Voucher Incentive Programs: Lessons From the States

Vouchers are increasingly being used to encourage investments in alternative fuel and other advanced technology vehicles. A major barrier for increased deployment of these vehicles is up-front cost. While fleets can typically calculate lifecycle savings and an attractive return on investment with hybrid electric and other vehicles, it is sometimes difficult to justify the high initial purchase cost. Tax credits are available at the state and federal levels, but many fleets are unable to take advantage of these incentives due to tax-exempt status or limited tax liability. Grant funding has led to many successful fleet conversions, but funding sources are limited, and some fleets do not have the resources to prepare proposals. Vouchers are intended to help encourage the market introduction of cleaner, more efficient vehicles by reducing the vehicle cost at the point of purchase and providing price certainty.

Voucher programs differ from one another in structure, requirements, and funding sources, but they all share some common characteristics. For example, most programs provide funding on a first-come, first-served basis. Programs to date have primarily targeted medium- and heavy-duty vehicles. The role of the equipment vendor, usually a dealership or manufacturer, is also an important factor. Some programs require the vendor to become certified or approved. Typically, the vendor applies for a voucher and deducts the amount from the purchase price. Once the purchasing fleet takes delivery and registers the new vehicle, the vendor submits the necessary documentation and is reimbursed for the full voucher amount.

California, New York, Maryland, and Oregon are among the states that have offered, or are currently offering, voucher programs. Each state has taken a different approach, and some programs are just getting started. State agencies interested in developing their own programs can learn from these challenges and successes.

California

California's Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (HVIP) is perhaps the most well-known voucher program. The California Air Resources Board (ARB) created HVIP in 2009 as a project under the Air Quality Improvement Program (Assembly Bill 118). Originally designed to fund hybrid electric trucks and buses, ARB expanded HVIP in its second year to include all-electric vehicles. By June 2013, ARB distributed 1,700 vouchers and expended all remaining funds. Additional funding has been allocated since then.

As of December 2013, the base voucher amount ranges from $8,000 to $45,000, depending on gross vehicle weight rating (GVWR). A fleet may receive up to 200 vouchers, and HVIP offers an additional $10,000 incentive for a fleet's first three eligible vehicles. Buses that public school districts purchase are also eligible for an additional $10,000 voucher credit through HVIP.

Other entities have provided additional matching incentives for HVIP to increase regional fuel and emissions reductions. For example, the San Joaquin Valley Air Pollution Control District contributes "plus-up" funding that adds up to $30,000 per vehicle on top of the HVIP voucher. Eligible vehicles must be garaged in the air basin 100% of the time for three years.

HVIP has helped generate significant results to date, including:¹

• Sales of more than 1,200 hybrid electric trucks and nearly 400 all-electric trucks, representing about 35% and 75% of national sales, respectively
• Almost all vouchers have been used to purchase private fleet vehicles.
• The majority of vouchers have been used for Class 4 and Class 5 vehicles. Beverage delivery and parcel delivery trucks are common fleet applications among voucher recipients.

¹ According to a presentation given by Tom Brotherton, CALSTART, at the High Efficiency Truck Users Forum in October 2013

New York

The New York State Energy Research and Development Authority (NYSERDA) is administering the New York Truck – Voucher Incentive Program (NYT-VIP), which is open to Class 3 to Class 8 vehicles meeting program requirements. NYT-VIP includes three types of vouchers:

• New York State Electric Vehicle – Voucher Incentive Fund (NYSEV-VIF)
  • 80% of the incremental cost, up to $60,000, for all-electric trucks
• New York City Alternative Fuel Vehicle – Voucher Incentive Fund (NYCAFV – VIF)
  • 80% of the incremental cost, up to $40,000, for CNG, hybrid electric, and all-electric trucks
• New York City Diesel Emission Reduction – Voucher Incentive Fund (NYCDER-VIF)
  • 80% of the total cost to purchase and install diesel emission control devices

Funding for NYT-VIP, which totals $19 million as of December 2013, comes from the federal Congestion Mitigation and Air Quality Improvement Program (CMAQ). As of December 2013, $9 million is available for NYSEV-VIF, and the other vouchers are expected in early 2014.

Maryland

The Maryland Energy Administration (MEA) offered two voucher programs, one for all-electric trucks and one for natural gas vehicles. Although both programs closed in 2013, MEA's experience offers several useful lessons MEA will apply to a future voucher program.

The Maryland Electric Truck Voucher Program provided up to $20,000 for qualified all-electric trucks. Partnering with the state Department of Transportation (MDOT), Department of the Environment (MDE), and the Maryland Motor Truck Association (MMTA), MEA administered $500,000 from the state's Transportation Trust Fund for this program.

Through the Maryland Natural Gas Voucher Program, MEA offered up to $20,000 for qualified compressed and liquefied natural gas vehicles. Working with the same team established for the Electric Truck program, MEA awarded over $200,000 from the Strategic Energy Investment Fund for these vehicles.

According to Chris Rice, Clean Cities coordinator and MEA voucher program contact, the Electric Truck and Natural Gas Voucher Programs will result in more than 85,000 gallons of conventional fuel saved each year. Looking ahead, MEA is developing a technology-neutral voucher program to provide purchase incentives based on the technology and GVWR. Once approved, the Freedom Fleet Voucher Program will provide funding from Maryland's Strategic Energy Investment Fund.

Lessons from Maryland

• Develop the program structure and materials with replication in mind. MEA was able to build upon the Electric Truck Voucher Program, minimizing the time and effort required to roll out the Natural Gas Voucher Program. The Freedom Fleet Voucher Program will stretch the initial development investments even further.
• Focus on the intent of the program while remaining flexible. MEA adjusted program guidelines after the initial rollout to allow for different business models because some fleets purchase vehicles while others only lease. MEA's flexibility allowed for both types of fleets to participate.
• Provide fleets with ample time to make purchase decisions. Under both of the closed programs, MEA had to set tight application deadlines due to timing constraints. MEA plans to allow more time under the Freedom Fleet Voucher Program so fleets can accommodate purchasing cycles, develop infrastructure, and prepare other plans as necessary.
• Assemble a strong team. MEA worked with MDOT, MDE, and MMTA to execute past programs, so the relationships were established. Each organization served a different role. MDE, for example, provided technical assistance to applicants. For the Natural Gas Voucher Program, MEA also worked with natural gas industry associations to spread the word.

Oregon

In March 2012, the Oregon Transportation Commission established the Oregon Commercial Electric Truck Incentive Program (CETIP) and allocated $4 million in CMAQ funds. Administered by the Oregon Department of Transportation (ODOT), CETIP was designed to encourage the replacement of older commercial vehicles with plug-in electric trucks. By the end of 2012, ODOT had not received a single application. After reviewing the program and potential reasons for the lack of demand, CETIP ended in early 2013, and OTC reallocated the CMAQ funds for other eligible projects.

Lessons from Oregon

• Set voucher amounts to be competitive with other states. ODOT received letters of interest from national fleets that ultimately decided to deploy vehicles in California instead where the incentives are more than double what CETIP offered.
• Consider whether manufacturing capacity is sufficient, particularly for nascent technologies.