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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 in 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 generation 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 conducted 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 of 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).
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Table 2 – Incremental Costs associated with IPM runs (Million $2010)

Incremental Cost Category 2020 2030 2040 2050

Variable Operation and Maintenance $1 $53 $121 $113 

Fixed Operation and Maintenance ($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 prices, 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 by 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 NPRM 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 conclude that we appropriately and conservatively included the incremental costs 

of additional electricity production in the central cost benefit analysis.