How are Utilities Thinking about EV Rate Design? Based on our workshop, everything is on the table
- Aug 5, 2019 2:50 pm GMT
At the Smart Electric Power Alliance (SEPA) annual Utility Conference in April, we hosted a first-ever solution lab program in which electric utility attendees participated in group exercises addressing different distributed energy resource topic areas. One exercise titled “Developing Electric Vehicle Rates” ran over two days and I was the primary facilitator.
Approximately 45 individuals participated across five groups or “utilities”. Each group was tasked with designing an electric vehicle (EV) time-varying rate to increase the adoption of EVs in their imaginary service territory, as well as to encourage off-peak charging. They were asked to equitably allocate costs and identify pain points. At the conclusion of the exercise they considered alternative options, like managed charging, to more effectively address the goals of the exercise.
The group then discussed available EV time-varying rates (see reading materials listed below). After this review, each of the “utilities”, was asked to develop a basic framework that included:
- The type of rate
- Method to transmit the charging data (e.g., meter, telemetry, EV charger, etc.)
- How the “utility” intended to market the rate to customers
- If applicable, how the “utility” would communicate variable price signals to their customers
The results surprised me, and I thought it would be useful to share the insights from this exercise. Most current EV time-varying rates are specifically time-of-use rates. I anticipated that this exercise would reflect this national trend and draw largely from the existing work. However, we discovered that utility participants were very interested in thinking outside of the box. Nearly every group created a rate that was unique and not reflective of the status quo. These outcomes demonstrated that individuals from these utilities could think creatively and innovatively, but perhaps that creativity gets lost somewhere along the way.
The next part of the exercise was to consider alternatives to time-varying rates, and the group continued to push the boundaries of existing program design. Some of the options outlined below did not make it into what I thought to be a fairly comprehensive SEPA report, A Comprehensive Guide to Electric Vehicle Managed Charging. Options created included:
- On-bill financing for L2 smart chargers
- Unique off-peak incentive programs
- Auto OEM-managed charging with utility geofencing
- An EV signal that allows the utility to use the on-board battery for peak events
- Game theory incentive programs to delay charging, including social media recognition
- Managed charging to integrate renewables through green power tariffs.
Based on this workshop, I reconsidered the challenges faced by our utility members. Creativity is certainly alive and well, but there are so many program options and EV deployment unknowns, the path forward is unclear.
Allowing utilities to employ maximum creativity, flexibility, and explore options as they begin to tackle these tough rate issues is critical in the early days of EV deployment. According to a 2019 report by the Illinois Citizens Utility Board, optimizing charging patterns for in-state EVs can generate significant savings for utilities and customers. Shared savings could reach as much as $2.6 billion in Illinois by 2030 if regulations encouraging off-peak charging through charging optimization (including rate design) are implemented.
More details about these and other EV specific rate design options will be available in November in an upcoming SEPA report titled, “The Efficacy of Residential Electric Vehicle Time-Varying Rates: Attributes that Increase Adoption.” Regulators could play a key role in encouraging innovation through a broad range of rate design options. The more data the industry can collect on rate design outcomes, the more quickly and efficiently we can make progress.
Suggested Reading Materials:
1) Start with Smart: Promising Practices for Integrating EVs into the Grid, Regulatory Assistance Project, March 2019 (Link)
2) A Primer on Time-Variant Electricity Pricing, Environmental Defense Fund, 2015 (Link)
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