Electric Vehicles Providing Challenges and Opportunities for Utilities
- Apr 7, 2020 3:22 pm GMT
Transportation is continually moving towards electrification. Two million electric vehicles (EVs) were sold in 2018. Forecasts predict EV sales to reach 10 million vehicles annually by 2025, and 28 million by 2030. With the extraordinary increase in EVs, there will need to be charging infrastructure to accommodate these vehicles and reduce customer range anxiety. Publicly accessible charging stations will need to be supplied with appropriate connections and necessary electrical circuit capacity to integrate them into the distribution grid. This will obviously create challenges, but also opportunities, for electric utilities. With charging networks still in their relative infancy, we believe now is the time for utilities to develop a strategy as to how they can accommodate the increase and position themselves as the trusted provider to benefit from the need for EV charging.
New load growth challenges and opportunities for utilities
Historically, load growth was the top priority of electric utilities. In this case, integrating EV charging networks new load will be more challenging than adding traditional load growth entities (residential/commercial establishments) in the past. Charging stations will have different peak load profiles than previous historical trends of common residential or commercial load profiles. Peak demand will occur in discreet pocket sections on the distribution grid, driven by customers’ daily commutes, demographics, and retail charging options providing different profiles, demand curves, and input into the localized network peaks. The distribution grid will need to be more flexible than ever before, which will lead to investment opportunities for the utility when upgrading and enabling this flexibility. These investments can be direct contributors to increased reliability and customer satisfaction overall, through new automated switching devices, upgraded sensors and communication equipment, advanced metering infrastructure, and enhanced operations and monitoring software. Established grid flexibility will enable and facilitate the growth of the EV industry and market penetration, enhancing how a utility can capitalize on EV opportunities and satisfy customer needs.
Further, building in this flexibility can allow the utility to utilize EVs themselves to aid in the management of peak loads and area outages via vehicle to grid (V2G) discharging. An unused and charged EV can be used as a small generation device by discharging the stored energy back into the grid. This strategy will help enable carbon reduction goals, objectives that many utilities already have in place, and drive brand loyalty for other services that utilities provide.
New rate making opportunities
The uniqueness of this “new” load and need to service it strategically is an opportunity for utilities to help shape the coming rates around EV charging before these rates are instead imposed upon the utility by their respective commission with little or no input from the utility. EV rates can be shaped in a way which would benefit both consumers and the utility. They can be designed to encourage consumers to discharge via V2G for spot outages or local peak demand intervals. Rates can incentivize customers to curb their own peak demand through V2G discharging, saving themselves energy costs and applicable demand charges.
Capital investments in EV charging stations can create another revenue path
A major driver for utility revenue traditionally is capital investment in network assets. Utilities can earn a commission approved rate of return on their recent, or projected capital asset investments depending on how the utility’s rate making methodology is approved with their respective commission. Constructing and owning a local EV charging network, where the utility already knows the best and least expensive places to connect and integrate into their own system, is another way of responsibly increasing capital investment for the benefit of customers and the utility alike. Beyond the capital investment into the charging network, usage fees and advertising screens built into the charging station can provide supplemental revenue. Another avenue is pairing new EV charging stations with strip mall-like retail and restaurant storefronts, which will attract more customers to charge while shopping or using services at these locations. Conceivably, the utility could own the entire premise and rent out the storefronts as another method of diversified revenue stream via an affiliated non-utility entity.
The greater path for capital investment is the distribution grid itself. These new dynamic loads will require significant infrastructure upgrades. Automated devices, smart sensor deployment, advanced metering infrastructure, and additional switching capabilities will all be required to add the necessary flexibility the grid will need to accommodate EV charging stations, regardless of whether the utility decides to build out their own charging network. These significant additions and upgrades will provide a long-term revenue stream based on approved rates of return by the utility’s commission. These investments need to be part of an overall asset management and modernization integrated resource plan.
EVs are here, and the wave will only grow stronger as time passes. Now is the time for utilities to plan and create their own strategies to prepare and facilitate the growth and integration of EVs into the transportation industry. Utilities will be key to the successful penetration of EVs into local markets and can grab hold of this opportunity to provide consistent revenue growth for future years. We believe this is an important timeframe in the transition to electrification where utilities can secure their future financially and begin to shape their existence as a platform of enablement for future technologies.
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