Volkswagen Settlement May Create EV Opportunity for Electric Utilities

In October 2016, Volkswagen (VW) agreed to pay $14.7 billion as part of a settlement related to diesel vehicles violating Clean Air Act regulations. For electric utilities, settlement investments may improve the availability and adoption of electric transportation, which may ultimately result in electric load growth.

Key Details

  • The settlement originates from VW’s installation of software, allowing cars to comply with emission standards during testing but not during daily operations
  • The $14.7 billion in settlement funds will be split among three programs:
    • Vehicle buyback and recall ($10 billion)
    • Environmental Mitigation Trust ($2.7 billion)
    • Zero-Emission Vehicles (ZEV) Investment ($2 billion)
  • The vehicle buyback and recall program requires VW to buyback or repair cars that do not meet emission standards under the Clean Air Act
  • The Environment Mitigation Trust will focus on reducing NOx emissions
    • States will manage and deploy $2.7 billion in settlement allocations for on- and off-road clean transportation projects
    • Eligible projects include light-duty ZEV supply equipment (e.g., charging stations), medium-duty delivery trucks, shuttles and buses, along with several others
    • Efforts are still in the early phases. A trustee has been named, and one of the key next steps is certifying states as beneficiaries
  • The ZEV Investment will focus on clean-emission infrastructure
    • VW will deploy $2 billion over 10 years; $800 million in California and $1.2 billion for the rest of the nation
    • The national funding will specifically focus on:
      • Infrastructure: Eligible activities will include designing, planning, constructing, installing, operating, and maintaining infrastructure (e.g., electric vehicle charging and hydrogen fueling stations)
      • Education & public outreach: Activities must build or increase public awareness of ZEVs
      • Exposure or access – Increase consumer exposure and access without ownership at full market value (e.g., car share)
    • The ZEV Investment will occur over four 30-month cycles; the first investment plan was released in April 2017

Implications

The VW settlement will pump money into electric vehicle adoption and infrastructure which should spur adoption and ultimately load growth for utilities. In addition, electric utilities have an opportunity to access dollars for infrastructure projects and have input into state-level plans for settlement funds.

Additional Resources

EPA: Volkswagen Clean Air Act Civil Settlement

EPA: Environmental Mitigation Trust FAQs

EPA: ZEV Investment FAQs

This report is part of the Clean Tech & Sustainability Minute series. To view all featured Minutes, please click here.

Additional Contributing Authors: Luke Williams, Shaun Caldwell

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