NewEnergyNews: TODAY’S STUDY: New Rules For EVs


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    Monday, October 31, 2016

    TODAY’S STUDY: New Rules For EVs

    Driving Integration; Regulatory Responses To Electric Vehicle Growth

    Rachel Gold And Cara Goldenberg, October 2016 (Rocky Mountain Institute)

    Executive Summary

    The rapid growth of electric vehicle (EV) charging in the next decade will challenge traditional paradigms of regulation and policy in the electricity sector. The complexity and dynamism of emerging EV industry trends are akin to those of other fast-changing high-tech sectors, with the potential for revolutionary change. Regulators and policymakers alike will have to embrace new approaches that allow for experimentation and adaptation with new technologies, market mechanisms, and institutional arrangements in order for EV growth to benefit rather than impair the grid.

    This report explores issues policymakers, especially state utility regulators, face in forming policy and regulation in this dynamic landscape of charging companies, aggregators, municipalities, utilities, and auto manufacturers, among others. Regulators are critical decision makers because of their ability to accelerate or slow EV deployment through policy decisions. They also have an important role to play to enable effective EV integration—both for accommodating new loads from EV charging onto the grid, and for ensuring reliability as new variable resources come online. In this report, we first describe the range of possible benefits that state utility regulators can enable from smart charging beyond simply minimizing impact on peak. We then describe the cases of two leading states—California and Washington—working to unlock the benefits of EVs. Although both California and Washington have addressed EV policy in some way, neither has comprehensively prepared for the arrival of EVs en masse and their potential impacts on the transportation and electricity systems.

    Throughout the cases and in the discussion beyond, we pose six questions for regulators to use as analytical tools as they explore options and trade-offs in enabling deployment and integration of EVs. These questions help regulators think through how they will define the need and scope of their role in EV integration, design policies to support that role, and then create adaptive processes to support learning from those changes.

    1) How much of a role should utility regulators play in enabling EV integration or deployment?

    • Utility regulators should proactively consider policies for enabling the integration of EVs onto the grid where it minimizes costs to ratepayers over time and supports their core mandate to ensure the provision of safe, reliable utility service and infrastructure at reasonable rates.

    • Regulators have a role to play in planning for EVs given the challenges that unmanaged charging can create at relatively low penetrations at the distribution level and the opportunities for enabling EV integration as a tool to ensure reliable, lower cost electricity service.

    2) What factors will utility regulators have to consider when they evaluate the public interest in the context of EVs?

    • State utility regulators must balance competing public interests—such as those of utility ratepayers versus grid-interactive EV car owners—when shaping rate design, EV charger siting and planning, and the utility’s role in EV infrastructure ownership. The choice among these competing interests will be largely based on the principles of equity and cost-effectiveness for the grid as a whole, the limitations of existing law, the appropriate time horizon for considering costs to these groups, and a determination of how much public funding is necessary in addition to private investment to support market transformation.

    3) What tools do utility regulators have to encourage effective grid integration and optimal siting?

    • To capture the potential value from EV integration, utility regulators should work with utilities to provide customers access to rates and signals that incentivize charging during times of the day when energy demand is low and significant supply is available. They will need to balance grid system-oriented rates, which would encourage charging during certain times and at locations based on grid needs, and customer-oriented rates, which incentivize charging in convenient locations that influence customer adoption.

    • More broadly, utility regulators have an opportunity to proactively ensure EV integration is included in utility planning processes, including the benefit-cost analysis of planned infrastructure upgrades. This is especially true as regulators evaluate the benefits and costs of utility investments in two-way, real-time telemetry and communication systems that can send price signals and will enable optimal EV deployment.

    4) Who should own, operate, and maintain charging stations, and what types of incentives should be provided to encourage EV integration and/or deployment through those roles?

    • Several different entities could own EV charging stations. To prepare for the potential impacts and benefits of these new EV assets, regulators must determine the extent to which the “regulatory compact” with monopoly utilities should be extended to ownership of EV charging infrastructure.

    • It may be appropriate for utilities to own EV infrastructure under certain conditions: if ownership results in net benefits for ratepayers or if there are market segments that a competitive market is unlikely to serve. Where these conditions exist, regulators should design rules and incentives for utilities that encourage investment but do not unfairly promote utility involvement or raise market power concerns. Utility regulators will also have to consider other roles utilities can serve in the operation and maintenance of charging stations.

    5) What policy support is necessary to enable aggregation so that EVs can provide demand response and ancillary services?

    • To enable EVs to provide grid services, utility regulators need to first determine at what scale a resource can qualify to serve a demand response or ancillary service function, while taking into account the needs of market participants and operators and existing rules and barriers. The choice to define the EV resource as the vehicle, a charging station with an embedded submeter, or the primary facility meter will help determine who has ownership over the resource, how the resource is measured, and how communication is managed.1 State utility regulators then need to adjust rules in concert with grid operators to ensure that markets or contractual structures are available to support EV aggregation.

    6) What are the processes regulators can use to ensure that regulation is adaptive in this dynamic environment?

    • Utility regulators should support more frequent, assertive use of scalable demonstration projects to test EV integration approaches and allow solutions to evolve iteratively. Pilots that allow for alternative avenues outside the traditional regulatory framework are necessary to enable experimentation and build adaptive solutions. Pilots should be designed to allow for expansion and scaling and should be evaluated against simple, collaboratively developed metrics to support measurement of success against EV deployment, grid integration, and environmental goals.

    • Given the unpredictable nature of EV deployment, utilities should include a wide range of EV growth scenarios in distribution grid planning. We offer these questions and present options and recommendations as inspiration for regulators to proactively address the opportunities and risks created by this nascent technology.

    Why Public Utility Regulators Need to Prepare for Electric Vehicles…Grid-to-Vehicle Value Streams…Stakeholder Alignment…EV Integration and Deployment in Action: Case Studies…Key Regulatory Questions…Looking Forward…

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