Gap between Current Investment and 2030 Investment

Gap between Current Investment and 2030 Investment

In addition, much of the existing infrastructure will need to be expanded or replaced between now and 2030. This is especially true for hydrogen infrastructure, as the majority of existing hydrogen fueling stations were created to support research, pilot studies, or small fleets. These stations have significantly lower capacities than would be required for commercial operation. Therefore, this analysis assumes that all hydrogen stations required for 2030 will be built in the future. For this reason, spending on hydrogen stations is not estimated along with spending on CNG, E85, and electric vehicle infrastructure.

Using the same information on infrastructure costs that was used to generate the country estimates for infrastructure spending to support the AFVs in operation by 2030, estimates of past spending on infrastructure total $8.2 billion for the selected regions. Total spending in Europe was the highest at $3.6 billion. China spent the second most at $2.6 billion, and the United States spent $2.0 billion.

Subtracting the values calculated for previous infrastructure spending from the total required by 2030 results in $86.6 billion in additional investment between now and 2030 in the selected countries. Europe will need to invest an additional $38.5 billion, China will need to invest an additional $31.6 billion, and the United States will need to invest an additional $16.5 billion in AFV infrastructure by 2030.

All four AFV types discussed in this analysis are based on technologies (vehicles and refueling infrastructure) that are more expensive to implement than their gasoline- and diesel-powered equivalents. In addition, some of these vehicles will require substantial adaptation on the part of consumers (e.g., charging at home, more careful planning of routes, and the use of new refueling infrastructure). Successful adoption will depend on consistent and sustained policies to promote the adoption of AFVs and required support infrastructure.

FINANCING MODELS TO SUPPORT INFRASTRUCTURE INVESTMENT

There are many benefits to infrastructure investment and promoting funding approaches which incentivize such activity. Infrastructure investment is well documented in its benefit to economies, both in terms of jobs and future productivity. One recent study evaluated the employment effects of U.S. infrastructure spending and found that 18,000 jobs (direct, indirect, and induced) could be created for every $1 billion of new investment spending.¹⁵⁴ The study results indicate that this is more job creation than would materialize from a tax cut of similar size. Infrastructure spending is particularly supportive of construction and manufacturing employment, which tend to be good paying middle class jobs. As a supportive (albeit tangential) study shows, manufacturing employment can have very high jobs multipliers. The Center for Automotive Research has analyzed the direct, indirect, and induced jobs multiplier for one automotive factory job. The most recent update calculated a jobs multiplier of 10.0, meaning that nine additional jobs are created for every one automotive assembly job.¹⁵⁵ To the extent that infrastructure investment promotes growth in manufacturing, such activity will have substantial payback to employment growth. While this research does not analyze that impact, the study cited supports this assessment.

As discussed previously, several types of fueling infrastructure can be provided by the private sector with appropriate market incentives for investment. For example, a natural gas distributor has an incentive to build pipelines to support an expansion of natural gas retail outlets. With ample demand, the distributor could charge an embedded fee in the gas transmission price to cover the amortized costs of the infrastructure investment. In light of tight government budgets, infrastructure build-out of natural gas infrastructure may be more forthcoming than for other, more expensive infrastructure with public good attributes.

Economic theory shows that public sector provision of infrastructure which has public good attributes is justified. Left to the private sector, such infrastructure would not be funded to the optimal point where social benefits exceed social costs. The private sector underprovision of infrastructure is documented in economic literature.¹⁵⁶

At the same time, as was the case in Brazil, there may be public policy objectives (regardless of the public-private infrastructure attributes) which would warrant sizable public sector investment. In Brazil, the government saw a need to support domestic agricultural interests that were already producing sugar and alcohol, as well as to reduce the country’s dependence on oil. As a result of government intervention, Brazil’s fuel infrastructure was quickly transformed by the development of infrastructure needed to produce, distribute, and dispense ethanol.

There are many methods that can be used to provide support for AFV infrastructure. These include direct public support, the use of infrastructure banks, formation of public-private partnerships, and private financing (including innovative mechanisms such as “green bonds”). These methods are described in the following sections along with examples of how they have been used in the past and how they could be used to further the development of AFV infrastructure.