Electric vehicles are a once-in-a-generation opportunity for utilities

May 5, 2020

The number of electric cars on global roads is expected to skyrocket in the coming decade. The International Energy Agency forecasts the number of electric vehicles to expand from about 6 million in 2019 to a whopping 130 million by 2030. And that’s when EVs shift into high gear, with Bloomberg New Energy Finance forecasting that electric cars could make up 57% of all passenger car sales worldwide.

That’s great news for the fight to reduce greenhouse gas emissions and clean up urban air quality. But what’s often overlooked is the fundamental economic shift that will occur when utilities become the primary source of electricity for automobiles.

A 2019 study by the Boston Consulting Group estimates that the rise of EVs could create $3 billion to $10 billion of new value for the average utility. The opportunity goes way beyond generating and delivering more electricity. It represents an expansion of a utility’s relationship with its customers strictly for lights, the fridge, and big-screen television—to both home and car.

The first task for utilities is to educate customers about the environmental benefits of an EV. They don’t have tailpipes, so there are no direct emissions. But EV critics are quick to point out that the emissions move upstream to where the juice is produced. So it’s incumbent upon utilities to explain that electric vehicles are greener even in the most coal-dependent parts of North America.

EVs are greener everywhere—and getting greener

The Union of Concerned Scientists (UCS) recently studied the emissions related to producing gasoline for an internal combustion car and electricity for an EV. For a gasoline car, that meant looking at the emissions from extracting crude oil from the ground, transporting the oil to a refinery, making gasoline, and bringing it to a gas station. For EVs, the calculation included emissions from power plants and the production of coal, natural gas, and other fuels used by power plants.

When all those numbers are crunched, the EV, on average, produced greenhouse-gas emissions equivalent to an 88-mpg gas car. That’s nearly three times more efficient than the average new gas car, which gets 31 miles per gallon.

In regions where the grid mix is cleaner, such as California, the equation benefits EVs even more. In the Golden State, a gasoline car would need to get 122 mpg to have emissions as low as the average EV. UCS reports that 94 percent of people in the US live where driving an EV produces fewer emissions than what comes from the tailpipe of a 50-mpg gasoline car.

But what needs to be underscored is how the millions of electric vehicles on the road get cleaner over time—thanks to the grid reducing the use of dirty fossil fuels, slowly but surely year by year.

Emissions from EVs dropped on average by 10 percent between 2016, when the Union of Concerned Scientists last conducted its study, and when it pulled the most recently available data from 2018. That’s because emissions from power plants in the US fell over 5 percent in that time.

Power plants are a new part of the transportation ecosphere

Utilities should think of EVs as a multiplier for their carbon-reducing efforts. With each new EV plugging in at night, all of the investment to move to renewables gets more pronounced—giving utilities a reason to encourage customers to get an electric car.

The appeal is undeniable. EVs are quick and quiet, which makes them a blast to drive. In many regions, they are granted access to carpool lanes even when driven by a solo commuter. With fewer moving parts, they cost less to maintain. But perhaps the most dramatic advantage of EVs is the lower cost of fuel, an economic advantage that utilities can play up by offering attractive EV rate plans and rebates.

Many enlightened utilities are also expanding their role in transport by funding and operating public charging stations. According to the Edison Electric Institute, investor-owned utilities in more than a dozen states operate stations. In some cases, the utility can fill in geographical gaps in EV charging and provide opportunities for people living in multi-family dwellings to gain access to charging.

In other cases, by establishing a pilot charging program, a utility can garner data and gain a better understanding of how EV charging impacts the grid—including testing and improving responses to the extra demand. The shift to EVs will be monumental so that the earlier a utility can learn about these impacts, the better it can prepare for the inevitable wholesale transition to EVs.

It’s essential for all players to understand that the majority of EV charging takes place at home. That makes refueling super convenient for EV drivers. It only takes about five seconds to plug in.

A new tool for load balancing

For the utility, the increase in demand from one EV is roughly equivalent to the grid usage of one additional home. By offering compelling time-of-use rates—lowering the price per kilowatt-hour in the wee hours when demand is low—utilities can use the grid’s untapped capacity.

Incentivizing EV owners to charge during off-peak hours reduces the need for peaker plants, firing up other relatively dirty forms of energy, or building costly infrastructure. It’s a matter of shaving the peaks and filling the valleys. In other words, through smart rate plans, utilities can discourage those millions of EV owners from charging when everybody gets home from work and starts flipping up on lights.

All it takes is for EV drivers to set their vehicle to start charging around 2 am, still giving the car plenty of time to fill up before the morning commute.

When a utility service area can stagger charging throughout the night, it raises the valley to meet average daytime uses.

The emissions-reducing potential for both transportation and electricity generation is tremendous. But utilities don’t have time to waste. The EV revolution is underway. It’s not a matter of if the world will transition from internal combustion to electric vehicles. It’s a matter of whether it will happen fast—or faster.

With much of the world staying at home during the pandemic, we’re driving a lot less. Those blue skies have given consumers a glimpse of what the environment could look like if we all drove EVs. They want that reality now and for when life starts to return to normal.

If utilities start preparing for the EV future now, they’ll have the right strategies in place to provide the necessary extra gigawatt-hours at the cleanest and greenest time. And they’ll be ready for a once-in-a-generation opportunity to change the world.