How utilities can encourage electric vehicle adoption in their territory
August 20, 2018
August 20, 2018
Falling demand for electricity threatens utilities
Since steam ceded its position as the main provider of mechanical power to electricity in the early 1900s, there has been one stable relationship; as a country’s output and economy has grown, so too has its consumption of electricity. Thanks to the electrification of factories, by the 1920s, American manufacturing productivity soared to far greater heights than ever imagined. And it kept on rising astronomically from there.
Put simply, electricity consumption has always fueled economic growth. However, over the past decade, this relationship has decoupled and as the US economy has grown, the demand for electricity has flat-lined.
The main cause for this electricity market torpidity lies in a stagnation, and in some cases even a decline in demand. There have been various factors that have driven this slowdown. Over the past 10 years, the energy efficiency of industrial processes, to electricity distribution, all the way through to domestic appliances has increased significantly, requiring less energy to generate the same output. At the same time, much of the heavy industry that was previously carried out domestically has now been outsourced to factories in the developing world, leaving a sizeable hole in the utility companies’ balance sheets.
As utilities lay out their resource plans for the coming years, many are finding them to rapidly become out of date, having underestimated the scale of the decline in demand. This makes planning for capital-intensive infrastructure like transmission lines and power plants increasingly risky.
This is bad news for the government-owned utilities, but it’s even worse for investor-owned utilities (IOUs), which provide electricity to over half of the US. These utilities have to make money for their investors by earning a rate of return on the investments they make in power plants and distribution infrastructure. Declining demand reduces the need for new hardware, resulting in falling revenues and profit.
Utilities must adapt to survive
To survive in these new times, utilities must learn to adapt and invest in developing systems that will utilize digital technology to balance supply and demand both efficiently and reliably.
At the same time, they must look to embrace new markets that could turn the tide on declining demand, having the opportunity to claw billions of dollars of transportation derived revenue away from the fossil fuels sector.
EVs as a new market to drive revenues
Utilities once thought of the growth in electric vehicles (EVs) as a threat. There were widespread concerns that charging them in significant numbers would require massive new investments in infrastructure. And that plugging them all in would result in uncontrollable spikes in demand that would destabilize the grid and cause residential transformers to overload and fail prematurely.
While these considerations need to be planned for and protected against, the negative mindset is slowly shifting due to multiple success cases across the US, principally on the West Coast, and also in Europe. In European studies, households with an electric car have doubled their total household energy use – a significant increase in demand for utilities to capture.
Bloomberg New Energy Finance’s 2017 forecast predicted that electric vehicle sales will surpass internal combustion engine (ICE) sales by 2038 and that by 2040, plug-in vehicles will represent a third of the global auto fleet. They have also estimated that electrifying the US light-duty fleet would add 774 terawatt hours of demand to the grid, which is almost that of the entire US industrial sector today.
These figures show how vital it is that utilities act now, and fast, so that they can benefit from this increased demand, while managing the charging in a way that will not put undue pressure on their existing infrastructure.
Despite this fact, there has been an initially slow response to this expected exponential growth in EV sales. A SEPA report in October 2017 showed that almost 75 percent of electric utility companies were only in the early stages of planning for growth in EV ownership. SEPA defines utilities in the ‘early stages’ of planning to be those that are just beginning to consider transportation electrification. These utilities have taken little concrete action, but maybe starting to assess EV penetration and grid impacts in their service area.
However, since that report was published, further research conducted on 34 utilities showed that nearly 60 percent would be engaging in research on time-of-use (TOU) pricing or other rate-design issues, and nearly 50 percent will be pursuing smart-charging research. This subsequent research, also supported by SEPA, suggests that the tide is starting to turn.
For example, Con Edison is running the SmartCharge New York program. This program allows participants to track their EV stats and automatically earn rewards each month by charging in the Con Edison service territory. They can also earn additional rewards by shifting charging to off-peak hours and staying clear of summer peak hours.
Run pilot programs to understand demand and manage charging
The key to understanding the effect that EVs will have on demand, and how charging times can best be controlled, is to run pilot programs. When these programs are supported by accurate, real-time charging data, then program administrators have the power to make informed decisions quickly and decisively and respond to the dynamic needs of the grid.
Options for encouraging EV adoption and managing charging
As EVs become more commonplace, managed charging and demand-side solutions will become mandatory for utilities. They will also help to encourage a higher uptake to electric vehicles within your service area. Dynamic EV charging is a mechanism of demand response, where vehicles charge when prices are low and there is an oversupply of electricity, and then stop charging when prices are high and there is a scarcity of supply.
The payoff from allowing demand response to participate in wholesale markets can be significant. When one regional transmission organization allowed demand response to participate in its capacity market, their price of capacity dropped 85% in one year.
Vehicle-to-grid charging supports a sustainable grid
Vehicle-to-grid (V2G) technology works on the concept that during peak periods, EVs operate as ‘batteries’ and return electricity to the grid. This offers utility companies the opportunity to potentially avoid having to invest in costly infrastructure to meet increased demand, as well as improving the stability of the grid by balancing the load and reducing voltage fluctuations.
As more of the electricity on the US grid is generated from renewable energies, V2G charging enables utilities to store the energy that is often generated at non-peak times, in order to make it available when it is needed. Solar farms, for example, produce their power during daylight hours, while nationwide demand peak starts after the sun sets in the evening.
A V2G pilot program in Denmark paid drivers for the electricity they supplied back to the grid. In the first year, participant EV owners earned an average of $1500, offering a significant enticement for those who are considering purchasing EVs within the utility’s service territory.
Time-of-use (TOU) rates
When an EV owner charges their vehicle, they are actually storing electricity rather than using it in real-time. This means that owners can make a conscious decision as to when they choose to increase their power store. Some utilities have trialed the use of submeters, installed in the EV owner’s house, that separate the EV charging from the rest of the household’s power demands. This enables the utilities to influence charging times, offering lower rates to incentivize off-peak charging, and in turn, manage demand.
Owners that follow this pricing structure and complete their charging during off-peak times will benefit from cheaper overall mileage rates, bringing down the cost of EV ownership and incentivizing EV adoption in the service territory.
One of the negative effects that these TOU trials have shown has been the creation of a second peak in demand, when all EV owners start charging their vehicles at the beginning of the off-peak period, causing a sudden rise in local power consumption. Utilities have also found it challenging to sign customers onto the submeter trials, due to the long lead-time and high cost of installation of the submeters.
Smart charging to manage demand response
‘Smart charging’ uses a combination of hardware and communication signals sent directly to a vehicle, or via a charger, to influence the driver’s decision on when to charge their car. This provides utilities with a more dynamic load management strategy, which allows for the distributed charging of EVs across the entire off-peak period, without having to invest in expensive submeters.
FleetCarma has developed two smart charging solutions. These technologies enable utilities to shape load from EVs, in the same way, that successful building energy saving programs operate with smart-thermostats.
FleetCarma’s SmartCharge Rewards® program enables utilities to cut the cost of charging and enhance electric grid efficiency. It provides turnkey EV charging incentives and a flexible customer rewards platform for the EV owner while providing the utility companies with comprehensive charging data.
EV owners benefit from reduced costs of charging, and utilities benefit from enhanced electric grid efficiency and resilience. And by offering participants SmartCharge Rewards®, utilities benefit from the built-in flexibility to adjust the financial rewards structure without the lengthy process of seeking the regulatory approval necessary for tariff adjustments.
The logging device takes seconds for the EV owner to install, making it a much more scalable EV load management program compared to submetering, which can be quickly and easily rolled out to thousands of vehicles. Another benefit compared to submetering is that SmartCharge Rewards® can monitor and incentivize all charging behavior, not just that which occurs inside the home.
With SmartCharge Manager®, FleetCarma offers an intelligent EV charging solution for automated demand response. It enables utilities to gain access to real-time data, and control real-world charging utilization patterns.
A logger is plugged into the customer’s vehicle, obtaining real-time vehicle-side data such as battery state-of-charge. This provides utilities with a comprehensive overview of their smart charging program, enabling them to gain a better understanding of the charging behavior in their service territory.
Network administrators can instantly see the impact of allowing or curtailing vehicle charging at any given time. This enables efficient deployment of demand response programs while ensuring vehicles always receive the charge they require.
And with little-to-no impact on the EV owner’s lifestyle, utilities will find it easier and cheaper to achieve high user engagement than with a classic TOU program.
Eric Schmidt is the Marketing Manager of EV Ecosystems at FleetCarma, a division of Geotab. He has over 10 years of experience helping Canadian technology companies tell their stories to the world. His work in marketing, design, communications, public relations, print, video, advertising, data analysis, and research has helped increase the awareness of FleetCarmas unique set of products and services. Prior to becoming interested in business, technology, and new energy Eric graduated with Honors in Graphic Design and Advertising from George Brown College.