In a 2021 General Motors Superbowl ad with Will Ferrell, the comedian punches his fist through Norway’s location on a globe. The commercial took potshots at Norway because its number of electric vehicles (EVs) per capita far exceeded those in the United States. But GM shared that the U.S. is next: the company plans on offering 30 EV models domestically by 2025.
Norway leads the world in EV adoption, and it’s worth looking at how it achieved that distinction. Sixty percent of new cars sold in Norway during 2019 were EVs, compared with just 2% in the U.S. (Figure 1). What can the rest of the world learn from Norway?
Government Policy Ignited Norway’s EV Transition
As of 2021, there are more electric cars than non-electric in Norway. Ten years ago, nobody could have imagined this. And it’s not just cars that have gone electric. Norway has launched networks of electric buses, trains, and trams, plus fleets of electric bikes.
Government policy was a key to the rapid rate of electrification. The government introduced incentives for purchasers. Norway’s lesson is that the most effective way to accelerate the uptake of EVs is to make them affordable. Since oil and gas companies enjoy large subsidies, Norway lowered taxes on EVs to make them competitive with internal combustion vehicles. As an extra incentive, EVs are exempt from road tolls.
The other approach available was raising taxes on traditional cars, a kind of pollution tax. Norway decided to impose a 25% VAT tax on new internal combustion vehicles, in addition to a carbon tax of about 20%, plus smaller incremental taxes based on vehicle weight, a nitrous oxide emissions tax, and a car scrapping fee.
The impact of these decisions is that EVs are cheap in Norway. The Nissan Leaf, an unpretentious little car, is the best-selling vehicle in Norway. But in the U.S., Tesla models are a clear winner with a total of 71,000 sales (data from the first half of 2020); Chevy Bolt sold about 8,000 and Nissan Leaf sold 3,000 in the same period.
It’s helpful to remember that an electric engine and drivetrain are much simpler than an internal combustion engine (ICE). This means cheaper to build, maintain, and repair. A large part of the cost is the battery; it accounts for about a third of the price consumers pay. As batteries come down in price, so will total car price.
Driving distances are relatively short in Norway, which is only the size of New Mexico; this is an advantage for EV buyers. A Norwegian family visiting relatives on the other side of the country can drive there with little concern about finding a charging station. In contrast, a U.S. family driving from Kansas to visit family in California would need to carefully map out charging stations for the long trip.
Cheap Electricity Is Key to EV Adoption
If a country wants to decarbonize its transport system of cars and trucks, it needs two things: cheap EVs and cheap electricity. As explained above, Norway’s policies lowered the cost of EVs for residents. They also generate affordable electricity through 1,500 hydroelectric power plants around the country. Many of these are low-impact designs called run-of-river plants that don’t require dam building. Hydropower provides 96% of all electricity in Norway. So Norway’s decarbonized infrastructure was already built-in.
Norway has one of the cheapest electricity prices in the world and a very good infrastructure to harness and transmit it to the end user. Based on per kWh in USD, the 2020 price of electricity in Norway was 16.4 cents for households (and about half that for businesses) – compared with an EU household average of 25.8 cents. In the U.S., the average was 13 cents (business 11 cents) while Texas was 11 cents.
Being so cheap, hydropower renewables provide 67% of all in-country energy consumption in Norway. The next largest is oil at 24%, mostly for vehicles. Norway produces a lot of oil and natural gas but they export most of it.
With energy consumption of 67% hydropower, it was natural for the country to turn to EVs – it just took a nudge from tax incentives to set off a buying spree. The tax policy amplified the benefits of an inexpensive, built-in electric generation infrastructure.
Learnings for the US
The U.S. doesn’t have to wait for renewable electricity to run charging stations, because electricity is already cheap at $0.11/kWh in Texas and $0.13/kWh on average across the country.
However, this can be a problem if the electricity is produced by power plants because more and more people and financial institutions want a low-carbon footprint for the whole supply chain. In other words, they want electricity from wind or solar.
If they accept electricity from a gas-fired power plant, they want “responsibly sourced gas” (RSG), which means gas that hasn’t suffered a lot of methane leaks in its delivery to the power plant. Natural gas, which burns cleaner than coal, is touted as a halfway house to wind and solar, but it doesn’t have a lower carbon footprint than coal if there are too many methane leaks.
Subsidies or tax credits will also be needed to shift the price lower. The Tesla Model-3 is affordable only for the top 10% of the economic scale in the U.S. Some of the 30 EVs that will be available from GM by 2025 will match the earnings of the lowest 40% and the middle 50% of U.S. households.
EVs will outpace charging stations. For a family, the temptation will be to buy a new EV for use around town, at least until charging stations are plentiful across the country. The older ICE will be dedicated to cross-country trips. The new infrastructure bill now in Congress has $60 billion appointed for building new charging stations across the nation. This will encourage the EV transition.
A charging hookup in the home garage should be cheaper (hopefully subsidized as a home energy improvement), which would motivate more homes to adopt rooftop solar systems for their electricity. Such a system can be purchased with a larger battery backup to cover the EV as well as power outages, as happened in Texas just last winter. Batteries like this are not cheap but would be reasonable if the electricity savings paid out within 10 years.
Norway’s transport sector went from 3% renewable to 60% in just eight years. Transitions don’t have to take several decades.
About the Author
A petroleum engineer and consultant, Ian Palmer, Ph.D. has worked at Los Alamos, The Department of Energy, BP, and Higgs-Palmer Technologies. He is a contributor at Forbes.com and the author of The Shale Controversy.
Feature image: markobe – stock.adobe.com