Volkswagen settlement & electric vehicles

By Matt Bearzotti on August 24, 2018

Using electricity from your rooftop solar system to recharge an electric vehicle (EV) is compelling to many solar homeowners. It should come as no surprise that “roughly one-half of consumers who have solar or EV technology have both.” But as many EV owners are aware, there are several barriers keeping EVs from reaching their transformative potential. Insufficient charging infrastructure and modest demand are still problems, with EV sales lingering around 1% of the total U.S. market. The market could receive a needed boost because of a legal settlement between automaker Volkswagen and the federal government.

In or around 2009, Volkswagen began selling Americans diesel vehicles in the United States that the company knew did not meet the Environmental Protection Agency’s requirements on emissions standards. To get the cars past these rules, the company installed defeat devices to trick testing equipment into passing inspection. By 2014, the U.S. had caught on to the cheating and found the company in violation of the Clean Air Act. The government and VW settled on $15 billion in penalties, primarily to fund projects intended to make up for the additional pollution that the diesel engines produced, called nitrogen oxides (or NOx, which is linked to smog and chronic respiratory conditions like asthma).

Thanks to a partial focus on transportation electrification, the settlement will have a big impact beyond just NOx mitigation. Powering vehicles with clean electricity can have sweeping health and environmental benefits, and it enables their batteries to potentially play a dynamic role in the grid of the future.

Settlement outlines

Two specific sections of the VW settlement are relevant. First, VW must fund $2 billion worth of investment on zero emissions vehicle infrastructure and promotion of zero emissions vehicles. Second, VW must provide the 50 states and the District of Columbia with $2.7 billion in NOx mitigation funds to offset the impact of the excess pollutants emitted by the cheating diesel vehicles.

The process of spending these funds is in various stages, but there is still time and a need for thoughtful observation and additional input.

Impact on EV Charging Infrastructure

VW created a subsidiary named Electrify America to comply with the infrastructure investment directive. It plans to spend the $2 billion in four, thirty-month funding cycles ending in 2027. The first cycle investment of $300 million began implementation in early 2018.] When this is concluded, likely around June 2019, Electrify America should have deployed a brand neutral network of 2,700 chargers in 40 states.

The second cycle of Electrify America is currently making plans based on public comments received through March 2018 and is slated to last from July 2019 to December 2021. The next opportunity for public comment will be in the fall of 2020, in advance of cycle three planning. In the interim, much remains to be seen on Electrify America’s performance and impact on electric vehicle charging infrastructure and on the EV market. Fortunately for interested observers, the California Air Resources Board posts the frequent reporting updates it receives from Electrify America.

State settlement funds

The impact of the $2.7 billion mitigation fund is less clear because the money will be handled individually by the various states and because there is flexibility within the allowable spending actions states can take. Each state must use these resources to either repower (change the engine) or completely replace a variety of light and heavy-duty utility vehicles with newer technology, such as cleaner diesel, electric power, fuel cells, or other alternative fuels. States can choose among 10 eligible mitigation actions to spend. These include repowering or replacing existing bus fleets, heavy duty trucks, freight switcher cars, water going vessels, and airport equipment, among others (see report here) with cleaner systems. Mitigation funds may also be used to build out light duty EV charging infrastructure.

This framework provides a narrowed but flexible set of options for the various state jurisdictions. It seems clear that one result will be the reduction in the emissions of NOx compared to what otherwise would have been the case. However, the extent to which states choose EV technologies is a major variable, and so too the extent of the added benefits of electrified transportation.

In most cases, the state departments of environment are responsible for establishing spending plans. As with any policy issue given to regional execution, the status of state VW mitigation spending plans varies widely, with some states having acted quickly, while others may be less effectively organized. For more information on how your state is doing, please consult your state icon under the “Solar and EVs” section of our website and look for VW fund details.