 2050

Variable O peration and M aintenance $1 $53 $121 $113

Fixed O peration and M aintenance ($19) $38 $124 $174

Fuel $89 $1,593 $3,891 $3,889

Capital $12 $394 $745 $2,040

IPM Total Incremental Costs $82 $2,077 $4,880 $6,216

As these costs were not available in time for the final rulemaking cost

- benefit analysis, EPA used

a surrogate (expenditures on electricity by drivers of electrified vehicles , using national average

electricity costs ) as a method for estimating the societal cost of changes in the electricity sector.

Much as we do with gasoline fuel prices, we used a weighted national average estimate of

electricity pric es, rather than a regionally or temporally specific value. As we assume that most

electrified vehicles will charge at night time, when electricity is typically less expensive, this

surrogate method may also lead to a overstatement of the costs incurred b y these drivers, and is

potentially conservative (Table 3)

.

Table 3

– FRM incremental expenditures of electricity by drivers of electric vehicles

(Million $2010)

2020 2030 2040 2050

FRM

Electricity Costs $114 $1,453 $2,802 $3,800

The ratios of the cost estimates developed on the production side using the IPM model

with the N P R M demand , and costs on the consumer side in Table 3, using purchase price of

electricity and the FRM demands are roughly the same as the ratios shown in table 1. Therefore

, with the notable caveat that we did not monetize the decreased electricity demand from

refineries , we c onclude that we appropriately and conservatively included the incremental costs

of additional electricity production in the central cost benefit analysis.