In 2022, electric vehicles accounted for more than 5% of new car sales in the United States, and experts believe the rapid trend toward transportation electrification is expected to continue. Federal funding will help build a nationwide charging network and incentivize consumers to purchase dozens of new models from automakers.

The share of electric vehicles in new car sales has risen from about 2% in 2020 toover 6%。

"We are facing tremendous opportunities and momentum," said Ben Prochazka, executive director of the Electrification Coalition. The organization advocates for policies to accelerate the adoption of plug-in vehicles and believes the 2021 Bipartisan Infrastructure Law and last year's Inflation Reduction Act are key accelerators for industry growth.

Among them, the infrastructure law provides$7.5 billion to build a national network of 500,000 EV charging ports, while the Inflation Reduction Actextends the federal tax credit for EV purchases。

Prochazka said electric vehicles are "on the brink of a tipping point," but he also acknowledged that "we do face challenges," including how to refine the structure of federal incentives.

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

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

U.S. President Joe Biden wants electric vehicles to make uphalf of new car sales in the U.S. by 2030. Experts believe this goal is quite challenging, and its achievement will depend on easing supply chain bottlenecks and the specific implementation of federal incentives.

Stephen Engblom, senior managing director at commercial real estate firm CBRE, said he is "optimistic" about achieving the president's goal if the challenge of charging station siting is resolved and the grid can support the added demand. "You have to have the energy, and you have to have the real estate," he said.

Engblom noted that building the EV charging network "is really a real estate challenge," requiring collaboration among auto and charging companies, utilities, and commercial property owners. "I think real estate is going to be the biggest challenge by far, and I'll be watching those partnerships closely over the next year."

In New York City, Raghusimha Sudhakara, director of e-mobility and demonstration at Consolidated Edison, said the company has "seen tremendous growth over the past few months."

Sudhakara said the transition to electric vehicles "is something we think about every day," and "so far, so good," with ConEd able to meet every new charging service request. But the utility is also actively planning grid upgrades to address demand in areas where large fleets may electrify.

The Edison Electric Institute, which represents investor-owned utilities, projects thatthere will be 26.4 million electric vehicles on U.S. roads by 2030, with sales that year approaching 5.6 million, or about 32% of all light-duty vehicles.

"Last year we doubled sales from 3% to 6%," Britton said. "Obviously, I'm not sure we can double every year, but we're going to see a lot of growth... I think we could sell 1.5 million 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 disbursement of $5 billion in funds under the president's National Electric Vehicle Infrastructure (NEVI) formula program, and addressing potential utility bottlenecks in charging station electrification.

Vehicle tax credit rules

The Inflation Reduction Act includes$369 billion in clean energy investments, including the restoration of EV tax credits. But the new tax credit is not simple: it isdivided into multiple parts, and eligibility depends on where the vehicle is assembled and where the critical minerals used are extracted or processed.

"I think the current changes to the tax credit are difficult for the average consumer to understand and determine which vehicles qualify," Prochazka said. "Any new policy like this, where consumers have to sift through the details, takes some time."

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

The Treasury Department and IRS issuedsome clarifying informationin December, and Prochazka said proposed guidance and a notice of proposed rulemaking on new purchasing provisions for the clean vehicle credit are expected in March.

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

Charging network fund disbursement

Another major factor this year is the disbursement of billions of dollars to states to build 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, and the Federal Highway Administration announced in September that all plans had beenapproved。

Prochazka said the initial funds have been distributed to states, laying the groundwork for developers to propose charging solutions. He said states are developing requests for proposals to build new charging stations "so that companies can get ready and sign contracts to build the infrastructure network."

"I think this is also very important for consumers, to start seeing the development of infrastructure and the stories associated with it," Prochazka said. "But it won't happen overnight; it requires a lot of effort."

"The speed at which states move, I think, depends in part on their maturity and experience. But with this Bipartisan Infrastructure Law funding, we could see significant charging infrastructure buildout over the next three to five years," Britton said.

Utility interconnection issues

Beyond vehicle sales and charger development, there is the issue of utility grid interconnection—and delays are already emerging in this area.

"With grid upgrade queues pushed into the 2030s," utilities may consider using solar and storage options to serve charging stations in certain areas, said Jeffrey Douglass, market and research manager at Invinity Energy Systems, in an email. The company is a utility-scale energy storage developer.

He said managing the electrical load associated with transportation electrification will help "maintain grid stability and accelerate the world's transition to net-zero emissions”。

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

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

Cathy Zoi, CEO of charging company EVgo, said on athird-quarter earnings callin November that building a new charging station takes about 4 to 8 weeks. But she said the end-to-end time from site concept to energization is now about 18 months, compared to about 12 months previously, with utility delays stretching the development cycle.

"Utility work backlogs are related to transformer shortages," Zoi said. "When we're building configurations now with ultra-fast 350kW chargers and more charging stalls, this almost always requires a transformer upgrade."

The utility industry warned federal lawmakers last year thatdistribution transformer shortageswere depleting replacement equipment inventories and causing delays or cancellations of some electrification projects.

"Ongoing utility labor shortages and transformer supply chain constraints are exacerbating utility work backlogs at both the front and back ends of the charger development process," Zoi said. "We expect utility-related delays to continue to be an issue as power companies prepare for transportation electrification and work to adapt the power system to the impacts of climate change."

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

"With the current growth, we're serving customers relatively smoothly," he said. "But having a mechanism to harden the grid and build in fleet-dense areas would be helpful."

Sudhakara said ConEd has more than 1,000 DC fast chargers in its queue of charger service requests.

"The timing of utilities meeting demand is challenging," Prochazka said, especially for those utilities that may not have received prior regulatory approval for necessary system construction. He said such approvals, along with streamlined permitting processes, can help utilities "clear hurdles more quickly."