How Utilities Play a Major Role in the Future of EV Charging Infrastructure

 In EV Charging, EV Industry, Utilities

Plug-in electric vehicles (PEVs) offer a wealth of societal benefits that extend far beyond the good feelings many drivers get from skipping the gas pump. In recent years, these benefits have become increasingly quantifiable, as studies and new methods for understanding the impacts of PEVs have accumulated.

Consumers, the public, governments and utilities all stand to gain from economic payoffs associated with strong PEV adoption. In some markets, policymakers and regulators have shown an encouraging level of commitment to accelerating PEV growth, but there are a number of important gaps that will need to be filled in order to achieve significant cuts in greenhouse gas (GHG) emissions.

For investor-owned utilities (IOU), the infrastructure investments required to support widespread PEV adoption often require approval from regulators, who will be evaluating proposals based on criteria like these:

  • Will the investment benefit ratepayers by reducing the cost of electricity?
  • Does the investment meet a need beyond reducing rates, such as increasing stability of the grid?
  • How will an investment impact consumer choice, competitiveness and innovation in the market?

As PEVs grow to represent an increasing share of vehicle miles travelled in the United States, the electricity required to charge them will place new burdens on the grid. Utilities will eventually need to make improvements to support this new demand. Far from an unwelcome cost of doing business though, many utilities are eager to invest in electrified transportation. It is, after all, in their—as well as the public’s—economic interest to accelerate the rate of PEV adoption sooner rather than later.

To learn why, let’s turn to the nation’s largest and most-studied PEV market: California.

Electricity Demand by End Use Sector

Electricity Demand by End Use Sector (E3 U.S. DDPP Report’s “High Renewables” Case)

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California Utilities Benefit From PEV Adoption

One might be tempted to guess that the main motivation for utilities to support PEVs would be increased revenue from electricity consumption. While electricity demand does stand to see a boost from each new PEV on the road, the bulk of the benefits won’t come from new load demand but from savings in other areas, like the cost of energy production.

Thanks to accelerating investments in renewable energy that will see technologies like solar and wind hit as much as 40% penetration in some parts of the state, utilities in California will face new challenges managing their net loads. The cleanest sources of energy from an emissions standpoint (renewables and nuclear power) all happen to fall into the category of non-dispatchable generation. This means that they can’t be easily be ramped up or down to match demand at a given hour of the day.

Solar and wind farm

In a study of California’s Renewable Portfolio Standard (RPS) and the impact it will have on load balancing, Energy and Environmental Economics (E3), a research group specializing in utilities and energy policy, found significant added rate costs stemming from over-generation. It recommended utilities do their best to incentivize the flattening the net load during key periods of low demand and high non-dispatchable generation. One of the most promising avenues for solving this problem can be found in Time of Use (TOU) and dynamic Vehicle Grid Integration (VGI) pricing, which can help steer electricity demand from PEVs to periods of the day that are most beneficial to the load balance.

Infrastructure Investments Pay Dividends to Consumers and Shareholders

A Ratepayer Impact Measure (RIM) Test of estimated lifetime net utility revenues from PEVs placed in 2014 ranged from $2,788 to $9,799 depending on the cost structures applied to vehicle charging. Under basic tiered pricing, utilities experience a net revenue gain of $9,799 per vehicle compared to a $2,788 gain under TOU pricing. Once savings resulting from load balancing under TOU pricing are factored in though, the net benefit of a tiered pricing scheme shrinks to $4,997, while the net benefit under TOU increases to $6,267.

The dividends under either pricing model are significant and are projected to increase over time—even as federal and state purchase incentives for PEVs phase out. These dividends will be shared between PEV owners, IOU shareholders and ratepayers. Additional social benefits resulting from the health benefits of cleaner air, decreased petroleum reliance and GHG emissions cuts can also be estimated. These other factors boost the case for PEVs significantly.

Societal Net Benefits from PEV Adoption

Illustrative Societal Net Benefits from PEV Adoption (E3/ICF CalETC Study)

What Utilities Can Do to Encourage PEV Growth and Reduce Load Imbalance 

California has set the ambitious goal of lowering GHG emissions to 70 percent of 1990 levels by 2020, and 20 percent by 2050. In order to keep pace with this goal, the state aims to have 1 million PEVs on its roads by 2020 and 1.5 million by 2025. Utilities can target support for PEVs into five main areas:

1.) Installation of Charging Stations

According to E3, investment in home and commercial charge infrastructure will have to reach approximately $3.8 billion by 2030. Additionally, Statewide PEV Infrastructure Assessments estimate that public and workplace infrastructure will be required to support 230,000 to 410,000 charge sessions per day. This would require increasing the total number of charge points by at least a factor of 18 compared to 2014 levels.

The costs of these installations can be spread between vehicle owners, ratepayers, state & local governments, and shareholders. Initially, the California Public Energy Commission (CPUC) barred utilities from investing significantly in charge infrastructure based on concerns that it might stunt competitiveness in the charge market. Recently though, the CPUC has approved several limited, rate-funded investments from California’s five major utilities.

Expansion of public, commercial and workplace infrastructure can be very useful in balancing non-dispatchable production with demand during key peak generation periods. For example, when paired with dynamic pricing, robust workplace and public infrastructure could significantly impact PEV charge schedules by shifting a portion of overnight charging to the daytime, when solar generation is at its highest.

EVs charging at charging stations

2.) Development and Promotion of TOU and Dynamic Pricing

Time of Use and dynamic pricing models can save PEV drivers thousands of dollars in energy costs over the lives of their vehicles. Utilities will need to invest in studying charging habits under these models in order to optimize their effectiveness.

A good deal of outreach will be also required to make PEV owners and prospective buyers aware of the benefits of alternative pricing schemes. Promoting the cost benefits of PEV ownership and helping customers to understand the available pricing models will be a major weapon in boosting PEV adoption.

3.) Generation and Grid Investments

Even under the most optimistic forecasts, minimal grid or generation capacity upgrade costs will be required to meet added demand from PEVs before 2030. These costs can be further mitigated by investments in charging infrastructure and implementation of TOU and dynamic pricing. The more evenly demand is spread, the lower the costs of meeting this new demand from PEVs will be.

4.) Deployment of Smart Charging Systems

Building off of points #2 and #3, utilities can use smart charging systems to further flatten peak periods and shift charging to off-peak hours or when solar/wind energy generation is highest. Smart charging is the intelligent charging of EVs, where charging can be curtailed based on grid loads.

It’s important that it’s not done blindly, where charging is curtailed without knowing the vehicle’s state-of-charge. With paired smart charging (vehicle and EVSE), charging can be shifted in accordance to the vehicle owner’s needs and without impacting their driving behavior.

Utilities have already begun piloting these systems, and are prepping for full-scale deployment. We will have an in-depth case study on a particular pilot project posted soon (subscribe to get notified when it comes out).

Smart Charging Daily Load Profile screenshot

5.) Support Customer Education on EVs

While we’ve seen electric vehicles gain notable traction over the past few years, consumers still demand better education on how the vehicles operate and the benefits they can bring both financially and environmentally.

To date, vehicle manufacturers have left a lot to be desired when it comes to promoting their electric vehicles, with Tesla being the obvious exception. The Tesla Model 3 launch brought the first wave of EV awareness on a mass scale, and utilities can leverage this momentum to further educate their customers.

Making the Case

Though PEV data collection and analysis methodologies have come a long way in recent years, a significant amount of work remains to be done. Thanks to groups like E3, and a strong commitment by California and its IOUs, the Golden State is miles ahead of most others in understanding PEV infrastructure needs moving forward.

Utilities in other parts of the country may need to take more of this burden on themselves, deploying connected vehicle software and other data collection tools to learn more about the driving and charge patterns specific to their markets. This data will be essential to creating dynamic pricing models and making the case for investments with shareholders, regulators and the public.

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Sources:

Engaging Utilities and Regulators on Transportation Electrification

California Transportation Electrification Assessment Phase 1: Final Report

California Transportation Electrification Assessment Phase 2: Grid Impacts

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