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For second round of Volkswagen spending, N.C. looks to shift gears


Fossil fuels won round one of North Carolina’s Volkswagen settlement payout, with the state buying mostly diesel school buses and other gas-powered vehicles that will spew climate pollution into the atmosphere for the next decade or more. 

But Gov. Roy Cooper’s administration is proposing a shift in course for the last two-thirds of the state’s windfall. A draft plan issued this month focuses on deploying zero-emission electric vehicles and helping to achieve the state’s climate initiatives. 

While the $68 million blueprint doesn’t prohibit investments in fossil-fuel vehicles, it states among its priorities: “vehicle electrification to maximize emission and public health benefits.” 

The administration is holding meetings and taking comments on the plan until after Labor Day. It hopes to finalize the document by fall and begin disbursing grants next spring. 

And though three years ago Cooper officials tilted their ultimate spending document more toward diesel, propane and natural gas than their initial draft, clean energy advocates hope this time the opposite will be true.

“I think it’s going to get stronger,” said Diane Cherry, an independent consultant who works with the North Carolina Sierra Club and other groups. “You’ll see more people try to make it about the climate.”

The proposal comes as Duke Energy seeks permission from utility regulators to invest $56 million in electric school buses and charging stations. Together, the two efforts could jumpstart the electrification of the transportation sector, the largest single source in the state of both global warming pollution and the smog-forming emissions that disproportionately burden communities of color.

“That could really propel the state forward as they’re trying to address emissions and equity around transportation emissions,” said Justin Brightharp, a program manager at Atlanta-based Southeast Energy Efficiency Alliance.

Still, after losing a long-running battle over who pulls the Volkswagen purse strings, the administration can’t spend a dime until Cooper, a Democrat, and the Republican-controlled legislature adopt a bill that appropriates the money. Both chambers have yet to agree on a budget, but the most recent version passed by the Senate doesn’t allocate the Volkswagen money until July 2022.

“If you did that, you’re basically making it six months late,” Cherry said. “It’s not ideal. We started late anyway, compared to other states.”

Starting late

Indeed, fifty states, the District of Columbia, Puerto Rico and 29 American Indian tribes all got a share of the federal government’s multibillion-dollar settlement with Volkswagen, exacted after the automaker was caught systemically cheating on tailpipe pollution tests. 

But as of June 2020, North Carolina was among just nine states that hadn’t yet spent any money, according to data compiled by Atlas EV Hub. Lawmakers finally appropriated a third of the state’s $92 million portion last July.

By that time, the plan that guided the disbursements was nearly two years old, adopted under pressure from lawmakers and industry. And it hadn’t been refreshed to reflect Cooper’s subsequent climate initiatives. 

As a result, a March 2021 report showed, the state used the money for about 60 charging stations — the maximum allowed under the settlement’s terms — and 17 electric buses. The rest went to more than 150 buses, garbage trucks, and other vehicles powered by fossil fuels, including 85 diesel school buses using emissions-control technology conceived 20 years ago.

But now, the Department of Environmental Quality looks ready to make up for lost time and lost climate action. Originally planning to spend the money in three stages of two years each, it’s proposing to consolidate the last two phases into one, still wrapping up by 2024.

“Doing so,” said spokesperson Zaynab Nasif over email, “expedites the use of the remaining settlement funds so North Carolinians can benefit from the emissions reductions from the vehicle replacements as soon as possible.”

A new focus on electrification and equity

The Phase 1 blueprint was finalized months before Cooper issued an executive order on climate, pledging 80,000 electric vehicles on the state’s roads by 2025. And its ink was long dry by the time the governor joined a multi-state compact promising nearly a third of new heavy-duty truck sales would be electric in 2030. 

The 2021 plan spotlights both, noting that the Volkswagen monies can be used to “incentivize fleet transition from older heavy-duty diesel equipment and vehicles” to electric versions that would fulfill the pledges. “It’s intentional,” said Dionne Delli-Gatti, the state’s clean energy director, based in the governor’s office.

Unlike the 2018 plan — which earmarked 35% of the funds for diesel, propane, and compressed natural gas school buses — this year’s blueprint doesn’t set aside any monies for fossil fuel vehicles.

In another departure from Phase 1, the Phase 2 plan omits a metric heavily pushed by the diesel industry: tons of pollution reduced per dollar spent upfront. The standard favors fossil fuels because it doesn’t incorporate the reality that electric buses cost less than half as much to operate as their diesel counterparts. And it ignores the fact that, unlike diesel and gas versions, electric buses will deliver progressively more cuts to smog-forming nitrogen oxides over time, as carbon-free energy powers more of the electric grid.

As in Phase 1, the plan devotes the maximum allowed amount, 15% of funds, to the charging stations considered vital to the widespread deployment of electric vehicles. Another 40% is allotted to school buses, and 20% to transit buses. Twenty percent is set aside for a variety of other heavy-duty diesel replacements.

According to cost estimates in the document, the plan could cover 60 electric school buses and more than a dozen electric transit buses along with their charging stations. It could also fund roughly 70 fast-charging stations — capable of delivering 80 miles of power in about a half hour — along with over 200 slower chargers that can produce that range in under four hours. 

The document also prioritizes economically distressed counties that didn’t benefit from Phase 1 spending, and includes an environmental justice component, taking into account “areas that bear a disproportionate share of ambient air pollution.”

That “equity piece” is critical, said Brightharp. “Generally, low-income and Black communities, and other minority communities, are more adversely affected by emissions from transportation corridors.”

The public is invited to comment on the plan in writing until Sept. 7 and at open meetings that began this month. “We look forward to hearing feedback on the draft Phase 2 plan from residents, communities and stakeholders,” the Department of Environmental Quality’s Nasif said.

The feedback from clean energy advocates so far is positive. “It is exciting to see DEQ prioritizing transportation electrification in underserved and under-resourced communities,” said Stan Cross, electric transportation policy director for the Southern Alliance for Clean Energy, in an email. 

But the need is great. The state’s school bus fleet alone numbers about 14,000 vehicles; even 60 electric additions would be a drop in the bucket. With 80,000 electric vehicles on its roads, the state would need roughly 16,000 public charging outlets, experts say. It now has just over 2,100.

That’s why the state should focus its spending on a few high-profile projects that take advantage of economies of scale and help create momentum, said Cherry: Concentrating electric school bus purchases in a select few districts, for example, or ensuring there’s a charging station in every single state park. “It would be nice if we could do one swath of things all over the state,” she said.

The size of the Volkswagen fund also means the state should be coordinating closely with Duke Energy, which wants to build out more than 1,000 electric charging stations and fund 60 electric school buses. The utility’s proposal, which expands on an earlier pilot program about half its size, is now being reviewed by regulators. 

‘Coolest thing?’

Still, strong coordination and an airtight plan will be of little use if the money isn’t available until next July, as the state Senate envisioned on page 59, Section D of this budget document, adopted in May. 

According to the Department of Environmental Quality, that was a deliberate move: Senators didn’t want to appropriate the money in this fiscal year until they got a glimpse of the state’s Phase 2 plan. Now that the draft is public, the agency is urging lawmakers to allocate the money in the first year of the biennium in their final budget, expected around the end of August.

North Carolina’s robust fossil fuel industry ecosystem, from diesel engine manufacturers to propane distributors, undoubtedly helped spring loose the first Volkswagen appropriation from lawmakers. 

But the state has a nascent electric vehicle manufacturing sector, too. London-based Arrival, which makes electric vans and buses, has made Charlotte its North American headquarters. It plans two “microfactories” in the area, one in the city and one in nearby Rock Hill, South Carolina. 

Thomas Built Buses in High Point, among the nation’s leading school bus manufacturers, unveiled an electric model in 2018, and in May, it celebrated the deployment of its 50th electric bus nationwide. 

Last fall, the electric bus, called the Jouley, even won the little-known, inaugural online competition organized by Cooper’s Department of Commerce: the “Coolest Thing Made in N.C.”

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