The California ZEV program supports three broad statewide policy goals: reduce criteria pollutant and greenhouse gas emissions; reduce gasoline and diesel fuel demand; and maintain leadership in environmental technology policy and foster job growth. The ZEV mandate requires that large volume manufacturers produce and offer for sale in California a specified number of ZEVs. The existing ZEV program requirements are primarily expressed in terms of the number of vehicles that must be offered for sale, with adjustments for different types of vehicles.

The study analyzes five related topics:

• Current status of vehicle and infrastructure technologies
• Appropriate metrics for measuring progress toward commercialization
• Costs of transitioning to a self-sustaining market
• Complementary policies to support electric vehicle deployment
• The state of practice in electric vehicle policy worldwide

Three of five planned reports have now been released, covering technology status (Task 1), metrics (Task 2), and complementary policies (Task 4). The remaining two analyses will be completed in 2011.

Task 1: Technology status. The study’s findings on technology status highlight declining costs. Recent estimates for fuel cell vehicles show the cost dropping from several hundred thousand dollars today to roughly $75,000 in 2015 and $50,000 or less in 2020. Most analysts project that the cost per kilowatt-hour (kWh) for BEV batteries will fall from $650–$1000 today to $400–$700 in 2015 and $300–$500 in 2020, with some projections for 2020 going as low as $150 per kWh. (To put those numbers in perspective, the Nissan Leaf battery pack is 24 kWh, for a total cost of $7,200 at $300 per kWh.) But despite these trends and the rapid advancements in ZEV technology, the potential for commercialization remains unclear. The unique contribution of the California ZEV mandate is its ability to sustain technology-neutral research and development during periods of uncertainty and market challenge.

Based on the research outlined in the report, ICCT offered the following summary observations:

• ZEV technology is advancing rapidly, with major manufacturer investment in vehicle technology development and deployment.
• There is substantial uncertainty regarding commercialization potential.
• Analyst projections of future production volume for the most part are consistent with the targets set forth by ARB staff at the November 15, 2010, workshop, but caution is advisable.
• Vehicle deployment targets need to be defined from the bottom up (the number that can feasibly be produced in a given timeframe) as well as from the top down (the number needed to meet 2050 GHG reduction targets).
• Over the long run, the ZEV program will transition into the LEV program GHG fleet average. Thus, the mechanism for achieving the 2050 GHG target is, in reality, the fleet average not ZEV production volume.
• Over the long term, the ZEV program can be viewed as a transitional effort to support investment in a broad range of technologies.
• More generally, the ZEV mandate can now be viewed as a “floor,” establishing minimum production requirements that will maintain some level of investment and momentum even if the voluntary programs in other jurisdictions do not move forward as planned.
• ZEV technology provides environmental benefits now, but further efforts will be needed to ensure that, in the future, the vehicles achieve their full emission reduction potential.

As history has shown, it is difficult to predict cost and vehicle deployment trajectories for advanced technology vehicles. Therefore, the relevant question is how should ZEV policy proceed in the face of this uncertainty?

—“Task 1: Technology Status”

ICCT made the following recommendations based on the assessment of technology status and cost projections:

• ICCT recommends continuation of the ZEV program in recognition of its critical role in encouraging continued long-term technology development.
• ICCT supports ARB staff’s consideration of a firm 2026 transition date, at which point the ZEV requirements would be removed and replaced by reliance on a fleet average GHG standard, while recognizing that additional work is needed.
• ARB staff should begin now to define how upstream GHG emissions from electric drive vehicles can be accurately accounted for in the fleet average emission calculations. ICCT provides a more complete discussion of this topic in the Task 2 report on metrics.
• ICCT supports the ARB staff proposal to retain, without significantly changing, the existing requirements through 2017. This approach is consistent with viewing the ZEV program as a “floor,” as noted earlier.
• ICCT believes that the regulation should recognize and appropriately credit Enhanced Advanced Technology PZEVs, but there should not be a specific requirement that such vehicles be produced.
• With regard to future deployment targets, for Phase V (2018–2021) ARB staff has proposed a target increasing from 1.5% to 4% of sales, and for Phase VI (2022–2025) a target increasing from 5% to 8% of sales. More aggressive targets would help lock in the deployment numbers anticipated by manufacturers and ensure significant investment in vehicle deployment. On balance, ICCT recommends caution and recommends targets consistent with (although slightly lower than) the ARB proposal when expressed in terms of the number of vehicles required.
• ICCT agrees with ARB staff that cost evaluations should take into account sales outside of California. If other jurisdictions follow through on announced plans, and customers actually purchase the vehicles at the proposed levels, California deployment will be only a portion of global deployment over the next several years.
• ARB staff should explicitly consider LEV III GHG and ZEV interactions with the Low Carbon Fuel Standard, the Renewable Electricity Standard, and emerging federal and state climate policies and, as appropriate, consider regulatory modifications to programs to maximize synergies.

Task 2: Metrics. This document reports ICCT analysis and findings regarding the metrics to measure manufacturer compliance with ZEV requirements. The outcomes encouraged by ZEV program metrics fall into three general categories: marketability, diversity of platforms and technologies, and emission reductions.

At today’s early stage of ZEV development, substantial uncertainty exists as to what mix of vehicle features and performance characteristics will have the greatest appeal to consumers. Given this uncertainty and the broad range of experimentation now taking place, ICCT believes that metrics should allow manufacturers the flexibility to design, manufacture, and market vehicles that will meet ZEV goals and customer needs rather than encourage a specific technology or design.

This policy does not imply that the program should simply treat all electric vehicles the same. Because increased performance comes at increased cost, not all of which is likely to be recoverable through increased vehicle price, an approach that treats all vehicles the same provides a de facto incentive for manufacturers to produce the cheapest, least capable vehicles. Thus, the basic underlying objective is to define metrics that compensate manufacturers for higher cost/higher function solutions so that the ZEV program encourages rather than discourages manufacturers to pursue a variety of approaches.

—“Task 2: Metrics”

ICCT recommends the use of range and footprint as metrics to determine manufacturer compliance.

Task 4: Complementary Policies. This study identifies and promotes policies that support vehicle electrification, focusing on the California ZEV program.

In general, it appears that policies and programs are in place to adequately support the planned initial deployments of BEVs. There will be many challenges, but the pent-up demand from electric vehicle enthusiasts and the ample support from governments and manufacturers appear to be sufficient to carry through the “first wave” of electric vehicle deployment, roughly the next 3 years. It is far from clear, however, that the same can be said for the “second wave” of deployment, roughly 2014 through 2018. It is ICCT’s view that policy attention, particularly in California, should focus on how best to support this upcoming second wave.

—“Task 4: Complementary Policies.

The electric vehicle–targeted incentive and other programs currently in place can be grouped into three categories according to their intended result, the report notes:

• to support and encourage the manufacturing of electric vehicles and key components such as batteries;
• to increase customer demand for electric vehicles; or
• to encourage the installation of electric vehicle infrastructure.

ICCT recommends several steps to continue to provide for an orderly, sustainable transition to electric-drive vehicles:

• Incentives should continue to focus on research and development as well as deployment.
• Work should continue on a variety of approaches to ensure the systematic deployment of hydrogen infrastructure.
• The ARB should continue its efforts to forge a mutual commitment among auto companies and fuel providers that vehicle and hydrogen infrastructure deployment will proceed hand in hand.
• ICCT agrees with the data-driven approach to electric infrastructure deployment being recommended by the California Plug-In Electric Vehicle Collaborative, and urges caution regarding the pace of installation of additional public infrastructure to avoid stranded assets and over-reliance on daytime charging.
• The ARB should explore the use of on-bill financing and property-assessed clean energy (PACE) programs to allow loans for infrastructure installation to be tied to the property.
• The ARB should encourage the development of programs that allow for placement of electric vehicles in community centers or other facilities in low-income neighborhoods to provide some access to these emerging technologies.
• The ARB should monitor developments with regard to secondary use of vehicle batteries and determine whether there is a role for state action.
• The ARB should provide additional focus on fleets as an early market for electric vehicle passenger vehicle deployment.
• The ARB should promote the common procurement of a substantial number of electric vehicles in the 2013 time frame.
• The ARB should pursue policies that put a price on carbon, resulting in higher prices for conventional fuels.
• The ARB should pursue adoption of a feebate program that will provide a self-financing ongoing price incentive for low-carbon vehicles.
• The ARB should begin to develop a package of incentives directed at the “second wave” of customers and vehicle deployments, focused on the time frame of 2014 through 2018. Elements of the package should include loaner conventional vehicles, customer trials, customer information, and provision of renewable electricity and hydrogen to electric vehicle owners.