US climate goals: EVs are on track, but clean power is lagging

Based on headlines alone, you might expect that the U.S. is cruising toward its clean electricity goals while sputtering toward its EV goals. 

But in a counterintuitive turn, a new report finds the opposite to be true. 

Electric vehicles are on track to meet the country’s goals of decarbonizing transportation — even if EV sales growth is slowing down after years of record-setting increases. Meanwhile, the U.S. still isn’t adding clean energy fast enough to hit its ambitious carbon-cutting goals for the electricity sector. Solar and wind power are now firmly cost-competitive with fossil fuels, but a heap of big, structural challenges like grid interconnection delays are holding up progress.

That’s all according to a report released Wednesday from the Clean Investment Monitor, a joint project between analysis firm Rhodium Group and the Massachusetts Institute of Technology’s Center for Energy and Environmental Policy Research.

The 2021 Bipartisan Infrastructure Law contains more than $80 billion in funding for the power grid, EV charging, energy storage, clean hydrogen, carbon capture and other climate investments. And the 2022 Inflation Reduction Act, the most significant federal climate policy in U.S. history, is directing hundreds of billions of dollars of tax credits, grants and federal lending authority to reduce carbon emissions. The law’s total investment will depend on how extensively the private sector makes use of its many tax credits.

The Biden administration’s overarching goal is to meet the U.S.’ Paris Agreement commitment of cutting economywide carbon emissions in half by 2030 relative to 2005 levels. Previous forecasts from nonprofit research group Energy Innovation, Princeton University’s Repeat Project and Rhodium Group have found that those laws can help the U.S. cut emissions by between 37 percent and 42 percent by 2030 — a much better outlook than before the laws existed.

The main pathway the U.S. has to reach these climate goals is to take advantage of the solutions that are already mature: clean electricity and EVs. The Biden administration is aiming for EVs to make up half of all new vehicle sales by 2030 and to achieve a carbon-neutral electricity supply by 2035.

The Bipartisan Infrastructure Law and Inflation Reduction Act ​“successfully closed the cost gap for clean energy and transportation compared to fossil-fuel incumbents in almost all applications,” said Trevor Houser, a partner at the Rhodium Group. ​“But closing the cost gap alone is not enough. Building clean infrastructure and selling clean vehicles at the pace that’s needed requires an unprecedented level of infrastructure and technology deployment.”

Reports like this one — the first in a series planned over the coming months and years — ​“can help point policymakers in the right direction and help them not be whipped around by headlines,” he added. ​“If you were reading the news, you could be forgiven for thinking that clean vehicle sales are lagging and that clean electricity deployment is going gangbusters. In fact, the opposite is true.” 

The good news: EVs are on track, despite some bumps

Gloomy headlines have clouded the EV outlook in recent months, but the new analysis provides a more positive interpretation. Even if EV sales growth slows down in 2024, the number of EVs hitting the road has already exceeded what previous projections have found is necessary to meet U.S. emissions-reduction goals.

“Sales in 2023 came in at the top end of the range of post-IRA projections,” the report states. Preliminary data indicates that 1.43 million zero-emissions vehicles were sold in the U.S. in 2023. That aligns with data from automotive services company Cox Automotive, which tracked 1.2 million U.S. EV sales in 2023.

According to Clean Investment Monitor’s analysis, zero-emissions vehicle sales made up 9.2 percent of total light-duty vehicle sales last year, up from 6.8 percent in 2022 and 2.2 percent in 2020. That puts last year at the high end of what was forecast in a 2023 analysis from Energy Innovation, Repeat Project and Rhodium, which estimated an 8.1 percent to 9.4 percent sales share in 2023. 

The trendline is even more striking when compared to bearish forecasts of the past, the report points out. In 2020, the U.S. Energy Information Administration projected 580,000 zero-emissions vehicle sales in 2023, a little more than one-third of last year’s actual total.

Whether U.S. EV sales will continue to grow at the breakneck pace set in the past few years is very much an open question. A lack of lower-cost EV models available in the U.S. is crimping consumer appetite for the vehicles. Ford and General Motors have pulled back on their multibillion-dollar EV growth plans, citing weakening consumer demand. And increasingly stringent rules on which vehicles can earn the $7,500 EV tax credit extended by the Inflation Reduction Act — rules designed to reduce reliance on key battery materials from China — are expected to limit the impact of the tax credit in the near term.

Even so, the Clean Investment Monitor report states that sustained 50 percent year-over-year sales growth ​“was neither expected to occur” after the Inflation Reduction Act was passed, ​“nor is it required to achieve the legislation’s goal of a 40 percent reduction in net [greenhouse gas] emissions by 2030.” The necessary growth rates are instead between 30 percent and 44 percent between 2024 and 2026, and from 15 percent to 27 percent between 2027 and 2030, according to the models from Rhodium, Energy Innovation and the Repeat Project.

The bad news: Clean energy is lagging, even though it’s cheap

While EVs may be on track for meeting U.S. climate goals, clean electricity is not.

That’s true even though the U.S. added new wind and solar power resources at a record-setting pace last year: Clean Investment Monitor tracked 32.3 gigawatts of zero-carbon electricity generation and storage capacity additions in 2023. That’s 32 percent more than was added in 2022, when U.S. clean energy saw a significant downturn, and slightly more than the previous record of 31.6 gigawatts in 2021. This expansion helped drive down U.S. power-sector emissions by 8 percent in 2023 compared to the previous year, according to Rhodium Group.

But that’s not enough for the U.S. power sector to cut emissions by 40 percent by 2030, which Rhodium Group, Repeat Project and Energy Innovation have modeled as vital to reaching the country’s overall climate goals. Just how far behind the country is compared to those models is shown in the graph below.

To catch up with those models this year, the U.S. will need to add orders of magnitude more clean energy than ever before: between 60 and 127 gigawatts of capacity in 2024 alone. Currently, the groups are tracking 60 gigawatts of capacity under development with a scheduled start date this year, just enough to hit the bottom end of that range. ​“But projected start dates at this time of the year have a tendency to slip, making it likely that the full year 2024 number for capacity additions will end up coming in considerably below,” the report warns.

It will be even harder to keep clean-energy growth on track to meet targets through the rest of the decade, according to the report. The Rhodium Group, Repeat Project and Energy Innovation models call for average annual capacity additions of 70 gigawatts to 126 gigawatts between 2025 and 2030. That equates to installing more than twice the amount of clean energy added in 2023 every year.

What’s more, the cost of new clean energy and energy storage is no longer the chief barrier to meeting these growth targets. Despite short-term inflation, the tax credits and other incentives in the Inflation Reduction Act have made ​“renewable electricity cost-competitive with coal and natural gas” for the foreseeable future, the report notes.

Instead, the biggest barriers are large and complex problems ​“like siting and permitting delays, backlogged grid interconnect queues, and supply chain challenges.”

Power grids across the country face major and growing bottlenecks in interconnecting new clean-energy projects. The average wait time for wind and solar developers is three and a half years, and grid-upgrade costs are rising for projects that do get through the lengthy process. In some regions, such as the 13-state region from Virginia to Illinois served by grid operator PJM, the backlog has grown so severe as to put individual states’ 2030 renewable energy goals out of reach.

Nor is the transmission grid itself being expanded nearly fast enough to accommodate all the new clean energy the country needs to hit its goals. Princeton’s Repeat Project has found that hitting the Biden administration’s goal of a zero-carbon grid by 2035 will require 75,000 miles of new high-voltage lines — far less than what’s being built today — and that over 80 percent of the Inflation Reduction Act’s emissions-reduction potential can’t be realized if the current pace of expansion isn’t dramatically increased.

Streamlining clean-energy interconnection and speeding transmission growth are complicated challenges, and various efforts are underway at the federal and state levels to make it happen. Whether the panoply of reforms being proposed can be enacted quickly enough to help speed growth in the next few years is highly uncertain, however.

Siting and permitting are another thorny problem. Local opposition to new wind and solar projects is growing in many parts of the country, driven by environmental and land-use concerns as well as by anti-renewables interests ginning up controversy via social media.

But difficult as these challenges may be, solving them is ​“critical for the IRA to achieve its full clean energy deployment and emissions reduction potential” — and for the U.S. to stay true to its international climate commitments.