Structural Determinants of Electric Vehicle Market Growth · Structural Determinants of Electric...

StructuralDeterminantsofElectricVehicleMarketGrowth

February2017

AResearchReportfromtheNationalCenterforSustainableTransportation

GustavoCollantes,PolicyInstituteforEnergy,EnvironmentandtheEconomy,UniversityofCalifornia,Davis

JeffKessler,InstituteofTransportationStudies,UniversityofCalifornia,Davis

EricCahill,InstituteofTransportationStudies,UniversityofCalifornia,Davis

AbouttheNationalCenterforSustainableTransportationTheNationalCenterforSustainableTransportationisaconsortiumofleadinguniversitiescommittedtoadvancinganenvironmentallysustainabletransportationsystemthroughcutting-edgeresearch,directpolicyengagement,andeducationofourfutureleaders.Consortiummembersinclude:UniversityofCalifornia,Davis;UniversityofCalifornia,Riverside;UniversityofSouthernCalifornia;CaliforniaStateUniversity,LongBeach;GeorgiaInstituteofTechnology;andUniversityofVermont.Moreinformationcanbefoundat:ncst.ucdavis.edu.

U.S.DepartmentofTransportation(USDOT)DisclaimerThecontentsofthisreportreflecttheviewsoftheauthors,whoareresponsibleforthefactsandtheaccuracyoftheinformationpresentedherein.ThisdocumentisdisseminatedunderthesponsorshipoftheUnitedStatesDepartmentofTransportation’sUniversityTransportationCentersprogram,intheinterestofinformationexchange.TheU.S.Governmentassumesnoliabilityforthecontentsorusethereof.

AcknowledgmentsThisstudywasfundedinpartbyagrantfromtheNationalCenterforSustainableTransportation(NCST),supportedbyUSDOTthroughtheUniversityTransportationCentersprogram.TheauthorswishtothankSydneyVergisforherinvaluableinputonvariouspartsofthisreportandtheNationalCenterforSustainableTransportationforfinancialsupport.Weareindebtedtoallstakeholdersfortheinformationtheysharedandfortheirtrustinustofindpracticallessonsthattheycoulduseintheirworktofurthervehicleelectrification.

StructuralDeterminantsofElectricVehicleMarketGrowth

ANationalCenterforSustainableTransportationResearchReport

February2017

GustavoCollantes,PolicyInstituteforEnergy,EnvironmentandtheEconomy,UniversityofCalifornia,Davis

JeffKessler,InstituteofTransportationStudies,UniversityofCalifornia,Davis

EricCahill,InstituteofTransportationStudies,UniversityofCalifornia,Davis

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TABLEOFCONTENTSIntroduction...........................................................................................................................1Methodology..........................................................................................................................2

UnderstandingtheTISFunctions......................................................................................................5ResearchDesign...............................................................................................................................7

Results..................................................................................................................................12TheStateofWashington................................................................................................................13

EntrepreneurialExperimentation.....................................................................................................14KnowledgeCreation&Diffusion.......................................................................................................17ResourceMobilization......................................................................................................................20GuidanceoftheSearch.....................................................................................................................21Legitimation......................................................................................................................................22MarketFormation.............................................................................................................................24DevelopmentofPositiveExternalities..............................................................................................25

TheStateofMassachusetts...........................................................................................................26EntrepreneurialExperimentation.....................................................................................................27KnowledgeCreation&Diffusion.......................................................................................................29ResourceMobilization......................................................................................................................33GuidanceoftheSearch.....................................................................................................................33Legitimation......................................................................................................................................34DoesthePublicHaveaPositiveOpinionofPEVs?............................................................................34MarketFormation.............................................................................................................................35DevelopmentofPositiveExternalities..............................................................................................36

StateofGeorgia:ACaseStudyofthePEVRetailSubsystem...........................................................36EmpiricalFindings.............................................................................................................................37

DiscussionandRecommendations........................................................................................44Methodology.................................................................................................................................44Findings.........................................................................................................................................45

References............................................................................................................................50Appendix..............................................................................................................................53

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StructuralDeterminantsofElectricVehicleMarketGrowthEXECUTIVESUMMARYZeroemissionvehicles(ZEV)andplug-inelectricvehicles(PEV)arecriticaltechnologiestoattaindeepreductionsingreenhousegasesfromtransportation.PEVmarkets,however,havegrownmoreslowlythananticipatedbymanyobservers.Inthisstudy,weseekadeeperunderstandingofthechallengesfacingPEVmarketsandhowtheymightevolveindifferentregions.UsingaTechnologyInnovationSystems(TIS)framework,weexaminethemajorconditions—political,technological,economic,andsocietal—thatdrivethedevelopment,deploymentanduseofthesevehiclesatthestatelevel.Withthisholisticapproach,weidentifystrengthsandweaknessoftheinnovationsystemsinafewrepresentativestates,whichwetranslateintorecommendationsforpolicystrategy.WefindthatwhilesignificanteffortshavebeenundertakentosupportPEVinnovation,therearesignificantdeterrentstothebroadermarketuptakeofPEV.

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IntroductionThetransportsectorwillneedtoundergonothingshortofadramatictransformationtoachievethedeepreductionsingreenhousegasesneededforclimatestabilization.Zeroemissionvehicles(ZEV),comprisedofplug-inelectricandhydrogenfuelcellvehicles,areessentialcomponentsofthistransformation.Keystudiessupportthisconclusion,includingareportbytheNationalAcademiesofScience(NationalResearchCouncil,2013).Thatreportsuggestsan80%reductioningreenhousegas(GHG)emissionsfromlight-dutyvehiclesbytheyear2050canbestbeachievedthroughpromotionofplug-inelectricvehicles(PEVs)andhydrogenfuelcellvehicles(FCVs).Otherresearchersreachsimilarconclusionsforglobalmarkets:forexample,Ou,ZhangandChang(2010)showthatonlyscenarioswithtangiblemarketpenetrationofelectricdrivevehiclesmaybesuccessfulatsubstantiallyreducingemissionsfromtransportationinChina.

StakeholdersintheUnitedStatesandotherkeyglobalmarkets(e.g.China)haveincreasinglyexpressedinterestinunderstandingthedriversandobstaclesforPEVmarkets.Manyseekeffectivestrategiestodrivesalesgrowthaimedatmeetingeconomicandenvironmentalgoals.Unpublishedongoingresearchsuggeststhatincentiveprogramsshowstatisticalefficacy1inacceleratingPEVmarkets,thepaceofgrowthinmoststatesremainstoosluggishtoplacethetransportationsectoronacleartrajectorytomeetcarbonmitigationgoals.Inconversationswithstakeholders,weheardconcernsabout“structural”factorsorfactorsaffectingmarketdemandthatarenotfullyunderstoodorevenidentified,andthatcouldconstraintheeffectivenessofincentiveprograms,therebyhinderingoverallmarketdevelopment.

Toprovideanswersinthisarea,aholisticunderstandingofthefactorsthatmobilizetheprocessofZEVinnovationisneeded.Factorsrelatedtothevehicle-consumerinterface,suchasvehicleprice,financialandnon-financialincentives,infrastructureavailability,income,andothers,areimportanttoinformpolicy.However,theseaspectsconstituteonlyapartoftheinnovationprocess,whichalsoincludesahostofrelevantsocio-technicalfactors.Weexpectthataholisticunderstandingoffactorsaffectinginnovationprocesseswillyieldcriticallessonsforpublicpolicy,corporatestrategy,non-profitadvocacy,resourceallocationdecisionsandacademicresearchagendas.AreviewoftheliteraturerevealednoholisticstudiesofPEVinnovationintheU.S.

Theoverarchingobjectiveofthisresearchistohelpbridgethisgapandidentifysystemicfactorsthataffect—positivelyandnegatively—thedevelopment,deployment,anduseofplug-inelectricvehicles.Inthisstudywefocusonlyonplug-inhybridandbatteryelectricvehiclesfortworeasons:First,PEVsremaintheonlyZEVscurrentlyproducedandcommercializedatscale.Hydrogenfuelcellvehicles,ontheotherhand,remainrelegatedtolimitedproductiontrials.Second,theinnovationsystemsofthesetwoZEVtechnologiesarenotoneandthesame.Specifically,thisresearchisconcernedwith:

1Unpublishedworkbyoneoftheauthorsinvolvingempiricaldataanalysis.

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• Describingtheinterrelatedfactors—policy,social,economic,institutional,technological,andothers—neededtodevelopPEVmarkets;

• Assessingthesefactorsinthecontextoftechnologyinnovationsystems;and• IdentifyingpoliciesandstrategiesthatcouldimproveconditionsforPEVinnovation.

Asignificantbodyofresearchhaslookedatthereasonsthatconsumersbuyadvancedtechnologyvehicles(e.g.OzakiandSevastyanova,2011;Heffner,ReidR.,2007)andtheextenttowhichthesefactorsmayimpactconsumers’choices(e.g.Bunchetal.,2000;Collantes,2010;LiuandGreene,2014).Thisveryimportantbodyofresearchfocusesontheinterfacebetweentheindividualconsumersandthetechnology.Thesuccessofatechnologyinthemarketplace,however,dependsonalargersystem,sometimesreferredtoastheinnovationsystem(Bergek,Jacobsson,Carlsson,Lindmark,andRickne,2008;CarlssonandStankiewicz,1991).ScholarshavedevelopedthefieldofInnovationSystemsandtesteditasaresearchtooltounderstandhowdifferentinnovationsortechnologiesaredeveloped,diffusedandused(Hekkert,Suurs,Negro,Kuhlmann,andSmits,2007;Negro,Hekkert,andSmits,2007;SuursandHekkert,2009).

MethodologyWerespondtotheneedforasystemsapproachtothestudyofZEVinnovationbyadoptingtheTechnologyInnovationSystems(TIS)framework.TheTISframeworkprovidesaholisticapproachtothestudyofinnovationprocessesbyassessinganumberofinterconnectedfunctions,whichaffectthemarketdevelopmentanddiffusionofnewsustainabletechnologies(Bergeketal.,2008;Hekkertetal.,2007).Likeeverysystemicapproach,TISmethodstakesabroadperspectiveandlookatthepartsofasystemasanintegratedwhole.CentraltotheTISframeworkthatweuseisthenotionthatbarrierstotechnologyinnovationcanbefoundnotonlyinactorsandmarkets,butalsoininstitutions(suchaspolicies)andnetworks.Wedefineatechnologyinnovationsystemastheinterrelatedsetofactors,networksandinstitutionsthatcontribute–inasupportingordetractingway–tothedevelopment,diffusionandapplicationsofknowledgeand/orproductsrelatedtoagiventechnology.Recognizingthatmanycontributionshavebeenmadetowardframeworksforthestudyofinnovation,weadoptseveralconceptsproposedoradaptedbySchumpeter(Schumpeter,1934).WeunderstandinnovationintheSchumpeteriansense,asembodyingnotonlythetechnologicaldevelopment(invention)butalsotheadoptionandeffectiveuseofthetechnologiesofinterestinthemarketplace.Innovationisnotjustabouttheidea(orthetechnology)itself;itisratheraprocessofdiscoveryfollowedbyimplementationanduseinamarketsetting.WealsosubscribetoSchumpeter’sperspectiveoninnovationandentrepreneurshipasessentialforcestocreatethedisequilibriumneededforendogenouseconomicgrowth.TISframeworkshavebeenappliedtothestudyofaspectsofZEVmarkets(Vergis,2014;VergisandMehta,2012)aswellastothedevelopmentofpolicyinterventionstoaddressmarketbarriers(Bergek,Jacobsson,Carlsson,Lindmark,andRickne,2005).TheliteratureproposesthatTISarecharacterizedbyasetofsevenfunctions(Hekkertetal.,2007).Thesesevenfunctions

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aredefinedataconceptuallevel,givingresearcherslatitudetodesignoperationalization’sandmeasurementsthataresuitabletotheproblemathand.InTable1weshowthesevenfunctions,includingdescriptionsofthefactorsintheinnovationsystemthattheyrepresent.Table1.FunctionsofTechnologyInnovationSystems

FunctionTechnicalName Description ExampleIndicators

Knowledgedevelopmentanddiffusion

ReferstotheknowledgerelatedtothetechnologythatisaccumulatedanddisseminatedbyactorsandnetworksintheTIS.

Patentfiling,research,conferences,

Influenceonthedirectionofsearch ReferstothepressuresonactorsandnetworkstoactivelysupportordetertheTIS.

Technologybottlenecks,regulationsandpolicyincentivesorarticulationsoftechnologyexpectations.

Entrepreneurialexperimentation Referstotheprobingofnewideaswiththegoalofsupportinginnovationaroundtheparticulartechnology.

Pilotanddemonstrationprojects,andvarietyofproductsavailableonthemarket

Marketformation Referstothecreationofconditionsthatdirectlyleadtoincreasedadoptionofthetechnology,eitherinnichemarketsorbroadermarkets.

Marketsize,customergroups,andprocurementprocedures.

Legitimation Referstothesocialacceptanceofthetechnologybyconformancewithexistingculturalvaluesandinstitutionalframeworks,ordevelopingnewvaluesandinstitutionalframeworks.

Attitudestowardsthetechnologyamongconsumersandstakeholders.

Resourcemobilization Referstothefinancial,materialandhumanresourcesthataremadeavailablewiththegoaltosupportordetractfrominnovationinthetechnology.

Personneldedicatedtothesupportprogramsrelatedtothetechnology,capitalcommittedbystatestosupportmarketuptake,increasingvolumeofseedandventurecapital.

Developmentofpositiveexternalities

Referstoeconomicandnon-economicfactorsindirectlyrelatedtoatechnologythathelpstrengthentheothersixfunctions.

Spillovereffectsfromandtootherindustries

Anin-depthinvestigationofallthesefunctionsforanygivenU.S.stateisalaboriousendeavor.Inthisparticularresearch,wewillfocusonthreestatesforsuchin-depthinvestigation.Inadditiontoobtainingadeepunderstandingoftheinnovationsysteminthesestates,thisexercisewillhelpusidentifyindicatorsandthemesforeachofthefunctionsthatwouldenabletheassessmentofplug-inelectricvehicletechnologyinnovationsystemsinotherstates.InthisreportwefocusonthestatesofGeorgia,MassachusettsandWashington.Weselectedthese

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statestorepresentsomeofthediversityacrossstateswhilesharingsomecommonalities.Forexample:

• AllthreestateshadongoingprogramstosupportPEVdeploymentattheonsetofourstudy;

• Thissetincludesstateswithandwithoutregulatoryrequirementsonsales;• Allstateshavelarge,vibrantcitieswithstrongtechnicaluniversitiesandhigh-tech

communities;• Thesestateshavedifferentcharacteristicsintermsofthecarbonintensityoftheir

electricity;• Theyfallindifferentpartsofthespectrainavarietyofvariables,includinggeography,

overallpoliticalinclinations,weather,andtopography.Todefinetheunitofanalysis,andfollowing(Bergeketal.,2008),weconsiderthefollowingthreeaspects:fieldofknowledgevs.product;breadthvs.depth;andspatialdomain.Wechoosetofocusonaproduct,theplug-inelectricvehicle(PEV).Intermsofbreadth,weareinterestedinanarrowuniverse,namelytheaggregationofallmodelsofhighwaycapable,light-dutybatteryelectricvehiclesandplug-inhybridelectricvehicles.Bychoosingthissystembreadthweensurethattheactors,networksandinstitutions,foraparticularregion,areaboutthesame.Ifwechoseabroadersystem,forexamplebyincludingheavy-dutyvehicles,wewouldhavetoincludeadifferent(thoughlikelyoverlapping)setofactors,networksandinstitutions.Asforspatialfocus,asdiscussedabovewefocusonthreestatesintheUnitedStates.WhileingeneralaglobalscopeispreferredforaTISstudytobetteraccountforlikelyspillovereffectsandadditionalnetworkinteractions,ourmaininterestiswithvariationsininnovationacrossstates,whichrelievesusfromtheneedtoconsiderglobalaspectinmuchdetail.Thus,ourunitofanalysisistheinnovationsystemrelatedtoplug-inelectricvehiclesatthestatelevel.Ourmainsourcesofdataweresemi-structuredinformationalmeetingsandnewspaperarticlesassociatedwithelectricvehiclesineachofthesestates.Thenewspaperarticleswerefurtherclassifiedandcodedtoproviderelevantinsightsandcontextforthetechnologyinnovationsystemsineachstate.Throughthesemeetingsandphonecallsweidentifiedtheelementsandprocessesthataffect,orarebelievedtoaffect,PEVinnovation.Consistentwiththesystemapproachofourstudy,wecommunicatedwithactorsfromallrelevantsectors,namelygovernmentandpolitical,supplyside,demandside,intermediaryinfrastructureandknowledgeinfrastructureactors(Alkemade,etal.,2007).Examplesofactorsinthesegroupsincludeautomanufacturers,consumergroups,universityresearchers,advocacygroups,andregulators.Technologyinnovationprocessesareinherentlydynamicandone-timecommunicationswithstakeholdersarenotthebestwaytocapturethesedynamics.Wemadeaneffort,withinthelimitationsofourcommunications,tocollectinformationontrendsaswellascurrentconditions.

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Usingnaturallanguageprocessingtechniquesandmachinelearningalgorithms,itispossibletoanalyzelargedatasetstodetermineifthereareanysignificanttrendsacrossvastquantitiesoftext(CambriaandWhite,2014;Liddy,2001).Weutilizedthisapproachforassessingnewsarticlestobetterevaluatethetechnologyinnovationsystemforelectricvehicles.Thishasbeendonetofurtherhelpinformtheinnovationnarrative,andelucidateinteractioneffectsbetweengovernmentandtheprivatesector.Throughuseofmachinelearningandtext-classification,itispossibletoevaluatenewsarticlestodeterminethecontentofthestoriesbeingreported,yieldinginsightintothedevelopmentoftheinnovationsystemovertime.Additionalclassificationofthesearticlesallowsforgeographicevaluation,whichcanproviderobustdatasetsforinter-regionalcomparison.Inferencescanbemadeusingthismethodologywhereregionsexhibitsignificantlydifferentinnovationsystemtrendsfromoneanother.Inthecontextofourstudy,duringourinformationalmeetings,weusethefollowingareastohelpwiththeidentificationofpotentialexternalitiesinagivenstate:

• ThepotentialforthegrowthofPEVmarketstogeneratejobsinthestate• ThepotentialforthegrowthofPEVmarketstogenerateeconomicgrowthinthestate• ThepotentialforthegrowthofPEVmarketstocreateenvironmentalbenefitsinthe

state• ThepotentialforthegrowthofPEVmarketstocreatepolitical,administrativeor

economicbenefitordamagetoanystakeholdersinthestate.

UnderstandingtheTISFunctions

TypicalapplicationsofTISframeworksdonotpostulateanestablishedsetoftestablecausalmechanisms.WhilescholarshavemadenumerousvaluablecontributionstodevelopingTISresearchmethodologies,wefindthatexistingTISframeworksstillneedrefinement,andwehopethatthisstudycontributesinthatregard.WebelieveitisimportantforTISstudiestoclearlydefinetheirconceptualizationoftheTISfunctions,andthatisthepurposeofthissection.Westartwithproposing“elevatorpitch”definitionsofeachofthefunctions,tohelpsimplifytheseconceptsforthereaderswhoarenotfamiliarwiththisapproachtothestudyofinnovation.Wethendivedeeperintoacoupleofthefunctionsandofferamoresubstantivediscussionofthemeaningofthesefunctionsandtheirconnectionswithotherbranchesofsciencethatrelatetoinnovation.

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Table2.Elevator-pitchDefinitionoftheTISFunctions

EntrepreneurialExperimentation

ThisfunctionoftheTISisrelatedtoprobingnewideastosupporttechnologyinnovation.Newideascanrelatetotechnologies,methods,andinstitutions,andisnotsolelylimitedtohigher-riskbusinessventures.

KnowledgeDevelopment

ThisisthefunctionoftheTISrelatedtothecreationofnewknowledgeabouttechnology,methodsrelatedtothetechnology,orinstitutionsthatsupportthetechnology.Knowledgediffersfromdataandinformation,thoughthesearegenerallyaconditiontowardknowledgecreation.KnowledgecreationisoftenoneconsequenceoftheprobingthattakesplaceaspartoftheEntrepreneurialExperimentationfunction.

KnowledgeDiffusion

ThisisthefunctionoftheTISconcernedwithdisseminatingknowledgethroughnetworksintheinnovationsystem.Inastronginnovationsystem,knowledgediffusionandknowledgecreationareintimatelyconnected,althoughneitherwarrantiestheother.

InfluenceontheDirectionoftheSearch

ThisisthefunctionoftheTISconcernedwithmotivatingorpressuringactors,institutionsandnetworkstodedicatethemselvestosupportinginnovationinthepertinenttechnology.Pressurescantakemanyforms,includingregulatory,marketdemand,psychosocial(e.g.expectationsandbeliefs),andothers.

MarketFormation

Thisfunctionrelatestoallactivitiesthathaveadirect,tangibleeffectontheadoptionofthetechnologyinagivenmarketsegmentandthatwouldnothappennaturallyorspontaneouslyunderestablishedinstitutions.Marketformationcanhappeninmanyways,rangingfrompublicinterventiontotheimplementationofaningeniousmarketapplication.

Legitimation

ThisfunctionoftheTISrelatestoactivitiesthathelpmakethetechnologyacceptedbythepublic,policymakers,andtheprivatesector.Legitimacyisbetterunderstoodonthebackgroundofestablishedcompetingtechnologies,whichareacceptedbythemarketandsupportedbyeconomicand/orpoliticalgroups.Legitimacyforatechnologyincreaseswhenatechnologyislessresistedbythepublicandestablishedgroupsofpower.

ResourceMobilization

ThisistheTISfunctionconcernedwithallocatingcapitalandlabortowardsupportingtechnologyinnovation.

DevelopmentofPositiveExternalities

ThisistheTISfunctionconcernedwithbenefitsandspilloversfromthetechnologysystemofinteresttoandfromothertechnologysystems.Suchbenefitscantakemanyforms,includingtechnological,symbolic,economic,andpolitical.

Thefunctionsoftheinnovationsystemareinterconnected.Becauseofthedynamicnatureofinnovationsystems,thewayinwhichthefunctionsinterconnectislikelytochangeovertimeandwiththestateofmaturityoftheinnovationprocess.Innovationoutcomesarelargelydependentoncontext–asthesecontextschange,sotoocaninnovationoutcomes,andthenetworksandagentsthatsupporttheinnovationsystem(Bergeketal.,2015).Forthepurposeofillustration,weshowinFigure1aschematicoftheTISfunctionsandasubsetofthe

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connectionsbetweenTISfunctionsthatwewouldhypothesizeforarelativelyearlystageofthemarket.Thisparticularsubsetofconnectionsproposesaclosedloopinwhichthetestingofnewideascanresultinnewknowledge,whichinturnsupportsthedisseminationofknowledge,whichpropsthelegitimationofthenewtechnology,whichencouragesthededicationofresourcestosupportthetechnology,whichinturnfeedsfurtherexperimentation.Thestrengthofthefunctionsdeterminestheenergyofthiscycle,andoneweakfunctioncouldresultintheentirecycletobecomingdysfunctional.Forexample,ifnewknowledgeisnoteffectivelydisseminated(weakknowledgediffusion),legitimationwillsufferwhichcanhaveverynegativeeffectsontechnologyadoption.

Figure1.SubsetofpossibleinterconnectionsbetweenTISfunctions

Aswenotedearlier,TISisstillanevolvingframework.Duringthecourseofthisstudy,wefelttherewasvalueinproposingcontributionstothefurtherconceptualizationoftwoTISfunctions,namelyentrepreneurialexperimentationandthedevelopmentofpositiveexternalities.Whilethesediscussionsmaybehelpfultosomereaders,theyarealsorathertheoretical,andforthisreasonwehaveincludedthemintheAppendixattheendofthereport.

ResearchDesign

UsingasnowballsamplingmethodologyandcontactsestablishedthroughtheZeroEmissionMarketAccelerationPartnershipatUCDavis,wewereabletoassemblealistofimportantandrelevantactorsinthePEVinnovationspaceforstateswewereinterestedin.Wesetupseveralinformationalcommunicationswiththesecontacts.Thepurposeofthesecommunicationswastounderstandinasmuchdepthaspossibletheinnovationsystem,includingactors,networks,andinstitutions,thatpromoteordetractfromthedeploymentofbatteryelectricandplug-inhybridelectricvehicles.Wecommunicatedwithactorsfromavarietyofdifferentorganizations,includingdealerships,stateandlocalgovernments,non-profitgroups,carcompanies,utilities,infrastructurecompanies,andresearchinstitutions.Communicationswererequestedandagreedupononthepremiseofconfidentiality,andthereforewedonotdisclosethenamesorassociationsoftheindividualswithwhomwespoke.Forthisphaseoftheresearchwedid

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studiesoftheentireinnovationsystemsforthestatesofMassachusettsandWashington,andwedidadeep-divestudyofonespecificsectoroftheinnovationsystem,namelythenewvehicleretailspace,forthestateofGeorgia.

Buildinguponcollaborativenetworksthatwehaveinthesestates,wesentanemailtopointpeople,requestingthattheyfilledoutaformwithalistofactorsassociatedwithspecifictypesoforganization.Weaskedthesepointpeopletoprovideactorsthattheydeemedtobeparticularlyrelevantforcontributingtoelectricvehicleuptakewithinthestate.AnexampleoftheformweusedisshowninFigure2.

Figure2.Formusedtocollectpossiblestakeholdersforcommunications

Wethencontactedbyemailtheindividualslistedintheformstorequestameetinginpersonorphonecall.Theresponserateforourrequestswasgreaterthan95%.WedevelopedalistofinformationitemsaroundPEVinnovationtoguideourinformationalmeetings,andensuredthatinformationwascollectedabouteachofthefunctionsoftheTIS(Bergeketal.,2008;CarlssonandStankiewicz,1991).Weaskedstakeholdersforobjectiveinformation,excludingpersonalopinions,abouttheitemsshowninTable3.

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Table3.GuidanceProtocolUsedinInformationalCommunications


• Pleasedescribetheresources(funding,personnelanddedicatedroles)thatareallocatedtosupportingPEVdeploymentinyourstatebyeachofthefollowing

– Yourorganization– Localgovernmentsinyourstate– Yourstate’sgovernment– Thefederalgovernment

• Whatarethemainsourcesofuncertaintyonwhetherresourceswillbeallocatednowandinthefuture?• WhatroleistheGovernor’sOfficeplayingonPEVdiscussionsinyourstate?

MarketFormation

• Doesyourstate,orlocalgovernmentsinyourstate,offerincentivesortakeanyotherstepstohelpusersandfleetsadoptPEVs?

– Whatimpacthavethesestepshad?– Ifincentives:Howwasitsmagnitudeandstructuredecidedupon?– Ifnoincentives:Arethereplanstoimplementone?

• Dogovernmentalorprivateorganizationssubsidizeorotherwisesupportthedeploymentoruseofchargingequipment?

– Whatimpacthavethesemeasureshad?• Isthere,orhastherebeen,amarketingcampaigntargetedtogenerateinterestinPEVsinthepublic?If

so,whichorganizationsledit/them?(e.g.carcompanies,government,etc.)Legitimation

• Howinformedisthegeneralpublicinyourstateaboutplug-invehicles?• IsthegeneralpublicopinionaboutPEVspositiveornegative?• WhicharetheprimarymarketsegmentsthatpurchasePEVinyourstate?• ArethereimportantstakeholdersinyourstatewhoareantagonistictowardPEVsinyourstate?• WhatisthemostcommonlineofargumentagainstPEVsinyourstate?• ArethereestimatesofthemarketdemandforPEVsinyourstate?• ArethereadvocacygroupsactivelysupportingPEVs?• IspoliticalleadershipgenerallysupportiveofPEVs?

KnowledgeDevelopmentandDiffusion

• Whatarethemorecriticalfactorsthatdrive/deterthemarketadoptionofPEVinyourstate?Includefactorsofanysort:technological,economic,societal,political,legal/regulatory,knowledge,orother.

• Howdostakeholdersinyourstatelearnaboutthefactthatthesefactorsarecritical?Examplesmayincluderesearch,experimentation,stakeholderdiscussions,conferences,learningfromotherregions,consultingwithindustry,orother

• Withthefactorsyoujustmentionedinmind,– Aremoststakeholderslikelytoagreeontheimportanceofthesefactors?– Howwelldevelopedisthestateoftechnologyorknowledgerelatedtoeachofthesefactors?Is

therestillalotoflearningortechnologicaldevelopmenttobedone?• Whatisbeingdoneinyourstatetolearnmoreaboutordeveloptechnologyrelatedtothefactorsyou

mentioned?

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InfluenceontheDirectionofSearch

• Howdoexistingstate/localactionsinfluenceactivitiestosupportplug-invehicleadoption?a. AretherespecificregulationsthatsupportPEVadoption?

• Arethereanylaws,regulations,competingtechnologies,ororganizationsthatpreventPEVfromgettingmoresupportfromstakeholders?

• Hasthestateand/orcities/countiesinthestateadoptedaPEVactionplanorsimilarstrategy?• Whatarethekeyelementsofthisplan/strategy?• Whatisthestateofimplementationofthisplan/strategy?• Whatlessonshaveyoulearnedsofar?• Haveyourstateorcitiesinyourstateadoptedanyrequirementsonautomakersorfleetsfortheadoption

ofPEVs?• Havetherebeenclearstatementsorexpressioninsupportofvehicleelectrificationfromthepolitical

leadershipinyourstate?


• Arethereanycompaniesinyourstatethatsupplyparts,servicesortechnologyfortheproductionofPEVorPEVcharginginfrastructure?Examplesmayincludebatteries,softwareforbatteryenergymanagement,other.

• ArethereexceptionalPEVchampionsinyourstate?• Canyouciteinnovativeideasthatwereproposedandtestedinyourstate,tosupportPEVmarkets?This

canincludeideasofanysort:technologydemonstrations/pilots,policy,education&outreach,orother.• Aretherecompaniesororganizationsinyourstatethataredevelopingortestingnewtechnologiesor

servicesintendedtosupporttheuseofplug-invehicles?• Areyoufamiliarwiththestartupcommunityinthisspace?


• DoPEVsgeneratejobsinyourstate?• DoPEVsgenerateeconomicgrowthinyourstate?• ArePEVsbeneficialtotheenvironmentinyourstate?• CouldPEVsbenefitanystakeholdersinyourstate?

a. Politically?Whoandhow?b. Administratively?Whoandhow?c. Economically?Whoandhow?

• Arethereindustriesinyourstatethatcanhelpand/orbehelpedbythegrowthofPEVmarkets?

Overaperiodoftwomonthsintheyear2015,weconsultedwith40individualsacrossthethreestates.Weconductedconsultationswithadurationof45to60minutesusingourthematicprotocolasguidance.Timeavailablewouldnothaveallowedforthecoverageofeachandalltheitemsintheprotocol,andwenarrowedconversationsaroundthemestowhichtheparticularstakeholderseemedmorefamiliarormorecomfortablespeaking.Werecordeddatabyhandandthesenoteshavebeenusedtoinformourtechnologyinnovationnarrativeforeachstate.Allobtainedinformationisanonymousandwedesignedallcommunicationswithstakeholderstonotcollectpersonal,subjectiveorconfidentialinformation.WeaskedparticipantstointurnsuggestotherstakeholderswhotheydeemedtobeimportantinthePEVspacewithinthestateandwhoweshouldcontactforthepurposeofcollectinginformation.Mostofthenamessuggestedwerealreadyinourlistofparticipantsforthefirstroundofconversations.

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Weusetheinformationcollectedfromthesemeetingstoassesscommonalitiesanddifferencesbetweenthetwostates.ThisfacilitatesbetterassessmentoffactorsinplacethatpromoteordetractfromPEVadoption.AssuggestedinFigure3,PEVadoptionshavefolloweddifferentdynamicsinWashington,MassachusettsandGeorgia.Whileoverallmarkettrendsareupward,thecaseismoreorlesscleardependingonthestate.WhileTISisgenerallynotwellsuitedtomakestronginferencesfromdataofthissort,weshowthemtohelpprovidecontexttotherelativestateofthemarkets.

Figure3.Plug-invehiclesalespercapitainthestatesincludedinthisstudyandCalifornia

Whilewerelyonourinformationalmeetingsasthemainsourceofdatatoassessinnovationpatternsandtrendsinthestatesofinterest,weusedtextualmedia(primarilynewspaperarticles)fromacrosstheUnitedStatestocapturereferencestotheTISfunctionsinthestatesofinterest.ThesereferencescanbeinterpretedassalientelementsoftheTISfunctionsandwillhelpusvalidatequalitativelyandidentifypotentialgapsinouranalyses.Toextractusefuldatapointsfromthisverylargesemanticdataset,weusecomputationallinguisticstechniques.BuildingoffoftheLexisNexisdatabase,weconductedahigh-levelsearchforallEnglish-languagenewsstoriesassociatedwithelectricvehicles.FromLexisNexisindexingmetadata,weidentifiedthenewspaperarticlesthatwererelevanttoelectricvehiclesinthethreestatesofourstudy.Tofurtherextractinformationfromthelargedataset,weusedasupervised-learningapproach.Supervisedlearningrequiresmanual,human-classificationonasmallersubsetofdatathatisthenusedasinputintoastatisticalmodel.Thisisknownasthe“trainingset.”Wetrainedmachine-learningalgorithmstoanalyzeeacharticlesandcategorizearticlesintooneormoreoftheTISfunctions.MorespecificdetailsonthismethodologycanbefoundinKessler(2015).

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ResultsUsingthetrainedmodeltoclassifyarticlesintoTISfunctionsfortheentiredatasetofarticlesforallstatesintheUnitedStates,wegeneratedanationaltrendforEVinnovation.ThetrendsareshowninFigure4.

Figure4.Nationaltrendsintheplug-inelectricvehicleinnovationsystem,asgivenbyclassifiedarticlesrelevanttoelectricvehicleinnovationintheUnitedStates.

OurarticleclassificationshowsthatsteepincreasesinmediaarticlesrelatedtoPEVstartedevenbeforethecommercializationoftheNissanLEAFandtheChevyVoltin2009-10.Earliercoverageincreasescoincidewithanumberofotherevents,includingTesla’sannouncementthatitwouldproducetheRoadstermodelandoilpricespikesstartingin2007tonametwo.Theseresultssuggestalsothattherehasbeensteadygrowthacrossmostinnovationfunctions,witharecentsurgeintheperceivedlegitimacyofthePEV.Somefunctions,however,showsignsofstagnationandevenweakening.Toderivefurthermeaningfromthearticlecountanalysis,weareinterestedinwhetherthecountsforagivenstatearesignificantlydifferentfromcountsinotherstates.Todothis,weuseafixed-effectsmodelforpanelcountdata;inparticular,weuseanegativebinomialgenerallinearmodel.ThismodelassumesthatstateandyearfixedeffectsaccountforamajorityofthevariationinmediaportrayalofPEVinnovationineachstateandeachmonth.Weincludeastate:yearfixedeffecttoaccountfordifferencesthatoccurinastateinagivenyear.Ifthiseffectissignificant,itindicatesthatsomethinguniquehappenedinthatstateinthatyearcomparedtotheexpectedtrend.Itisfromthisperspectiveofincreasingelectricvehiclelegitimacy,andamaturingtechnologyinnovationsystemthatwehopetogaininsightintohowtofurtherfosterandsupportthissystem.Wenowturntothestudyoftheindividualstates.

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WeprovidequalitativeempiricalanalysisofthePEVtechnologyinnovationsystemsinoursampleofstates.Additional,textualmediarelevanttoelectricvehicleshasbeencapturedforall50states(andD.C.)from1994through2014.Thecontentfromeachdocumenthasbeenclassifiedthroughcomputational,machine-learningmethodsandeachcorrespondstooneormoreofthetechnologyinnovationsystemfunctions(Kessler,2015).Theinnovationsystems,asdocumentedthroughthismethodforWashingtonandMassachusettsaretrackedovertime.Supportforeachfunction,andhowthissupportchanges,canbequantitativelycomparedtootherstates.

TheStateofWashington

WashingtonisoftenincludedalongsideCaliforniaandOregonduringdiscussionsofenvironmentalpolicyandregulatoryaction.ThestatehasattemptedtoadoptpoliciesandapproachessimilartothoseinCaliforniatodealwithgreenhousegasemissions.Mostrecently,WashingtonhadplanstoadoptandimplementaCleanFuelStandard,similartotheCaliforniaLowCarbonFuelStandard(Witcover,Kessler,Eggert,andYeh,2015).Theseimplementationattempts,however,haverecentlybeenderailed(64thWashingtonLegislature,2015).ThestatehasadoptedtheCaliforniavehicleemissionstandardsandhasconsideredovertimeadoptingtheZeroEmissionVehicle(ZEV)program(CollantesandSperling,2008),butimplementationoftheZEVprogramremainsunlikelygiventhatitneedstobeapprovedbyaStateLegislatureunsupportivetotheidea.Inthisrespect,thestateofWashingtonoffersanimportantdifferenceinthepolicylandscapewhencomparedtoOregonorCalifornia.

Despitetheabsenceofasalesmandate,per-capitaPEVmarketuptakeinWashingtonhasbeenamongthetopintheUnitedStates,considerablyexceedingthatinmostZEVstates.LookingatarticlecounttrendsforWashington,wealsoseethattheTISmirrorsthenationalEVTISintermsofstrongsupportincreasingovertime.Remarkably,however,thereisstagnationinmediareportingfollowedbyasuddendropinsupportinWashingtonin2011and2012thatdidnotoccurforotherstates.

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Figure5.Visualmappingofthedifferentfunctionsoftheplug-inelectricvehicleinnovationsysteminthestateofWashington.Theoverallnationaltrendisshownforcomparison.

TobetterunderstandwhytheTISleveledoutandthendeclinedin2012,weexaminedwordcloudsforallarticlesassociatedwithelectricvehiclesinWashingtonforeachyear.Startingin2012,anumberofnewPEVmodelsemergedthatcapturedsignificantinterestintheWashingtonmarket(liketheTeslaModelS).Atthesametime,discussionofPEVssuddenlyshiftedfromdealingwithafuturetechnology(“PEVswillbeenteringthemarket”),toacurrenttechnology(“TheTeslaModelSisavailable”).Asisoftenthecasewithnewtechnology,mediahypecanexist(MeltonandAxsen,2015).Hypeoccurswhenusersexpectperformancefromthetechnologytoexceedthetechnology’sexistingcapabilities.Itistheavailabilityofnew,hypedPEVmodelsandthelead-uptotheirentryfrom2012to2013,withacorrespondingshiftinmediareportingfromafutureeventtoacurrentoccurrence(hypecorrection),alongsidePEVsupplyshortagesforelectricvehiclesliketheNissanLeaf,thatisresponsibleforthisstarkcontrastbetweenthe2011and2013TISinWashington.OtherstatesthatdidnothavesuchstronganticipationorhypeforfuturePEVmodelsdonotshowacorresponding“correction”inTISsupport.

InthissectionweexploretheTISfunctionsasportrayedthroughinformationalmeetings,andwetrytoidentifythecriticalfactorsdrivingmarketperformance,aswellasfactorsdeterringfromanevenstrongermarketuptakeforelectricvehicles.WealsoinvestigatehowtheresultsfromtheTISarticle-modelingapproachcompare.


StakeholdersdidnotidentifycompaniesinWashingtonthatsupplyparts,servicesortechnologyfortheproductionofPEVorPEVcharginginfrastructure.TheexceptionisMC

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ElectricVehicles,asmallPEVproducer,whichcouldnotbedirectlylinkedtotheproductionofplug-invehiclesforthelargerscalemarket.WewereintriguedbythefactthatstakeholdersdidnotidentifythejointventurebyBMWandSGLasanimportantpresenceinthestate,contributingtothesupplychainofelectricvehicleproduction.Thesecompanieshadinvestedabout$100milliontodeployacarbonfiberplantinMosesLakeinCentralWashington,andhaveannouncedasecondstageinvestmentof$200milliontotripletheplant’scapacityto9,000tonsperyear.CarbonfiberproducedintheplantisusedintheproductionofthebodyoftheBMWi-seriesplug-inmodelsinGermany.

Thestatehasseenstrongsupportforvehicleelectrificationfromthestateexecutiveoffice,firstwithGovernorChristineGregoire(2005-2013)andthenwithGovernorJayInslee(2013-present).Stateagencieshavealsoplayedasignificantroleinsupportingvehicleelectrification,withanumberofindividualsthatstakeholdersrecognizeaschampions,particularlyinthedepartmentsofTransportationandCommerce.Theseagenciescollaboratedinthepioneeringimplementationofaregionalnetworkoffastcharginginfrastructurecorridors.ThestateDepartmentofTransportationtookaninstrumentalroleinmovingthisprojecttowardcompletionandpublicizingit.TheSustainabilityOfficeofthelargestcityinthestate,theCityofSeattle,hasbeenstronglyengagedinactivitiestosupportvehicleelectrification,andinconveningworkinggroupstocoordinatestatewideactivities.TheWesternWashingtonCleanCitiesCoalitionwasalsoreferencedbystakeholdersasanimportantchampionandakeysourceofinformationaboutEVsforcities.

Asmallnumberofnon-profitswerealsohighlightedaschampions.Amonglocalnon-profits,theSeattleElectricVehicleAssociationhasbeenthemostprominentintermsofEVsupportinthepolicyspace.Plug-inAmerica,anon-profitofnationalscopebutwithastrongpresenceinWashington,hasbeenidentifiedasastrongchampionaswell.ThelevelofengagementthattheautocompanyNissanshowedinsupportingEVmarketsledsomestakeholderstoidentifythemaschampions.Wealsoidentifiedthepresenceof“champion”Nissannew-vehicledealers,whopursuedaggressivemarketingandsalesofNissanLeafs.TheNissandealershipimmediatelyoutsideofSeattlebolsteredthestrongestNissanLeafsalesofanydealersintheU.S.forseveralconsecutivequarters.Uniqueamongstates,thestateofWashingtonhasaLegislatureEVCaucus.ThestrongsupportforEVthatthisbodyhasdemonstratedearnedthemthechampionlabelinthemindsofsomestakeholders.TheengagementofNissanandtheEVCaucuswasinstrumentalonresurrectingthePEVsalestaxexemption.

Prominentamongabsenteesinthelistofchampionsareelectricutilities.Stakeholdersrecognizedthatutilitiesarestartingtoshowstrongerinterestinvehicleelectrification,butindicatedthattherewasstillsubstantialuncertaintywithhowutilitieswillbestbeabletointegrateinthemarket,andthatutilitiesarecautioustoexperimentduetoregulatoryconcerns.

Weemphasizethattheconceptofchampionisgenerallyattributedtoindividualsratherthanorganizations.Clearly,organizationsdeserverecognitiontotheextentthattheyenable

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individualsinthemtobecomechampions,butforeachoftheorganizationsmentionedabovetherehavebeenoneormoreindividualsthateffectivelyplayedthatrolewithpersonalcreativityandresults-orientedcommitment.Wedonotmentionthenamesoftheseindividualstomaintainthefocusofthisreportonthestructuralfactorsratherthanonindividuals.Wearealsoawarethattheremayhavebeenchampionsinorganizationsthatwerenotmentionedabove,butthelistincludedhereisarepresentationofthosewhowerereadilyidentifiedbystakeholders.

Washingtonhasoftenbeenattheforefrontofexperimentationtosupportelectricvehicles.AsoneofthestatesthattookearliestactiontosupportEVs,itoftenfounditselfinunchartedterritory.AcollaborativeeffortofthePugetSoundRegionalCouncilandthestate’sDepartmentofCommerceledamulti-stakeholderprocesstodevelopthefirstmodelordinance,developmentregulationandguidancefortheinstallationofEVcharginginfrastructureinthenationin2010.Thisdocumenthasbeenveryhelpfulinseveralfronts,helpinglocalgovernmentsstartthinkingaboutthesequestions.Asmentionedabove,theDepartmentofTransportationincollaborationwiththeDepartmentofCommerceplannedandimplementedthefirstregionalnetworkoffastchargingstationsinthenation,connectingcommunitiesnorthtosouthalongInterstate5,aswellasalongU.S.Highway2andInterstate90,connectingwesternwithcentralWashington.OnecriticaloutcomefromtheseprojectshasbeentheengagementofcommunitiesinareasthatwerenotinitialPEVtargetedmarkets,helpingthembecomefamiliarwiththetechnologyanditsbenefits.Thisrepresentsaniceexampleofaconnectionbetweentheentrepreneurialexperimentationandlegitimationfunctions.Onefinalareaofexperimentationatthestatelevelthatisworthnotingistheuseofrevenuecollectedthroughtheannual“roadfees”thatPEVownerspaytocompensateforthegasolinetaxesthatwouldotherwisebecollectedfromaconventionalvehicle.This“roadfee”isdirectedtowardinvestmentincharginginfrastructure.

KingCounty,thecountywiththelargestpopulationandthestrongesteconomy,startedexperimentingwiththeuseofplug-invehiclesforitsvanpoolprogramevenbeforethelaunchofcommercial-scalevehiclesin2010.TheirexperimentationexpandedtothetestingoftheNissanLeafinthevanpoolprogramandtoProterraelectricbusesfortheirtransitsystem.

Beyondtheexperimentationthathastakenplace,stakeholdersidentifiedanumberofideasthatcouldbegoodcandidatesforexperimentation,reflectinganactiveexperimentationmindsetamongthePEVpolicycommunity.SuchideasincludedthedonationofPEVstodrivingschoolstoincreasefamiliaritywiththetechnologyamongthepre-car-ownershippopulation.WelearnedthatideaswerebeingdiscussedtolinkPEVstolow-incomefamiliestotapintomarketsthatmaybeattractedbythelowoperatingcostsofthesevehicles.WewerenotabletoidentifymanycompaniesororganizationsinWashingtonthathavebeendevelopingortestingnewtechnologiesorservicesintendedtosupporttheuseofplug-invehicles.Stakeholdersingeneralwerenotawareofplayersinthestartupcommunityinthisspaceinthestate.

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AnalysisfromTISmodelingresultsindicatethatEntrepreneurialExperimentationistheonlyfunctioncapturedthatshowssignificantlybettersupportinWashingtonthanelsewhereinthenation.Modelingresultsindicatethatthisfunctionhasbeenwellsupportedsince2009.ThiscorroboratestheaccountofconsiderableinterestinEVsfromtheprivatesectorandprivateindustryforexperimentingwiththereleaseofEVmodelsinWashington.In2009,NissanbegantoprimeselectNorthAmericanmarketsfortheirreleaseoftheLeaf,includingstoppingin22citiesincludingSeattleandotherkeymarketsontheWestCoast.

KnowledgeCreation&Diffusion

TheStateofWashingtonhasimplementedoneoftheveryfewexemptionsonthesalestaxforelectricvehiclesinthenation.Thispolicyoriginallyappliedtobatteryelectricvehiclesonlyandmorerecently,asitsexpirationdateapproached,wasextendedandamendedtoincludeplug-inhybridelectricvehiclescontingentonaminimumrequirementonthesizeofthebattery.StakeholderspointtothispolicyasakeydriverofthePEVmarketinthestate.Thelevelofcertaintyaboutthedegreeofeffectivenessofthetaxincentivevariedsomewhatacrossstakeholdersfromcompletecertaintytomorecautiousconfidence.SomestakeholdersbasedtheirbeliefabouttheeffectivenessofthisincentiveonthefindingsofastudycommissionedbytheLegislature’sJointTransportationCommittee.Thisstudy,whichwasactuallycriticizedbysomestakeholders,wasconcernedwiththeexplorationofbusinessmodelsforcharginginfrastructure,anddidnotdoanyanalysisoftheeffectivenessofvehicleincentives.Thismisperceptionormisunderstandingofthefindingsofthestudyfundedbythelegislaturesuggestsweaknessesintheprocessofpolicyknowledgecreationanddiffusion.Afewstakeholdersarguedthatplug-inelectricvehicleshelpconsumersthinkaboutvehicleeconomicsintermsoftotalcostofownership,insteadofsolelyfromanupfrontexpenditurepointofview.SomestakeholdersstillbelievethatwithouttheseincentivesPEVsaremoreexpensivesinceproratingcostsis“aluxurytohigherincome”segments.StateagencieshavedevelopedestimatesshowingthattheNissanLeafenablessavingsintheorderof$6,500overtheownershipofthevehicle,althoughtheyexpressedconcernthatthistypeofinformationisnotyetwelldisseminatedandconsumersremainrelativelyuninformedinthisrespect.Furthermore,thelevelofthesesavingscansubstantiallydiminishduringperiodsoflowgasolineprices,bringinguncertaintytothetruevalueofthepurchase.ExperiencefromPEVsoperatedinthestatefleetshowsthatPEVsdooffercostsavingsprovidedthattheyaredrivenasufficientnumberofmiles.Itwassuggestedthattheupfrontcostisnotarealbarriergiventhecompetitiveleasingplanscurrentlyofferedbysomemanufacturers,particularlyNissan,butthattheperceptionofPEVsbeingmoreexpensiveisstillprevalent.Thesalestaxexemptionalsoappliestoelectricvehiclesupportequipment(EVSE).SomestakeholdersalsobelievethattheavailabilityofpublicEVSEhasbeeninstrumentalinsupportingthemarketpenetrationofPEV.OnestakeholderreferencedthecaseofKansasCity,wherePEVadoptionreportedlygrewwiththenumberofchargingstations,accompaniedbyadropinthecostofinstallation.FundingfromtheAmericaRecoveryandReinvestmentAct

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providedasignificantboosttothedeploymentofanetworkofchargingstationsinWashingtonstartingin2009-2010.Somestakeholderssaidthatthemulti-stakeholdercollaborationmentionedabovethatresultedinthedevelopmentofguidanceandzoningdocumentsfortheinstallationofcharginginfrastructurewasanimportantknowledgecreationmilestoneinthatitforcedstakeholdersfromallsectorstothinkaboutanddocumentanswerstokeyquestions,aswellasingettingmunicipalitiestounderstandtheirroleinsupportingthemarketdeploymentofthesevehicles.Becausemunicipalitieswererequiredbylawtoadoptdevelopmentregulationsforcharginginfrastructurebasedonthereportofthisprocess,knowledgediffusionwithinthestatewasstrong.Theresultingdocumentalsoservedasamodeltomanyjurisdictionsaroundthecountry,whichextendedtheinfluenceofthispioneeringcollaborationbeyondthebordersofWashington.Therearefactorsthatwewouldcallnative,orunderlyingcharacteristicsofageographicalregion,thatcanbefavorableorunfavorabletoinnovationinagiventechnology.AmongnativefactorsthatmaybepresentinthestateofWashington,stakeholdersmentionedpro-environment,outdoorsy,andtechnology-lovingattitudesamongsignificantsegmentsofthepopulation.Itisgenerallybelievedthatamarketwiththesecharacteristicsislikelytohavepositiveattitudesaboutanewandcleantechnologysuchasplug-invehicles.Nativefactorsdonothelpexplaininnovationinagivenstate,asthesearerelativelystableovertimeandareanindicationofthebaselineoftheinitialmarket.Assuch,thesefactorscannotbeaffectedmuchbypolicy.Nativefactorsdohelpexplaindifferencesinmarketdynamicsacrossstates.Theyarecarefullyevaluatedbyindustrywhentheydeveloptheirmarketdeploymentstrategies,anditisnocoincidencethatNissanandGeneralMotorschosetheSeattlemetropolitanareaasoneoftheirlaunchmarketsintheUnitedStates.StakeholdersalsoidentifiedanumberofdeterrentsforbroaderadoptionofPEVinthestate.Theneedforfurthertechnologyevolutionandlimitedconsumerinformationwereamongthemostfrequentlymentioneddeterrents.Fromatechnologystandpoint,stakeholdersgenerallybelievethatvehicleelectricrangestillisasignificantbarrierandthatthisbarrierisstrongerforone-carfamilies.Theyalsobelievethatadditionalelectricvehiclemodelsarealsoneededtoappealtoabroaderbaseofthemarket.KingCountyhasbeenexperimentingwithelectricvehiclesintheirvanpoolservices,butfindthatthecurrentmodelsarenotwellsuitedforthedrivecycleencounteredinthistypeofoperations.Staterepresentativesindicatedthatelectricvehiclesinthecurrentstateoftechnologycouldreplaceabout350oftheexistingunitsinstatevehiclefleetswhenretired.Iftheelectricrangeincreasedto200miles,thispotentialcouldexpandsixfoldto2,000vehicles.WhileingeneralstakeholdersarecommittedtohelpingcreatethebestpossibleconditionsforPEVadoption,theyuniversallybelievethatthemosteffectivewaytogrowthemarketatthispointistoseefurthertechnologicalimprovements,predominantlyincreasesinvehiclerange.

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TheneedformoreeffectivecommunicationwithmotoristsaboutPEVswasalmostuniversallyrecognizedasaweaknessintheinnovationsystemandthatneedstoberesolvedtoseestrongermarketuptake.Whilemanyconsumersarefamiliarwiththetechnology,manymorestillneedtobetterunderstandthetechnology.Forexample,experiencewithstatefleetssuggeststhatmanypeoplehavesome“emotionalapprehension”towardthenewtechnology.Thereisnoclearvisionamongstakeholdersonhowtoimproveconsumerawarenessandeducation.Somestakeholdersbelievethatnewcardealershavenot,ingeneral,activelymarketedtoorinformedthepublicaboutplug-invehicles.Thereasonsforthisarenotwellunderstoodthoughthereisasensethatdealers’lowmotivationmaybelinkedtoPEVhavinglowerprofitmarginscomparedtoconventionalvehiclesaswellasahigherriskassociatedwithcustomersatisfaction.Adecades-longlineofresearchonthedynamicsofinnovationssaysthatpeer-to-peerandsocialnetworksprovideanimportantplatformforthediffusionofknowledgeaboutanewtechnology(e.g.Aral,Muchnik,andSundararajan,2009;BollingerandGillingham,2012;Katona,Zubcsek,andSarvary,2011;Moretti,2011;Valente,1996).ThereisnoreasontobelievethiswouldnotapplytoPEV.AnumberoffactorshoweveractagainstthenaturaldiffusionofinformationaboutPEV.First,itismoredifficulttochangeestablishedbeliefsthantohelpdevelopnewones.Thetechnologyhadtoriditselfofhistoricalstigmas,suchastheimageofelectricvehiclesasgolfcarts.Second,perceptionsaboutplug-invehicleshavebeennegativelyaffectedbycampaignsandmediareportsfromdifferentsectorsincludingcarcompanies.Withthiscontextinmind,interventionstohelpwiththedisseminationofinformationaboutplug-invehiclesarewarranted.InWashington,non-profitorganizationssuchasPlug-inAmericaandtheSeattleElectricVehicleAssociationhaveorganizedeventstoconnectPEVownerswithregularconsumers,tofosterpeer-to-peerinformationdiffusion.Whilecharginginfrastructure,particularlyintheworkplaceandalongregionalcorridors,isrecognizedamongstakeholdersasanimportantdriverforPEVadoption,thestate,likeeveryotherstate,facesimportantchallengesaroundthefinancingofthisinfrastructure.Federalfundinghasbeencriticaltojumpstartinvestmentsbutnowlimitedpublicfundingandprivateinvestmentsarechallengestotheexpansionofthisinfrastructure.Wefoundthatgovernmentalorganizationsstruggletofindorcommitthefundingtoinstallchargingstationsattheiroffices.Localgovernmentsinthestatestarteddiscussionsabout“chargeforcharging”toaddresstheconcernofpublicgifting,butpayingfortheuseofthestationswouldonlybeapartialcontributiontowardfinancinginstallations.StakeholderssharedopinionsaboutavarietyofpossibleissuesthatcouldbeslowingthemarketdeploymentofPEV,includingthecomplexrelationshipbetweencarmanufacturersandthestate,thelimitedengagementofelectricutilities,informationgapsinthestatelegislature,andothers.Overall,stakeholdersrecognizetheneedforabetterunderstandingofthebarriers;thiswouldhelpthembemorestrategicintheireffortstosupportPEV.EntrepreneurialeffortsbyPEVchampionsintheOfficeofSustainabilityoftheCityofSeattleandthestateDepartmentofCommercehavehelpedconvenestakeholdersonaregularbasistoexchangeinformationandcoordinatepolicyideas.However,accordingtostakeholders,

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thereisnoconcertedstrategytoidentifythefactorsthataffectPEVmarketsandhowtosupportthemmosteffectively.Stakeholdersstillhavequestionsabouttheroleofcharginginfrastructureandhowgovernmentcanbesthelpwithdeployments.OneexampleistheuncertaintyaboutthevalueofinvestmentsincharginginfrastructureifPEVwithmuchlongerrangewerecomingtothemarketinthenearfuture.Sourcesofinformationthatstakeholdersuseincludemediawrite-ups,theTeslaownercommunity,experiencefromotherregionsandcountries(suchasNorwayandtheNetherlands),datafromandexperienceswiththeuseofPEVinstateandmunicipalfleets,andtheFacebookLeafuserspage,thoughstakeholdersunderstandthatthesearenotrigoroussources.Itisgenerallyrecognizedthatthereisaneedformoregranularinformationonlessonslearned.Limitedsounddataandanalysis,stakeholdersrecognize,canleadtoinefficientpolicydevelopmentandinvestments.Thereisalsoasensethatthecommunicationwiththecarmanufacturerscouldbebetterandthatimprovingthiscommunicationwouldleadtobetterstrategydevelopment.ThegeneraluncertaintyassociatedwithPEVincentivemechanisms,alongsideconfusioninpolicyefficacyandfurtherengagingmanufacturersandutilitiesisalsoreflectedinthestatisticalanalysisconductedonTISarticlecountdata.WefindthattheKnowledgeDevelopmentandDiffusionfunctionhasnotbeenbettersupportedinWashingtoncomparedtoelsewhereintheUnitedStates.DespitecomparativelystrongPEVuptake,theseresultssuggestthatthereisroomtostrengthenknowledgecreationanddiffusioneffortsinWashington.


TheoverallsenseamongstakeholdersisthattheresourcesavailabletosupportPEVmarketdiffusionareinsufficient.ThestateofWashington,however,hasoneofthemostgenerousincentiveprogramsforPEVsintheUnitedStates.Statelawgrantsexemptionsonthestatetaxonthesalesandleasesofvehiclesthat“(a)areexclusivelypoweredbyacleanalternativefuelor(b)useatleastonemethodofpropulsionthatiscapableofbeingreenergizedbyanexternalsourceofelectricityandarecapableoftravelingatleastthirtymilesusingonlybatterypower”(RCW82.08.809,2015).WhiletheincentivewasstatelawbythetimeoftheNissanLeaflaunch,part(b)ofthelanguagewasintroducedin2015,whentheincentivewasextendedthrough2019,toincludeplug-invehiclemodelsthatinitiallydidnotqualifyfortheincentive.Thesetaxexemptionsrepresentsavingsof6.5and5.9percentoftheretailpriceforsalesandleases,respectively.Theargumentusedtogetlegislativesupportfortheextensionoftheincentivebeyondtheoriginalsunsetdate(July1,2015)wascenteredonthehealthimpactsthatmobileemissionshaveonspecificcommunities.

Startingin2015,statesofferingPEVincentivesfacedincreasingconcernsaboutthesocioeconomicequityofthesepolicies.Washingtonwasnoexception.Duringthepolicyprocesstoextendtheincentives,theLegislatureproposedanamendmentlimitingtheeligibilityforthetaxexemptiontovehicleswitharetailpriceunder$35,000.Ensuingdiscussionsresultedinamorebalancedamendmentthatexcludedfromtheincentivetheportionoftheretailpriceinexcessof$35,000,whilethefirst$35,000ofthepriceremainedeligible.ThisanecdoteisatestamenttothethoughtfulnessofsomeofthePEVpolicydiscussionstakingplacein

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Washington.ItisalsoatestamenttotheabilityandcommitmentofWashingtonstakeholderstonavigatethedesignandimplementationofPEVincentivesthroughthelegislativeprocess.

Thestatehasalsoinstitutedarevolvingcharginginfrastructure“bank”atthe$1millionlevel.Thisfund,administeredbythestate’sdepartmentoftransportation,isfinancedwithproceedsfromplug-invehicleregistrationfeesandispredominantlyintendedforinvestmentinpublicaccessfastchargingstations.Arecenttransportationfundingpackagealsoincludesanallocationof$25millionperyeartocoverferryridesandtollsforelectricvehicles—astickerforferryridescosts$250pervehicleperyear.Becauseofdividedviewsinthestatelegislatureabouttheimportanceofsupportingvehicleelectrification,thereissomeuncertaintyaboutthestabilityoftheseresourcesinthelongterm.

AtthestatelevelthereissomepersonneltosupportPEV.TheCityofSeattle’sSustainabilityOfficehasledeffortstounderstandmarketbarriersandconvenestakeholders.CommunitiesassociatedwithTheKingCountyCitiesClimateCollaborationaredevotingstaffresourcestoaddressingbarrierstoPEVandEVSEdeployment.WhenfurtherassessingResourceMobilizationinWashingtonthrougharticlecountdata,wefindthatarticlesdonotrepresentthisfunctionbetterforWashingtonthanelsewhereintheUnitedStates.Giventhatnotmanyotherstatesoffercomparablemonetaryincentivesforthedeploymentofelectricvehicles,thisresultmaybeareflectionoflimitedsalienceofthestate’sincentive.

GuidanceoftheSearch

ExercisingitsrightundertheUnitedStatesCleanAirAct,thestateofWashingtonhaschosentoadoptCalifornia’svehicleemissionstandards.Unlikeotherstatesthatfollowedasimilarpath,thestatehasnotadoptedregulatoryrequirementsforthesaleofzeroemissionvehicles.DuringdiscussionsaboutthepossibleadoptionoftheZeroEmissionVehicleMandate,thestateencounteredstrongoppositionfrompoliticallyinfluentialnewcardealers.Thisstakeholdergroupbelievedthatsuchregulationwouldforcethemtotakeforretailfromthecarmanufacturerszero-emissionvehiclesthattheydidnotnecessarilywant,requiringthedealershipstoinvestintrainingasalesforcethattypicallyhashighturnoverrates.Somedealersalsoopposedonthegroundsthattheywouldhavetomakeinvestmentsincharginginfrastructureatdealershiplocations.AlthoughtheZEVmandatehasnotbeenadoptedinWashington,thestatehasadoptedgoalstoincreasethenumberofPEVinstatefleets,aimingtohaveplug-insaccountfor10%ofnewvehiclepurchasesby2018.Twenty-twostateagenciessignedapledgecommittingtothisgoal.Moreinformally,thestatehasaminimumgoalof50,000plug-invehiclesonstateroadsby2020.Anotherstate-levelactionthatsupportsPEVmarketsisanupcomingamendmentforbuildingcodes,whichwillrequireparkingfacilitiestobeEVSEready.

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Governmentleadershipattheexecutivelevelhasexplicitlysupportedvehicleelectrification.FormerSeattle’sMayorGregNickelsworkedtoconvinceNissantochooseSeattleasoneofthemetropolitanareasforinitiallaunchoftheLeafaspartoftheEVProject,in2009-10.GovernorJayInsleeisacutelyawareofthechallengesposedbyclimatechangeandhasshowncommitmenttolowercarbonemissionsinthestate.TheGovernor’sOfficeunderstandstherolethatvehicleelectrificationcanplayinreducingcarbonemissions.Thestateispresentlyworkingonthedevelopmentandimplementationofarulemakingtoestablishacaponcarbonemissions.Thestate’senergypolicyframeworkiscenteredonpromotingenergyefficiency.Whilethisinitselfisanimportantgoal,ithashadtheeffectoflimitingtosomeextenttheinvolvementofcertainelectricutilities.Activelysupportingvehicleelectrificationcanbeinterpretedaspromotingtheuseofelectricity.ThestatehasadoptedoneoftheearliestEVactionplansinthenation.Theplanlaysout13actionsforthe2015-2020timeframe,believedtohelpthemarketdeploymentofplug-invehicles.Importantly,sincethisplanwasadopted,significantprogresshasbeenachievedtowarditsimplementation.Actionsthatwererecommendedintheplanandonwhichprogresshasbeenmadeincludethefurtherdevelopmentofthestate’sfastchargingnetwork,theextensionofthevehiclesalestaxincentive,theamendmentofthebuildingcodesandothers.FurtherstrengtheningtheguidanceofthesearchintheWashingtoninnovationsystem,theCityofSeattlehasadoptedaGreenFleetactionplanthatalsohasastrongfocusonvehicleelectrification.ThecityalsoadoptedaClimateActionPlanthatimpliessignificantPEVmarketadoption;stakeholdersbelievethathastobethecaseifthecityistoachievethegoal81%reductionincarbonemissionsby2030setforthintheplan.WhilecurrenteffortsareunderwaytofurtherpromotePEVadoptioninWashington,resultsfromourarticle-countanalysisindicatethatthisisafairlyrecentmaterialization,andthatfurthersupportcanstillmanifest.Priorto2009,modelingresultsindicatethatWashingtonhadbeensignificantlyworsethanotherstatesintheU.S.atguidingthesearchtowardPEVs.OncecommercialPEVmodelsbecameavailable,however,thisnegativetrendended.

Legitimation

WesternWashington,andparticularlythePugetSoundregion,hasahighconcentrationofresidentswhoarehighlyeducated,interestedinnewtechnologies,environmentallymindedandrelativelycomfortablefinancially.Thiscombination,intheopinionoflocalstakeholders,hasofferedafertilemarketforthefirstgenerationofplug-invehicles.Residentsarealsoawareoftheverylowcostandlowcarbonintensityofelectricityinthestate,whichisimportanttoconsumersinthefirstandsecondwaveofadopters(new-cardealersnotethateconomicconsiderationsareimportanttothesecondwaveofconsumers).Thisoffersinitialconditionsconducivetostronglegitimationofplug-invehiclesamongconsumersinWashington.

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ConsumersarerelativelyfamiliarwithandinformedaboutPEVinthePugetSoundregion,thoughlesssoinmoreruralregionsofthestate.SomebelievethatthereismisinformationaboutthecostofownershipandthereliabilityofPEV,andthestatehasbeentryingtoaddressthesequestionswithlimitedresourcesbypostinginformationonline.Itisbelievedthatconsumersarealsopoorlyinformedabouttheavailabilityofgovernmentincentives.Intheabsenceofsignificantinformationdissemination,marketingcampaignsandminimalmediaattention,informationdiffusespredominantlyinapeer-to-peerfashion,mainlythroughtheweb.OrganizationsliketheSeattleElectricVehicleAssociationandthePlug-inElectricVehicleCenterhavebeenactivelydisseminatinginformationtothepublic.Thelatter,inparticular,hasbeeninstrumentalinbringingattentiontovehicleelectrificationinruralareasinCentralWashington.Thereisrelativeuncertaintyaboutwhocouldmosteffectivelystepuptoinformconsumers.Whilemostbelievethattheautoindustrywouldbebestequippedtodesignaninformationcampaign,thereisacertaindegreeofdistrustoftheautoindustryamongsomestakeholders.Stakeholdershighlightedtheimportanceoffleetsasatechnologydiffusionmechanism;fleetsadoptionofPEVhelps“putbuttsintheseats”andhelpmotoristsgaindrivingexperienceandfamiliaritywiththetechnology.Somefleetmanagershavebeenproactivelyprovidinginformationtoemployees.Thereisanecdotalevidencethatwhenemployeesparticipateintrainingprogramsthatfocusonvehicleoperationandmakethemfamiliarwiththetechnology,theyincreasetheuseoftheplug-invehiclesrelativetoothervehiclesinthefleet.Simultaneously,fleetoperatorsandtechniciansgainexperiencewiththetechnologyandthusbecometestedsourcesofinformationforpeersanddecisionmakers.Thepublicimageofplug-invehiclesinWashingtonisoverallpositive.Forapopulationwhocaresabouttheenvironment,thesourceoftheelectricityisanimportantelementintheimageofelectricvehicles.Evenwhenmostofthestate’selectricitycomesfromcleanhydropower,thereisstillsomegenerationfromcoalpowerplants,andsomemediaoutletshavehighlightedthisfact.Insomecircles,particularpolicyones,therehasbeenaninterestingpolarizationofthisimagebetweenthe“cool”Teslaandotherelectricvehiclesthatarestillsometimeserroneouslyassociatedwithgolfcarts.TheTeslahasbecomeaniconofwealthandalsoasymbolofwhatelectricvehiclescanbe.Ingeneral,thepublicfeelsthat“EVsareheretostay”,asreportedlyhighlightedbyastatelegislator.IntheexperienceofWashingtonstakeholders,themainconcernthatconsumersexpressaboutelectricvehiclesisaconstrainedvehiclerange.Webelievethattheissueofrangehasbecometocertaindegreepartofthefolkloreofelectricvehiclesandthatitisoftengeneralizedtoplug-inhybrids,whichdonotsufferfromrangeconstraints.Paraphrasingarespectedexpertinconsumerbehavior,Dr.KenKurani,talkingaboutrangeanxietyonlyreinforcesrangeanxietyinconsumers’minds.Thisiscertainlyaperceptionthatworksagainstthelegitimationofplug-invehiclesfortheaverageconsumer.AswewillseeinthesectionaboutMassachusetts,theissueofrangetakesaslightlydifferentspininthecontextofcoldweather.

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Consumers’abilitytochargevehicleathomeisalsoastrongdeterminantoflegitimation.Consumerswhocouldnotpluginatorinthevicinityoftheirresidenceswilllikelyfeelthatplug-invehiclesarenotforthem.Limitedorlackofaccesstoresidentialchargingaffectstwokeymarketsegments,namelyrentersandcondodwellers.TheCityofSeattle’sOfficeofSustainabilityidentifiedthequestionof“garageorphans”earlyonandhasbeenactivelyinvestigatingalternativestoaddressit.

Onaverage,legitimationamonglawmakersisnotstrongandcertainmisperceptionsofthetechnologyremain.WhiletheStateLegislatureisperceivedasbeingdividedacrosspartylinesovertheissueofvehicleelectrification,thereisabipartisanEVcaucus,whichenablesproductivediscussions.PartofthereluctanceamongsomelawmakerstosupportEVpolicyhasbeenduetoequityconcerns,namelytransferringpublicfundstohigh-incomeconsumers;thisissueisbeingaddressedthroughrecentlegislation,whichwediscussedabove.Besidesthispoliticaldivideinthelegislature,wedidnotidentifystakeholderswhoareactivelyantagonistictowardPEV.StakeholdershoweverpointedtotheelectricutilitiesasastakeholdergroupthatshouldhaveplayedastrongerroleincreatingconditionsforPEVmarketdevelopmentintheearlystageofvehicledeployments.Atthetimeofthisstudy,therewasnoformalstatecoalitionortaskforcechartedwithadvancingvehicleelectrification.Atthestatelevel,theGovernor’sOffice,thestateDepartmentofTransportationandtheEnergyOfficeareallverysupportiveandplaysomeroleoncoordination.TheCityofSeattleSustainabilityOfficehasalsoledstakeholdercoordinationefforts.AssessmentofarticlecountsonlegitimationsuggeststhatWashingtoncouldbettersupportthisfunctionoftheTIS.ThelegitimationfunctionisnotbetterrepresentedinWashingtoncomparedtootherstates,andthereisnoindicationthatthestateasawholestartstorecognizePEVasamainstreamtechnology.ThisresultplaysoutintherecentbattleovertheextensionofthestatesalestaxexemptionforPEVs.Goingforward,itseemsthatmoremodelofferingsandadditionalfamiliaritywiththetechnology,andtheinstitutionofarecognizedandresourcedstatecollaborativeorsimilar,maybeabletochangethisperception,furtherlendinglegitimacytothetechnology.

MarketFormation

TheCleanerEnergyActof2007(HB1303)requiresstatefleetstopurchasealternativefuelvehicles,includingplug-invehicles,“totheextentpracticable”.Theintentofthefleetprovisionswastoformmarketfornew,cleantransportationtechnologies,includingplug-invehicles.Theimplementationofthislegislativedirection,however,hasbeenchallengingandisstillinprogress.Partofthechallengescomefromconfusinglanguageusedinthelaw,whileanotherpartcomesfromthefinancialrealitiesfacingstateagencies.WhiletheGovernorhassentstrongencouragementtostateagenciestoconsideradoptingPEV,limitedadoptionhasoccurredtodate.Thisisatrendthatisfurthercorroboratedbythelackofsignificantmarketformationtrendsinarticlecountdata.

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Someofthefactorsaffectingfleetadoptionwerediscussedabove.Ingeneralterms,thereisacostassociatedwiththeorganizationtimeneededtounderstandthetechnologyandtoimplementadministrativeandinfrastructurestepsfortheiroperation.WhilesomefleetoperationsstakeholdersindicatedsupportforPEVstatingthattheoveralleconomicsofthevehicleswereattractive,otherstakeholdersthoughtthatPEVwereonlysuitablefornicheapplications.ArecurringcritiqueassociatedwiththeuseofPEVinfleetswasthelackofamorepowerfulormorespaciousPEVmodels,whichwouldberequiredformanyoperations.

Wediscussedabovethestrongincentiveprogramimplementedbythestate,whichhasmarketformationeffects.ThereisgeneralagreementonthepositiveeffectthatthecurrentsalestaxincentiveprogramhashadandishavingonPEVmarketdevelopment.Stakeholderspointedtoonestudy(Keybridge,2015)thatlookedspecificallyattheeffectofthePEVsalestaxexemptiononthestateeconomyandarrivedattheconclusionthatsucheffectsarepositive.

Besidesstateincentives,thelargestelectricutilityinthePugetSoundregion,PugetSoundEnergy(PSE),implementeda$500rebateforthefirst5,000qualifiedcustomerstoinstallresidentialelectricvehiclechargingequipment.PSE’smainmotivationistocollectdataandbetterunderstandquestionsrelatedtotheintegrationofplug-invehicleswiththeelectricitygrid.


PEVsupportersinWashingtonhavebeenabletomakestrongargumentsabouttheeconomicandenvironmentalbenefitsthatthemassadoptionofthesevehicleswouldbringtothestate.ElectricityinWashingtonisamongthecleanestandmostaffordableinthenation.Thepotentialforairqualitybenefits,particularlytodisadvantagedcommunities,hasbeenastrongsellingpointforbothsidesofthepoliticalspectrum.Whenitcomestoacknowledgingthebenefitsaccruingfromthelowercarbonemissionsofplug-invehicles,thepoliticaldivideissignificantlywider.Onenarrativeconsistentwiththedefinitionofthepositiveexternalitiesfunctionisthatifthedevelopmentorproductionofanewtechnologyresultsinincreasesineconomicprosperity(e.g.newjobcreation)inthestate,thenthestatewouldshowinterestinsupportingtheindustryplayersresponsibleforsuchbenefits.ThishasnotentirelybeenwhatweobservedinWashington.BMW,theGermanautomanufacturer,investedover$200millioninthestateforthedeploymentofaplantthatmanufacturescarbonfibersthatarethenshippedtoGermanyfortheproductionofthecompany’selectrici-series.Interestingly,thisinvestmentandtheassociatednewjobsdidnotgeneratesignificantlymorepositivepoliticalattitudestowardvehicleelectrificationingeneralorthecompanyinparticular.Indeed,BMWelectricmodelswerealmostentirelyleftoutofthestatetaxincentive,astheoriginaltextofthelawproposedcappingeligibilityto$35,000.DiscussionswithstakeholdersindicatethatBMWislookingtoextendtheapplicationofmanyofthesemanufacturingtechniquesandmaterialadvantagestotheirothervehiclemodels,makingtheeconomicsforsuchafacilitymorecompelling.

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DespitethestrongbenefitsthatcancomefromPEVs,manyofthesebenefitsarenotuniquetoWashington.Assuch,thePositiveExternalEconomiesfunctionwasnotbetterrepresentedinWashingtonthanintherestoftheU.S.inthearticle-countanalysis.

TheStateofMassachusetts

MassachusettssharessomesimilaritieswithWashingtonandisdissimilarinseveralimportantways.LocatedintheNewEnglandregioninthenortheastoftheUnitedStates,itissubjecttolargerseasonalclimaticswingswhereone-digitwintertemperaturesarenotinfrequent.Alsoconsideredagenerallyprogressivestate,Massachusettsismuchsmallerthanthestatesinthewest,andhasahigherpopulationdensity.Thestatehasbeenaleaderintheregioninregulatoryactiontoaddressmobileemissions,adoptingtheCaliforniaemissionstandardsaswellastheZEVregulationinthe1990’s.Becauseoftherelativelysmallsizeofmoststatesinthenortheast,thesestateshavehistoricallyapproachedairqualityproblemscollaboratively.Thisisstillthecasewiththerequirementofzeroemissionvehiclesales,whichhasalsobeenadoptedbytheregionalstatesofMaine,Vermont,RhodeIsland,Connecticut,Maryland,NewYorkandNewJersey(CollantesandSperling,2008),ThiscollaborationismanagedbytheNortheastStatesforCoordinatedAirUseandManagement(NESCAUM),anon-profitorganizationjointlycreatedandsupportedbythesestates.

Despitethepresenceofasalesmandate,PEVmarketuptakeinMassachusettshasbeenrelativelychallenging.Furthermore,trendsassociatedwithTISarticle-countanalysisindicatethatMassachusettshasnotsupportedanyoftheTISfunctionsbetterthanotherstates,andhassupportedthe“GuidanceofSearch”functionsignificantlyworsethanintherestoftheU.S.Thismaybeduetoavarietyoffactorsthatwewilltrytoidentify.TheoverallTIStrendsasrepresentedthroughrelevantarticlecountsareshowninFigure6InterestingtonoteistherecentdeclineintheMassachusettsPEV-TISsinceapeakin2012–atstarkcontrastwithWashington.

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Figure6.VisualmappingoftheTISfunctionsforMassachusetts,alongwithoverallnationaltrend.

InthissectionweexploresomeofthecriticalfactorsdrivingtheEVmarketdynamicsinthestate.


WedidnotidentifycompaniesinMassachusettsthataresignificantpartsofthesupplychainofplug-electricvehicledevelopmentandproduction.ThecompanythatstakeholdersreferencedmoreoftenisA123,adeveloperoflithium-ionbatteriesthathadoriginallyattractedsignificantattentionofinvestors.Anumberofsmallercompanies,particularlyinthevehiclechargingspace(e.g.wirelesschargingandtraditionalequipmentsuppliersandinstallers,suchasEVGo.ChargePoint.Voltrek,etc.)werealsomentioned.Thestate,andparticularlytheBostonmetropolitanregionhostavibrantstartupcompanycommunity,andcertainlysomeofthesehaveimplicationsforelectromobility.Thus,thereisaninnovationdialoguethatisdifficulttoevaluate.WefoundsomeevidencethatideasfromthestartupanduniversitycommunitiesmaybegivenaplaceinPEVpolicyandstrategydiscussions;thoughwebelievethereisspaceforbettercommunication.

WeareawareofanumberofchampionsinthestatewhohavebeencommittedtoadvanceandsupportelectromobilityinMassachusettsforyears.StakeholdersoftenreferencedthestateDepartmentofEnvironmentalProtectionandtheDepartmentofEnergyResourcesincludingtheCleanCitiesCoalitionhousedinthelatter.TheGovernor’sExecutiveOffice,whichrunstherecentlycreatedzeroemissionvehiclecommission,wasalsoidentifiedasanactivechampion.Thevalueofthesechampionswascharacterizedascoordinatingstakeholderactivitiesandpushingpoliciessuchasfinancialincentives.Whileactiveandinfluential,someof

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thestakeholderswithwhomwespokewerenotabletoidentifychampions.Thismaysuggestthattheirreachcouldbeexpandedtoincludestakeholdersandgroupsthatarenotdirectlyengagedinpolicyandplanningdiscussions.

Someofthemunicipalities,suchasBostonandBedford,wereidentifiedaschampions,leadingtheadoptionofplug-invehiclesintheirfleets.OtherchampionsincludedthetopnewcardealersandtheAcadiaCenter,anon-profitorganization.

StakeholdersingeneralthinkthatthereislittleexperimentationwithnewideastosupportPEVmarkets.Thereisgeneralagreementthatrideanddriveeventsareeffective,astheyexposeconsumerstothevehicleandhelpthemgetovermentalbarrier.Thestaterecentlystartedaprogramtosupportworkplacecharging,whichcanbeconsideredagoodexampleofexperimentation.However,atthetimeofourresearchthisprogramwasfairlynewsosomestakeholderswerenotawareofit.

Newideasfromtheprivatesectorincludetheuseofelectricvehiclebycarsharingcompanies,whichalsohelpsconsumersexperiencethevehicles(likelyamoreimmersiveexperiencethanarideanddrive),andalsomayhelpwithprovidingsomepublic-accesscharginginfrastructure.ThecompanyChargePointimplementedrelativelyinnovativeinfrastructurefinancingformulti-unitdwellingswherebyownersretaintheabilitytotakethechargingequipmentwiththemifandwhentheymove.Somedealershipsstartedofferingextendedtestdrives,lettingconsumerstakethevehicleforseveraldaysbeforebuyingthevehicle.

TheelectricutilityEverSourcewasreferencedasaprogressiveorganizationwithcustomersinthestatesofMassachusettsandConnecticutthathasbeenworkingonideastosupportPEVdeployment.ItinstitutedresidentialPEVratesstructuredasanaccessfeetiedtoaflatenergyrate.InMassachusetts,theyuseda$3accessfeeanda¢0.23perkWhrate.InConnecticut,theyusedanaccessfeeof$16andanenergyrateof¢0.15perkWh.Accordingtostakeholders,thetestingofnewideas,suchasdedicatedrates,issometimeschallengingastheyarefacedwithcomplaintsfromdifferentstakeholdergroups.Forinstance,socialjusticegroupsmaytendtofocusonthehighpartoftherate(theaccessfeeinConnecticutandtherateinMassachusetts)andargueagainsttheexclusionoflowerincomesectors.Conservationgroups,ontheotherhand,maybeuncomfortablewithideasthatpromotetheuseofenergy.Toavoidpubliccriticismandperceptionthattheymaynotbeactinginthebestinterestofconservationorlowerincomecustomers,risk-averseutilitiesmayprefertodonothing.

AcompanybasedinWatertown,MA,isdevelopingwirelesschargingsystemsthatcouldbeinstalledinvehiclesinfactoryorasretrofits.Thesesystemsareachievingtechnologicalmaturityandcouldhelpimproveconsumerschargingexperience.Firstgenerationapplicationsofthesesystemswillbestationary,locatedinplacessuchasparkinglots,whilesecondgenerationapplicationscouldbedistributed,suchasinbusstops.

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KnowledgeCreation&Diffusion

Aswesawabove,PEVsalesinMassachusettshavefollowedaslowerupwardtrendthaninotherstates.Weconsultedwithstakeholdersaboutpossiblefactorsthatmaybeactinginsupportofanddeterringfromstrongersales.Onereasonthatstakeholdersputforthisthatindustryisnotdeliveringawidervarietyofmodels,andastheearly-adoptermarketsegmentissaturated,otherconsumerslookforothermodeloptions.

Whilestakeholdersbelievethatplug-invehiclesofferarangeofbenefitsthatshouldbeappealingtoconsumers,suchasagooddrivingexperienceandloweroperationandmaintenancecosts,manystakeholdersagreedthatconsumersarenotwellawareoftheseaspectsofthetechnology.StakeholdersalsopointedoutthatcurrentlythePEVmarketplaceisconfusingtoconsumers.ConsumersaretoldaboutBEVvs.PHEVvs.PHEV40,orlevel2vs.level1vs.DCFastcharging,whichisoftentootechnicalandhardtoabsorb.Forconsumers,gasolineismucheasiertounderstand.Thus,thereseemstobeaneedtosimplifythewaythatPEVarecommunicatedtothemarket.

Frominformationwereceived,thecarcompanieshavenotdonemuchmarketing,forreasonsthatarenottoocleartostakeholders,althoughsomeventuredthatindustryisnotshowingmuchinterest.Theyalsopointedtodifferencesinattitudesacrossautomakers:somehavechosennottomakeplug-inmodelsavailable,whileothershave.SomestakeholdersindicatedthattheZEVregulationhasbeenthemainmotivationforindustrytobringplug-inmodelstothemarket.Thereisnorobusteducationcampaignfromotherstakeholdergroupeitherandingeneralthereseemstobeuncertaintyastohowtobestfilltheconsumereducationgap.Somebelievethatintheend,toeffectivelyinformthepublic,industrywillneedtogetinvolved,butthattheyaredrivenbyprofitandcurrentlyhaveverylimitedbudgetstosupportvehicleelectrification.

SomestakeholdersbelievethattheeconomicsofPEVownershiparecompelling,particularlyafterthestateimplementedfinancialincentives.Somestakeholdersreferredtosurveyresearchthatsuggeststhatcapitalcostandlimitedmodelavailabilityarekeyobstaclestoconsumeracceptance.TheTeslaModelShasdemonstratedthatPEVcanbeattractiveandexciting,andthatothermodelswithattractivedesignwouldhelpattractothermarketsegments.Whileobjectivelyplug-invehicleswouldsaveconsumersmoneyonfuel,somestakeholdersquestionwhetherthisentersconsumerscalculationsasstronglyasthehighercapitalcost.

Stakeholdersgavetheavailabilityofpublic-accesscharginginfrastructurevariousdegreesofimportanceasamarket-drivingfactor.Somestakeholderssayitiscriticaltohavearobustchargingnetwork,andsomefurtheremphasizedtheimportanceofastrongnetworkofDCFastchargingstations(atthetimeofthisresearch,therewere30suchstationsinthestate,whichsomestakeholdersconsideredinsufficient).Otherstakeholder,however,pointedtosurveyresearchthatsuggeststhatpublicaccesschargingisnotanimportantfactortodrivesalesatthispoint.Inthiscontext,somestakeholderscommentedthateventhoughnoviablefinancial

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modelhasbeenidentifiedforpublicaccesschargingstations,thisisnotasignificantfactorinexplainingPEVmarketuptakeinthestate.

The“garageorphan”issuewasalsoidentifiedasanobstacleforPEVadoptionininnerBoston.Stakeholdersbelievethatmulti-unitdwellerswouldbeanimportantadopterpopulationiftheyhadaccesstocharging.ThisisconsistentwithearlierstudiessuggestingthatchargingstationsatcommercialcentersintheBostonareawereusedatnightbynearbyPEV-ownerresidents(TransportationandClimateInitiative,2013).Stakeholdersindicatedthatcondoassociationsarenotyetfamiliarorcomfortablewithquestionsrelatingtochargingaccess.Therearenoestablishedprogramstoaddressthis.

Massachusetts’consumerscurrentlycanbenefitfromfederalincometaxincentivesandstaterebatessupportingtheadoptionofplug-invehicles.Whilestakeholdersuniversallyagreethatsuchmechanismsarecriticaltohelpthemarketintheearlystages,someindicatedthat,accordingtoavailableevidence,incentivesaremosteffectivewhenimplementedatthepointofsale.Infact,somestakeholdersidentifiedthelackofapoint-of-saleincentiveasafactorthatslowsdownsales.Otherssuggestedthatfueltaxationwouldbeequallyincentivizingofthemarket.Higheroilpricesin2007-08influencedtherenewedconsumerandpolicyinterestinvehicleelectrification,whichhelpedcreatefavorableconditionsfortheintroductionofelectricmodelssuchastheNissanLeafandpublic-privatepartnershipsonmanufacturingcapacityinvestments,suchastheNissanbatteryfactoryinTennesseeandtheexpansionofTesla’sfacilities.Therecentdownwardtrendsinoilandgaspricesarere-creatingmarketconditionsconducivetofossilfuelconsumption.

StakeholdersacrosstheboardsuggestedthattheelectricrangelimitationsinmostPEVmodelscurrentlyinthemarketareacriticalimpedimenttobroadermarketacceptance.This,inconjunctionwiththelongertimesneededtorechargethevehiclesencouragetheperceptionthatbatteryelectricvehiclesarebestsuitedtobethesecondvehicleinthehousehold.Somestakeholdersbelievethatelectricrangesintheorderof200milesormorewouldsignificantlyhelpspurthemarket.ThecoldwintersintheNortheastandtheheavytollthattheuseofheatingtendstohaveononboardbatteriesarebelievedtosignificantlydeterioratetheelectricrangeofplug-invehicles.StakeholderssharedanecdotalevidencefrominteractionswithnumerousPEVownersthatconfirmsthiscoldweathereffectonelectricrangeandthatitfrustratesmanyPEVowners,itpreventsthemfrombeingmoreenthusiasticaboutthecarsandfrompassingontotheirpeerspositive“reviews”.Thiswouldnegativelyaffectthepeer-to-peereffect,oneofthekeymechanismsfornewtechnologydiffusion.

Itwasarguedbysomestakeholdersthatthebatteriesarenotsizedforthewinterandthatthenarrativethat“wedrivelessthan40milesaday”islesscompellinginthecontextofharshwinters.Ingeneralwefoundthatstakeholderstendtofocusonbatterysizeasthesolutiontotheelectricrangeconcerns,andmuchlessattentionisgiventootherstrategies,suchasadvancesincabinheatingsystemsorbetterintegrationofworkplaceorpubliccharginginfrastructureintouserchargingbehavior(asnotedabove,somestakeholdersdonotseenon-

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residentialinfrastructureasanimportantdriverinadoption).Tomoststakeholderswithwhomwespoke,improvementsinvehicletechnologyaremoreimportantatthispointthanpolicyandplanningtoseeimprovementsinmarketuptake.

Fromapolicyperspective,asdiscussedabove,stakeholdersagreethatfinancialmechanismssuchasrebatesandtaxincentivesareeffectiveatmovingthemarket.Somestakeholdershoweverbelievethatpolicydiscussionsinthestateareoftentoocomplicatedandbroad.Discussions“getstuck”onquestionssuchasregulatorytreatmentofpublicaccessstations,whichsomestakeholdersbelievearenottooimportantatthispointanddistractsstakeholdersandpolicymakersfrommoreimportantquestions.Somestakeholdersbelievethatthebreadththatpolicydiscussionstakeistheresultofalimitedunderstandingofthekeyissues.

Cardealershipswereseldommentionedinourconversationswithstakeholders.Fromthelimitedinformationwereceived,itappearsthatthereisadiversityofattitudesandwillingnesstopromoteplug-invehiclesamongdealers.Thereasonsforthisareapparentlydiverse.Itappearsthatbetterstakeholderknowledgeofthiscriticalareamaybebeneficial.

Somestakeholderssaidthattheyorotherstakeholderswerestillunclearastothenetenvironmentaleffectsofplug-invehiclesinthestate.Theycitedasexamplestheunclearunderstandingoftheconnectionbetweenplug-invehiclesandtheattainmentofclimategoals,questionsabouttheso-called“longtailpipe”(theimpactthatPEVmighthaveonupstreamemissionsfromcoalelectricitygeneration),andenvironmentalquestionsrelatedtobatteryrecycling.Theseuncertaintiesweakenthepro-environmentnarrativetosupportPEVdeploymentamongsomestakeholdersinthestate.

HowDoStakeholdersInformThemselves?

TheStateofMassachusettshasalonghistoryofcollaborationwithotherstatesthatadoptedtheZEVregulation.WhentheZEVstatessignedamemorandumofunderstandingcommittingtotakedecisiveactiontosupportthedeploymentofzeroemissionvehicles,oneoftheirfirststepswastodevelopanactionplan.Theresultwasadocumentdescribing11actionsthattheyidentifiedascriticaltosupportzeroemissionvehiclemarkets.Intheprocessofdevelopingthisdocumentandtodeepentheirunderstandingofwhatwasneededtoimplementit,theZEVstatesconvenedanumberofactivitiestoelicitinputfromawidevarietyofstakeholders.ThestateandthecityofBostonalsojoinedaninitiativecalledZeroEmissionMAPthatconvenedgovernmentjurisdictionsinNorthAmericainterestedinincorporatingthelatestresearchtoinformtheirzeroemissionmobilitystrategies.Atthestatelevel,however,therehadnotbeenaformalforumforstakeholderstosharelearnedlessons,coordinateactivitiesandinformstrategiesrelatedtoplug-invehicles.TheZEVCommission,formalizedrecently,isexpectedtoplaythisimportantroleandsupportknowledgesharinganddiffusion.Somestakeholderstoldusthatthecommissionhasalreadybeenvaluabletodiscusswhatworksandwhatdoesn’t.

TheMassachusettsCleanCitiesCoalitionisperceivedasaleaderamongCoalitionsintheNortheastandisactiveinconveningstakeholdersinspecificsectorstoshareinformationand

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experiences.SimilartotheCaliforniamodel,thestateimplementedasurveythatconsumerswhoreceivethestatePEVrebateneedtocomplete—theresponsestothesurveyhavebecomeanimportantsourceofinformationforregulators.Afewstakeholderswerefamiliarwithresearchevidenceandexperiencesinotherjurisdictions,althoughnotallofthemweredirectlyinvolvedindiscussionstoinformstatestrategy.

Moststakeholderswithwhomwespokesaidthattheytrytogatherinformationfromavarietyofsources,tappingonrelationships,collectinganecdotalevidenceandreadingpublicreports.Onestakeholderdescribedthisinformationgatherprocessas“beingoutandabout,listeningtopeople”.

WhatKnowledgeisNeeded?

Asmentionedearlier,somestakeholdersareinterestedinanarrowerpolicydiscussionthatfocusedonveryfewactions.Onestakeholdersummarizedthisperspectiveas“therestisnoise”.TheirperspectiveisthattheZEVactionplancontainstoomanyrecommendations,itpreventskeystakeholderstofocusonanyoneoftheactionitems,andthatthereisaneedforprioritization.Thisgroupofstakeholdersbelievesthatthebreadthofthepolicydiscussionisaresultofnothavinga“matureunderstandingoftheissues”.

Somestakeholdersemphasizedthatsupportingfurthertechnologyimprovementsismorecriticalthanaggressivepolicy.Policyneedstokeepsightofthestateoftechnologyandnottrytoforcethemarketsexcessively.Itmaybecounterproductivetosellatechnologythattheyarenotsureconsumerswilllove.Onthetechnologyfront,stakeholdersgenerallybelievethatelectricrangesuffersintheharshwintersoftheNortheastandthatindustryneedstodevelopsolutions.Forexample,stakeholderssuggestedthatspecificplug-inmodelsneedmoreefficientheatingsystems.StakeholdersingeneralalsobelievethatPEVmarketuptakewouldincreaseifindustrysuppliedmoreplug-inmodels.

Stakeholdersalsohighlightedtheimportanceofgettingabetterunderstandingofthepolicyleversthatcanbeeffectiveatmovingthemarketandwhatwouldlureconsumerstoconsiderplug-invehicles.Theyindicatedthatthereisnotsufficientinformationbasedonseriousmarketresearch.Stakeholdershaveopinionsorbeliefsaboutwhatisneededtoappealtoabroaderconsumerbase,buttheseopinionsandbeliefs,theyadmit,areoftennotgroundedonhardevidence.Oneexamplecitedbystakeholdersistheneedtobetterunderstandwheretolocatechargingstations.

Stakeholderssuggestedtheneedformoreexperimentationinareassuchaschargingratesandconsumerinformation.ThestatewasconductingapilottopriceDCFastchargingonanenergybasis.Regulatorsareinterestedindoingsomethinginthisspacebutmoreexperimentationmaybeneededtoseewhatismoreeffectivetosupportthemarket.Forexample,onequestionthatwasraisedwasweathertime-of-useratesystemswouldbemoreeffectivethantestingnewtechnologiesforthecontrolofcharging.Toaddresstheinformationgap,stakeholderssuggestedtheneedtofindmechanismstoengagewiththecardealerships,tounderstandhow

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togetmorebuy-inandgetthemtobettereducateprospectivebuyers.StakeholdersrecognizedthatNissanhasbeeningeneralmoreproactiveinworkingwiththeirdealershipstosupportPEVsales.


StakeholdersingeneralsaidthatthestatehascomealongwaytoallocatingresourcestosupportPEVmarket.Forexample,theZEVcommissionwasestablishedandaPEVsalesrebateprogramwasimplemented.Resourcesforthemostpartcomefromthestate;themainmetropolitanareashaveallocatedverylimitedresourcesanddonothavestrongprograms.

Whilethefundsforthevehiclerebatearereplenishedeveryyear,somestakeholdersexpressedconcernsaboutthestabilityofthatprogramandtheneedforalong-termfundingstrategytosupportvariousaspectsofPEVreadiness.VehicleelectrificationhasreceivedsupportfromtheGovernor’sOffice.Evenafterthechangeinadministrationin2014,theGovernorconvenedtheZEVCommission,supportedincentivesandstayingassignatoryoftheZEVMOU.

GuidanceoftheSearch

WhenconsultedaboutpossiblestatutoryorregulatoryelementsthatcouldbeslowingdownPEVadoption,stakeholdersoftenpointedtoissuesrelatedtotheinstallationofcharginginfrastructure.Installationsinmulti-unitdwellingsareapparentlyproblematic,asPEVownersdependonapprovalfromcondoassociations.Theprocessingofinstallationpermitsoftentakeslongandsomestakeholdersmentionedinstitutionalelementsthatmaydeterfromtheelectrificationofparkinglots.Moregenerally,stakeholderspointedtotheneedtoupdatethebuildingcodetoaccountforcharginginfrastructure.

Whilesomestakeholdersindicatedthatfurtherdeploymentoffastcharginginfrastructurewouldbecritical,theygenerallyexpressedconcernsaboutthecurrentdemandchargesbeingtoohigh(thesecondinthecountry)whichisanobstacletomaterializethatdeployment.

WiththeadoptionoftheZEVregulationandthesigningoftheZEVMOU,thestateissendingaclearsignalaboutitscommitmenttovehicleelectrification.Until2017,however,theregulatedautomanufacturerscanmeettheirZEVobligationsinMassachusetts(andanyotherZEVstate)countingsalesofqualifiedvehiclesinCalifornia,afterapplyingspecificproportionalityrules(CCR1962.1(d)(5)(E)).Thiscomplianceflexibility,commonlyknownasthetravelprovision,maybehavingtheeffectoftemporarilyweakeningorconfusingmarketsignalsforMassachusettsbarringotherclearincentivesforPEVadoption.TheadoptionofanactionplanalongwithotherZEVstatesprovidesdirectionregardingtheareasthatwillbeprioritized.Additionally,theZEVcommissionhasdevelopedanactionplanandsubmitteditforapprovalbythecommissioners.TheCityofBostonhasnotadoptedstrongsignalstodrivePEVadoption.Thecity,oneofthemajorhubsofinnovationinthecountry,releasedanupdatetoitsclimateactionplan,GreenovateBoston,in2014,whichcontainednospecificdirectionsorgoalsrelatedtoplug-invehicles.

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InMassachusetts,stakeholdersoftenexpressedtheneedforPEVtechnologytomaturebeforepolicycouldbemoreeffective.Giventhis,anduncertaintyaboutcontinuedpolicysupportandresources,signalstopursuePEVdevelopmentanddeploymentinthisregionareweakened.UncertaintiesandlackofguidancetowardPEVtechnologieswerealsoevidencedbythestatisticalanalysisweconductedonPEVTISarticlecounts.TheresultssuggestedthatMassachusettswassignificantlyworsethanotherstatesatinfluencingthedirectionofsearchtowardPEVtechnology.

Legitimation

StakeholdersuniversallyagreedthatconsumersinMassachusettsareeitherunawareofplug-invehiclesorunfamiliarwiththetechnologyanditsenvironmentalbenefits.Thisisapparentlybackedbyresultsfromconsumersurveys.Wereceiveddisparateinformationaboutthedegreeofawarenessamongpolicymakers,frommostlyunawaretoaware.Theinformationgapamongconsumersisaresultoflimitedinvestmentsinmarketingbyindustryandotherkeystakeholders.Massachusetts’electricutilitiesareeffectiveatdisseminatinginformationaboutincentivesandenergyefficiency,thoughtheyarenotengagingsignificantlyoninformingthepublicaboutplug-invehicles.Somestakeholderssaidthatthelimitedinvolvementofelectricutilitiesisamissedopportunity.Asapossibleexampletofollow,theyreferredtothecaseofSouthernCaliforniaEdison,oneofthelargestelectricutilitiesinCalifornia,whichseeded100plug-invehiclesinthecommunitiesitserves,loaningthesecarsfortwoweekstoincreaseconsumerexposuretothetechnology.

DoesthePublicHaveaPositiveOpinionofPEVs?

BecausepublicawarenessofPEVislow,itseemsfairtoassumethatonlyarelativelysmallsegmentofthepublicwouldhaveanopinionaboutthem.Stakeholderscouldnotagreeonhowpositivesuchopinionswere.WhilethatsegmentofthepublicseesPEVgenerallyasagreentechnology,theremaystillbequestionsaboutthe“longtailpipe”stillremainamongnotjustthepublicbutalsoamongsomestakeholdersandpolicymakers.TheresultisayetunclearunderstandingamongcertainsectorsoftheconnectionbetweenPEVandclimatepolicy.Onestakeholdersaidthattherearenopolicymakerswhoare“passionate”aboutplug-invehicles.

TheTeslaModelShasbeenmorepublicizedandmorepeopleareawareofitthanothermodels.TheModelS,accordingtostakeholders,hasbeensuccessfulatdemonstratingthebenefitsofplug-invehicles,beatingthecompetitioninitscategoryinallmetrics.Teslashowsconsumersthattheelectricvehicleisnotexoticorimpractical.AstakeholderdescribedtheTeslaasan“aspirationalproduct”.

WhilestakeholdersgenerallyseetheTeslaasasuccessstoryandafewcarcompaniesareactivelysupportingPEVmarkets,othercarcompaniesarepubliclyexpressingskepticismaboutthemarketforPEVintheregion.Inthiscontext,non-profitorganizationsaretryingtoplayanadvocacyrole.StakeholdersidentifiedAcadia,theSierraClubandtheConservationLawFoundationasthekeyadvocatesinthenon-profitsector.TheyhavehadsomesuccessatbringingawarenessaboutthePEV-climateconnectiontokeydecisionmakers.

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MarketFormation

ThestatehasimplementedaPEVrebateinmid2014.Therebateprogram,namedMOR-EVandfundedwithproceedsfromtheRegionalGreenhouseGasInitiative,offers$2,500and$1,500tobuyersorlesseesofbatteryelectricvehicles(BEV)andplug-nhybridelectricvehicles(PHEV)respectively.PEVbuyersandlesseeswithleasesofatleast36monthscanapplyfortherebateandcouldexpecttobeissuedtherebatewithintwoandhalfmonths,contingentonapprovalandavailablefunding.Inthefirst18monthstheprogramhadissuedalmost1,600rebates,withover65percentoftheapplicationsreceivedfromBEVbuyers/lessees.Bythenabout$4millionhadbeenallocatedtoconsumers.

WhilestakeholdersbelievethatMOR-EVisimportanttodrivemarkets,theyaredebatingtherolethatitoughttoplayinsalesofhigher-endvehiclemodels.TheTeslaModelSrepresentedabout430rebateapplications,orover25percentofthetotal.Higher-endmodelsareeligibleforthesameincentiveasmoreaffordablemodels.Justlikeinotherstates,thisissparkingadebateabouttheroleoftheprograminhelpingwealthierconsumers.Somestakeholdershavearguedfortheexclusionfromtheprogramallmodelswitharetailpriceoveracertainlevel.Otherssupportatieredincentivestructurethatincludesallmodels.Therationaleforthelatteristhathigher-endmodels,particularlytheModelSinstakeholdersopinion,areimportanttobringawarenesstothepublicaboutPEVandaboutthefactthatBEVcanbeaproductwithstrongmarketappeal,whichwouldhelpwithacceptance(orlegitimation,aswediscusslater)ofthetechnology.

OnEarthDay2013,thestatealsoimplementedMassEVIP,aprogramadministeredbytheMassachusettsDepartmentofEnvironmentalProtection,toofferfinancialsupportfortheadoptionofplug-invehiclesinmunicipalandstatefleets,pubiccollegesanduniversities.Bytheendof2015,theprogramhadawardedalmost$700,000for93BEV($7,500pervehicle),$165,000for33PHEV($5,000pervehicle),and$444,000for43chargingstations(over$10,000onaverageperchargingstation).

Therehavebeeneffortstoincreasepublicawarenessofplug-invehicles,includingawebsiteadministeredbythemultistateZEVTaskForce,numerouseventstoexposethepublictovehiclesorganizedbystateagenciesandnon-profitorganizations.Therehasnotbeenhowevercoordinatedmarketingorcommunicationscampaignsinthestateaimedatcreatingpublicawarenessandinterest.Asdiscussedabove,stakeholdersbelievethatconsumers’informationandawarenessaboutplug-invehiclesisrelativelylowandthatitisimportanttobridgethatinformationgap.Stakeholdersacknowledgethevalueofgovernmentoutreachefforts,butingeneralbelievethatmarketingandinformationshouldbeleadbyindustrysothatthedifferentcompaniescanbringtheirmarketingexpertiseandtailortheirmessagetothespecificsoftheirproductoffering.Somestakeholdershavetheviewthat,becauseofexistingregulatoryrequirementsemanatingfromtheZEVprogram,thattheburdentocontinueimprovingandmarketingtheproductisonthecarcompanies.Intheirviewthereismuchmorethatindustrycandotoeducatethemarket,includingdirectadvertisingandsendsignalstoconsumersthatlegitimateplug-invehicles.Forexample,whenacompanyannouncesthatitwillcapproduction

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oftheirplug-inmodels,thatactionmaysendasignalintheoppositedirectionofwhatisneededtodevelopthemarket.

Despitetherecentforaysintomarketformingpolicies,ourstatisticalanalysisofarticle-countdatadoesnotindicatethattherehadbeenasignificantriseintheMarketFormationfunctioninMassachusettscomparedtootherstates.Thismayreflectthattherewaslimitedinformationportrayedthatrelatedtotheincentivein2014,orthatevenwiththeadditionalincentiveMassachusettshasnotsignificantlychangedtheinnovationtrajectoryforPEVsinthestate.


Stakeholdersindicatedthatplug-invehiclesbringbenefitstothestateintheformoflowercarbonemissions,improvedairqualityandlowerurbannoiselevels.Wheninquiredaboutthepossibleimpactofelectricityfromcoal-firedpowerplantsonthegreenhousegasemissionsattributabletoplug-invehicles,stakeholdersgenerallyindicatedthatthestateproducesmuchofitselectricityfromnaturalgasandrenewablesources.AreportbytheMassachusettsExecutiveOfficeofEnergyandEnvironmentalAffairssuggestedthatdeploying300,000electricvehiclesinthestatewouldresultinnetlifecyclegreenhousegasemissionssavingsofover800,000shorttons.

Stakeholderswereingeneralunsureabouttheimpactofvehicleelectrificationonjobsinthestate.Somepointedtothejobscreatedwiththegrowthofthechargingstationnetwork,suggestingthat3-4peoplearepaidtoinstallastation

StateofGeorgia:ACaseStudyofthePEVRetailSubsystem

Inthissectionwetakeanin-depthlookatonepartofthePEVinnovationsystem,namelythenewvehicleretailsubsystem.RetailpracticeshavebeenthefocusofmuchinterestamongPEVactorsgiventhecriticalroledealershipsplay,asthenexusbetweenthetechnologyandthemarket.Anumberofinteractingstakeholders(actors)andregulations(institutions)convergeinthisspace,whichmakesthedenominationofsubsystemappropriate.Bylookingatasubsystemweareabletouncoveranddiscussprocessesatamoregranularlevel,includingspecificsofactorsandnetworksbehaviorsandinstitutions’roles.AsacasestudyweselectedthestateofGeorgia,whichdrewtheattentionofPEVstakeholderswhenitemergedasoneofthefastestgrowingPEVmarketsintheUnitedStates.In2014,salesofPEVsinthestateofGeorgiagrewseven-foldoverthepreviousyear,catapultingGeorgiatosecond,behindCalifornia,inthelistoftopPEVmarketsintheUnitedStates(Pratt,2015).Atonetime,GeorgiawasthefastestgrowingmarketforPEVsinthenation,adding600vehicleseverymonthtoitstallyof12,000registeredPEVs(Francis,2014).Thestate’scapital,Atlanta,wasalsothenumberonemetromarketfortheNissanLEAF,historicallythenation’smostpopularall-electricPEVuntilTesla’sModelSoutsoldtheLEAFin2015.Manyobserversattributethestate’sPEVsalessuccesstotheformer$5,000statetaxcredit.Theevidencelendssupporttothisargument:ShortlyafterenactmentofHouseBill170,which

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repealedthislong-standingincentiveforlow-andzero-emissionvehiclesinearly2015,PEVsalesplummeted.Whiletheimpactofthestate’staxincentiveseemsapparent,itislikelythatotherfactorswereatplayinGeorgia’sremarkablegrowthinPEVsales.TheselectionofPEVssoldatasubstantialpremiumcomparedtosimilarlyequippedconventionalvehicles.LikeotherstatesinwhichPEVsaresold,carmakerscan“bakein”afederalincometaxcreditforPEVsworthupto$7,500throughleaseprogramsthatyieldcompetitivemonthlypayments.Somecarmakersofferadditionalincentives.Nissan,forexample,offersspecialpricingforcorporatecampusesanduniversities.AnumberofstatesofferadditionalbenefitstodecreasethepricepremiumforPEVs.California,forinstance,offersa$1,500rebatecheckforbuyersofplug-inhybridvehicles(PHEV)anda$2,500rebatecheckforall-electricPEVbuyers.UnlikeCalifornia,GeorgiaresidentscouldcapturethestatetaxcreditonPEVleasesforleasetermsasshortastwoyears(thoughCaliforniarecentlyreduceditsminimumownershiprequirementto30monthsfrom36months).Notably,unlikethefederaltaxcredit,buyersmustwaittoclaimthecreditthroughtheirindividualtaxfilingsratherthanthroughtheleasecontractatthetimeofpurchase.Inaddition,bothGeorgiaandCaliforniagrantaccesstoHOV/HOTlanesforsingleoccupancyPEVs.

EmpiricalFindings

Georgia’staxcreditforzero-emissionvehicles,combinedwithtargetedmarketingledbyNissan,appeartohavebeenakeydriverofthestate’sPEVsales.Sinceplug-inhybridsdidnotqualifyforthestate’staxcredit,theincentiveclearlyfavoredbatteryelectricvehicles.Perhapsunsurprisingly,BEVscomprisedthevastmajorityofGeorgia’sPEVsales.Duringthestudyperiod,onlyfourBEVswereavailableinthestateofGeorgia:TheNissanLeaf,FordFocusEV,TeslaModelSandtheBMWi3.Georgia’sfranchiselawscapsalesmadedirectlybyautomanufacturersat150unitsannually,imposinganupperlimitonsalesofTesla’sModelS.BMW’si3didnotarriveuntilspringof2014butmadeinroadsshortlythereafter.NissanMotors,provingtobethemostaggressiveofthePEVmanufacturersinthisregard,ledcompetitiveleasepricing.BasedonfeedbackreceivedfromleadEVdealersinearlymarketslikeCalifornia’sSanFranciscoBayArea,NissanNorthAmericawasthefirsttocapitalizeontheabilitytorollthefull$7,500federaltaxcreditintoaleaseagreement.ThisdramaticallyloweredthemonthlypaymentandincreasedEVaffordability.Toremaincompetitive,othercarmakersfollowedsuitwiththeirownaggressiveleaseprograms.BecausetheGeorgiataxcreditcouldbeclaimedonleasesasshortas24months,themonthlypaymentsrequiredtoleasetheLeafwereeffectivelybroughttozero.Factoringinitialcostsassociatedwiththetransactionandincludingapproximategassavings,thecostofPEVownershiplandedintheneighborhoodof$50permonth,foratotalbiennialownershipcostofjustover$1,100(seeFigure7).

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Figure7.Examplecustomercostcalculationforatwo-yearPEVlease,alongwithaNissanLEAFadfromtheAtlantaarea.

BEVsavailableforsaleinGeorgiaincludetheNissanLEAF,BMWi3,TeslaModelSandFordFocuselectric.Kia’sSoulelectriconlymorerecentlydebutedintheAtlantaregion.TheNissanLEAFwasaclearleaderinPEVsales.ThissuggeststhatunderstandingthemarketsuccessofPEVsinAtlantarequiresabetterunderstandingofhowNissandifferentiateditsstrategicmarketingand/orPEVproductintheregionalcontext.Whilethereiseveryreasontobelievethatpricewasthekeydeterminantofsuccess,pricingisjustonepieceofthepuzzle.Dealers(amongotherstakeholders)oftendescribedthesuddentakeoffofPEVsalesintheAtlantaareafrom2013toearly2015asa“perfectstorm”offactorsthat,whentakentogether,yieldedacompellingvaluepropositionforlocalmotorists.Thesefactorsincluded:

• AggressiveandinnovativemarketingbyNissan• Thefederaltaxcredit• Uniquestructureofthestateincometaxcredit• Single-occupantHOV/HOTlaneaccessforPEVs• Ahandfulof“champion”dealersthataggressivelyembracedPEVsales• DiscountedelectricityratesandrebatesforhomesandbusinessesthatinstallPEV

chargers• Heavyrush-hourtraffic• Moderatecommutedistances• AhighnumberofcorporatecampusesthatqualifiedforspecialPEVpricing

Manyofthesefactors,however,arenotuniquetoGeorgia.WhileAtlantaranksinthetoptierofU.S.citieswiththeworsttraffic,severalothercitiesinstateswithEV-friendlypolicy

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environmentsrankhigher,including:Portland,Oregon(No.10),Seattle,Washington(No.5)andHonolulu,Hawaii(No.3)(Bowerman,2015).AtlantaalsorecordedthelongestaveragecommutedistanceamongallU.S.metropolitanareasin2015,at12.8mileseachway,beatingoutHouston,DetroitandLosAngeles(KneeboneandHolmes,2015).Yet,accordingtoaFHA-fundedreport,AtlantawasabsentamongcitieswiththemostHOV/HOTlanefacilities(BoozAllenHamilton,2008).TheTwinCitiesregiontopsthelistwith83,followedbytheSanFranciscoBayArea(47),PugetSound(Seattle-Tacoma,40),LosAngeles(23)andHouston(21).AbsentdataonHOVutilizationbyEVbuyers,itisdifficulttopinpointwhetheraccesstoHOV/HOTlanesplayedadefiningroleindrivingsalesofEVsinthegreaterAtlantametroregion.Nevertheless,stakeholderscitedHOV/HOTaccessinAtlanta’shighcongestion,longcommuteenvironmentasacompellingexplanatoryfactorintheregion’saffinityforEVs.TimeseriesdataonthedeploymentofDCfastchargestationsusingChaDeMoconnectors(thestandardcompatiblewiththeNissanLEAF)showsthattherapiduptakeofPEVsprecedesincreasesinthistypeofinfrastructure.ThissuggeststhatDCfastcharginginfrastructurewasnotamajorcauseofstrongincreasesinPEVsales.Instead,rapiddeploymentofLevel1and2charginginfrastructure,particularlyatworkplacelocations,mayhaveplayedagreaterrole.Asdiscussedabove,deploymentofworkplacechargers,particularlyatmajorcorporationsandinstitutions,helpslegitimizeEVtechnology.WespeculatethatchargingatworkisparticularlysupportiveofEVlegitimationinlocalitieswithlongcommutedistances,suchasAtlanta.Table4showsthatLevel2charginginfrastructuregrewatarapidclipalongsidePEVsalesoverthesameperiod.

Table4.Level2EVSE(charger)deploymentintheAtlantametroregion(Source:Plugshare)

Entrepreneurialexperimentationatdealerships:Novelmarketingandsalesapproaches

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OnlyspeciallycertifieddealerssellPEVs.NissanwasthefirstmanufacturertolevycertificationrequirementsondealerswishingtosellPEVs.Ofnote,statefranchiselawsrequirethatautomakerssellallnewvehicles,PEVsincluded,throughindependentfranchiseddealers(Cahill,2015;Crane,2015).Whiletheselawsmayvarytosomeextentfromstatetostate,ingeneral,theystipulatethatautomakersmustinprincipalprovidedealersequalopportunitytosellitsproducts.Dealersultimatelydecidewhichvehiclelinestheyselland,inturn,howvehiclesareretailedtoendcustomers(withintheconstrictsoffranchiseagreementsandalargebodyofconsumerprotectionlaws).Inturn,automakersmaysetrequirementsfordealerssellingparticularproductsortechnologies.Theburdenofproof,however,restswithautomakerstojustifythatsuchrequirementspassthetestof“reasonableness”inthecourts(Crane,2015;Marx,1985).DealersinterestedinsellingtheNissanLEAFmustfirstearndesignationasaLEAF-certifieddealer.Certificationtypicallyrequiresup-frontdealerinvestmentinPEV-specificassetsincludingequipment,facilityupgradesandtraining.ExamplesincludepurchaseandinstallationofaminimumoftwoLevel2chargers(oneforthelotandonefortheservicebay),aserviceliftcapableofaccommodatingaccesstothevehicle’shigh-voltagebatterypackandtrainingofatleastonememberofthesalesteamandoneservicetechnician.NissanalsoencouragesdealerstoinstallDCfastchargersandtomakethemavailabletothepublic.Thedecisiontodoso,however,restswiththedealer.ThoughalaterentranttotheAtlantamarket,BMWimplementedasimilarcertificationprogramforBMWdealersinterestedinsellingitsinitialEVmodelsthroughits“i”sub-brand.Thissub-brandisintendedtoshowcaseBMW’scuttingedgetechnologiessuchastheuseoflightweightunibodyconstructionmadewithcarbon-fibersmanufacturedintheStateofWashington,aswediscussedinthesectiononthatstate.UnlikeBMW’sMinisub-brand,inwhichitssignatureMiniCooperandother“Mini”nameplatemodelsaresoldthroughseparate“Mini”-brandedfacilities,i-brandedmodelsaresoldalongsideconventionalvehiclesonBMWdealers’lots.2LikeNissan,BMWdealersmustinvestinaminimumofEV-specificequipment,facilityupgradesandtrainingformembersofthesalesteamandservicetechnicianpool.TraineesundergofourdaysofinstructionatBMW’sBayAreafacilitiestoimmerse“i”-certifiedsalesadvisorsinthehistory,philosophyandtechnologythatunderpinBMW’s“i”productline.BMWmotivatesitsstudentstopassthe“finalexam”foricertificationbygrantingthosethatachieveapassingscoretheopportunitytodriveBMW’si8flagshipsupercar.Thecompanyalsoencouragesgraduatestosharetheexperienceviasocialmedia.Thoughstudentsspendjustone-halfdaybehindthewheelofthei3,eachisgiventheopportunitytobuyorleasethisPEVatreducedemployeepricing.BMW’spurposeistoplacemore“i”salesadvisorsinapositiontogainreal-worldexperiencebehindthewheelofani3PEV.Doingsomayaidinspeedingsalesadvisorsuptheconsiderablysteeperlearningcurve

2BMWhaslaunchedseparate“i”brandeddealerfacilitiesinCalifornia.

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associatedwithsellingPEVtechnology(Cahill,2015).DealersmayalsobemorepreparedtoexpertlyaddressthesophisticatedquestionsposedbyprospectivePEVcustomersandtocraftmessagesandanecdotesthatmoreeffectivelyconveytheuniquevalueofdrivingaPEVtocustomers.RealworldEVdrivingexperiencealsopositionssalesadvisorstobetterdeterminewhetheracustomerisagoodfitforthetechnology.WeseedealertrainingascontributingtostrengtheningvariousfunctionoftheTIS,includingknowledgecreation,knowledgediffusionandlegitimation.OfthecarmakerswithPEVstosell,NissanembarkedononeofthemorecomprehensivemarketingcampaignsintendedtointroducecustomersinkeymarketstotheLEAFPEV.Theircampaignincludedparticipationinride-and-driveeventssuchasNationalDriveElectricWeeksponsoredbythirdpartiessuchasthelocalElectricAutoAssociation.ThecampaignalsofeaturedNissan-ledroad-showsthatshowcasedtheNissanLEAFatvariousautoshowsandvenuesintargetedPEVmarketsacrossthenation(Figure8).InthegreaterAtlantaarea,NissanspecificallytargetedpotentialPEVcustomersatlargecorporatecampuseslikeCoca-Cola,UPS,andGeorgiaPower.ItalsotargeteduniversitycampusesintheAtlantaregion,includingGeorgiaTechandEmoryUniversity.

Figure8.2011DriveElectricNissantourstopsatAtlantaStationinmidtownAtlanta

NissandistinguishesitsmarketingeffortsfromotherautomakersbyactivelytargetingandengagingpotentialPEVcustomersatlocationsawayfromdealerfacilities.Companyrepresentativesnotedthatfranchiseddealersarebestsituatedtosellfamiliarproductsinmarketswheredemandalreadyexists.Conversely,dealersaremuchlessequippedtosellnewandunfamiliartechnologiesinanearlymarketwherelowinitialdemandisanticipated.Giventhesedistinctions,theautomakeracknowledgedthatPEVsneedadifferentretailapproach.

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NissanconcededthattheroleofmarketingPEVsstartswithvehiclemanufacturers.Onecompanyrepresentativenotedthatdealersaresetuptofacilitatevehiclesalesinrelativelyhighvolumes;itisuptothemanufacturertoensurethatcustomersarriveatdealershipsprimedforapurchase.Inlightofthis,thecompany’smarketingeffortsfortheLEAFdepartedfromcustomarymodellaunchesinthattheyprovideadditionalsupporttodealers.Thistakestheformofride-and-driveeventsintendedtoexposecustomerstothetechnologyinaneutralsettingandtocomplementdealercoreexpertise.Dealerscanthendowhatdealersdobest:transactthesaleoncethecustomerarrivesonthelot.Todothis,notonlydidNissanpackagetheLEAFatacompellingpricepoint(essentiallyfreeoncefuelsavingsareaccountedfor)butalsotargetedcustomerswhoneededtosolveaparticularproblem,namely,adifficultcommute.Nissanregionalmanagersconcentratedtheiroutreacheffortsoncorporateanduniversitycampuses.Asonemanagerputit,“Ratherthanlookingforaneedleinahaystack,wegototheneedlefactory.”Typically,thisinvolvedcoordinatingano-cost(tothesponsor)ride-and-driveeventduringlunchtimehours,oftenorchestratedthroughcampussustainabilitymanagers.CorporateanduniversitycampuseshousedthemostlikelycustomersforPEVtechnology:Well-educated,upperincomeprofessionalsfromadiversityofbackgroundswhofaceadailycommute.Moreover,thecompanypositionedsubjectmatterexpertscapableofaddressingthewidearrayofquestionscustomersthrewatthem.TopicsincludedtheinsandoutsofnotonlytheLEAFPEV,butalsorelatedchargingequipmentandoptions,electricityrates,andmyriadpublicincentivesandbenefits.NissaninvitedareaLEAF-certifieddealerstosendarepresentativesalesmembertoassistwithofferingtestdrivesforinterestedcustomers.Inreturn,salesrepresentativesearnedtheopportunitytogeneratepotentialleadsandtoestablishthemselvesasthe“go-to”salespersonshouldthecustomerdecidetobuy.NissanVehiclePreferredPricing(VPP)combinedseveralelementsintoanenticingpackagebuiltaroundatwoorthree-yearsubsidizedleaseoption.Asmentionedpreviously,theleaseinstrumentallowedNMACtoreducethemonthlypaymentsbyapplyingthefull$7,500federaltaxcredittotheleaseamount.Overa36-monthleaseterm,thisamountedtoareductionof$208inthecustomer’smonthlypayment.Nissan,whichmaintainsitsowncaptivecreditagency(NMAC),wasalsofairlygenerousinfurthersubsidizingtheleaseandbysettingtheLEAF’sresidualvaluerelativelyhighsoastofurtherreducethemonthlyleasepayment.Atwo-yearleaseoptionprovedevenmoreenticingfortwoprimaryreasons.First,the$7,500federalcreditisconcentratedoverashorterterm,reducingmonthlypaymentsby$312(comparedto$208onathree-yearlease).Thismagnifiesthecredit’simpact.Second,Nissandealersemphasizedtocustomersthatthestate’s$5,000taxcreditwouldeffectivelyreducethemonthlypaymentbyanadditional$208.Unlikethefederaltaxcredit,themanufacturer’sfinancearmcouldnotusethestatetaxcredittoreducethecapitalcostofthevehiclethroughtheleaseinstrument.Regardless,dealersexpressedfewreservationsaboutsharingthisincentivewithprospectivecustomers.WithaVPPleasepaymentofjust$199amonth,

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customerscouldessentiallygetanewcarforfree.Asitturnedout,thepromiseofa“freecar”provedapowerfulenticementforattractingcustomers.

KnowledgeandinformationdiffusionNotsurprisingly,wordofa“freecar”canspreadfast.Bymanyaccounts,thispotentphraselikelyservedasthekindlingthatignitedthefireofLEAFsales,startingwithwatercoolerconversationsatcorporateanduniversitycampusesintheAtlantaregion.SeveralstakeholderssharedthattheLEAFwasparticularlypopularintheIndian/Pakistaniimmigrantcommunity.AsidefromtheLEAF’sattractiveeconomics,rationaleforthePEV’sappealwiththisparticularsub-groupincludedthecommunity’srelativelylargefootprintinthetechnicalprofessionstargetedbyNissan.OtherautomakerslikeBMWdidwitnesssomesuccesswithPEVsales.BMWdealers,however,suggestedthatthei3’s“polarizing”design,whicheschewedBMW’straditionaldesignaestheticinfavorofamuchmoredistinctprofile,limiteditssalespotential.Accordingtosalespeopleatthesedealers,thei3PEVhadminimalappealwithtypicalBMWbuyers.Asaresult,themodellikelyendedupcompetingforthesamepoolofcustomersastheNissanLEAF.Withcustomersaccustomedtothe“virtuallyfree”pricepointoftheLEAF,BMWdealersfounditthatmuchmoredifficulttointerestcustomersinthehigherpricedBMWi3.Ironically,the“freecar”monikermayhaveplayedasmucharoleinprecipitatingtheultimatedemiseofthestate’salternativefueltaxcreditasitdidingoosingEVsalestorecordlevels.Wordofastate-subsidized“freecar”soonreachedthestate’scapitolinAthens,Georgia.There,thecreditfannedoppositiontoitscontinuation,withpositionsgenerallydividedacrosspartylines.Asinotherstates,includingCalifornia,dissenterspointedtoequityconcerns,amongothergeneralarguments.Attheendofthefirstquarterof2014,justfiveofthestate’s159countiescomprised80%ofGeorgia’sEVregistrations(Figure9).AllfiveweregenerallyconcentratedinthemoreaffluentAtlantametroarea.ThisleadtotheperceptionthatPEVswerebeingdisproportionatelysubsidizedbylessaffluentcountiesinthestate.

Figure9.80%oftheplug-invehiclesalesinGeorgiawereconcentratedinfivecountiesintheAtlantaregion

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Despitesuchheadwinds,thecredithadwithstoodpreviouschallenges.Advocatesexpectedarenewedchallengetothecreditinthe2015legislativesession.Theywerepreparedtoheadoffthislatestchallengewithanumberofargumentshighlightingtheeconomicbenefitstothestateinpreservingthelong-standingincentive.Arelativelydiverse,thoughnotverybroad,coalitionemergedtosavethecreditthatincludedNissan,GeorgiaPower,theSierraClub,theAtlantaCleanCitiesCoalition,aswellasanumberofotherstakeholders.Thistime,however,thecredit’srenewalaccompanieddebateoverthestate’stransportationbill,whichwasduetocloseagrowingshortfallforupkeepofthestate’sdeterioratingroadandhighwayinfrastructure.Intheend,opponentsprevailedandthecreditexpiredonJune30,2015.Initsplace,thestateimposeda$200annualroadusefeeonPEVbuyers.Inamatterofweeks,thestatepivotedfromhavingthestrongestPEVincentiveinthenationtotheweakest.AreaNissanandBMWdealersreportedtousthatsinceGeorgia’staxcreditexpiredonJune30,saleshavecollapsedbyasmuchas90%.Absentacohesivepost-credittransitionstrategy,automakersandtheirdealersmaybehard-pressedtorestorePEVsalestotheirformerheights.

DiscussionandRecommendations

Large-scalemarketdeploymentofzero-emissionvehiclesiscriticalforachievingdeepreductionsingreenhousegasemissionfromtransport.Mostpublicsupportforplug-inelectricvehicleshasbeenjustifiedonthesegrounds.Thishasplacedplug-invehiclesinthemiddleofcomplicatedpolicyprocessesatthestatelevel,withpoliticalgroupsdividedovertheirpositionsregardingclimatechangeandtheneedforpolicyintervention.Legitimationofthetechnologyatthegovernmentlevelislow.Thisinturnnegativelyaffectsresourcemobilizationandmarketformation,whichnegativelyaffectsotherfunctionsoftheTIS.

Theelectrificationoftransportationisachallengeofenormousproportions.Assuch,itdemandsgreatcommitmentandmobilizationofresources,aswellasexpertplanning,coordinationandimplementation.Inspiteofextraordinaryeffortsbyimportantstakeholdersectors,thePEVinnovationsystemsinthestatesthatweexaminedremainunderdeveloped.GiventhatMassachusettsandWashingtonrepresenttwoofthemoreaggressivestatesinsupportofPEVmarkets,webelieveitisfairtoexpect,thoughthiswouldhavetobeverified,thatPEVinnovationsystemsareunderdevelopedinmostotherstatesaswell.

Methodology

WeusedtheTISframeworkinresponsetotheneedforholistic,system-levelapproachestounderstandmanyaspectsofplug-inelectricvehicleinnovation.WehadobservedthatearlierTISstudieshaveusedtheframeworkforpost-hocdescriptionsofthedevelopmentofinnovationincertaintechnologies.WewerethusinterestedinbetterunderstandingwhetherTIScouldhelpusalsodrawinferencesofprescriptivevalue,whichcouldtheninformstrategyandpolicy.

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WefoundthatTISishelpfulindisaggregatingtheresearchintoamoremanageablesetoffocusareas.ThisdisaggregationthroughtheTISmethodologynotonlymakestheresearchmorereplicable,butalsofacilitatestechnologyinnovationsystemcomparisonsacrossdifferentgeographicaloradministrativejurisdictions.Atthesametime,werecognizethatTISisstillunderdevelopment.Whilethefunctionsappearcomprehensiveintermsoftheirreachtoallaspectsoftheinnovationsystem,wefoundtheprecisemeaningandscopeofthefunctionsthemselvesattimestobesubjecttointerpretation.Forexample,ifastatelegislatureapprovesafinancialincentivetosupportsalesofplug-inelectricvehicles,thisclearlyhasimplicationsfortheresourcemobilizationfunction,butitcanalsobeinterpretedasaffectingthemarketformationandlegitimationfunctions.Itcouldevenbeinterpretedasaffectingpolicyactors’entrepreneurialexperimentation,totheextentthattheincentiveprogramisevaluatedonlyafterimplementation(ifatall),andpossiblyamendedtoincorporatenewinformation.Thesequestionsmotivatedustosetcleardefinitionsforeachofthefunctionsastheywereusedinourstudy,anditisapracticethatwerecommendtoresearchersusingTIS.Theyalsomotivatedustodedicatesomespacetoexpandinguponourunderstandingofthemeaningoftwofunctions,namelyentrepreneurialexperimentationandthedevelopmentofpositiveexternalities.

Findings

Earlierwedescribedinnovationasincludingboththeprocessesoftechnologydevelopmentandoftechnologyadoption/diffusion.Whileouranalysisrevealsthatallfunctionsoftheinnovationsystem,particularlyKnowledgeDiffusion,areunderdeveloped,ourstudyshowsthatpresentlythemaindetractorforacceleratedmarketadoptionistheearlystateoftechnologydevelopment.Therearedistinctdifferencesinmindsetandproductstrategybynewentrant(namely,Tesla)andincumbentautomakers.Fromadesignperspective,Teslahassoughtavehiclewithuniversalappeal(nosacrifices)butispursuinganichestrategythatbuildslegitimacyforthetechnologyandthebrandthroughatop-downapproachfeaturingentryatamuchhigherpricepointintheluxurymarketandmovingdown-market.Conversely,themajorautomakershave,fromavehicledesignstandpoint,fieldedvehicleswithexplicitcompromises(inrange,performanceorutility)atamuchlowerpricepointviaabottom-upintroductionstrategy.Wefindthat,whileresultinginamoreaffordableproduct,thesecompromisesnotonlylimitthemarketbutalsoaffectnegativelytheLegitimationandKnowledgeDiffusionTISfunctions.Acrosstheboard,stakeholderssurmisethatthebestwaytoincreasemarketacceptanceofPEVsisforindustryasawholetodeliverproductlinesthatappealstoabroaderconsumerbase.

Inthislight,weseethecaseofsuddenPEVuptakeintheAtlantametronotsomuchasasuccessstory,butratherasevidenceofthelimitedmarketappealofPEVofferings.RatherthanemphasizingthecomparablylargenumberofPEVssoldinthatregion,weinsteadponderwhyvehiclesaleswerenotlarger,especiallygiventhatconsumerswereessentiallyoffereda“freecar”afterfactoringinvariousprivateandpublicsectorincentives.ThedifferencebetweenTeslaandtheincumbentmanufacturersextendsbeyondthetechnologytoencompassanumberofsocialandinstitutionalfactorsthatmagnifytheirdifferences.Importantamong

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thesefactorsisaweakGuidanceoftheSearchfunction.ExceptforTesla,whoseveryexistenceandcorporatestructureridessolelyonthesuccessofelectricplatforms,incumbentautomanufacturersarguablyarelesspreparedandfaceadifferentsetofpressures(shareholdersandthemarket)toinvestmoreaggressivelyonplug-inmodelsandtomarketmoreaggressivelytheirexistingproductlineup.Wefoundevidencethatthedegreeofengagementhasvariedacrosstheincumbentautomakers,withNissanbeingtheleader.

Additionally,actorsandnetworkshavenotdevelopedtheknowledgeneededtodesignandimplementthemosteffectiveandconsistentstrategiesandpolicies.Despitethesuccessfulimplementationofpoliciesandprogramstosupportmarketadoption,policylearninghasbeenslow.Ingreatpart,thishasbeenduetotheabsenceofresourcesdedicatedtorigorousprogramdesignandprogramevaluation.

PoliticaldividesaboutthesupportforvehicleelectrificationfurtherweakenstheGuidanceoftheSearchfunction.Thetransformationofthetransportationsectortoelectromobilityneedssupportivepolicymaking,whichisdifficulttoachievewhilestatelegislaturesremainpolarizedonthesubject.EvenwhenanumberofstateshavebeenabletopasslegislativeorregulatoryprogramstosupportPEVinnovation,thepoliticaldisagreementsabouttheseprogramscreateaclimateofuncertaintythatdiscouragesinnovation.TheMobilizationofResourcesfunction,mostnotablyintheformofgovernmentfinancialincentives,whoseeffectivenessdependsuponlong-termstability,isinsteadexposedtouncertainpoliticalcycles.ThestateofGeorgiaservedasagoodillustrationofthisinstability.Theclimateofuncertaintyaffectspredominantlyactorsandnetworksinthesupplychainsintheinnovationsystem.Thecarmanufacturers’abilitytoengageinaggressivePEVproductplanningandmarketingisnegativelyaffected,whilenewcardealers’confidencetoplanmarketing,inventoryandsalesstrategiesisalsodegraded.

InspiteoftheresourcesdedicatedtosupportingPEVinnovation,PEVarestillcompetinginasystemthatisfriendlytopetroleumfuels.WealsofindthistobeanimportantstructuralweaknessinthePEVinnovationsystem.Thereareahostofinstitutionalfactorsthatdirectlyorindirectlyfavortheincumbentinternalcombustionvehicle.Lackofinternalizationofthesocialcostofburningfossilfuels,weakenforcementofspeedlimits,landuseplanningthatencourageslongtripdistances,taxbreaksforoilcompanies,andotherfactors,allcombineintowhatamountstoalargesubsidytoconventionalvehicles.Itiscriticaltounderstandthedifferencebetweentwoaspectsofinnovationpolicy,namelyfosteringasociallybeneficialtechnologyduringitsdevelopmentstage,andlevelingthecompetitiveplayingfield.Addressingbothaspectsofinnovationpolicyiscriticalintechnologyinnovationsystemsforconsumerproducts,wherethenewtechnologycompeteswithanincumbenttechnologywithdifferentconsumerexperience.Touseanexample,aPEVfinancialincentiveisnotareplacementtoafeeonvehiclecarbonemissions.Theformerispredominantlyintendedtohelpwiththehighercoststypicaloftechnologiesintheirearlystage;thelatterispredominantlyintendedtointernalizethesocialcarboncostofdrivingandthuslevelthecompetitiveplayingfieldacrossvehicletechnologies.

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Financialincentiveshavebeentheprimaryinstrumentusedbystategovernmentstoencouragethemarketadoptionofplug-invehicles.Wefoundthattheeffectivenessandefficiencyoftheseprogramsarestronglydependentonthewaythattheincentivesarestructured.Wesuggestthatifincentivesareattheconsumerlevel(e.g.rebates),theirstructureneedstobesimpleandeasytounderstand.Increasingthecomplexityoftheseincentivesdecreasetheireffectiveness,astheyincreasethecognitiveburdenonconsumers.

Whilesimplicitysupportsincentiveeffectiveness,itdoesnotnecessarilysupportprogramefficiency.Incentivesoftenfollowedtwo-tierstructureàlaCaliforniaintendedforsimplicityandtopushsales.3Suchstructuressendsub-optimalinnovationsignalsandthusmakeamixedcontributiontotheGuidanceoftheSearchTISfunction.SomePEVmodelscontributemoretoinnovation(andaremoresociallybeneficial)thanothers,andthusanincentivestructurethatreflectedmorecloselythesedifferenceswouldmakemoreefficientuseofpublicfundstowardpublicgoals.Incentivesthathavemoreefficient(andmorecomplex)structurescanworkbetteratthelevelofthemanufacturerorthedealer,whoareabletointegratethemintopricingstrategiesthatcanbestservetheircustomers.However,asweindicatedabove,ifappliedattheleveloftheconsumer,morecomplexstructurescanbeconfusinganddetrimentaltoadoption.

ThetaxrebateinthestateofGeorgiaconstitutedanexampleofanincentivewithamoresophisticatedstructure,whichprovideddealerswithflexibilitytointegrateitintotheirpricingandmarketingstrategy,reducingtheburdenforconsumerstofigureoutthemathontheirown.Theabilitytoapplytheincentivetoleasedvehicles,whereconsumerswereabletoeffectively“test”thecaroverthedurationoftheleaseservedtoreduceadoptionriskforconsumers.WhiletheincentiveultimatelydelegitimizedsupportforPEVatthepoliticallevel,itacceleratedknowledgediffusionofthetechnologyacrosssomeconsumermarkets.Georgia’sincentivehadtheeffectofasteepincreaseinPEVleasesintheAtlantametropolitanarea,alocationwitha“champion”dealer.AlthoughPEVusageincreaseddramatically,theincentivemayhavebeenoverlygenerous.Itencouragedaconsumerword-of-mouthnarrativecenteredontheideaofa“freecar”,withmuchlowerattentiontothevalueofthetechnology.Inourassessment,thisworksagainstthedevelopmentofalastingLegitimationfunction.Consistentwithmodernmarketingpractices,itmaybebetterinnovationpolicytoplacetheproductinthehandsofconsumerswhocanbecomeambassadorsandsupportbroaderconsumeracceptancefortherightreasons,andtoprovidemechanismsthatservetoreducetheriskforindividualsinterestedin“trying”thetechnology.Equallyimportant,thestructureoftheincentive(andsubsequentspikeinsales)encouragedaquickpoliticaloppositionthateventuallyresultedinphasingouttheprogram.

Thesimplicityofsomeincentiveprogramshaseventuallyrunintoconcernsamongstakeholdergroupsconcernedwiththeirequityimpacts.Concernssuchastheseoftenleadto

3Two-tierrebateprogramsgenerallyofferasetamountforbatteryelectricvehicletransactionsandaloweramountforplug-inhybridelectricvehicletransactions.

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regulatory/legislativereview/amendmentprocessesthatresultinuncertaintiesaroundtheprograms.WhilethesebumpsintheroadcanbeconsideredpartoftheEntrepreneurialExperimentationfunction,itisimportantthatlessonsbedistilledandincorporatedintoprogramstructuresinotherjurisdictions.Weheardfromstakeholders,however,thatpolicylearningacrossstateshasbeenslow.Thusthereareopportunitiestostrengtheninterstatecollaboration.

Beyondincentivesandincentivestructure,wealsofoundthattheLegitimationfunctionisstillweakandthatthisweaknessmanifestsitselfattheactor,networkandinstitutionallevels.Whilesegmentsofthepublicareawareofplug-inelectricvehicles,therehasbeenonlylimitedprogressontheimplementationofeffectivelarge-scalestrategies/campaignstoincreaseawarenessamongconsumers.Stakeholdersareingeneralawareofthisgap,buttheystruggletoidentifysolutions.

Wehavefoundthatdealershipscanplayanessentialroleinthepromotionanddeploymentofelectricvehicles.Giventheirproximitytolocalmarketsandpersonalinteractionwithcustomers,dealerscanactasasourceofinformationtoassuageconsumeruncertaintyrelatedtoPEVtechnologyandinfrastructure.Theextenttowhichcustomerstrustdealerasanobjectivesource,however,remainsanimportantbarriertodealereffectivenessinthisrole.Consequently,automakersorotherentitiesmaybebettersuitedtotheseactivities.Conversely,dealersmaybebetterpositionedtoensurethataPEVisagoodfitforcustomersarrivingatthedealerintendingtobuy.Inthisway,thedealeractsasafinalchecktoensurethecustomer’sneedsaremetbeforethecustomerhascommittedtoapurchase.

Werecognizethepotentialforendogeneity,asdealerchampionsmaybemorelikelytobepresentincommunitiesthatarereceptiveofplug-invehiclesinthefirstplace.Wedidnottrytoassessthispotentialinthepresentstudy.SellingaPEVtoacustomerwhowillnotbesatisfiediscounterproductiveforthedealerandforthebroaderinnovationsystem(detersdiffusionbycontagion).So:

• Dealersareconcernedwithmakingthecustomerhappy,whichmotivatesthemtoplacePEVjudiciouslyintherighthands(whichisgood),ortocontinuewithBAUandfocusonconventionalcars(whichisnotgood);

• PolicyneedstobecarefulnottopushdealerstothepointwheretheincentiveofsellingaPEVexceedstheincentiveofplacingPEVsinthehandsofthosebestabletorealizetheirvalue.

ToacceleratePEVsalesandtechnologyinnovation,dealerswithsubstantialknowledgeaboutthetechnologyandtherangelimitationsorchargingcaveatsassociatedwithitsusemaybebetterabletoinformpotentialcustomersaboutthetechnology,furtheringlegitimacyandknowledgediffusionintheTIS.Inturn,informeddealersmayhaveabettersenseoftechnologyweaknessesandtheconsumermarketsbestsuitedforadoptionofPEVs.Assuch,dealersthat

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championPEVshelpsupporttheinnovationsystemandpolicyincentivesystemtobetteraligntechnologydevelopmentwithconsumerdemand.

Modernmarketingstrategiesrequireatypeofexpertisegenerallybeyondthescopeofthepublicsector.Itwouldalsobeextremelydifficulttoarticulateaneffectivemarketingcampaignwithouttheparticipationoftheautoindustry.Intheend,webelieve,thisbringsusbacktothevaluethatconsumerscurrentlyseeinthetechnology.Awarenessbecomesviralwhentheproductiscompelling,asillustratedbyTeslaandbythedistinctionthatstakeholdersoftenmakebetweenTeslaandothermodels.Havingacknowledgedtheimportanceofproductvalueproposition,thereismorethatnetworksandinstitutionscandotofurtherthelegitimizationofthePEVtechnology.WeobservedvaryingdegreesofcommitmentstosupportPEVamongstakeholders.ThereareleadersandchampionsingovernmentthatworkveryhardtomobilizemarketsforPEV.However,thegovernmentinstitutionswheretheseleadersandchampionsresidedonotnecessarilyregardPEVasahighpriority.Thereasonsforlimitedinstitutionallegitimationcanbecomplex,butinourassessmentoneimportantreasonisthelimitedunderstandingoftheconnectionbetweenPEVandattainingdeepreductionsincarbonemissionsinthetransportationsector.

Tosummarizeourconclusionsrelatedtoincentivepolicy,webelievethePEVTISisstillinsearchofincentivestructuresthatstrikeabalancebetweeneffectivenessandefficiency.TheworkdoneacrossjurisdictionscanbeconsideredpartofthefulfillmentoftheEntrepreneurialExperimentationfunctionandhasbeenextremelyvaluabletolearnlessons.Movingforward,werecommendthatstatesallocateresourcestothecarefuldesignoftheirincentives’structures.Thiswouldtypicallyinvolveengagingexpertsandstakeholderswhocanworkwithregulatorsandpolicymakerstoidentifysolutionsthatarebothefficientandpracticable.Bestpracticesbasedonexperienceinclude:

• Makeincentivesavailableatthepointofsale;• Empowerdealersandautomakerstointegrateincentivesintheirmarketingandsales

plans;• Exemptconsumersfromtheneedtodothemathoreventobeawareoftheincentive

program;• Providelong-termcertaintyfortechnologydevelopers;• Createsignalsthatencourageinnovation,• Reducetheriskforconsumerstogainexperienceorknowledgeaboutthetechnology,

and• Incentiveprogramsarenotasubstituteforprogramsthatcanlevelthecompetitive

playingfield.

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Appendix


Uncertaintyandriskarenaturalelementsoftheinnovationprocessandassuchtheyshouldbeembracedandaccepted.Awaytodealwithuncertaintyistofosterexperimentation.VibrantexperimentationisasignthattheTISunderstandsthattechnologicalpathwaysareuncertain(andcannotbepredicted),andthatintensiveexplorationofideasisneededaspartoftheinnovationstrategy.Indeed,aTISthatdoesn’tembraceuncertainty,oronethatdoesn’tfosterexperimentationorthatprescribesthepathofinnovation,isaTISthatstiflesinnovation.

EarlierTISstudieshavegenerallyunderstoodEntrepreneurialExperimentationastheprobingofnewtechnologiesandapplications.Withthisperspective,thecentralactorsofthisfunctionareinindustry.Whilewemaintaintheperspectivethatexperimentationaroundtechnologyisafundamentalbuildingblockfortechnologyinnovation,wegivetheEntrepreneurialExperimentationfunctionabroadermeaning.Inourview,thisfunctionembracesanumberofactivitiesandassociatedinstitutions,whichincludetheprobingofnew:

• Technologies;• Methodsorwaystoapplytechnologies;and• Institutionalmechanismstofostertheadoptionanduseofthesetechnologies.

Lowbarriersofentryfornewfirmsandinstitutions,anddiversificationofexistingonesaresignsofhealthyconditionsforexperimentation.

ScopeofExperimentation

Theconceptofexperimentationcanbeinterpretedbothasascientificprocesswherebyaseriesofstepsareperformedinacontrolledenvironmenttodiscoverortestaneffect,andmorelooselyasreferringtoinformaltestingofhowwellsomethingworks.Asappliedtoinnovationsystems,scientificexperimentationismorecommoninresearchandtechnologydevelopment,whileotherlesstechnicalareaswillseemoreinformalexperimentation.Inanycase,experimentationforitsownsakeisnotnecessarilyasignofahealthyinnovationsystem.Experimentationneedstobeintertwinedwithknowledgecreationanddiffusioninawaysuchthatexperimentationa)buildsuponandisguidedbyexistingknowledge(wheneveravailable),andb)resultsinnewknowledgethatcanbedisseminatedandused.Thelastpointisimportant:experimentationneedstointegratemechanismstotransformfindingsintodocumentedoracceptedknowledge.Forexample,experimentationwithanewstateprogramtosupportconsumeradoptionofplug-invehiclesshouldbuilduponanyexistingpertinentevidenceandshouldincludemechanismstotestandinterprettheextentofitseffectiveness.

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TheScopeofEntrepreneurship

Doesthetermentrepreneurembodyactorswhosemissionisnotspecificallyrelatedtotechnologydevelopment?Theoriesofthepolicyprocesshaveusedthistermtorefertoactorsthatbringattentiontopolicyproblemsand/orproposepolicysolutionstotheseproblems.Publicentrepreneurshipistheprocessofintroducinginnovationintothepublicsector.Theconceptofpolicyentrepreneurshiphasbeenusedinearlierstudiesinarelativelyloosemannertohelpexplainpolicychange.TheconceptplaysacentralroleintheMultipleStreamframeworkforthestudyofpolicychange(KingdonandThurber,1984).MintromandNorman(2009)proposeawaytointegratepolicyentrepreneurshipmoreformallyintotheoriesofthepolicyprocessandpolicychange.Ondescribingpolicyentrepreneurs,KingdonandThurber(1984)saythattheycan“beinoroutofgovernment,inelectedorappointedpositions,ininterestgroupsorresearchorganizations.Buttheirdefiningcharacteristic,muchasinthecaseofabusinessentrepreneur,istheirwillingnesstoinvesttheirresources—time,energy,reputation,andsometimesmoney—inthehopeofafuturereturn”(p.122).MintromandNorman(2009)offeracrispperspectiveonwhatdistinguishesapolicyentrepreneur:“Manyactorsandorganizationsparticipateinpolicymakingorseektoinfluencedecisionmakers.Mostoftheseparticipantsarecomfortableworkingwithinestablishedinstitutionalarrangements;doingtheirbittoachieveimprovedoutcomesforthemselvesandtheirsupporterswithoutupsettingthestatusquo.Policyentrepreneursdistinguishthemselvesthroughtheirdesiretosignificantlychangecurrentwaysofdoingthingsintheirareaofinterest”(p.650).Kirzner(1978)definesentrepreneurshipasthefacilityofawarenessoralertnesstoprofitfromopportunitiesexistinginaworldofdisequilibrium.Shane(2000)articulatesentrepreneurialbehavioras“asituationinwhichapersoncancreateanewmeans-endframeworkforrecombiningresourcesthattheentrepreneurbelieveswillyieldaprofit”(p.18).Theseconceptualizationscanbedirectlyadaptedforourpurposestothecaseofpublicentrepreneurs,bysubstitutingprofitwithpublicbenefit.

InthecaseofPEVinnovationsystems,institutionalexperimentationiscritical.Thisinitselfisabroadarea,soweattempttoanalyzeitincategories:

• Governmentprogramdevelopmentandevaluation,• Stakeholderprogramdevelopmentandevaluation,• Thestrengthofeducationprogramsthatcreatethenecessaryskilledworkforce,• Thevitalityofresearchprogramsatacademicandresearchinstitutions,thatcreatenew

ideas;• Datacollection,anactivitythatiscriticaltoaddressinguncertainties;withoutdata,

programevaluationandtechnologyprogressandacceptancearevirtuallyimpossible.

Fortechnology-relatedexperimentation,welookattwomaincomponents:thediversityandfluidityoftechnologyfirms,andtechnologicaldiversity.

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Diversityandfluidityoftechnologyfirms

Thisisconcernedwiththeabilityofnewfirmsandstartupstodevelopandtestnewideas.Thisabilitydependsontheremovalofunwarrantedcapitalandinstitutionalconstraints.

CapitalConstraints

Researchingandexperimentingwithnewtechnologiesandmethodsrequiresaccesstocapitalthatisfairlyrisk-tolerant.Forhigher-risksocial-returnexperimentation,governmentinvestmentsarewarranted.Forearlystagemarketformation,fundingshouldsupportadiversearrayofideasandmarketplayers,suchasuniversities,startupsandsmallbusinesses.Narrowerportfoliosareacceptableoncetechnologyprobinghasshowncleardirectionsforinvestment.TheinfluenceofcapitaltranslatesintoadirectrelationshipbetweentheResourceMobilizationandEntrepreneurialExperimentationfunctionsinthetechnologysystem.Weexpectstatesthatallocateresourcesmoreeffectivelytosupportentrepreneurialexperimentationwillhelpadvanceideasandfosterknowledgecreationinthetechnology,methodsorinstitutionalfronts.Inturn,theaccumulationofknowledgeenablesknowledgediffusionandlegitimationofthetechnology.

InstitutionalConstraints

Experimentationcanalsobehinderedbyincompatibleexistingrulesandregulations,marketpowerbytheeconomicestablishment,prescriptiveearlygovernmentaction,andtheweakness,weakcoordination,orabsenceofinstitutionalnetworksthatsupportinnovation.ForaTIStofosterentrepreneurialexperimentation,itisnecessarytoreviewexistingregulationsandrulestounderstandandaddresssuchpossibleobstacles.Examplesincludetheimplementationofdevelopmentregulationsfortheinstallationofcharginginfrastructure,addressingcondominiumassociationcovenantsthathindertheinstallationofchargingequipmentatresidentialbuildings,addressingliabilityquestionsforprospectivehostsofpublic-accesschargingequipment,deregulation,asappropriate,ofelectricityratesandothermarketelementsthatcouldbeinternalizedthroughthird-partyinnovativeideas,poorlydesignedincentiveprograms,etc.

Themarketpowerofestablishedeconomicplayersmaypromotethebeliefthatitisthedominantsectorthatwillleadthegenerationofinnovationsandsocialchangeneededforthemarketsuccessofthenewtechnology.Disruptiveinnovationgenerallyneedsnewrulesandpracticesthattheestablishmentisnotdirectlysetuptoprovideorforwhichitcannotadjustfastenough.Atleasttwoareasdeservecloseattention:newcardealershipfranchiselawsandtheroleofelectricutilities.Thequestionofdealershipfranchiselawsiscomplexandadiscussionofitliesoutsideofthescopeofthisstudy.TheappropriateroleofelectricutilitiesinPEVinnovation,whileithasnotbeenstudiedindepth,toalargedegreerelatestothequestionofvehicle-gridintegration.Itiscriticalnottoassume,soearlyintheinnovationprocess,thatitwillbethissectorthatwilldrivetheinnovationsneededtowardtheintegrationofplug-invehicleswiththegrid.Theinnovationsystemoughttoprovideahealthyenvironmentforexperimentationthatisopentoestablishedplayersaswellasnewentrantsintothemarket.

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Tofosterexperimentation,governmentactivityneedstoavoidbeingtoonarrowsuchthatitprescribestheexactoutcomesthatprivatesectorinnovationshouldachieve.Suchgovernmentactivityshouldalsoincorporatemechanismsthatallowlearningandactivityre-adjustmentbasedonoutcomes.TheCaliforniaZEVregulation,asanexample,constantlystrivestofindabalancethatmaximizesinnovation.Notpushingenoughmayloosenincentivesontheindustrytoinnovate,whileprescribingtoomuchmayrestrictexperimentation.ThecurrentdebateovertheallocationofZEVcreditsbasedonvehicleelectricmilesdriven(eVMT)isanillustrativeexample.GrantingeVMTcreditssuggestsanopportunityforexperimentation,andcouldsimultaneouslyreduceincentivestoinnovateonlarger-batteryvehicleplatforms.Governmentprograms,whilegenerallywellintended,oftendonotincludeevaluationelements,whichlimitsopportunitiesforlearning,whichinturncripplesthevalueofexperimentation,andhamperstheabilitytoapplysuccessfulprogramstootherjurisdictions.

OperationalizationofEntrepreneurialExperimentation

Giventheprecedingdiscussion,awiderangeofpossiblewaystooperationalizearisesforentrepreneurialexperimentations.ThesecouldincludethepresenceofstrongPEVchampionsinthestate,theexistenceofworkinggroupsrecognizedbygovernment,dedicatedtotheadvancementofPEV,thedevelopmentofastateand/orcityactionplansorsimilardocument,thenumberofentrepreneursinthePEVspace,thenumberofPEV-relatedRD&Dprograms,thenumberofPEV-relatedpilotprograms,thenumberofPEV-relatedstartupcompanies,thedevelopmentandadoptionofmetrics,theparticipationofdealerships,patentfilings,scientificresearchrelatedtoPEV,measuredforexampleasthenumberofpeer-reviewedpublications,thenumberofPEVdedicatedmodelsinthemarketbyOEM,thenumberofPEVmodelsofferedinthestate,amongothers.Giventhetimeconstraintsonourinformationalmeetings,wesynthesizedtheseintothefollowingsmallersetofareastohelpwiththeidentificationofentrepreneurialexperimentationinagivenstate:

• Presenceofcompaniesinthestatethatsupplyparts,servicesortechnologyfortheproductionofplug-invehiclesorplug-invehiclecharginginfrastructure(e.g.batteryproductioninputs,energymanagementsoftware,etc.)

• ThepresenceofexceptionalPEVchampionsinthestate• InnovativeideasproposedandtestedinthestatewiththegoalofsupportingPEV

markets.Thesecouldbeideasofanysort,includingtechnologydemonstrations/pilots,policy,education&outreach,orother.

• Thepresenceinthestateofcompanies(includingstartups)ororganizationsthataredevelopingortestingnewtechnologiesorservicesintendedtosupporttheuseofplug-invehicles.


Innovationprocessesandpolicyaregenerallythoughtofastakingplacewithintherealmofafirmoranindustry.Anappropriatedefinitionoftheboundariesoftheinnovationsystemisimportanttoattainanunderstandingoftheprocessesoccurring(orthatcouldoccur)atdifferentscales.Thedecisionofwheretoplacetheboundariesofthesystemforanygiven

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studywilldependonaspectsofthestudyandthepreferencesoftheanalyst.Thechoiceofboundariesshouldnonethelessbeconsistentwiththeobjectivesofthestudyasitenables(preclude)theanalystto(from)study(studying)innovationprocessesatthedesiredscale.Narrowlydefinedsystemssimplifythestudyandmaybetherightchoiceinsomecases.Expandingthesystemhowevermayunveilimportantinteractionsbetweendifferentsocio-technicalsystemsandsubsystemsthatcanhelpstrengthenorweakentheprospectsofgrowthforthenewtechnology.

Tohelpclarifywhatwemeanbyallthis,imagineexpandingoursystemtoincludeamoreestablishedtechno-economicsystem,suchasthatofwindenergy.Ifthereweresubsystemswithinthewindenergysystemthatbenefitedfromthegrowthoftheplug-invehicletechnologysystem,thesewouldrepresentpositiveexternalitiesthatwouldinturnbenefitthePEVtechnologysystem.Forexample,PEVscouldreducethecostofgridintegrationforwindenergythroughincreasedreliabilitybymakinguseofidlebatterystoragecapacityinPEVs.Similarly,negativeexternalitiescouldresultifPEVinnovationwerecontrarytotheinterestsofestablishedsocio-technicalsystems.ThiscouldresultintheaffectedsystemsdedicatingresourcestocounterthethreatposedbythePEVtechnologysystem.

Positiveornegativeexternalitiescantakedifferentforms,includingeconomic,symbolic,technological,policyorother.Forthisreason,webelievethattheuseofthetermexternalitytoconceptualizetheseprocessesisconfusing,asitiscommonlyusedintheeconomicliteraturetodescribeprocessesthatcanbesimilarbutarenotnecessarilyidenticaltotheonesinwhichTISscholarsareinterested.

Externalitydynamicsbecomeparticularlyimportantaswerecognizethefinitenessofpublicsectorresources.Thereisalonghistoryofemergingenergytechnologiesinthetransportationsectorthathavebeenaffectedbynegativeexternalities.Alternativefuelstakeholders,suchastechnologydevelopersandproducers,haveoftenbeenpittedagainsteachother,competingfortheattentionofpublicsectorfundingforresearch,development,demonstrationanddeployment.Specificallyintherealmofvehicleelectrification,thereareongoingstrugglesbetweenproponentsofhybridelectricvehicles,plug-inelectricvehiclesandhydrogenfuelcellvehicles.Thesearepredominantlyrhetoricalcompetitionsforthelegitimizationofaparticularvehiclefuelplatformintheeyesofthepublicandgovernment;oftenattheexpenseofcompetingplatforms.Fromatechnologyperspective,advancesineachoftheseelectricdriveplatformshaveproducedspillovers(positiveexternalities),includingtechnologydevelopmentandmaturation,productionlearningandeconomiesofscale.Manyoftheinvolvedtechnologiesaredevelopedwithinthefirmandgenerallyremainproprietary;thisincludes,forexample,energyandpowermanagementsystemsaswellaselectrochemicalstoragetechnologiesandproductionknowhow.

Therearealsogeographicareaswhereexternalitiesoccur.Forinstance,externalfirmssupplycertaininputsfortheproductionoflithium-ionbatteries.Cobaltelectrodes,forexample,arethesinglemostexpensivecomponentoflithium-ionbatteriesandaresuppliedbyasmall

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numberofproducers,predominantlyinSouthKorea.Asproductionoflithium-ionbatteriesincreases,sodoesdemandfortheseelectrodes,enablinghigherproduction,withtheconsequentgainsineconomiesofscale.Inthissense,themarketgrowthofplug-invehicles,whichisentirelybasedonlithium-iontechnology,likelyproducedpositiveexternalitiestohybridelectricvehicleproducersastheyshiftedfromnickelmetalhydride(NiMH)tolithium-ionwhentheproductioncostofthelattercamedown.

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