Driving it Home: How Australia Can Make the Switch to Electric Vehicles

At the 2021 United Nations Climate Change Conference, Australia signed a global agreement committing to make electric vehicles (EVs) the new normal by 2030. Whilst a welcome initiative, and one supported by most Australians, the question of how to do this remains up in the air.

Australia currently faces several challenges in taking EVs mainstream, which includes a lack of physical and legislative infrastructure to support EVs, little private sector support and fewer models of EVs readily available on the domestic market.

What is happening domestically?

Action is being taken at both Federal and State government levels to address the issues mentioned above. For example, the Future Fuels Fund and, more recently, the Future Fuels and Vehicle Strategy aim to provide substantial funding and promote initiatives to support the smooth transition to EVs. This includes leveraging private sector investment to roll out refuelling infrastructure in both metropolitan and regional areas and capitalising on Australia’s large resources of critical minerals to manufacture EVs and other battery technologies.

At the State level, New South Wales, Victoria, the Northern Territory and Australian Capital Territory have implemented financial incentives, such as excluding EVs from stamp duty and introducing rebates, to encourage greater uptake of EVs. On the other hand, South Australia, Western Australia, Queensland and Tasmania are focused on developing public infrastructure to support the use of EVs.

While these interventions are important, there are still a lot more to be done to make EVs the new normal by 2030.

What is happening internationally?

Several countries have successfully promoted the EV industry in their respective domestic markets through a combination of incentives packages, effective policy instruments with government backing and substantial investment in infrastructure which supports the move to EVs.

Since the 1990s, Norway has maintained a consistent demand and supply for Evs. Among other initiatives, Norway has promoted an incentives package which imposes a high tax for high-emission vehicles and relatively lower tax for low-emission vehicles. Alongside implementing policy instruments and initiatives, Norway has also invested heavily in the construction of appropriate infrastructure to support EVs. An example of this was equipping all main roads in Norway with fast-charging stations.

The UK introduced its own discount programme to encourage more consumers to switch to less polluting cars, with a view to phase out internal combustion engines by 2030. Currently, consumers may be eligible for discounts of up to £2,500 for new low-carbon emission vehicles, with the plan to expand the scope of the programme so a greater number of consumers can access this benefit.

Other countries, such as the US (California) and China, have implemented mandatory targets for EV sales. These targets put pressure on manufacturers to increase production of low-emission vehicles, thereby making more models of EVs available for purchase in the domestic market.

With these initiatives in mind, there are a few key steps Australia can take to expedite and sustain the switch to EVs.

A path to the future?

Infrastructure and policy

An important first step is to continue building the required infrastructure to support EVs – including the roll-out of more charging stations and the development of appropriate policy instruments and regulations. This could include a national subsidy plan for making the switch to EVs, regulations to maximise efficient use of charging stations (particularly during the day/’peak’ hours versus off-peak/night hours), development of fuel-efficient standards and cost-effective home charging options.

Grow Supply and Demand

Also crucial is the focus both at Government and industry level on growing and maintaining demand and supply. This essentially boils down to consumers consistently choosing to buy EVs over similar fossil fuel alternatives and manufacturers choosing (i.e. not being commercially deterred from) exporting their EVs to Australia – at least until domestic manufacturing becomes sustainable.

One way of doing this is by developing incentive packages for consumers and manufacturers. This may take the form of discount programmes, exemption from GST, stamp duty or fringe benefits tax, or access to funding to make the switch to EVs a reality. Another method is to diversify the EV models available on the market to cater to a wider range of Australian citizens and their needs, and to cast a wider net for manufacturers potentially interested in selling their EVs in Australia.

To encourage continued commitment to phasing out high-emission vehicles for low-emission EVs, Australia could follow the example of the US and China and introduce a national sales mandate. Given Australia will, in time, likely follow suit as a domestic EV manufacturer, a national sales mandate may stimulate and drive greater domestic production of EVs.

Turn your EV into a household battery

A potentially game changing emerging technology is bi-directional charging, which essentially enables homeowners to use their EV as a household battery to power their home and make money by selling power from the vehicle’s battery back to the grid at times of peak demand.

If the energy used to charge the car comes from a free or cheap source, such as rooftop solar, a free charger at the local shopping centre, or even the workplace, the potential is there to substantially reduce consumers’ home power bills. Alternatively, there is an arbitrage use by charging the EV off-peak and exporting back to the grid during peak evening hours to optimise profits.

While bi-directional charging is not yet available in Australia, a trial backed by the Australian Renewable Energy Agency (ARENA) is underway in Canberra to test the technology. The Realising Electric Vehicles-to-grid Services (REVS) trial involves 51 Leaf EVs that are part of the ACT Government fleet and when plugged in will inject power back into the grid when the vehicles are not in use. Once the charging units have been certified by the relevant authorities it is hoped the technology will be ready to roll-out in Australia.

To consumers, these developments will help normalise the use of EVs and ensure it is seen as a legitimate, viable alternative to high-emission vehicles.

The world is undeniably in a period of exciting change, where traditional sources of fuel and energy are being traded for renewable resources in a bid to ensure a greener and more sustainable future. For Australia who recently affirmed its commitment to achieving this future, EVs may be just the way to drive that point home.

The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects. For more information, please contact Matt Baumgurtel.