Electric vehicles surpassed 5% of new car sales in the United States in 2022, and experts expect the rapid expansion of transportation electrification to continue in 2023. Federal funds will be used to build a national charging network and incentivize consumers to purchase dozens of new models from automakers.

Electric vehicles have risen from about 2% of new car sales in 2020 to more than 6% in the third quarter of 2022. This data comes from CleanTechnica's statistics.

"The current opportunity and momentum are extremely significant," said Ben Prochazka, executive director of the Electrification Coalition. The organization advocates for policies that accelerate the adoption of plug-in vehicles and views the 2021 Bipartisan Infrastructure Law and last year's Inflation Reduction Act as key accelerators for the industry.

Among them, the infrastructure law provides $7.5 billion for a network of 500,000 electric vehicle charging stations nationwide, while the Inflation Reduction Act extends the federal tax credit for vehicle purchases.

Prochazka believes electric vehicles are "on the brink of a tipping point," but he also notes that challenges remain, especially as the specific implementation rules for federal incentive policies have not yet been fully clarified.

"The transition takes time," said Joe Britton, founder and former executive director of the Zero Emission Transportation Association. The association's members include utility companies, charging companies, Tesla, Lucid, Sunrun, and other technology firms.

Britton expects electric vehicles could reach 10% of U.S. sales this year, but he does not believe sales can continue to grow at such a rapid pace.

U.S. President Joe Biden wants half of all new car sales in the United States to be electric vehicles by 2030. Experts consider this goal quite ambitious, and its achievement will depend on whether supply chain bottlenecks ease and how federal incentive policies are implemented.

Stephen Engblom, senior managing director at commercial real estate firm CBRE, said he is "optimistic" about achieving the president's goal if charging station siting challenges are resolved and the grid can support new demand. "Energy and real estate are both indispensable," he said.

Engblom noted that building the charging network is "essentially a real estate challenge," requiring collaboration among automakers, charging companies, utilities, and commercial property owners. "I think real estate will be the trickiest part, and I'll be closely watching the progress of these partnerships over the next year."

In New York City, Raghusimha Sudhakara, director of e-mobility and demonstration projects at Con Edison, said the past few months alone have seen "rapid growth."

Sudhakara said the transition to electric vehicles is "something we think about every day." So far everything is "going fairly smoothly," and Con Edison has been able to meet every new charging station service application. But the utility is also proactively planning areas of the grid where large fleets may electrify.

The Edison Electric Institute, which represents investor-owned utilities, projects that electric vehicles on U.S. roads will reach 26.4 million by 2030, with nearly 5.6 million new vehicles sold that year, accounting for about 32% of total light-duty vehicles.

"Last year our sales doubled, from 3% to 6%," Britton said. "Obviously I'm not sure we can double every year, but we will see a lot of growth... I think we could sell 1.5 million units in 2023."

Industry observers point out that key factors accelerating EV adoption in the coming year include: the implementation rules for vehicle tax credits, the allocation of $5 billion under the president's National Electric Vehicle Infrastructure formula program, and addressing potential utility bottlenecks in the electrification of charging stations.

Vehicle tax credit rules

The Inflation Reduction Act includes $369 billion in clean energy investments, which restored the electric vehicle tax credit. But the new credit is not simple: it is divided into multiple parts, with eligibility depending on where the vehicle is assembled and the proportion of critical minerals mined or processed in the United States.

"The current changes to the tax credit may make it very difficult for the average consumer to figure out which vehicles qualify," Prochazka said. "Any new policy with this kind of nuance takes time for consumers to digest."

Part of the uncertainty surrounds which vehicles qualify for the credit, depending on mineral content and whether domestic assembly requirements are met.

The U.S. Treasury Department and the IRS issued partial clarifications for new vehicle purchases in December. Prochazka said proposed guidance on new procurement provisions for the clean vehicle credit is expected to be released in March, along with a notice of proposed rulemaking.

Implementation details will "be a challenge for everyone," Britton said. "In the short term, we will all be trying to figure out who is eligible, whether the standards are achievable, and what benchmarks to use. There is a lot of implementation work to be done."

Charging network funding takes shape

Another major factor this year is the disbursement of billions of dollars to states to develop the national charging network.

To access the first $5 billion in funds, states, the District of Columbia, and Puerto Rico had to submit charging plans. The Federal Highway Administration announced in September that all plans had been approved.

Prochazka said the first round of funds has been disbursed to states, laying the groundwork for developers to propose charging solutions. States are already developing requests for proposals to develop new sites, "so that businesses can prepare and sign contracts to build the infrastructure network."

"This is also important for consumers, so they start to see infrastructure being built and the progress associated with it," Prochazka said. "But this won't happen overnight; it requires a lot of effort."

"The speed at which states act depends in part on their maturity and experience. But with funding from the Bipartisan Infrastructure Law, we could build charging infrastructure at a very fast pace over the next three to five years," Britton said.

Utility interconnection issues

Beyond vehicle sales and charging station development, signs of delays have already emerged in the utility interconnection process.

"With interconnection upgrade queues extending beyond the 2030s," utilities may turn to solar and storage solutions to serve charging stations in some areas. Jeffrey Douglass, market and research manager at Invinity Energy Systems, said in an email. The company is a utility-scale energy storage developer.

He said managing the electricity load from transportation electrification will help "maintain grid stability and accelerate the world's transition to net zero."

Britton believes the electricity demand from EV adoption is unlikely to cause generation or capacity constraints, but some areas may need substation upgrades.

"One of the biggest constraints in the market will be the capacity of the utility grid," said CBRE's Engblom. "Upgrading the grid to handle all the new high-power charging demand will be a major challenge."

Cathy Zoi, CEO of charging company EVgo, said on a third-quarter earnings call in November that building a new charging station takes about 4 to 8 weeks. But the end-to-end time from site conception to energization is currently about 18 months. She noted that this used to be about 12 months, but utility-side delays are lengthening the development cycle.

"Utilities have a backlog of work related to transformer shortages," Zoi said. "When we build current configurations—350 kW ultra-fast chargers with more charging stalls—transformer upgrades are almost always required."

The utility industry warned federal lawmakers last year that distribution transformer shortages are depleting replacement equipment inventories and delaying or canceling some electrification projects.

"Ongoing utility labor shortages and transformer supply chain constraints are exacerbating utility backlogs at both the front end and back end of the charging station development process," Zoi said. "We expect utility-related delays to persist as power companies prepare for transportation electrification and work to strengthen the power system's resilience to climate change."

Sudhakara said that as of the end of last year, about 2,300 Level 2 chargers and 140 DC fast chargers had been installed in Con Edison's service territory. The utility expects its Power Ready program to rapidly boost these numbers, reaching 18,500 Level 2 chargers and more than 450 DC fast chargers by 2025. To meet state EV adoption goals, it projects 400,000 chargers in its service territory by 2035.

"With the current growth trajectory, we are serving customers relatively smoothly," he said. "But if we can build a mechanism that allows us to strengthen the grid and build in fleet-dense areas, it would be very beneficial."

Sudhakara revealed that among the chargers queued for service at Con Edison, more than 1,000 are DC fast chargers.

"The timing for utilities to meet demand is quite challenging," Prochazka said, especially for utilities that may not have received prior regulatory authorization for necessary system construction. Such approvals, along with streamlined permitting processes, can help utilities "clear hurdles more quickly."