By Frank Scotti – Sustainable Energy Advocate Aug 15, 2024
As California continues its ambitious push towards sustainability, electric vehicles (EVs) have become a key component of the state’s strategy to reduce greenhouse gas emissions. Just last week, my son purchased his first new car, and it is an EV. He did so in an effort to help in the effort to reduce carbon emission as well as to save money.
With the federal rebate and incentives, he got a great deal. Calculating cost of ownership shows other advantages as well such as less maintenance costs and lower fuel costs, although calculating fuel savings over time (electric vs. gas) is a tad less predictable.
With electric rates climbing sharply, particularly those we’re seeing in Pacific Gas & Electric (PG&E) territory, a utility energy provider in California, a crucial question arises: Will owning an EV still be a cost-effective choice for Californians in the face of rising electricity prices?
Compared to gasoline vehicles, EVs offer significant savings on fuel. The U.S. Department of Energy estimates that driving an electric vehicle costs about half as much per mile as driving a gasoline vehicle.
However, the benefits seem to be shifting as PG&E continues to raise rates, 12.8% in the first eight months of 2024. PG&E’s rate increases are often attributed to a range of factors including infrastructure upgrades, wildfire mitigation costs, and regulatory pressures. As a result, the anticipated savings on fuel could be diminished if these costs continue to escalate.
To understand the impact, consider this: If electricity rates rise significantly, the cost per mile for charging an EV will also increase. For instance, if an EV owner previously paid 20 cents per kilowatt-hour (kWh) and energy rates rise to 30 cents per kWh, the cost of driving the same distance would increase by 50%. While the exact impact depends on the efficiency of the vehicle and driving habits, a substantial increase in electric utility rates could offset some of the financial advantages of EV ownership.
The good news is, If there is any, is gas prices have been as volatile as electric prices. In 2000, a gallon of gas in California costs about $1.58, a kWh of electricity cost about $0.13. Since then, gas has increased 316% and electricity has increased 346%, a pretty even increases over a 24-year period.
Charging an electric car in California currently costs the equivalent of $2.60 per gallon, but gasoline costs more than $5 per gallon. The net result is that EV drivers in the Golden State see a savings of $2.40 per gallon. Going forward, as electric prices increase, so will gas prices. So the savings remain relative. Electric price increases would have to far outpace gas price increases over time to negate any savings from driving an EV, which no one anticipates will happen.
Many first time EV buyers are homeowners who also already have a solar energy system, which can mitigate the effects of higher utility rates by charging their EV from solar energy.
Going forward, as EV technology matures and production scales up, the cost of EVs is expected to decrease. Technological advancements in battery efficiency and energy storage could reduce the cost per mile of EV operation. Innovations in battery technology and energy management systems could lead to lower charging costs.
While disproportionately rising PG&E rates could erode some of the financial benefits of owning an electric vehicle in California, we historically have not seen this happen.
As California progresses towards its environmental goals, ongoing policy adjustments, rate restrictions, and technological innovations will play a crucial role in determining whether EVs remain a financially viable option for its residents.
As for now, though, investing in an EV in California still makes a good deal of sense vs. purchasing a gasoline engine vehicle.
