Can MPAs Fix the Climate?

Can the mileage purchase agreement (MPA) idea accelerate the adoption of electric vehicles?

The idea of the mileage purchase agreement (MPA) is getting off the ground. Recently, I asked the Gigaton Scale Question: can this idea scale to be a solution to the climate crisis. Can it, for example, avoid a gigaton of carbon dioxide emissions within a decade? That is the scale of solutions we need and the Gigaton Scale Question is a sanity check on whether an idea can help solve our climate crisis.

Gigaton Scale Question: can a climate solution avoid a gigaton of carbon dioxide equivalent emissions within a decade?

Gigaton Throwdown Report 2009

How big is a gigaton? A lot. For context, we need to reduce global emissions by 14 to 30 gigatons per year by 2030. This would limit warming to 2 to 1.5° C.* So reducing emissions by a gigaton per year would help achieve that ambitious goal. One gigaton-scale solution is not a silver bullet, but nothing is.

This is a complicated question that I have tackled before.** Using a back-of-the-envelope spreadsheet model, I conclude that we could achieve gigaton scale with about an additional 100 million EVs in the worldwide fleet. This is a simple model and I make some key assumptions, for example that these are high mileage vehicles and that they are deployed into a grid with carbon intensity similar to today’s California grid.

Is it possible to add an additional 100M EVs by 2030? Current projections show we will have about 116 million EVs worldwide by 2030, which is less than 10% of the total. Could we get to about 200 million EVs by 2030? Certainly it is audacious goal (also big and hairy). But yes, it is possible.

Evidence from solar shows a path of how it could work. Ten years ago, everyone projected that 20+ percent annual growth in solar was not sustainable. Yes, that had been the historic growth rate, but it didn’t seem possible that it could continue. As we know now, the growth rate continued and even accelerated past 20%.

A big reason for solar’s rapid growth was the introduction of third party financing of solar in the form of power purchase agreements (PPAs), loans and leases. In 2010, for example, these financial products were introduced in Colorado and within two years, they represented 75% of solar installations.

Could a financial innovation also cause a massive growth in EV adoption?

The 2020 Bloomberg EV Outlook predicts 116 million EVs by 2030. It assumes price parity for the up-front price of EV versus fossil-fuel in 2025 and continued price reductions through 2030.

How could MPAs result in over 200 million EVs by 2030? Like solar, financial innovations can make a dramatic difference in adoption. What if the up-front cost of an EV became cheaper than a fossil-fuel car this year instead of 2025? What if by 2025, EVs are “free” in the same way a cell phone is free as part of a carrier’s payment plan? MPAs and related innovations can make both these true.

What if EVs are free in the same way cell phones are free as part of a carrier’s plan?

To make it happen, we will need to climb a mountain of policy changes, company creation and building, capital formation, and most important — willingness to imagine and dream big.

I’m taking the first step by investing in project financing to get early MPAs deployed and mentoring the companies fielding MPAs. I’ve also assembled a team to put together a fund to accelerate the change as we figure out the details of how to make it work.

Many steps to go…stay tuned… even better, join us.

If you want to stay up on the latest about the MPA concept, add your name to the Spring Free EV mailing list here and follow me on Twitter or Linkedin.

* In 2018 about 37 gigatons were emitted by fossil fuels if you include changes in land use it was a total of 55 gigatons. “By 2030, emissions would need to be 25 per cent  and 55 per cent lower than in 2018 to put the world on the least-cost pathway to limiting globalwarming to below 2 ̊C and 1.5°C respectively” (3.6°F to 2.7°F). Source:

** I was first exposed to the Gigaton climate wedge idea by researchers who were trying to conceptualize how to tackle the climate problem in the mid 2000s. (Pacala,S.,R.Socolow.2004.“StabilizationWedges:Solvingthe Climate Problem for the Next 50 Years with Current Technolo- gies.” Science. Vol. 305. August 13.) We used that concept on how to scale up clean energy technologies by 2020 in the study, “Gigaton Throwdown

The Mileage Purchase Agreement

Hundred Dollar Bills
The Mileage Purchase Agreement will save people money.

The mileage purchase agreement (MPA) idea is simple: Use the savings of driving an electric vehicle to reduce the up-front cost of buying an electric car.

The five year total cost of owning an EV like a Tesla Model 3 is cheaper than competitors like a Camry or BMW 3 Series. That means EVs are already a no brainer if people bought cars with cost in mind, with perfect rationality, perfect knowledge, and long term thinking. That, of course, never happens. Consumers and even fleet operators are driven by monthly payments and any number of other things like features, color, or whether they like the CEO. The MPA is a way to lower the monthly cost of driving an EV right away without having to do the math.

The economics will just get better over the years. A typical car lasts 16 years, not five, so the savings are even larger than the calculations above. Today’s electric cars should last even longer than today’s fossil-fuel cars. And it should just keep getting better with new battery technology, some of which claim to run one million miles.

One reason the MPA didn’t work in the past is that electric vehicles (EVs) were too expensive. Battery pack prices dropped prices by 90% from 2010 to 2019 due to ramp up in production and learning efficiencies.

Another reason it hasn’t worked yet is no one developed a version of the MPA that fit a burning need in the market. There was no “product-market fit” in startup language.

I ran a contest starting late in 2019 to find product-market fit for the MPA idea. We were successful in getting dozens of teams from around the world engaged. The top prize went to Flux EV, which is now getting ready to offer an MPA to facilitate getting a new EV and an in-home charger installation. Other contestants are also considering fielding an MPA product.

Simultaneous invention is a thing. You know an idea is ripe when many entrepreneurs hit on it around the same time. As a result of the contest, I know of several efforts to create variations of the MPA for different niches in different regions and countries. There may be others I don’t know yet.

If you are thinking of deploying the MPA idea or something similar, please reach out. You can drop me a line via Spring Ventures. I am looking for opportunities to invest in startup companies and creating a new fund to back MPAs as project financing for established companies as well as startups.

PS – If you want to stay up on the latest about the MPA concept, add your name to the Spring Free EV mailing list here or follow me on Twitter or Linkedin.

Photo by Giorgio Trovato on Unsplash