The overhaul of electrical grids and distribution would require labor and resources we don’t have.
The futurists at the Environmental Protection Agency are confident that electric vehicles will soon become cheap, reliable and easy to fuel. That’s the main bet in the agency’s new standard for carbon-dioxide emissions, released last week. Critics have rightly called the rule a backdoor EV mandate. The EPA admits it can be met only if EVs compose well above half of new vehicle sales by 2032.
That isn’t happening anytime soon. EVs are a niche product, used mostly by high-income urban consumers with garages. Electric cars accounted for shy of 8% of new auto sales last year and drained billions from automakers’ profits. It isn’t unreasonable for EV aficionados to hope for more business as technology progresses and, perhaps, as low-cost Chinese EVs flood the market. Whether the former happens quickly enough is one bet, and whether policymakers will be happy with Chinese car companies bankrupting American firms is another.
There is, however, another wild card in the EPA’s gamble. Widespread adoption of EVs will require an unprecedented and staggeringly expensive expansion of local electrical grids. This will require a huge increase in the production of electrical transformers, along with more power plants and transmission lines to produce and deliver energy.
This overhaul must include upgrading local grid distribution at the roughly 3,000 electric utilities across the country—the wires, poles and transformers that line our streets. There are 60 million to 80 million distribution transformers in neighborhoods, designed for existing loads. Around one million new ones are sold annually, two-thirds of which replace aged-out transformers. That replacement rate isn’t close to meeting the EPA’s dreams. Millions more—and heavier—transformers will be needed to handle higher power levels and more frequent use, even if many EVs are charged overnight. This will also require replacing many of the existing utility poles to handle new transformers’ extra weight.
On an individual level, millions of homes and apartment complexes will need electrical upgrades to accommodate at-home chargers. Consumers and taxpayers will pay for that multibillion-dollar price tag, whether through taxes or higher utility rates. Electricians will need to install new circuits for EV chargers, and many older homes will need new power panels to handle increased demand.
On-road fueling will still be needed, particularly for the millions of consumers without garages. Replicating the nation’s some 195,000 retail gasoline stations will require far more than the 4,000 charging facilities that the Federal Highway Administration has proposed. Given the physics of electricity, thousands of these charging stations will each have the power demand of an entire town rather than that of a typical convenience store. That will mean more massive upgrades, in this case for higher-voltage grid systems and, critically, thousands of new, large transmission-level transformers.
For EV enthusiasts, this overhaul is doable with the right amount of money. Yet they’re naive about the magnitude. One Energy Department study estimated some $50 billion to $125 billion in infrastructure upgrades will be needed to support EVs composing 10% of all on-road cars. Today they amount to less than 2%. We estimate that achieving the EPA’s goal will require north of $1 trillion in grid upgrades by 2035.
Money aside, transformers will be the big roadblock. Delivery of the largest utility transformers can already take several years, and overall transformer costs have risen 70% since 2018. Replacing tens of millions of distribution transformers would require massive quantities of copper, most of which would have to be imported. The process would also exceed the production capabilities of the handful of American manufacturers. The U.S. is heavily dependent on imports for large substation transformers, especially from Asia, itself raising obvious national-security issues.
The unique electrical steel needed for transformers and electric motors is also in short supply, served by only one major producer, Cleveland Cliffs. New Energy Department rules to improve transformer efficiency will require switching to even more specialized and costlier amorphous steel. Add to that a shrinking labor force that can build and install this specialized hardware. The EPA’s architects apparently believe there’s a magic wand to fix all this.
EV advocates at the EPA suggest that these mandates will induce market forces that will solve the attendant challenges. That’s a novel—and dubious—theory of innovation. Some behavioral changes might help, such as rationing access to EV charging or reducing the number of cars. Perhaps that’s the real goal. Whatever the motivation, the EPA’s de facto EV mandate is another green fantasy.