Utility Customers Set to Save Billions Each Year Thanks to Electric Vehicles
In most scenarios, electric vehicle owners stand to save money over the life of their vehicles compared to gas-powered equivalents. There is another major benefit that doesn’t get as much attention though – savings to electric utilities and their customers thanks to load-balancing.
Recently, the Natural Resources Defense Council (NRDC) funded a study through M.J. Bradley & Associates LLC (MJB&A) measuring potential outcomes for plug-in vehicle adoption in Connecticut, Massachusetts, Maryland, New York and Pennsylvania. (The results from a sixth state, Colorado, are pending.)
The study projected an annual total benefit of between $107-$265 for each plug-in vehicle on the road in 2030 and between $349-$520 per vehicle placed on the road by 2050. These benefits would come from savings to PEV owners, utility customers and greenhouse gas emissions cuts.
How Plug-ins Reduce Electric Costs
Electricity demand rises and falls over the course of each day. Overnight, usage tends to be very low, as lights are turned out, customers sleep and appliances are cycled off. In the morning, usage ramps up gradually before dipping slightly in the late afternoon and rising again to its peak in the early evening. Demand varies depending on geography and season, but this overall pattern tends to hold.
Plug-in vehicles will gradually add to electricity demand as they reach higher and higher levels of market penetration. But while it may be intuitive to assume that greater demand for electricity stemming from EV adoption will add to infrastructure and production costs for consumers, the opposite actually true.
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A significant portion of utility costs result from the disparate peaks and valleys of supply and demand throughout the day, as energy production is added and subtracted from the grid. When demand hits its daily peak, utilities are often forced to turn to more expensive sources of energy that are both more GHG-intensive and wasteful from a cost standpoint.
Ideally, it is in the interest of utilities and consumers for demand to be as flat as possible throughout the day. This scenario would allow renewable energy sources like solar and wind to make their maximum contribution while limiting the use of expensive, carbon-producing sources like natural gas or coal.
Plug-in vehicles help to flatten demand because they do most of their charging when overall electricity usage is lower. Depending upon when users choose to charge their cars, the impact of load balancing from plug-ins can be quite significant.
The study found that most infrastructure, production and distribution savings from electric cars will be passed along to consumers in the form of slowed rate increases over time. Based on state regulations, many utilities will be able to re-invest part of these savings back into grid improvements or even additional infrastructure to further support plug-ins.
In California and other states, such investments are allowed so long as they can be demonstrated to reduce costs for consumers.
Five States, Billions in Savings to Utility Consumers
MJB&A projected two possible scenarios for plug-in market penetration for each state:
In the first scenario, a state’s baseline goals for plug-in penetration under the 8-state ZEV Memorandum of Understanding (ZEV-MOU) are met. On a state by state basis, this would mean that between 5 percent (Connecticut) and 8.9 percent (Maryland) of the new car market will be comprised of plug-ins by 2030, leading up to between 17.2 percent (Connecticut) and 25.2 percent (New York) by 2050.
Under the second scenario, each state would reach levels of EV market penetration necessary to meet the ambitious “80 x 50” goal of reducing greenhouse gas emissions 80 percent by 2050. This scenario would require plug-in market penetration of as much as 92 percent by 2050 – a level of adoption that would require strongly favorable market conditions and major investments in infrastructure.
In the ZEV-MOU scenario, utilities and customers in these five states are predicted to save $341 million per year in Net Projected Value (NPV) stemming from PEV adoption in 2030, rising to $547 million in 2050. Under the rosier, “80 x 50” scenario, NPV from plug-ins could reach as much as $924 million in 2030 and climb to $2.3 billion per year by 2050.
The energy needs of states vary significantly. Some states—particularly those with robust renewable energy portfolios and more expensive non-renewable generation sources—will see greater savings, while others will see less. On the whole though, plug-in cars and trucks have the potential to set the conditions for a revolution in grid management capabilities.
What Utilities Can Do to Balance Demand
For each PEV market penetration scenario, MJB&A created two sub-scenarios: One in which cars are plugged in during the early evening (as tends to happen under natural circumstances); and another in which drivers are successfully incentivized to delay charging until late at night, when demand for electricity is otherwise low.
Under the best load-balancing scenario, consumers will benefit from even deeper cost savings over time. In the five states studied, MJB&A projected total additional annual savings of $116-$319 million in 2030, and $205-$950 million per year in 2050. These findings underline the importance of utility policies & programs in both encouraging and steering patterns of plug-in vehicle use among consumers.
One way utilities can do this is by offering aggressive Time of Use (TOU) rates that provide sufficient incentive to convince consumers to delay charging—either by setting a timer or waiting to plug their cars in before bed. A number of utilities have already begun experimenting with these types of rate structures.
A challenge with EV TOU pricing schemes though is that they require additional infrastructure. To disaggregate EV load from the rest of the household, a submeter is needed.
Since customers are typically required to cover submeter installation costs (and sometimes even pay a separate delivery charge), utilities are faced with low enrollment rates for their EV TOU programs.
A suggested alternative is a program like SmartCharge Rewards, a plug-and-play incentive program that can quickly & easily be rolled out across thousands of vehicles. Since it uses a connected car device, it doesn’t require the use of a submeter, and is a 10-second install that can be done by the EV owner.
It also means that utilities are able to generate (anonymized) comprehensive EV data, and benefit from the built-in flexibility to adjust the financial rewards structure without a lengthy process to seek regulator approval.
We recently launched a program with Con Edison called SmartCharge New York, where EV owners can earn $50 just for enrolling, $20 a month (from June to September) for not charging between 2 p.m. to 6 p.m. on weekdays, and 5 cents in rewards for each kilowatt hour of charging during off-peak hours. You can read more about the SmartCharge New York program here.
Plug-in vehicles will play an increasingly crucial role in helping states to meet greenhouse gas emissions goals over time. Depending on charge station deployment and how utility rates are structured, PEVs can also offer billions in annualized cost benefits to all electricity consumers.