TODAY’S STUDY: What EVs Can Do For The Grid

Electric Vehicles As Distributed Energy Resources

Garrett Fitzgerald, Chris Nelder, James Newcomb, June 2016 (Rocky Mountain Institute)

Executive Summary

While still small in both absolute size and market share, the electric vehicle (EV) market is one of the most rapidly changing and fastest growing high-tech sectors in the global economy. According to some estimates, sales of electric vehicles could account for one-fifth of new car sales globally by 2025; more bullish projections see EVs taking 50% of sales or more by 2030. China and India are considering initiatives that would dramatically increase their adoption of EVs. And with the disruptive potential of emerging technologies like electric autonomous vehicles and services, the portion of our transportation system that is powered by electricity may grow at a rapid and unpredictable pace in the next decade. The implications for electric utilities, customers, service providers, and vehicle owners are far-reaching and rapidly evolving.

Today’s fast-changing EV-charging market represents the beginnings of a demand-side opportunity like no other: intelligent, interactive electricity demand that is movable in time and space. A car with a 30 kWh battery stores as much electricity as the average U.S. residence consumes in a day. Even without vehicle-to-grid power flows, the ability to flexibly manage charging while still meeting customer requirements can provide a new kind of distributed resource at the grid edge.

Considered as a pooled resource, the growing number of electric vehicle batteries could provide a wide range of valuable grid services, from demand response and voltage regulation to distribution-level services, without compromising driving experience or capability. Electric utility companies can use new communications and control technologies, together with innovative tariffs and incentive structures, to tap the sizeable value potential of smart electric-vehicle charging to benefit utility customers, shareholders, vehicle owners, and society at large. This will mean influencing, with increasing precision, where and when EVs are charged through a combination of partnerships, incentives, and market structures. In its early stages, the interesting challenges and opportunities related to vehicle grid integration will be local or even hyper-local, at the scales where gridrelated issues will first emerge.

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Our review of the literature and numerous pilot projects, as well as some original modeling of state-level load profiles, confirms that EV charging alone can be integrated into the electricity system in ways that deliver net benefits to utility customers, shareholders, vehicle owners, and society at large.

If utilities anticipate the load of charging EVs and plan for it proactively, they can not only accommodate the load at low cost, but also reap numerous benefits to the entire system. Shaping and controlling EV charging can:

• Avoid new investment in grid infrastructure • Optimize existing grid assets and extend their useful life

• Enable greater integration of variable renewables (wind and solar photovoltaics) without needing new natural-gas generation for dispatchable capacity, while reducing curtailment of renewable production

• Reduce electricity and transportation costs

• Reduce petroleum consumption

• Reduce emissions of CO2 and conventional air pollutants

• Improve energy security

• Provide multiplier benefits from increased money circulating in the community

• Supply ancillary services to the grid, such as frequency regulation and power factor correction1

But if utilities respond to EV loads late and reactively, that could:

• Shorten the life of grid infrastructure components

• Require greater investment in gas-fired peak and flexible capacity

• Make the grid less efficient • Increase the unit costs of electricity for all consumers

• Inhibit the integration of variable renewables, and increase curtailment of renewable generation when supply exceeds demand

• Increase grid-power emissions

• Make the grid less stable and reliable

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To tap these opportunities, utilities and regulators will need to understand the big forces now driving change in the EV sector and engage with industry partners to influence the paths of technical and market development. These partners could include automakers, owners and aggregators of charging stations, employers with large numbers of EVdriving employees, campuses and military bases, and emerging providers of mobility as a service. By engaging with high-penetration EV adoption sites in workplaces, shopping centers, and residential neighborhoods, utilities and their partners can develop capabilities that will serve them well in a high distributed-resource future.

Several key forces are combining to accelerate the pace of electric vehicle adoption:

• Customer interest is increasing. The Tesla Model 3 attracted nearly 400,000 reservations in a twoweek period. At the $35,000 list price for the basic model, that would represent $14 billion in orders—an unprecedented success for any product launch.2

• Ongoing advances in battery technology, largely driven by the EV market’s expected volume, are dramatically boosting the performance and reducing the costs of electric vehicles. According to Goldman Sachs, battery cost and weight for EVs will decline by 63% and 52%, respectively, in the next five years, while capacity and range will improve by 50% and 72%3.

• Advances in manufacturing technology, materials, and processes will make unsubsidized electric vehicles as affordable to buy as their gasoline counterparts in the next six years (some models are already cheaper on a total-cost-of-ownership basis). Bloomberg New Energy Finance estimates that by 2040, long-range electric vehicles will cost less than $22,000 in today’s dollars.4

• Increased scale of production will help to drive costs down and market share up. Tesla and Chevrolet plan to start selling electric cars with a range of more than 200 miles priced in the $30,000–$35,000 range by 2018, and other manufacturers are likely to follow suit. Goldman Sachs projects that electric vehicles will account for 22% of the global car market by 2025—a share reached in Norway in 2015. Bloomberg New Energy Finance estimates the worldwide EV market share will reach 35% by 2040, or even more in some scenarios.5

• The emergence of new business models to deliver mobility as a service through providers such as Uber and Lyft, self-driving vehicles, and better integration with multimodal transport could open the door to fast uptake of electric vehicles that provide low costs for high-mileage vehicles used in urban areas.

• Policies at the state and city level, including climate action plans and innovative transportation policies, are speeding the adoption of EVs in some communities and regions based on local environmental and health criteria.

• Growing numbers of leading companies are promoting electric vehicle use by their employees through financial incentives, workplace charging benefits, and preferred parking for EVs. • Public charging outlets in the U.S. are becoming more prevalent, increasing 30% in 2014 and 27% in 2015, according to the U.S. Department of Transportation.6 Walmart, Whole Foods, and some other leading retailers find free charging beneficial because it increases shopping time in the store.

Equally, changing incentives and emerging technological options are shifting the way utilities and other grid operators perceive EV charging opportunities:

• Regulators in a growing number of key jurisdictions, including New York, California, and a number of other states, are looking to strengthen incentives for utilities to use distributed energy resources to reduce or avoid grid costs.

• Leading-edge utilities are finding that they can effectively shape the load profiles of electric vehicle charging with a combination of customer-facing charging apps and time-varying pricing, and they can use their flexible-demand capacity to support increased penetration of renewables.

• Regulators in some jurisdictions, notably California, are concluding that allowing utilities to participate in the build-out of electric vehicle charging infrastructure, including owning and operating charging stations, may be in the public interest. Especially in jurisdictions with high solar penetration, daytime workplace charging is getting increased attention as an area in which utilities may be crucial partners.

• New technologies being deployed by EV charging aggregators are opening the door to transparent and verifiable control of EV charging to deliver demand response, ancillary services, and other valuable services to grid controllers and local utilities.

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Together, these two sets of forces are creating new opportunities and increased scale for smart EV-charging solutions. As this transition unfolds, important questions loom for regulators and policymakers:

What role should utilities play in owning or managing charging infrastructure? Under alternative regulatory arrangements, utilities could serve as facilitators, managers, or providers of EV charging stations. Each of these scenarios has different implications for market structure and competition, and various options are currently being explored around the country. For example, regulators in California have reversed their previous stance and decided to allow utilities to own charging infrastructure, in order to serve public policy objectives to reduce greenhouse gases by accelerating the adoption of EVs. In other jurisdictions, utilities will play a more useful role by supporting private charging companies. But whatever the arrangement, utilities have an essential role to play in enabling and connecting EV charging infrastructure by helping to speed its development, usefully informing the siting of charging infrastructure to keep its costs low and ensure adequate grid capacity, and supporting development in areas that might otherwise be overlooked or underserved, such as low-income and multiunit dwellings.

What lessons are being learned from experiments in managing the timing of vehicle charging? Early pilot projects are demonstrating that EV-charging load profiles can be effectively shifted to off-peak hours under time-of-use pricing if the off-peak pricing is around one-third of the on-peak price. Customers have various means to ensure that their vehicles mainly recharge during hours when grid power costs are low, including onboard controls, charging station controls, and smartphone-based apps. While most of these pilots have focused on home charging, new emphasis is being placed on workplace charging in some jurisdictions, notably California and Hawaii, where abundant solar generation makes daytime charging especially attractive, and where it would incur the least emissions. As battery capacity increases and charging infrastructure becomes better developed, users may have increasing flexibility to charge at work and while shopping, and only need to top off their batteries at home. Utility incentives may influence both tariffs and the build-out of charging infrastructure in ways that influence the early trends in charging behavior—for example, whether workplace charging becomes conventional.

What roles might aggregators, automakers, and other parties play in managing charging in order to provide value? Communications and control systems can enable many different models for control and dispatch of demand response and other services that aggregations of EVs could provide to grid operators. In California, active programs today involve aggregators, such as eMotorWerks, and automakers, such as BMW, in managing groups of charging EVs. Multiple types of aggregation could operate in parallel. Regulators, utilities, grid operators, and other institutions may influence what types of aggregation are allowed and how these entities can provide services at various levels of the electricity system.

How can utilities be encouraged to facilitate EV integration for the greatest overall benefit to customers, shareholders, and society at large? EV charging touches on several aspects of utility regulation, including utility treatment of distributed energy resources (DER). Under traditional regulation, utilities may have incentives to increase electricity sales and to build their rate bases (the costs of capital projects that can be recovered through general customers’ utility rates). Under new forms of performance-based regulation, utilities may be rewarded for helping to reduce the cost of charging stations (for example, by identifying locations where the cost of building charging station infrastructure would be lower) and ensuring their utilization (for example, by managing EV charging directly, or contracting management services from private companies) to minimize the need for new investments in the grid. And in the long run, it may deliver the greatest benefit to society to build clean renewable power generators and structure incentives so that EVs will use that power instead of existing fossil-fueled power.

What can regulators do to remove barriers to greater EV integration? A large EV charging facility, such as one at a shopping center or a “charging hub” (described herein), provides both a charging service to retail customers and a dispatchable demand response service to a wholesale electricity market, but existing regulations don’t clearly distinguish between those two uses in how the electricity consumption of the chargers should be billed. How can charging stations get proper treatment for their various services? How can FERC-jurisdictional wholesale interconnections be streamlined and adapted to permit greater access to charging stations, particularly in a vehicle-to-grid-enabled future? And how can the full integrative value of EVs as a dispatchable grid resource be recognized and captured by EV and EV charging facility owners and operators to enhance the business case for their participation?

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Recommendations

Maximizing the Benefits of using EV charging as a distributed energy resource will require the active support of a wide and unusually diverse range of stakeholders: regulators, transmission system operators, distribution system operators, utilities, customers, aggregators, vehicle manufacturers, commercial building owners, elected officials, and others. And realizing those benefits will be a complex task, because doing so may require policies and mechanisms that cut across conventional boundaries, such as the ones between wholesale and retail markets, or between customers and generators.

This underscores the importance of including vehicle electrification in integrated resource plans.

It is essential to have policies, programs, and appropriate tariffs in place to support EVs and shape their charging before EV adoption ramps up to significant levels, because all of those things take time, and because utilities’ experience indicates that customer charging behavior can be effectively influenced during the first few months after a customer acquires their first EV, but that it becomes much more difficult after that. All stakeholders would be wise to anticipate their respective challenges before they arrive, and take a long-term view toward their respective opportunities.

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All participants in the EV ecosystem will have important roles to play. For example:

• Regulators, utilities, and distribution system operators need to offer well-formed TOU rates or other dynamic pricing to shift charging toward low-cost, off-peak hours; educate customers and vehicle dealers about the value proposition under these new rates; capture the potential value of EVs through controlled charging; anticipate and prevent overload conditions where clusters of EVs exist on the distribution grid; engage with aggregators to create effective partnerships; integrate EVs into distribution system planning; and bring insights back to policymakers and grid operators about customer behavior and how EV loads are influencing the grid.

• Regulators need to create incentives, tariffs, and market opportunities that will accelerate the deployment of EVs and charging infrastructure, pave the way for EVs to bid into wholesale markets as demand response, maximize the charging flexibility of EVs to balance renewable generation, increase the utilization of existing capacity, and limit the need for distribution upgrades. Regulatory uncertainty—about utility ownership of charging infrastructure, rules for cost recovery, and treatment of EV charging as DER—is often cited as a barrier to EV deployment.

• Transmission system operators need to accommodate aggregations of EVs as demandresponse assets and reflect EV effects in system planning.

• Utilities, regulators, and policymakers need to support aggregators, remove barriers to their formation and growth, and enhance their value opportunity for deploying charging stations, especially Level 3 public chargers. Coordinated effort will be needed to ensure that daytime workplace and public chargers are available where solar production is high and/or at risk of curtailment.

• Utilities, regulators, and aggregators need to work together to ensure that there is widespread access to charging stations, particularly at workplaces and public locations, to relieve range anxiety.

• Utilities and distribution system operators need to develop better awareness of where and how EV charging will affect their systems, and strategically deploy AMI, telemetry systems, new tariff structures, and possibly control systems. They also need to help customers understand their rate options and how to use their EVs to save money.

• Utilities, dealers, manufacturers, aggregators, and policymakers need to educate customers about the lower cost of owning EVs, their options for installing charging equipment, when it’s cheapest to charge their vehicles, and how to operate various charging control systems.

• Aggregators need to work with manufacturers of charging equipment and vehicles to further develop charging control and communications systems; coordinate with utilities to site charging depots for maximum benefit and lowest cost; and engage with regulators, utilities, and customers to convey the value proposition of aggregation.

• Vehicle manufacturers and dealers need to work with utilities to expand the EV market, encourage well-formed TOU rates, and develop charging-control system architectures to flexibly supply what the grid needs, possibly including implementing open-source hardware and software interfaces.

• Building owners need to work with utilities, aggregators, and customers to identify high-value sites for charging stations and enable their installation and maximum access for customers.

• Elected officials need to understand the importance of implementing the vision of EVs as a DER and help enable it by setting targets for growth, supporting regulatory and utility efforts, cutting red tape in building and planning departments, doing outreach and promotion, and looking for ways to cut the cost of charging-system installation.

• Regulators and policymakers need to be involved in these processes so that programs and policies are approved expeditiously…

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