The business of V2G
- Posted on September 25, 2012
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THE FUNNY THING ABOUT TANGIBLE INNOvation is that while doubters kick up dust, innovators move to market. In the case of V2G (vehicle-to-grid) technology innovation, a go-to-market strategy and caution's inertia are converging as you read this article.
The concept, of course, is that electric vehicles (EVs) might serve as mobile energy storage that, in aggregate, could serve as a significant resource for the grid. In fact, in certain quarters, the term V2G is giving way to "GIV," or grid-integrated vehicle, a term that reflects the two-way, controlled flow of electricity and data. At least GIV is favored by the first market mover, thanks to control and communications innovations at the University of Delaware that will make GIV a commercial proposition this fall.
Examining the value proposition
As every innovator knows, however, hurdles remain to realizing the potential of exciting ideas, including V2G. The launch of eV2g, a new partnership between NRG Energy and the University of Delaware, will face all the challenges to the commercialization of new technology and new ideas in place since the wheel caught on. (Who knows how long that took, or what naysayers conjured up?) But the technical innovations and the business case logic in V2G's case underscore the concept's attractiveness and why a variety of parties worldwide are pursuing it. And at least one utility and one RTO (regional transmission organization) in the U.S. are examining the value proposition in detail.
That value proposition, simply put, would aggregate EVs whose owners have signed up to do so-they could be fleets or individuals-and at scheduled times charge or discharge their batteries to provide ancillary services such as frequency regulation and spinning reserves to independent system operators (ISOs) and RTOs. In return, they would receive a payment which, over time, could further lower the barrier to EV sales. Eventually, as the number of GIV-enabled vehicles increase to a critical mass, that aggregation could serve as an energy resource on the wholesale market, according to proponents.
The key to involvement with the wholesale energy market is timing. "Whether we're doing grid-to-vehicle or vehicle-to-grid, we're doing it at a time when it has value to the electric system," said Willett Kempton, professor in the College of Earth, Oceans and Environment and professor of electrical and computer engineering at the University of Delaware, who has been instrumental in conceiving of V2G and bringing about its fruition. (Kempton also led the development of three crucial patents licensed by eV2g to commercialize the GIV concept.)
Patents propelling efforts
Intellectual property is often the most crucial differentiator in high tech, and in this case, three patents held by the University of Delaware (three more are pending) will propel eV2g's efforts.
One patent is for technology referred to as an aggregator, which comprises logic on the server of an ISO or RTO and sends signals from the grid operator to participating vehicles to control charging and discharging in aggregate, so that many cars function as one virtual power plant (VPP). The second patent is an enhancement to EVSE, or electric vehicle supply equipment, and it communicates between the ISO server and vehicles in a secure manner. The third patent is known as vehicle smart link or VSL, a component which resides inside the EV. It communicates with the aggregator and EVSE.
One advantage of partnering with NRG Energy, according to Kempton, is that it has legal representation in major markets where it will spearhead simple changes to existing laws to allow GIVs to be treated like net-metered solar installations. (Delaware may have been the first state to make that change, which it did last year.)
"I don't consider regulatory changes to be an impediment," Kempton said. "All they're doing is modernizing those laws." Kempton also doesn't see EV adoption rates as an impediment. He cited initial, modest market penetration numbers but pointed out that those numbers represent a doubling of EVs on the road in the United States per annum.
Hurdles still exist
The tangible hurdle that Kempton and others see is getting EV makers to adopt battery technology-and the patented, onboard EV intelligence-that allows EVs to discharge upon receiving a signal from the ISO. Kempton sees that as an educational challenge, more than a technical one. The short-term solution is to educate EV makers about the capabilities of their batteries. What about assuaging the concerns of EV owners regarding their vehicle's battery life? Software will enable EV owners to assign parameters for charging and discharging cycles, either online or via a smartphone, according to Kempton. If owners can predict their driving patterns, then an appropriate charging pattern can be programmed so that the charge or discharge cycle's wear and tear on the battery is significantly reduced. (Major wear and tear occurs when batteries near empty and when they're charged fully. Partial, as-needed charges and discharges produce less wear.)
Similarly, the battery's programmed characteristics will dictate whether it is appropriate for use as a frequency regulator (many shallow charges and discharges through a day) or as spinning reserve (a few dozen occurrences during the year, typically for 10 minutes at a time).
Another factor, Kempton readily acknowledged: "weirdness." GIVs essentially offer mobile energy storage and may compete for attention with stationary batteries for ancillary services. One large, 100-kW stationary battery may appear to be a simpler solution, with a swift path to market. GIVs for ancillary services have a few moving parts, so to speak, and like utility-scale batteries, they're decidedly nascent. Yet the capital outlay to harness 100 GIVs is something like 10 percent of an equivalent stationary battery. That's a least-cost path to the same service, Kempton argued.
San Diego spots opportunities
Of course, the market will be created by utilities, ISOs and RTOs, not proponents. Alex Kim, director of customer innovations at San Diego Gas & Electric (SDG&E), said his utility is focused on exploring V2G as part of its overall effort to make use of Southern California's abundant sunshine and high EV penetration.
San Diego may have one of the highest density of EVs in its region (more than 1,600) than any region in the country, according to Kim. SDG&E also may be tops in distributed solar photovoltaic panels, with more than 18,000 grid-tied systems. In combination, those two resources support a V2G business model that would focus on localized benefits in addition to ancillary services for the wholesale market that serve an ISO or RTO.
When there is an over-production of renewable energy, charging an electric vehicle at that time could help to mitigate impacts on the grid, Kim said.
Conversely, EV discharges could help balance the ramping caused by intermittent renewable energy production. The utility has a definite interest in the potential for solar PV to charge EVs, which could serve as a backup resource for the home. Kim noted that one major Japanese car manufacturer has announced it will launch a vehicle-to-home system in Japan this year.
In San Diego, greater than 30 percent of EV owners have solar PV as well. Meanwhile, SDG&E takes an active approach to bringing EV owners into the utility's database, so it can assess potential impacts to the distribution system and develop visibility into the distributed resources that will help it build a smarter, interactive grid.
SDG&E is working with a variety of stakeholders, including automakers and regulators, to explore how V2G might serve local needs and contribute to California's energy and carbon emission goals, Kim said. The utility has several ongoing efforts focused on how to draw maximum benefit from V2G. It has teams working on the controls and communications technology that would allow coordination with charging stations; it is conducting a demonstration project with a stationary battery as proxy, prior to testing mobile storage in EVs; and it is evaluating the variables that affect when a utility could call on V2G as a resource. Some of that work is ongoing at SDG&E's Energy Innovation Center.
Once EV penetration and bidirectional batteries make V2G a viable resource for frequency regulation, Kim said, there will be value for both the utility and the customer-though that value fluctuates over time.
"V2G is a value-driven proposition," Kim noted, "and that value will depend on the number of vehicles in the system and customer willingness to participate. So we're studying charging behavior, based on rates, with the University of California Davis. The complicated part is understanding what customers are doing and will be able to do. "This (V2G) is one piece of the puzzle in a smarter grid-how do those pieces fit together?" Kim noted. "We're taking a holistic approach."
PJM gets it
On the opposite coast, PJM Interconnection was intimately involved in the Mid-Atlantic Grid Interactive Cars Consortium (MAGICC) project from 2007 to 2010, in which a handful of EVs owned by the University of Delaware were actively charging and discharging from and to the grid. And money changed hands when the "fleet" provided energy on-demand to PJM, according to Scott Baker, a student at the university then, today a business analyst in the applied solutions division at PJM. That successful project was intimately tied to the development of the university's patents now being licensed for commercial use, Baker said.
Since that time, PJM lowered its requirement for the frequency regulation market from 1 megawatt down to 100 kilowatts.
"That's a wholesale market rule change that lowers the barriers to entry for V2G," Baker pointed out. "The 100-kilowatt scale is important because it allows market participants to demonstrate real results without a large capital investment. Now, you might only need 20 EVs to demonstrate V2G benefits and that gives entrepreneurs clarity and confidence."
Of course, those are private sector enablers. For PJM's part, the main motivator is reliability.
"From PJM's point of view, energy storage will be an enormously useful tool for system reliability," Baker said. "To date, only pumped hydro has served that role effectively, but it is unlikely that much more will be built in PJM. Looking ahead, then, distributed resources may provide for new grid-scale energy storage, such as thermal energy storage, demand response products with storage characteristics-and aggregations of EVs."
To take advantage of V2G's potential, of course, means that PJM will take cost-effective steps to see that V2G services make it to market. And according to Baker, while technology hurdles remain, the real uncertainty lies elsewhere.
"The jury is still out on which business model will prove out," Baker said. "That's the most interesting part, the innovation around the business model. That business model will improve as battery costs drop. The concept of using an electric car as an energy storage resource makes perfect sense. But the real challenge is how the business model works."
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