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Are energy companies truly ready for a boom in electric vehicle demand?

As I read through various forecasts for the energy industry in the coming years, a recurring uncertainty that always pops up to throw a question mark on everything is electric vehicle charging. Electric vehicles have seemed like they're primed to take over the market for years, and despite record sales in 2018, they've still represented only about 1% of new passenger vehicle sales. However, more automakers are pushing to get affordable EV models in their showrooms, policymakers are working to make plug-in electric cars accessible through tax credits, and a survey from AAA shows that 20% of Americans plan to go electric for their next vehicle purchase. 

All of this is to say: electric vehicles definitely are coming, we just don't know at what speed (if 80% of Americans are not going electric and many drivers go a decade between new cars, turnover will still be modest at best) and when that true inflection point of adoption will take off. That uncertainty is certainly frustrating for EV manufacturers and advocates, but the other group that it presents a large cloud of unpredictably is the energy management professionals. 

The effect that electric vehicles will have on the grid and the planning required from utilities will be massive, with no shortage of problems to address. Such considerations (as submitted to the Energy Management Community) include:

  • Planning for an influx of new electricity demand when multiple EVs are attempting to charge in the neighborhood, a type of energy demand that hasn't been prevalent previously
  • Determining pricing structures for public EV charging stations (how to split the charge between the EV driver using the charge vs. the public ratepayer who has subsidized initial rollouts in order to encourage adoption)
  • Ways EVs could be used with vehicle-to-grid (V2G) tech that could let them deliver electricity back to the grid, borrowing them during peak hours before being recharged during off-peak times
  • Similar strategies that would create a superhub of EVs that are charged while parked at the office or at home during the day, during hours of peak solar generation but lower demand, to smooth out the production curve of renewable energy sources (namely, solar)
  • In advance of the true influx of EV charging demands at customers' homes, many utilities are working to engage their customers to determine what their wants and needs will be as the EV revolution takes over

An electrified transportation sector has been on the precipice for some time now, but signs are pointing to the fact that the true EV takeover may finally be imminent. Utilities are no doubt aware and doing their best to prepare, but with so many unknowns how do they know if they're ready? I certainly don't have the answers to these questions, so I wanted to to turn it to this community. What are your companies and organizations doing to prepare for the changing power industry landscape that electric cars are going to usher in? What speed do these preparations need to take place? Do you anticipate any lesser discussed side effects to the EV boom? Have your customers begun expressing ideas, questions or concerns to you?

 

 

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Content Discussion

Matt Chester's picture
Matt Chester on December 6, 2018

Comment copied over, with permission, from the discussion about this article on reddit:

Energy companies love EVs.

Utility companies are regulated monopolies that aren't allowed to make money on selling electricity. They have to pass through their costs for generating electricity without any markup.

The way they are allowed to make money is what's called a "Return on Equity" (ROE) on major capital projects of theirs like building distribution lines and installing equipment. Basically, they're allowed to build infrastructure, charge rate payers for it through their power bills, and include a government-set profit margin on those costs.

Up until recently, US electric companies had been seeing flat or falling demand, as more efficient lighting, appliances and everything else reduced how much energy the average household and business used. Falling demand means no need for big infrastructure projects to increase capacity, which means nothing to earn their ROE on, which means lower profits for utility companies and their investors.

The switch from gas and diesel to electric as fuel for tens of millions of cars on the road is going to provide a new source of demand, which means utility companies will have a reason to spend money bulking up their grids to serve all those fast chargers, and other projects they can earn money on.

Bob Meinetz's picture
Bob Meinetz on December 6, 2018

Matt, it's been estimated California has enough transmission capacity to charge EVs even if everyone in the state owned one (because most EVs are charged at night).

Your source seems to believe utilities will be driven to build new infrastructure just to remain profitable, confusing Capital Cost Recovery (CCR)  with Return On Equity (ROE). CCR consists of payments utilities receive to finance new projects. ROE is a guaranteed return on the value of investments a utility already owns, which for U.S. utilities is 10.13% (average). "Flat or falling demand" has no effect on ROE payments - California's utilities, for example, already have $billions in equity "to earn their ROE on".

Despite efficiency, demand-response, and other token efforts to reduce peak demand, future nighttime electricity needs will only increase with the adoption of EVs. Without solar at night and nuclear anytime, demand can only be met by building new gas plants, resulting in millions of tons of added carbon emissions. The cost of those gas plants, with interest, will be billed to customers as CCR; the cost for fuel (gas) will be added to the utility's rate base.

Utilities and oil companies win, customers and the environment lose.

Areg Bagdasarian's picture
Areg Bagdasarian on December 7, 2018

Hi Matt and Bob, I know that SEPA. the Smart Electric Power Institute has a good comprehensive report on utility preparedness for these changes

here: https://sepapower.org/resource/utilities-electric-vehicles-evolving-unlock-grid-value/

In addition, only a handful of utilities are really actively ready for these changes (if any), examples include Calfornia utilities like SCE and San Diego Gas and Electric. SDG&E's "Power Your Drive" program is already in use for incentivizing drivers to charge their vehicles during "Grid-friendly" hours based on day ahead pricing, which is more accurate in taking into account the true cost of energy than just time of use pricing. If EV growth is even faster than utilities have previously estimated, many are woefully underprepared with respect to deploying utility scale renewables. 

Another concern really is that vehicle to grid technology is a great concept but how many poeple will opt-in to send power back to the grid? I think this issue will be mitigated as battery prices and and battery range continue to increase and there are more reserves to send back to the grid.  Utilities will continue to look to NWA (non-wires alternatives) and regulating demand before splurging on expensive infrastructure upgrades that may become stranded assets down the road. 

Lastly many utilities don't have a sense of when EVs on their network are being charged. Con Edison is using FleetCarma for monitoring in close to real time, when drivesr are charging their EVs and PHEVs. 

 

Matt Chester's picture
Matt Chester on December 7, 2018

Thanks for the thorough reply, Areg. I'm eager to see what happens as different utilities take different approaches, as that will quickly provide a sort of experiment on what the best approach is. Of course circumstances and executions will vary by region and company, but it'll still be interesting to see the crash course eventually come

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