NewEnergyNews: TODAY’S STUDY: The Way To Grow EVs With Electricity Rates


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    Tuesday, April 25, 2017

    TODAY’S STUDY: The Way To Grow EVs With Electricity Rates

    EVgo Fleet and Tariff Analysis -- Phase 1: California

    Garrett Fitzgerald and Chris Nelder, April 6, 2017 (Rocky Mountain Institute)

    Executive Summary

    Public direct current fast chargers (DCFC) are anticipated to play an important role in accelerating electric vehicle (EV) adoption and mitigating transportation sector greenhouse gas (GHG) emissions. However, the high cost of utility demand charges is a significant barrier to the development of viable business models for public DCFC network operators.

    With today’s EV market penetration and current public DCFC utilization rates, demand charges can be responsible for over 90% of electricity costs, which are as high as $1.96/kWh at some locations during summer months.

    This issue will be compounded by the deployment of next-generation fast-charging stations, which are designed with more than two 50 kW DCFC per site and with higher-power DCFC (150kW or higher).

    As state legislators begin to craft legislation defining the role of utilities in deploying, owning and operating electric vehicle charging stations (EVSE) and other supporting infrastructure, it is critical that utility tariffs for EV charging support, rather than stifle, the shift to EVs. Utilities, their regulators, and EV charging station owners and operators must work together to provide all EV drivers—especially those without home and workplace charging options—access to reliable EV charging at a rate competitive with the gasoline equivalent cost of $0.29/kWh.

    Put another way, it should be possible for DCFC operators to sell power to end-users for $0.09/mile or less, while still operating a sustainable business.

    This project analyzed data from every charging session in 2016 from all 230 of EVgo’s DC fast charging stations in the state of California. From that data, we developed demand profiles for eight common types of site hosts, and analyzed the components of EVgo’s costs based on the utility tariffs the charging stations were on.

    We also created a workbook modeling tool that EVgo could use to test the effect that different tariffs would have on its network of charging stations within the territory of the three major California investor-owned utilities (IOUs): Southern California Edison (SCE), San Diego Gas & Electric (SDG&E), and Pacific Gas & Electric (PG&E). To provide context for this modeling, we created four scenarios describing the possible future evolution of the EV and public charging markets.

    These scenarios were narrative in nature, and mainly served as conceptual guides to future cost modeling.

    After modeling how different current and future tariffs affect the utility bills for each type of site where EVgo’s DCFC are located, and how those bills might look under the four scenarios in the future, we developed a critique of the various tariffs and some recommendations for future EV-specific rate design efforts.

    We concluded that, in order to promote a conducive business environment for public DCFC charging stations like EVgo’s, tariffs should have the following characteristics:

    • Time-varying volumetric rates, such as those proposed for SDG&E’s Public Charging Grid Integration Rate(GIR). Ideally, these volumetric charges would recover all, or nearly all, of the cost of providing energy and system capacity. An adder can be used to recover excessive costs for distribution capacity, but only costs in excess of the cost of meeting the same level of usage at a uniform demand rate, and ideally such an adder would be something the customer can try to avoid. The highest-cost periods of the time-of-use (ToU) tariff should coincide with the periods of highest system demand (or congestion) to the maximum practical degree of granularity.

    • Low fixed charges, which primarily reflect routine costs for things like maintenance and billing.

    • The opportunity to earn credit for providing grid services, perhaps along the lines of a solar net-metering design.

    • Rates that vary by location. “Locational marginal pricing” is conventionally a feature of wholesale electricity markets, reflecting the physical limits of the transmission system. But the concept could be borrowed for the purpose of siting charging depots, especially those that feature DCFC, in order to increase the efficiency of existing infrastructure and build new EV charging infrastructure at low cost. This could be done, for example, by offering low rates for DCFC installed in overbuilt and underutilized areas of the grid, particularly for “eHub” charging depots serving fleet and ridesharing vehicles.

    • Limited or no demand charges. Where demand charges are deemed to be necessary, it is essential that they be designed only to recover location-specific costs of connection to the grid, not upstream costs of distribution circuits, transmission, or generation. Our analysis shows that the new EV-specific tariffs proposed by SDG&E and SCE in their SB 350 Transportation Electrification applications would have far more stable and certain costs than the tariffs currently available in their territories, and would meet the objective of delivering public charging to end-users for less than $0.09/mile, in all four scenarios. This is primarily due to the lower or non-existent demand charges outlined in the new tariffs.

    We show that reducing or eliminating demand charges for the commercial public DCFC market, as these new tariffs do, is consistent with good rate-design principles and helps California to achieve its social objectives. We suggest that recovering nearly all utility costs for generation, transmission, and distribution through volumetric rates is appropriate for tariffs that apply to public DCFC, and that recovering some portion of those costs from the general customer base would be justifiable because public DCFC provide a public good. Finally, we offer some additional suggestions for how EVgo might reduce the cost of operating its network, beyond switching tariffs.

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