Purpose of report
1.
This briefing reports back on the following issues related to an electric vehicle (EV) package:
1.1. the engagement process we will follow to develop a package (Part 1)
1.2. charging infrastructure issues (Part 2)
1.3. confirmation of EV measures that you agreed to in April 2015 (Part 3)
1.4. EV car sharing (Part 4)
1.5. tax certainty for purchasers of EVs (Part 4).
2.
This briefing builds on the advice we provided in March 2015 regarding measures to
encourage the uptake of EVs (OC02885 refers).
Background
3.
In April 2015, you agreed that a package of measures to encourage EV uptake should
include:
3.1. an information campaign by the Energy Efficiency and Conservation Authority (EECA)
3.2. government branding, promotion and information support for public charging
infrastructure
3.3. a trial of EVs in government fleets.
4.
At a subsequent meeting on 27 July 2015, you asked officials to:
4.1. work with local government and industry to ‘co-create’ a package of measures to
encourage the uptake of EVs
4.2. investigate options to fund EV charging infrastructure from the National Land Transport
Fund (NLTF)
4.3. consider the potential for scaling up an EV car sharing scheme
4.4. consider options to give greater tax certainty to purchasers of EVs.
5.
This paper addresses the matters above and seeks confirmation of your decisions regarding
an EV package in April 2015.
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Part 1: The engagement process we will follow to develop a package
6.
We have discussed with you options to develop an EV package (through a ‘co-creation’
process) with other government departments, local government and industry.
7.
At a Natural Resource Sector Chief Executives meeting on 13 August 2015, Martin Matthews
spoke to Fraser Whineray (Chief Executive of Mighty River Power) and Penny Nelson
(Executive Director of the Sustainable Business Council) about the co-creation of a package
of measures to encourage EV uptake. He proposed a meeting of chief executives from a
range of organisation to initiate the process. We plan to hold this meeting in the next fortnight.
8.
Along with Mr Whineray and Ms Nelson, the chief executives from Local Government NZ, the
Ministry for the Environment (MfE), the Ministry of Business, Innovation and Employment
(MBIE), EECA, the NZ Transport Agency, and Drive Electric will be invited to the meeting. It
is anticipated that these stakeholders could act as intermediaries with industry to manage the
potential risks discussed later in this briefing.
9.
Focused one-on-one and small group meetings with a wider group of stakeholders, such as
those listed in Table 1 below, would follow. The purpose of these discussions is to develop a
EV package that creates synergies between the EV initiatives of each party. This includes
leveraging funding, information, services or access to land and other property.
Table 1: List of the stakeholders that we will seek to engage with
Central Government
Local Government
Industry
NZ Transport Agency Local Government NZ Sustainable Business Council
EECA
Auckland Transport
Electricity Networks Association
MBIE
Drive Electric
MfE
Mighty River Power, Contact Energy,
Treasury
Vector, Z Energy and potentially
other energy companies
Automobile Association
Fleet Manager’s Association
10.
We have already been working with a number of these organisations to develop our advice
on EVs, and have existing relationships on which to base an engagement process.
Risks around engagement and deliverables
11.
Stakeholders have divergent interests in some areas and we are aware of a number of
tensions between them. As noted above, we expect that the group of chief executives that we
convene will also discuss how to manage these tensions in the development of an EV
package.
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12.
Engaging a limited group of stakeholders poses a risk that parties not included in the process
feel their potential contribution is not being recognised. We can manage this risk by
emphasising that the delivery agencies for an EV package will engage with interested parties
as they implement the package. If there is appetite for it, we could consider establishing an
industry-government group (similar to the Smart Grid Forum) to progress a joint work
programme on transport and environment issues, which includes encouraging uptake of EVs.
We can test stakeholders’ appetite for such a group during engagement on the EV project.
13.
We previously agreed to provide you with a draft Cabinet paper seeking agreement to an EV
package in September 2015. We now intend to engage with stakeholders over August and
September, and will be in a position to provide you with a draft Cabinet paper in October. A
draft Cabinet paper in October would include information on local government and/or
industry’s contribution to the package. If you prefer to receive a draft Cabinet paper in
September, we could draft it to seek agreement only to the Government’s contribution to an
EV package.
Part 2: Charging infrastructure
14.
On 27 July 2015, you asked for initial advice on:
14.1. the cost implications of charging EVs
14.2. the regulatory issues surrounding EV charging infrastructure
14.3. the potential to fund EV charging infrastructure from the NLTF.
EV cost implications for households and businesses
15.
Evidence from countries such as the UK shows that most EV charging takes place at the
home or workplace, but there will also be a role for public charging infrastructure to help
alleviate range anxiety, facilitate longer distance travel, and enhance the value of EVs.
16.
The high rates of off-street parking in New Zealand and our 230 volt power supply, are both
ideal for charging EVs at home, or at the workplace, and therefore do not pose additional
infrastructure costs. A benefit of home charging, is that there is an opportunity to use off-peak
electricity capacity. Electricity retailers are already looking at this issue, and some (such as
Mercury Energy) already offer off-peak rates for charging EVs, which are 30 percent cheaper
than standard rates.1
17.
If businesses want to install purpose-built chargers, there would be a one off installation cost.
These costs vary between $1,500 and $5,000 depending on the type of charger (single or
dual). Rapid charges cost significantly more. Juicepoint advised that their rapid charger is
$30,000 and installation is a further $10,000 (both figures are GST exclusive). ABB, another
EV charging station retailer, states that its rapid charger costs approximately $45,000, but
that the per-unit cost would be less for bulk purchases.
18.
EV owners who do not have access to off-street parking would likely require access to public
EV charging stations. Local authorities would need facilitate the provision of local roadside
charging if considered necessary for residences without off-street parking.
1 The cost of charging an EV is the equivalent of paying approximately 26 cents per litre of petrol, or less if they make use
of off-peak charging rates.
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Regulatory issues with installation of EV charging infrastructure
19.
Different issues arise depending on whether EV charging infrastructure is to be installed on
private land or public land.
Private land
20.
WorkSafe NZ is responsible for electrical safety. EECA advise that charging on private
property is accommodated under a WorkSafe NZ approach. This simply requires the
equipment and installation involved to be safe, which includes adherence to codes of practice
where applicable.
Public land
21.
We have not yet identified all the regulatory issues related to EV charging infrastructure on
public land. It is likely that councils have different bylaws that may apply to the installation
and use of charging infrastructure on public land.
22.
EECA officials are currently drafting a proposal to address identified knowledge gaps in this
area. This includes knowledge about the regulatory framework for establishing charging
infrastructure. A range of government departments, local government and industry may hold
the information to fill in knowledge gaps and will work together on this issue. The proposed
work is unlikely to be completed before the end of September 2015.
23.
Local regulatory issues have recently come to the fore in Auckland. It took Vector many
months to gain approval to install a roadside charging station outside its headquarters in
Auckland. We understand that Vector eventually resolved this issue through the precedent
set by its installation of other electricity distribution equipment on public property. We have
yet to fully assess the barriers in this case but we are investigating further.
24.
One identified regulatory issue, is that the parking space is located on a local road and
cannot be designated as an EV-only parking space (because no such designation exists).
This means that any vehicle could park in the space, thus preventing an EV owner from using
the charging station. We will need to consult with the NZ Transport Agency and local
authorities to determine the best way to resolve this issue. We will keep you updated on this
work via the weekly report.
Previous advice regarding EV charging infrastructure
25.
In March 2015, we advised of two market failures relevant to the provision of EV charging
infrastructure:
25.1. coordination problems – motorists may be reluctant to purchase EVs without widespread
access to public charging infrastructure, but the private sector may be reluctant to invest
in infrastructure until there is widespread uptake of EVs
25.2. information problems – for example, a recent survey of New Zealand fleet managers and
drivers showed that many do not know where they would be able to charge an EV.
26.
In the short term, these issues can be addressed by providing information to motorists about
their options for charging EVs, and the development of visible charging infrastructure. The
private sector is beginning to invest in charging infrastructure. For instance, industry
stakeholders have been clear that the ‘renewables highway’ being scoped by the Electricity
Networks Association will not require funding from the Government. Individual companies
such as Vector, Z Energy and Gull have also indicated plans to install public charging
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infrastructure. The first public charging stations in downtown Auckland have also recently
been installed, through a partnership between Auckland Transport and Mighty River Power.
27.
In our March 2015 advice we suggested that government involvement in establishing EV
charging infrastructure should primarily be through guidance2, branding, and promotional
support to facilitate a cohesive network. We also suggested that the Government could fund,
or co-fund, the installation of EV charging stations in locations where it is not commercially
viable for the market to do so3, or at central government-owned locations/buildings.
Options for funding EV charging infrastructure from the National Land Transport Fund (NLTF)
28.
You asked us to explore options for funding EV charging infrastructure from the NLTF. As
charging stations for EVs are a land transport service, they are eligible for funding from the
NLTF.
29.
The options for funding EV charging infrastructure from the NLTF are summarised and
assessed in Table 2 below. All of the options could involve NLTF funding in the standard form
of grants (as almost all transport projects are funded), or through a loan from the NLTF or
similar mechanism (which has only been used on rare occasions in the past, such as the
Christchurch rebuild).
2 For example, providing advice on standards, any necessary consents, and health and safety issues.
3 This would be more effective once we see if there are gaps in the network that the market cannot fill.
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Table 2: Options to fund EV charging infrastructure from the NLTF
Option Description
Issues
Under this option:
EV infrastructure projects would not have to compete
with a wide range of other land transport projects
the funding assistance rate could also be set at a
Amend the GPS to include a
higher rate, lowering the required contribution from
new activity class from which
local authorities
EV charging infrastructure can be assessed on the same basis as other land
1
be funded. For example,
transport projects, meaning that they would need to
establishing an “electric
achieve a cost-benefit ratio of at least 1 (which, given
vehicles” or “transport
low uptake of EVs, is unlikely).
technology” activity class.
If this option is pursued we suggest it be considered
within the development of GPS 2018. While GPS 2015
could be amended, GPS 2015 has only just come into
force, and amending it and regional and national land
transport plans would be a considerable undertaking.
Under this option EV infrastructure projects would:
have to compete for funding with other projects in
Amend the GPS to provide
that activity class, and therefore there is no
funding for EV charging
guarantee that they will be funded
infrastructure from an existing
activity class. For example,
have to receive a local share of at least 51 percent of
2
this would involve amending
the funding
the GPS to clarify that EV
EVs charging infrastructure projects would still need
charging infrastructure falls
to achieve a cost-benefit ratio of at least 1.
within the scope of ‘local road
improvements’.
If this option is pursued we suggest it be considered
within the development of GPS 2018 for the same
reasons above.
Funding EV charging
This option would require legislative change, as activities
infrastructure from the NLTF4, that are funded this way are specified in the Land
but outside of the GPS. A
Transport Management Act 2003. The currently specified
3
small number of activities are
activities have a strong user-pays link to the funds. For
funded in this way, such as
instance, boaties pay petrol excise duty and receive the
search and rescue.
benefit of search and rescue services.
Risk of crowding out private sector investment
30.
To prevent crowding out of private investment we recommend adopting a co-investment
approach regardless of which funding option is chosen. This could involve mobilising funding
from the NLTF, the Crown, and other parties, or funding from the NLTF/Crown with other
parties providing land and/or other resources. We will be able to determine what each party
can offer in this space once we engage with them.
31.
It is also likely that as EV adoption becomes more widespread, more companies will want to
begin charging a fee for the use of public charging infrastructure. We will need to consider
how this transition will occur alongside local authorities and industry to ensure that
investments we make in the short term do not create issues for the market later.
4 Though the funding comes from petrol excise duty, technically the money is taken prior to going into the NLTF.
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Part 3: Confirming EV measures that you agreed to in April 2015
Progressing other measures agreed to
32.
In addition to government support for public charging infrastructure, you also agreed that the
EV package should include funding for an information campaign by EECA and a trial of EVs
in government fleets (OC02885). We still recommend that the EV package include these
measures.
33.
In our March 2015 advice, we recommended an EV information campaign as a measure to
help overcome information barriers. Research commissioned by the Ministry and EECA has
confirmed that there are significant gaps in the knowledge of fleet managers and fleet vehicle
drivers with regard to EVs. We have asked EECA to provide further details about the scope
and cost of an EV information campaign for a Cabinet paper on the EV package. In particular,
options for the sources of funding for a campaign will be explored.
34.
Since the new All-of-Government vehicle procurement solution was announced in June 2015,
we have been working with the MBIE and EECA to scope a trial, including discussing
governance arrangements for a trial. This will allow us to provide further information about the
design of the trial and costings as part of a Cabinet paper on the EV package. Crown funding
for this will likely need to be sought and we expect it to be in the order of $500,000.
Part 4: Other measures discussed – EV car sharing and tax certainty
EV car sharing in Auckland
35.
On 27 July 2015, we discussed with you the potential to scale up the EV car sharing scheme
currently being investigated by Auckland Transport. Auckland Transport will issue an open
Request for Proposal document to companies interested in establishing the scheme. The
proposed scheme would have an initial fleet of 200 – 300 vehicles supported by around 350
charging stations across the city.
36.
Other car sharing schemes that use EVs, such as DriveNow which you recently visited in San
Francisco, have been established without direct government support. For instance, DriveNow
was established as a joint venture between BMW and a car rental company. However,
government may need to address barriers to private sector investment in these types of
businesses.
37.
We had informal discussions with officials from Auckland Transport at the Smart Transport
Forum on 6 August 2015. They were positive about the scope for central and local
government to work together to progress EV initiatives and have expertise (including lessons
learned) from the roll out of EV initiatives in the UK that they are eager to share. We have yet
to formally engage with Auckland Transport on this work.
City Hop’s concern about access to charging infrastructure
38.
At your meeting with officials on 10 August 2015, you raised City Hop’s concerns regarding
Auckland Transport Request for Proposal and access to EV charging infrastructure. In
particular, it considers that Auckland Transport could achieve a better outcome by
collaborating with existing market players. We will investigate this issue and report back to
you.
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Providing greater certainty to companies regarding the tax position of EVs
39.
In our March advice, we suggested that you consider the following measures:
39.1. reviewing the method for calculating fringe benefit tax for EVs
39.2. inviting stakeholders to discuss with tax policy officials the case for having higher
depreciation rates for EVs.
40.
Since the March 2015 paper, we have found further evidence that EVs are depreciating more
quickly than petrol/diesel vehicles. In Japan for instance, it appears that EVs are losing
between a third and half of their value in the first year. It is unclear exactly why this is, but
uncertainty about battery performance and the superior performance of newer EV models
may play a role.
41.
Given the continued uncertainty about the depreciation rate and resale value of EVs, there is
a question as to whether the tax system should favour the Crown or favour the taxpayer. For
example, if the tax depreciation rate for an EV is 20 percent in year 1, but actual depreciation
is 30 percent, businesses are unable to recognise that loss as it occurs.
42.
We consider that a review of the tax treatment of EVs would help identify whether the
amending the tax treatment of EVs is appropriate. Tax officials would have to lead this
review. Based on our earlier engagement with tax officials on the issues of fringe benefit tax
and depreciation rates for EVs, we understand that they are open to such a review but would
need a clear mandate from Ministers to undertake this work. The Cabinet paper on an EV
package could seek such a mandate.
43.
We will also explore the option of establishing a grant for EV purchases. While you have
stated that an EV package is unlikely to include direct subsidies, a grant may be justified on
the basis that it offsets any potential tax disadvantage or risk faced by businesses or
individuals that wish to purchase an EV.
Recommendations
44.
The recommendations are that you:
(a)
note that in April 2015 you directed officials to prepare a Cabinet paper on
the following measures:
1. an information and promotion campaign by EECA
2. government branding, promotion and information support for public charging
infrastructure
3. a trial of electric vehicles in government fleets
(b)
note that these additional measures were discussed at your meeting with
officials on 27 July 2015:
1. government funding for an EV car sharing scheme
2. options to provide greater certainty to businesses regarding the tax
position of EVs, including the possibility of a grant
(c)
note that we will convene the chief executives of key stakeholders with an
interest in EV within the next fortnight to initiate engagement on an EV
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