Each week, we review the papers, studies, reports, and briefings posted at the “indispensable” RFF Library Blog, curated by RFF Librarian Chris Clotworthy. Check out this week’s highlights below:
Damages from Pollution and Biodiversity Loss Have Cost India Almost 6% of GDP: World Bank
First study of its kind warns Indian growth is unsustainable unless urgent steps are taken to tackle air and water pollution. Environmental degradation is seriously restricting India’s economic growth, costing it around Rs. 3.75tr ($80bn) or 5.7 per cent of GDP each year. That is the stark conclusion of a major new report from the World Bank… — via World Bank
The Quality of Our Nation’s Waters: Ecological Health in the Nation’s Streams, 1993—2005
A new USGS report describes how the health of our Nation’s streams is being degraded by streamflow modifications and elevated levels of nutrients and pesticides. The national assessment of stream health was unprecedented in the breadth of the measurements—including assessments of multiple biological communities as well as streamflow modifications and measurements of over 100 chemical constituents in water and streambed sediments… — via US Geological Survey
Technology Roadmap: Carbon Capture and Storage
This carbon capture and storage (CCS) roadmap aims at assisting governments and industry in integrating CCS in their emissions reduction strategies and in creating the conditions for scaled-up deployment of all three components of the CCS chain: CO2 capture, transport and storage. To get us onto the right pathway, this roadmap highlights seven key actions needed in the next seven years to create a solid foundation for deployment of CCS starting by 2020… — via International Energy Agency
Benefits of Rebuilding Global Marine Fisheries Outweigh Costs
It could cost up to $292 billion and take almost three decades, but University of B.C. experts have a proposal to save the world’s fisheries. In a study released Friday in the online journal of the Public Library of Science, a team of American and Canadian economists and ecologists… — via PLOS ONE
Sea Level May Rise 2 Meters (6.6 Feet) for Each Degree Celsius of Warming
Sea levels may rise by more than 2 meters (6.6 feet) for each degree Celsius of global warming the planet experiences over the next 2,000 years, according to a study by researchers in five nations. The research, published today in the Proceedings of the National Academy of Sciences, attempts to iron out the impact of short-term fluctuations in sea levels… — via Proceedings of the National Academy of Sciences
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In this series of blog posts, RFF researchers Virginia D. McConnell and Joshua Linn take a look at the current state of the electric vehicles (EVs) and the effect of current and future policies on the market. Click to read the first, second, third, and fifth installments.
Subsidies to consumers that we discussed in the previous blog (“Can Electric Vehicles Compete on Price?) are substantial and come in a number of forms including tax credits, free electric charging and HOV lane access. These are not the only subsidies for EVs however. There are also indirect sales and production subsidies that are evolving out of new policies to reduce greenhouse gases (GHGs).
Federal fuel economy regulations, the so-called reformed Corporate Average Fuel Economy (CAFE) standards, have recently been revised in a two-stage process affecting vehicles for model years 2012 to 2025. These standards require increasing average fuel economy from vehicles sold by all manufacturers, and they also require reductions in GHG emissions for the first time. Average fuel economy will almost double from its current levels by 2025, and GHG emissions must fall by more than 40% over the same period.
The GHG provisions of the new rules established by the EPA give special status to EVs in several ways. First, miles driven on an electric charge are counted as zero emissions (thereby disregarding upstream GHG emissions that occur at power plants where the electricity is generated). This provision makes EVs more appealing to manufacturers as a way to comply with standards. More EVs in a manufacturer’s fleet means less reduction in GHGs is needed from other vehicles.
Another provision of the new federal CAFE rules that will have a similar effect for EVs is that there is a “credit multiplier” for electric vehicles for MYs 2017-2021. For example, an all- electric vehicle will count as 2 vehicles in 2017, though the amount of the credit will decline over time. This will also mean that increasing the number of EVs produced and sold will lower a manufacturer’s costs of meeting the standard.
How large are these subsidies for EVs? It is not clear yet how much either of these subsidies to manufacturers will be worth since they depend on the future costs of reducing emissions from traditional vehicles that EV manufacturers will avoid—that is, the size of the subsidy depends on how costly the standards will be to meet in the future. But some simple calculations suggest that the implicit subsidies may amount to a couple thousand dollars per vehicle within the next 5 years.
Another significant regulation that provides subsidies for EVs is the co-called “ZEV mandate,” which originated in California and has been adopted by 10 other states. Under the mandate, a set percentage of vehicles sold by large automakers (over 60,000 vehicles a year sold in a participating state) must be zero emission vehicles (ZEVs). All-electrics and fuel cell vehicles qualify, with PHEVs given partial credit based on their estimated all-electric miles driven. The required ZEV percentage started small in 2012, but must reach 15.4% by the 2025 model year. A credit market allows automakers to buy and sell ZEV credits that can be used instead of actual ZEV sales. This allows firms that exceed the required share of ZEVs to receive further subsidies. For example, in the first quarter of 2013, Tesla sold $68 million worth of credits to other automakers in California, which is $13,600 for each of the 5,000 cars it sold in the quarter. This provides a sizable additional subsidy for sales of electrics in states where the ZEV mandate is in place.
These incentives to produce EVs under the new CAFE and ZEV rules are not the only subsidies on the manufacturing side. There are also subsidies for manufacturing batteries for EVs and for basic research in battery development. For example, the federal government has supported investment in electric battery production facilities with over $2 billion in subsidies, and spends nearly $80 million a year for electric battery research and development. Another subsidy that effectively increases the demand for electric vehicles are certain federal and state requirements that a certain share of both public and private fleet vehicles must be alternative fuel vehicles such as EVs.
While these subsidies are likely to have significant effects on EV technology development and adoption, it is difficult to estimate the implied average subsidy per vehicle. Fleet mandates for EVs vary a great deal by geographic region, and the effect of R&D subsidies would need to be captured by vehicle production over many years.
In summary, total subsidies for electric vehicles—those to consumers to induce them to buy EVs, and those to manufacturers to induce them to produce and sell EVs—are large. Direct subsidies to consumers can be $9,500 per vehicle (or more in some states), implicit subsidies to manufacturers under CAFE rules are roughly a couple thousand per vehicle, and there are many other subsidies that are very hard to quantify on a per-vehicle basis but which nonetheless create very strong incentives. We next turn to what might justify such subsidies.
Takashi Hattori spent December 2012 through February 2013 at RFF, in between completing his role as director for climate change at Japan’s Ministry of Economy, Trade, and Industry and starting his new position as head of the Environment and Climate Change Unit at the International Energy Agency (IEA) in March 2013. He sat down with Resources as an independent expert to discuss his experiences with climate policy negotiations, both internationally and within Japan.
Resources: Takashi, why did you choose to get involved in the issue of climate change?
Takashi Hattori: When I was an undergraduate, I participated in the 20th anniversary Earth Day event in New York. I knew then that I wanted to do something about this global issue. Since then, within the government of Japan, I’ve had various opportunities to work on the issue, and I’ve realized that government cannot do everything. Industries, people, research communities, local governments—they all play a role in this issue.
Resources: You’ve been part of Japan’s team responsible for international climate negotiations through the UN Framework Convention on Climate Change. What do you think is necessary to move the international negotiations forward?
Hattori: I first attended the Kyoto Conference (COP3) in 1997, which set the Kyoto Protocol. It was a moment when we internationally agreed to do more to address climate change. Since then, the world has changed rapidly. Many countries—both developed and developing—have made efforts to work on climate change actions. But we need to work further.
Last year we started the Ad Hoc Working Group on the Durban Platform, which is negotiating the future framework beyond 2020. This is a forum for bringing many new ideas, where all countries can work together to further the climate issue. We need creative thinking to develop a new structure and new elements for international climate actions.
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Each week, we review the papers, studies, reports, and briefings posted at the “indispensable” RFF Library Blog, curated by RFF Librarian Chris Clotworthy. Check out this week’s highlights below:
U.S.-China Climate Change Working Group Documents
The United States and China have agreed to five new action initiatives with the goal of reducing greenhouse gas emissions and air pollution by tackling the largest sources of emissions in both countries. These initiatives were developed by the U.S.-China Working Group on Climate Change and presented in a Report agreed to by Leaders’ Special Representatives at the Strategic and Economic Dialogue. — via U.S. Department of State
An Ecosystem Services Approach to Assessing the Impacts of the Deepwater Horizon Oil Spill in the Gulf of Mexico
As the Gulf of Mexico recovers from the Deepwater Horizon oil spill, natural resource managers face the challenge of understanding the impacts of the spill and setting priorities for restoration work. The full value of losses resulting from the spill cannot be captured, however, without consideration of changes in ecosystem services–the benefits delivered to society through natural processes. — via National Academy Press
EPA Criticized by Science Advisory Board for Delaying Data Collection on its Fracking and Water Quality Study
EPA advisers are suggesting revisions the agency could make to its pending study of hydraulic fracturing’s potential impacts on drinking water to better position the analysis for use by policymakers, including prioritizing chemicals to be studied based on toxicity or use patterns and increasing focus on geological characteristics of specific shale formations. — via US EPA Science Advisory Board
A Tale of Renewed Cities: a Policy Guide on How to Transform Cities by Improving Energy Efficiency in Urban Transport Systems
The global economy could save up to $70tr over the next 40 years by revamping urban transport networks to reduce congestion, enhance fuel efficiency, and promote public transport, cycling and walking. — via International Energy Agency
Sustainability for the Nation: Resource Connection and Governance Linkages
…in order for the nation to be successful in sustaining its resources, “linkages” will need to be built among federal, state, and local governments; nongovernmental organizations (NGOs); and the private sector. The National Research Council (NRC) was asked by several federal agencies, foundations, and the private sector to provide guidance to the federal government on issues related to sustainability linkages. The NRC assigned the task to as committee… — via National Research Council
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In this series of blog posts, RFF researchers Joshua Linn and Virginia D. McConnell take a look at the current state of the electric vehicles (EVs) and the effect of current and future policies on the market. Click to read the first, second, fourth, and fifth installments.
Because electric vehicles are new technology, it will take time for consumers to fully understand their performance attributes, reliability, and convenience relative to more conventional vehicles. Competitiveness on price is therefore likely to be important for electric vehicle (EV) commercial success in the early years. There is a perception among car buyers that EVs are just too expensive. Yet, discounts and subsidies for electric drive vehicles appear to be commonplace. Do these deals and subsidies make these vehicles comparable in price to alternatives? Or, even with subsidies is price a major issue for EV sales?
The answer appears to be straightforward. There is almost universal agreement that current batteries are still very expensive, at least for the energy that is needed to power a car. Though battery costs have been coming down due to learning in production methods and scale economies, and will continue to do so, there is a limit to those cost declines without technological breakthroughs. Most forecasts are that battery costs may fall to $300-$400 a kWh by 2020—a decrease of more than 50% from today’s costs. Even with these reductions, power and range remain challenges for EVs. Greater cost reductions will be needed for EVs to dominate the vehicle market without subsidies.
However, not all EVs are the same, and each may compete for a different type of consumer.
A small all-electric vehicle, such as the Leaf, has a very simple electric engine. With current federal and state subsidies, it is only a bit more expensive than other cars in its size class. Nissan recently lowered the price of the Leaf to $28,000. The federal subsidy of $7,500 and subsidies in California of $2,000 or in Illinois of $4,000 reduce the cost to consumers who can take advantage of the full subsidies to below $20,000 (although many consumers lease EVs we focus on car prices, which are easier to compare, rather than lease prices). In addition, annual fuel costs for the Leaf are about one-fourth those of a similar gas-powered car: about $487 for the Leaf and $1700 for the gasoline engine vehicle.
The larger Volt has an electric drive train and a gasoline engine, so it is not limited to the range allowed by the battery. The all-electric range for the Volt is about 35 miles, but the gasoline engine allows for a total range of over 300 miles before refueling. But having two separate drive components makes the Volt more complex and more expensive than many other cars in its size class. The list price is just under $40,000, but with federal and certain state subsidies, price is closer to $30,000 for many buyers. Another mid-sized plug-in hybrid electric, the Plug-In Prius, has only about at 12-mile electric range, and is somewhat less expensive at $34,000. The subsidy is lower, however, because the subsidy increases in proportion to the size of the electric battery.
An important point is that vehicle prices to consumers are not the same as the costs to manufacturers for producing the vehicle. There is agreement, for example, that GM invested more than a billion dollars on the Volt over a number of years including for development, design and plant construction costs. It will take large volumes of sales over time to bring down per vehicle costs to something close to what the vehicles are currently selling for. This was likely true for the Toyota Prius hybrid—though first sold in 2000 it, according to industry experts, has only been making money for Toyota in recent years.
There are other subsidies to EV buyers, in addition to the direct subsidies that affect the price of the vehicle as shown in the table above. For example, EVs and many PHEVs are able to use High Occupancy Vehicles (HOV) lanes even with only a solo driver. The value to drivers of such access to HOV lanes will vary not only with their income and commute distance, but with local traffic congestion and patterns. The value of an HOV sticker is as high as several thousand dollars a year in Los Angeles.
In addition, charging stations for home, work and public areas have been heavily subsidized. The values of these subsidies vary quite a lot across regions but in many cases they can add up to several thousand dollars.
The retail prices of EVs are higher than the prices of other vehicles in the same size and type class, though the potential subsidies greatly reduce that price differential. And, fuel costs of EVs are considerably lower than for all-gasoline vehicles. So, as long as current subsidies remain in place, we will see how well EVs can compete with other vehicles on other attributes like performance, reliability, and convenience.
Last month, Illinois passed new legislation (SB 1715) strengthening and updating its oil and gas regulations. Governor Pat Quinn and sponsors of the new law claim it will give the state “the strongest, most effective drilling safeguards enacted by any state in the nation” while still allowing the industry to “develop in a responsible manner.”
The new Illinois law came too late to be included in RFF’s recent analysis of state shale gas regulations, which reviewed 25 regulatory elements (20 of which we tracked statistically) across 31 states. But we’ve since updated our database to include the new rules. As we’ve noted, the data doesn’t allow us to rank states according to the cost or environmental effectiveness of their regulations. But we can evaluate a bold claim like that made by Illinois, at least for the regulations in our sample.
The Illinois bill increased the stringency of many existing regulations and added newly regulated elements. For example, new regulations will increase the distance a well pad must be from a building, increase the distance from the well pad that water testing must take place prior to drilling, and increase requirements for cement depth and casing. New regulations include those regarding cement type, setbacks from water sources, and limitations on venting of gas. The severance tax rate is also increased under the new bill—though these rates are tracked in our analysis, we don’t treat them as a form of regulation or count them for stringency purposes.
In the report, we used three measures to examine regulatory behavior across the states. The first and crudest is the number of elements that each state regulates in our sample of 20. Prior to the updated regulations, Illinois regulated 15 of these 20 elements, a level slightly below the national average. After the rulemaking, Illinois now regulates 19 of the 20 elements. (Illinois still lacks freeboard requirements to manage changes in stream water flow from hydraulic fracturing.) The figure below shows how other states in our study compare. Only New York (in its proposed regulations) and West Virginia regulate all 20 of the elements considered in our study. Along with Illinois under its new rules, Colorado, Michigan and Pennsylvania also regulate 19 of the 20 elements.
For many of the elements we analyzed, we can go deeper. Where regulations use quantifiable standards, we can compare stringency across states. We normalized stringency for each element to a standard scale, and used that data to determine an average stringency for each state.
Looking only at each state’s quantifiable regulations, the most stringent state is Montana, at 96 percent, followed by Maryland at 90%—in other words, Montana’s rules, on average, were 96% of the stringency averaged across the most stringent regulations across the states. In this measure, Illinois was at 44 percent before the recent rulemaking, one of the five least-stringent states sampled. Including its new regulations, it is now at 66 percent, putting it into the top 10 most-stringent—but far from Montana’s 96%, and also less than other states with significant shale gas development, like Texas.
This measure isn’t perfect, however. It ignores elements a state doesn’t regulate at all. Montana’s high degree of stringency is only based on 4 elements, for example. When elements a state does not regulate are treated as minimally stringent, the picture changes. Maryland remains one of the most stringent regulators but Montana does not, for example.
Here, Illinois’ claims about the stringency of its new rules seem more plausible. Previously, its rules were in the middle of the stringency pack, at 42%. Under the new rules, Illinois is in a virtual tie with three other states at about 60%, ranking behind only Maryland at 74%. According to EIA data, Maryland’s gas industry remains very small, however.
Our data therefore supports (but does not prove—remember that our sample is limited) a somewhat qualified version of Illinois’ claim about the stringency of its regulations: under its new rules, it does appear to be in a small group of significant gas-producing states with the strongest regulations in the country.
Both our findings about stringency and claims like those made by Illinois should be taken with a grain of salt, however. Enforcement and, ultimately, cost and environmental effectiveness are as much or more important that on-the-books stringency. Having the tightest rules in the country doesn’t matter much if they aren’t effectively enforced, and is bad policy if they don’t address the right risks or are too costly. Making meaningful comparisons between states therefore requires much deeper analysis than we do here and Illinois’ politicians are doing in their press releases trumpeting the new law.
But if states compete to have strong and effective regulations, that’s not a bad thing. The evidence we have broadly supports Illinois’ claims about its new rules. States that want to compete will need to either strengthen their rules or show why their current approach is more effective than a simple look at stringency might suggest.
In this series of blog posts, RFF researchers Virginia D. McConnell and Joshua Linn take a look at the current state of the electric vehicles (EVs) and the effect of current and future policies on the market. Click to read the first, third, fourth, and fifth installments.
Some news reports suggest that sales of electric vehicles (EVs) are booming, but others say sales are far short of expectations. Consumer responses to EVs are bound to be complex, because they depend on many factors including vehicle performance, price, convenience of use, and other attributes compared to alternatives. Here we look at the evidence about EV sales over the past few years, compared to sales forecasts.
First, EVs have important advantages for consumers: in pure electric mode, they have excellent torque, which means that they are responsive and accelerate quickly, much more quickly than conventional vehicles. (Though they tend not to reach the same top speeds as conventional vehicles, topping out at only 80 or 90 mph). Also, all-electric vehicles often have limited range due to battery size. For example, the Nissan Leaf can go between about 70 and 80 miles on a charge. The Tesla Model S, a very high-end all-electric sports sedan, is an exception: with its large battery pack, it can travel about 200 miles on a charge, and has a lot of power even at high speeds. Consumer Reports rated the Model S as its best car for 2013—in fact the best they had tested since 2007. Other EVs have also won awards from consumer groups: the Chevy Volt, the first plug-in hybrid electric (meaning that it runs on a charge or with gasoline), won the Motor Trend Car of the Year in 2011.
But have sales met expectations? Two EVs have been available since 2010: the Volt and the Nissan Leaf. Sales of both have lagged manufacturers’ original sales expectations, but other sales metrics suggest more mixed results.
Originally, GM hoped that sales of the Volt would increase rapidly over the first few years. Forecasts were for global sales to increase from about 10,000 for MY 2011 to 45,000 by MY 2012 and 60,000 by MY 2013. Actual sales have been much lower. The first full year of sales for the Volt in 2011 were only 7,671, and in 2012 they were 23,461 in the U.S. market (about half the 2012 forecast; the U.S. accounts for most of the global market). The Volt plant in Michigan even had to shut down for a few weeks in November and December of 2012 because of high inventories. However, the Volt is selling well compared to other high-end mid-sized cars, such as certain Acura, BMW, and Infiniti models. Predictions of sales of the Volt in 2013 are for about 30,000 in the U.S. market, but so far in 2013 sales are only slightly higher than in 2012. Half of the market for Volts is in California.
Sales of the all-electric Leaf have been lower than for the Volt. Originally, Nissan had hoped to sell 20,000 Leafs per year, but in 2011 and 2012 it sold only about half that estimate. 2013 sales have been better, partly driven by a $6,000 price cut. So far in 2013, sales of both vehicles are about the same but are lower than hoped-for levels.
Tesla Model S sales have been strong, even relative to its competitors. Tesla plans to offer 20,000 Model S vehicles in 2013, which would give Tesla nearly 10 percent of the market for passenger cars priced at or above its base price of around $62,000. Tesla benefits from subsidies, especially in California (more on these policies in a future post).
By May 2013, there were more than 100,000 EVs on the road.
But new vehicle technologies are always adopted over time—how do EV sales compare with other technologies? The figure below shows cumulative sales by month after initial introduction of various EVs compared to the well-known Prius hybrid-electric (introduced in 2000). All of the EVs appear to be doing roughly as well or better than the Prius did in its first few years of sales in the U.S. Currently the Prius HEV sells about 235,000 vehicles nationwide (roughly 2% of all sales), and it is the best-selling vehicle in California. But one should be cautious before drawing broad conclusions from this comparison because there are many things that can influence sales.
So, although EV sales have been below expectations for a number of early models, sales have been increasing over time. Some EV models are doing reasonably well in the market compared to close competitors. But are the large federal and state subsidies the reason? In the next post, we’ll look at the decision to choose an EV from a consumer’s perspective.
The second round of unabashed and one-sided bashing of the oil and gas industry, and in particular shale gas, played on HBO Tuesday. Gasland II opens with comments from Robert Howarth, a Cornell professor who has questioned the climate benefits of natural gas relative to coal with his own estimates, which wrongly assumed that all methane not accounted for as production was released into the air, rather than being captured or flared. EPA’s latest estimates show fugitive methane emissions well below the breakeven benchmark with coal burned in power plants. Estimates due any day from a joint effort by the Environmental Defense Fund, University of Texas and several operating companies are very likely to corroborate EPA’s findings.
The relatively esoteric issue of fugitive methane gives way to some really outrageous statements. The most egregious is linking seismic events associated with a few deep injection wells in several states used to dispose of fracking wastes (the largest probably being a 5.7 on the logarithmic Richter scale) to a study of what would happen to Los Angeles if an earthquake releasing about 80 times the amount of energy (7.2 magnitude) occurred! No one has yet linked fracking itself to any seismic events that most people can feel, much less a large, destructive quake.
Anthony Ingraffea, another Cornell professor, explains in another scene how groundwater can be polluted by methane and various fluids in flowback and produced water. He draws only one cement barrier on the chalkboard (multiple barriers are common) and then leaves the novice listener with the false impression that “failures” of cementing and casings mean that groundwater becomes polluted. “Failure” in this case is a generic term for pressure anomalies that show something is not right in the wellbore, and these do happen quite often – he says 5 percent immediately and 50 percent over the well lifetime. How frequently groundwater is polluted in the process is not well understood in the scientific community, but, in any event, the frequency will be less than that for “failures.”
One helpful point made indirectly by the movie is the lack of transparency and information about this topic because industry practice in settling claims and lawsuits is to insist on silence from plaintiffs. Silence on the amount of the settlements is one thing. Silence on what happened is another. The public needs to understand what the actual risks are and by shutting in this information the industry does itself a disservice by giving the public the feeling that there is something big to hide. And, if there really is something big to hide, the industry needs to go all out to deal with it.
In a new Resources magazine article, RFF Senior Fellow Joel Darmstadter looks at why American coal is embroiled in controversy—both political and environmental—over plans to serve foreign markets, most notably in China and India.
Click here to read the full piece.
In this series of blog posts, RFF researchers Joshua Linn and Virginia D. McConnell take a look at the current state of the electric vehicles (EVs) and the effect of current and future policies on the market. Click to read the second, third, fourth, and fifth installments.
There have been numerous news articles and much hype about electric vehicles (EVs) over the last few years. Advocates believe they are the best option for dramatically reducing oil consumption and greenhouse gas emissions (GHGs) from light duty vehicles in the next 20 years. Governments at the federal and state levels have implemented large subsidies for electric vehicles to spur their introduction to the market—one goal is to have a million EVs on the road by 2015. Most of the subsidies were initiated under the Energy Independence and Security Act (EISA) in 2007, and have been extended and modified in recent years. The subsidies are designed to help jump start alternative engines and fuels, to both improve energy security and reduce greenhouse gas emissions that contribute to climate change.
Doubters see the subsidies as a waste of tax-payer money, and they see limited sales of electrics even with subsidies and other policies. And, media accounts tell conflicting stories about how well EVs are actually doing in the marketplace. Over the next few posts, we’ll try to take an unbiased look at the current state of the EV market, and at the effect of current and future policies.
First, it is important to define EVs. Electric vehicles get some or all of their power by plugging-in to the electricity grid. They include all-electric vehicles that get all of their power from an external charge, such as the Nissan Leaf; and, plug-in hybrid electric vehicles (often referred to as PHEVs) that have both a battery and a gasoline engine, such as the Chevy Volt and Prius Plug-In. A variety of new models of both types are being introduced to the market each year. Note that these EVs that plug in to the electricity grid are distinct from traditional hybrid-electric vehicles that do not plug in, like most models of the Toyota Prius.