Get ready for super-charged inflation courtesy of the folks in Sacramento.
The California Air Resources Board has proposed that 35 percent of all vehicle sales in the state be emission free by 2026. It dovetails into Gov. Gavin Newsom’s edict that fossil fueled new vehicle sales become extinct statewide by 2035.
Inflation is now at 8.5 percent.
The average new electric vehicle price is $62,876 or $15,000 higher than the average price of a gas-powered vehicle.
The demand for lithium and other precious metals critical to make EV batteries was in short demand with prices soaring before the Ukraine War disrupted the market.
Then there is the issue of electric generation capacity and the precarious power grid.
It takes 30 kilowatts to power an average EV for 100 miles of the typical daily household electricity consumption.
Keep in mind PG&E has started switching to peak pricing from 4 to 9 p.m. While it is a solid and needed move to make more efficient use of renewable energy and to lessen power demand during peak periods that strain the grid, it will be costly to EV users — think long distance travel of super commuters — who are faced with the need to charge their cars during that daily five-hour period.
You would hope whenever government moves to manipulate the market regardless of how righteous the reason might be that they make sure that there are adequate horses in place to pull the size of the cart they are creating.
In the case of forcing a switch to zero emission vehicles, one would hope the state would tap into its obscene surplus to make sure the power system can handle what they are requiring it to do.
The state, to remind you, is not just creating a greater demand for electricity to power EVs. They are also pushing heavily to do away with natural gas to heat homes and cook food. Instead, they want electricity used.
Besides pushing forward with the money pit of the millennium — some call it California High Speed Rail — the state is also slouching toward zero emission freight trains as well as the same for big trucks and one must assume ultimately farm and construction equipment.
What is the strategic plan for adequate power storage to assure supplies during periods when skies are too cloudy, if it rains for a prolonged period of time, or if half of California is burning due to power lines carrying electricity igniting wildlands?
It’s ironic. The state assumes the private sector and free market if left on their own — and arguably they are right — that they won’t advance EV production and sales to meet California’s climate controls.
Yet they seem to be willing to leave the private sector on its own to follow through all of the grunt work such as expanding and shoring up the power system that has a lot of regulatory pitfalls, they have to deal with not to mention the need for massive infusion of capital to change.
Why not find ways to streamline and expedite the approval process to develop large and secure power sources whether they are wind farms or solar farms?
Why not dangle a large chunk of the state surplus in the form of zero interest loans to encourage buildings with massive footprints such as distribution centers to add solar and storage batteries to sell back to power companies or for municipalities to convert wastewater treatment plants and water wells into being solar powered with storage batteries as well?
And if such zero-interest loan projects are phased in for funding over the next 13 or so years it would spread out the increased demand to help reduce pressure from the basic reason inflation happens — too much money chasing too few goods.
The state is essentially bringing a car to market that looks shiny and alluring but has paid little, if any, attention to what needs to go under the hood. They also have given no thought to the end cost and how to roll things out in a manner that doesn’t create a breeding ground for rampant inflation.
Rest assured Sacramento will come to the rescue when the prices aren’t dropping enough, the price of new electric vehicles becomes too painful for much of the middle class, and more people on the bottom end of the economic scale clamor for used gas powered cars they they are willing to keep repairing and will get more expensive due to increasing demand.
This will probably translate into big tax credits or tax rebates for buying electric.
And while that may look like it is helping soften the blow of inflated prices, it will actually make overall inflation higher. That’s because a large-scale rebate or tax credit scheme will be more than a blip on the state’s financial balance sheets.
Someone has to cover the bill. And that includes the very people befitting from a tax credit or rebate to soften the sticker shock of EVs being produced in too little numbers for the demand.
Such inflation is even higher given government has a nasty habit — depending upon what think tank you chose to believe — of draining 10 to 30 percent of the value of every dollar they take and then return to taxpayers in the form of social engineering.
Keep in mind none of this is to argue the state’s objectives aren’t sound or even necessary.
It is to point out they have put nothing in motion that assures Californians that attention is being given to the details needed to make this work so it doesn’t give the Golden State another economic boondoggle that will make high speed rail seem like a basement bargain project.