EVe of change
Time surely up for electric vehicles’ free pass on road user charges as falling petrol revenue opens $2b funding gap, writes Chris Keall
Electric cars currently have a free pass from paying Road User Charges (RUCs) — the fees charged to owners of non-petrol vehicles, starting at $76 per
1000km.
But at some point, the Crown will have to bite the bullet and make EV owners pay RUCs — or develop some whole new funding mechanism. This is because it will need to fill a $2 billion gap left by declining petrol tax revenue, an pay for billions in national grid upgrades to accommodate electric vehicles.
The AA says the average motorist drives 12,000km per year, which means $912 in RUC charges (at the usual rate; RUCs were halved from April 21 to September
21 this year in a parallel measure to the temporary petrol tax cut).
That’s going to take a lot of the gloss off the savings that EV owners enjoy today. (EECA’s rule of thumb is that charging an electric car is the equivalent of paying 40 cents per litre to fill a petrol tank).
EVs were exempted from RUCs in 2016 as one of its measures to boost electric vehicle uptake and Transport Minister Michael Wood recently rolled over the exemption until March 31, 2024.
Wood says he’s yet to receive advice on whether to roll over EVs’ exemption again.
There are other complications to consider.
A Waka Kotahi NZ Transport agency discussion document has raised the possibility that RUCs could be extended to electric motorcycles and e-mopeds.
Wood says some kind of system will have to be developed so that owners of plug-in hybrid cars are not double-charged for petrol tax and RUCs.
And Waka Kotahi’s report also says some kind of GPS system will likely have to be created to track electric cars’ mileage. While tracking systems are now common on trucks, it’s been a multi-year transition.
There are two factors that will likely force Minister Wood’s hand (or that of his successor):
The tax revenue gap
First, the Government currently receives income of around $4 billion per year from fuel excise (that is, petrol tax) and road-user charges on diesel vehicles (split roughly 50/50 between the two). In terms of petrol tax 70c per litre goes to road funding, 6c to ACC,
0.7c to a local authority fuel tax and
0.6c to the Fuels Monitoring Levy (and Aucklanders pay an extra 10c in Regional Fuel Tax). RUCs are the mechanism for non-petrol vehicle owners to chip in.
With only around 36,000 electric cars on NZ’s roads — or around 1 per cent of our total vehicle fleet, EVs’ exemption from RUCs is no big deal.
But, powered by the Clean Car Discount, EV sales are rising fast. Kiwis’ spending on new electric cars doubled to $877m the year to March, in a total vehicle market worth $6.1 billion).
And however green our Government’s policies in the years to come, EVs will increasingly dominate — simply because every major car manufacturer says it will abandon production of petrol-only vehicles by 2030. And new car buyers, mindful of resale value, will skew heavily away from internal combustion engines well before then (and of course, once EV sales have momentum, there is no need for a Clean Car Discount. This week, with EV sales soaring thanks to record fuel prices, the UK Government scrapped its £1500 ($2900) grant towards the cost of a new electric vehicle).
A report by national grid operator Transpower said 50 per cent of NZ cars could be electric by 2035. That will leave a big hole in petrol tax revenue.
The price of powering up
Second, the EV takeover will necessitate upgrades to our power system. The Energy Efficiency and Conservation Authority (EECA) says a full transition to EVs will increase total electricity demand by 20 per cent.
A Transpower report said modelling indicated 10 to 15 largegrid power upgrade projects would be required by 2035, with each costing up to $250m — or up to a total of $3.75b. That’s another bill that will need to be paid.
Transpower does also say the transition away from more expensive petrol to EVs will save households a collective $4b — but assuming so, the Crown will need RUCs, or some other mechanism, to transfer some of that money to its own pockets if it’s to help fund power upgrades.
Whatever happens with RUCs, the