Coming ready or not: A battery of Teslas arriving on Auckland wharves in January. Photo / John Barker, Senior Pilot at Ports of Auckland
Electric cars currently have a free pass from paying Road User Charges (RUCs) – the fees charged to owners of non-petrol vehicles, starting at $76 per 1000km.
But at some point, the Crown will have
to bite the bullet and make EV owners pay RUCs – or develop some whole new funding mechanism. This is because it will need to fill a $2 billion gap left by declining petrol tax revenue, and pay for billions in national grid upgrades to accommodate electric vehicles.
The AA says the average motorist drives 12,000km per year, which means $912 in Road User Charges (at the usual rate; RUCs were halved from April 21 to September 21 this year in a parallel measure to the temporary petrol tax cut).
That’s going to take a lot of the gloss off the savings that EV owners enjoy today. (While it depends on your model of EV and power plan, EECA’s rule of thumb is that charging an electric car is the equivalent of paying 40 cents per liter to fill a petrol tank).
EVs were exempted from RUCs in 2016 as one of its measures to boost electric vehicle uptake and Transport Minister Michael Wood recently rolled over the exemption until March 31, 2024.
Wood says he’s yet to receive advice on whether to roll over EVs’ exemption again.
There are other complications to consider.
A Waka Kotahi NZ Transport agency discussion document has raised the possibility that RUCs could be extended to electric motorcycles and e-mopeds.
Wood says some kind of system will have to be developed so that owners of plug-in hybrid cars are not double-charged for petrol tax and RUCs.
And Waka Kotahi’s report also says some kind of GPS system will likely have to be created to track electric cars’ mileage. While tracking systems are now common on trucks, it’s been a multi-year transition.
There are two factors that will likely force Minister Wood’s hand (or that of his successor):
The tax revenue gap
First, the Government currently receives income of around $4 billion per year from fuel excise (that is, petrol tax) and road-user charges on diesel vehicles (split roughly 50/50 between the two). In terms of petrol tax 70c per litre goes to road funding, 6c to ACC, 0.7c to a local authority fuel tax and 0.6c to the Fuels Monitoring Levy (and Aucklanders pay an extra 10c in Regional Fuel Tax). RUCs are the mechanism for non-petrol vehicle owners to chip in.
With only around 36,000 electric cars on NZ’s roads – or around 1 per cent of our total vehicle fleet, EVs’ exemption from RUCs is no big deal.
But, powered by the Clean Car Discount, EV sales are rising fast. Kiwis’ spending on new electric cars doubled to $877m the year to March, in a total vehicle market worth $6.1 billion).
And however green our Government’s policies in the years to come, EVs will dominate – simply because every major car manufacturer says it will abandon production of petrol-only vehicles by 2030. And new car skew, mindful of resale value, will heavily away buyers from internal combustion engines well before then (and of course, once EV sales have momentum, there is no need for a Clean Car Discount. This week, with EV sales soaring thanks to record fuel prices, the UK Government scrapped its £1500 grant towards the cost of a new electric vehicle).
A report by national grid operator Transpower said 50 per cent of NZ cars could be electric by 2035. That will leave a big hole in petrol tax revenue.
The price of powering up
Second, the EV takeover will necessitate upgrades to our power system. The Energy Efficiency and Conservation Authority (EECA) says a full transition to EVs will increase total electricity demand by 20 per cent.
A Transpower report said modeling indicated 10 to 15 large-grid power upgrade projects would be required by 2035, with each costing up to $250m – or up to a total of $3.75b. That’s another bill that will need to be paid.
Transpower does also say the transition away from more expensive petrol to EVs will save households a collective $4b – but assuming so, the Crown will need RUCs, or some other mechanism, to transfer some of that money to its own pockets if it’s to help fund power upgrades.
Whatever happens with RUCs, the Government will have to decide soon.
Bear in mind that even today, entrepreneur Ian McCrae sports an “EV powered by Indonesian coal” sticker on his Tesla – a reference to the July 2021 revelation that New Zealand had to import 1 million tons over the prior year as the Huntly Power Station been called on to supplement our hydro and geothermal generation.
Achieving NZ’s goal of 100 per cent renewable energy, and net zero emissions by 2050 is a goal most would support – but it’s also a tab that’s got to be picked up.
Transpower says we’ll need as much new generation capacity in the next 15 years as we created in the past 40.
There will also be a new generation of smart power meters at home that can help balance the load on the network as EV owners plug in at once, at the end of rush-hour – and councils who wake up to a raft of issues already being by a surge in EV ownership in high-density Auckland, where townhouses and apartments are caused garageless.
In my neighbor, there’s a Facebook fight over an EV owner who runs an extension cord out to the curb. But we’re still a long way from creating rules, or capacity, for roadside chargers for residential properties.