LOS ANGELES — California's electric vehicles will accelerate utility sales growth, but could cost the state $3 billion in gas tax revenues, Moody's Investors Service said.
The state's strong incentives for electric vehicle ownership is a credit positive for the state's utilities, but the credit implications are mixed for auto manufacturers as well as the state itself, Moody's analysts said in a report Monday.
The report presents three scenarios for electric vehicle adoption by 2025, ranging from flat sales to the state's goal of having 1.5 million electric vehicles on the road in ten years.
"California's preferred EV growth scenario would be a boon for the state's utilities and independent power producers, who would see sales growth and grid investment opportunities," wrote Swami Venkataraman, a Moody's senior vice president and author of the report. "It would also reduce risks related to future carbon compliance as EVs enable the auto sector to contribute significantly to emissions reduction."
It represents a double-edge sword for public power electric utilities like the Los Angeles Department of Water and Power where 40% of its energy is produced by coal. LADWP will have to work to produce additional energy while it tries to reduce dependence on coal and increase renewable energy sources, Moody's said.
LADWP aims to be off coal by 2025 and to hit the state's goal of 50% of production through renewables by 2030, according to the rating agency.
EVs account for between 6-20% of all cars sold in 30 California cities today, and have the potential to cumulatively remove up to $3 billion in gas tax revenue through fiscal 2030, but the credit impact on the state is minimal because the gas tax is a minor revenue source for the state's $114 billion budget despite its large dollar size, analysts said.
The report did not delve into the state's struggles in dealing with a multi-billion backlog of needed infrastructure repairs.
"We see California adjusting its tax or spending policies to compensate for any decline in tax revenues related to fuel usage," wrote Julius Vizner, an assistant vice president at Moody's. "The state also stands to gain from long-term health benefits brought about by the reduced use of gasoline cars."
Gas taxes are also not a significant credit factor for local governments, analysts said.
California levies a per-gallon gas tax, which Moody's said is 27.8 cents-per-gallon for fiscal 2017 and is expected by the state to increase to about 35 cents per gallon by 2021. The state also levies a 2.25% sales tax on gasoline, which it remits to local governments. The state launched a pilot-vehicle miles traveled tax in July.
The gas tax is also eroding gradually and the state cut $754 million and delayed $755 million from its $36 billion transportation spending plan to account for the drop in the price of gas.
According to the report, EVs could account for up to 5% of total electricity consumption for California utilities by 2030 and represent over two-thirds of annual load growth.
Moody's calculates that each EV in California today saves about 2.7 tons of CO2 emissions per year, with potential cumulative savings of $725 million through 2030. The report also credits the state's policies in incentivizing electric vehicle purchases as the primary driver of growth.
