The Rise of Transportation Electrification
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- Jan 31, 2020 2:57 pm GMTJan 24, 2020 12:03 pm GMT
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In the United States, where transportation accounts for 29 percent of total energy use per year, the country is witnessing a slow but steady shift from gasoline and diesel fuel to electricity—with electric vehicles (EVs) now forecast to become 11 percent of all passenger vehicle sales by 2025, and 55 percent by 2040. At this rate, the sector is expected to reach a $567 billion market size by 2026 — a nearly $500 billion increase from 2017. Signs of this growth abound, from the many Teslas, Chevrolet Bolts, and Nissan Leafs on the roads, to the charging stations sprouting up in public and commercial parking lots. Most automakers are planning for EVs to eclipse conventional vehicle manufacturing within the decade.
The rising trend of transportation electrification will create tremendous opportunities for the electric utility sector.
The rising trend of transportation electrification will create tremendous opportunities for the electric utility sector. Growth in transportation electrification is driven by a variety of factors, including declining EV prices, increased EV driving range, and consumer readiness to switch to EVs with a wider variety of choices and EVs now being a more mature technology. New EV models from major auto makers, for example, are set to increase drive ranges from an average of 114 miles (in 2015) to 275 miles by 2022. In addition, higher-capacity vehicles are making their way into auto showrooms. Ford Motor Company recently announced an all-electric Mustang to demonstrate that sports cars can also perform well as an EV. Electric buses from suppliers like Proterra are already in service, while electric pickup trucks by Rivian and long-haul semi-trucks by Tesla are poised to enter the market within the year.
Accompanying the growth in quantity and variety of EVs is an acceleration in EV charging infrastructure. The Edison Electric Institute (EEI) forecasts almost 10 million chargers of various types will be located at workplaces, commercial yards, apartment buildings, municipal parking lots, and transit depots across the United States by 2030. Figure 1 shows a projection of EV charging stations by 2030, for homes, public lots, and work locations.
Figure 1 depicts the future – reality looks a bit different right now, and industry is grappling with determining how much to invest in EV infrastructure to accommodate and or even encourage EV growth.
A POLL OF 2,000 CONSUMERS ABOUT EVs REVEALED INTERESTING INSIGHTS
To better understand the market momentum around EV adoption trends, West Monroe conducted a survey of residents and business owners in two heavily populated areas within the United States – areas with different utility regulatory paradigms, demographic and consumer bases, and different terrains: California and the Northeastern states of New York, Connecticut, and New Jersey.
We surveyed consumers and businesses on what’s encouraging them to invest in EVs, what holds them back from buying or leasing, who is leading the charge for scaling EVs, and finally, what this means for the electric utilities expected to support the growth.
Survey respondents were comprised of 2,000 people (vehicle owners or leasees) — 1,000 in each of the two regions surveyed, and 280 enterprise owners with business vehicles, divided evenly across the two geographies. The results reveal that while both US consumers and businesses are enthusiastically adopting EVs — particularly Generation Z consumers, those born after 1996 — they’re also concerned about infrastructure, which presents an opportunity for utilities. Here’s what they said:
The majority of Gen Z drivers do not currently own or lease an electric vehicle, but the desire exists, with 59 percent of consumers saying they want their next vehicle to be electric. Gen Z sub-cohort (23 and younger) is leading the charge, but serious concerns over cost, battery life, and lack of charging stations are holding people back.
Figure 2 shows that most consumers surveyed intend to buy an EV as their next car — and most want to buy within the next two years. Sixteen percent of surveyed utility consumers said they currently own or lease an EV, but expect this number to dramatically increase over the next few years: Among the vehicle-owning consumers West Monroe surveyed, 59 percent said it’s likely their next vehicle purchase will be an electric car, and the majority (52 percent) said they’ll probably make that purchase within the next two years.
Figure 2 (Source: West Monroe Partners poll, 2019)
While rates of consumers who currently own or lease EVs are quite similar bicoastally — 17 percent in California compared to 15 percent in the Northeast Tristate region — California consumers are notably more likely to say they’re “extremely likely” to purchase an EV as their next vehicle relative to their Northeast counterparts (22 percent vs. 14 percent). Overall, as shown in Figure 3, 16 percent of respondents indicated ownership of an EV.
Figure 3 (Source: West Monroe Partners poll, 2019)
This contrast might result from the California’s generous EV rebate program, where EV owners and lessees can earn a maximum $7,000 rebate. By contrast, EV rebates in New York currently tap out at $2,000. A perceived lack of charging stations deters consumers and business owners nationally from buying EVs. Across both regions, the availability of public charging stations is relatively equal: As of September 6, there were 5,894 public EV charging stations in California — an average of roughly one per 28 square miles — compared to 2,125 stations in the Northeast Tristate region, for an average of one per 32 square miles. Another potential explanation for the difference in next vehicle purchase expectations might be the terrain and weather, and population density favoring West Coast EV purchases.
Figure 4 (Source: West Monroe Partners poll, 2019)
While several EV-focused Gen Z studies — like a late 2018 one by J.D. Power — suggested Gen Zers didn’t intend to purchase EVs, West Monroe’s study found that, in practice, they do. One-third of Gen Z vehicle owners surveyed by West Monroe currently own an electric vehicle, notably more than any other generation (19 percent of millennials, 14 percent of Gen Xers and 6 percent of Baby Boomers). Gen Z is also most likely to consider employer-sponsored benefits that reward sustainable practices as “extremely important” in their selection of where to work.
Figure 5 (Source: Wets Monroe Partners poll, 2019)
Business owners share consumers’ EV enthusiasm, but high costs and a lack of charging stations holds both groups back from broader adoption. Like consumers, business owners are embracing EVs. Among business owners who’ve integrated EVs into their fleet, half report that EVs now constitute 50 percent or more of their total fleet. But both consumers and business owners share cost and charging station concerns. According to consumers, the biggest deterrents to purchasing an electric vehicle are cost (67 percent), a lack of charging stations (43 percent) and limited battery life (29 percent), as shown in Figure 4. A notable percentage of consumers (nearly 29 percent) are also concerned about the limited range of EVs due to a lack of charging stations on a broader geographic scale. Similarly, the business owners West Monroe surveyed cited cost (65 percent), a lack of charging stations (51 percent) and a lack of needed vehicle types (33 percent) — like SUVs, vans or pickup trucks — as the biggest deterrents to adding EVs to their existing fleet. When it comes to what would most incentivize business owners to add more EVs to their fleet, a notable majority — 70 percent — said more charging stations. Figure 5 references the fact that 78 percent of respondents believe it important for employers provide benefits or incentives encouraging sustainable behaviors and practices, including support for EVs.
Those who already use EVs have a positive experience
The EV usage rate among survey respondents hovered only around 15 percent, but this group was still asked about their perceptions based on their experiences. On the whole, their experiences with EVs are reported to be positive and their satisfaction is high – yet, still pointing to a need for increased education around EVs and referral programs. Specific answers to questions by respondents are reported in Figures 6, 7, and 8.
Figure 6 (Source: West Monroe Partners poll, 2019)
Figure 7 (Source: West Monroe Partners poll, 2019)
Figure 8 (Source: West Monroe Partners poll, 2019)
An inflection point for local electric utilities
For utilities, the rapid growth of the EV market across consumer and commercial sectors is both an opportunity and an inflection point. On the one hand, it presents an opportunity to more efficiently manage and use the distribution grid and bolster consumer demand. On the other, it requires utilities to thoroughly evaluate their existing approaches to grid investment and make transportation electrification program management a strategic imperative.
Electric utilities across the country are stepping up to help bridge these barriers, supporting a wide variety of EV programs for the workplace, multi-unit dwellings, ridesharing, public transit, and residential managed charging.
The utility plays a role in addressing EV adoption barriers. As noted in the survey results, two of the biggest barriers to EV adoption are lack of widespread public charging stations and limited customer education on EVs. Electric utilities across the country are stepping up to help bridge these barriers, supporting a wide variety of EV programs for the workplace, multi-unit dwellings, ridesharing, public transit, and residential managed charging. Many of these programs include financial incentives to charge during off-peak periods while providing additional monetary support to offset EV procurement costs.
As noted by West Monroe colleague, Shelly Hagerman, “These programs also provide educational opportunities to customers, from the basics of how EVs and home charging works to working with customers to plan and evaluate EVSE infrastructure installation. In some cases, the utility can play a critical role in the expansion of EVSE infrastructure,” she wrote. “For example, in areas where EV adoption has not yet taken off, the utility can make the investments that are not yet attractive to private entities. As a result, the availability of the public infrastructure can spur and support EV adoption. Further, the utility can incorporate additional considerations such as locating charging stations in areas where there is ample grid capacity and/or in areas that support low-carbon mobility for disadvantaged customer groups.”
The road ahead for utilities
As consumers and businesses embrace transportation electrification at different rates, electric utilities face a decision: take a proactive stance or maintain a “wait and see” approach. And, for many utilities, such decisions are heavily dependent upon, or determined for them by regulators. For some, the business case for supporting transportation electrification is clear and has already been translated into regulatory filings and policy. Proponents of utility support of transportation electrification, for instance, often point out that greater grid use and an improved load factor can result from the flexibility of EV loads. In the case of California, regulators approved significant funding for major investor-owned utilities based on several value streams for transportation electrification that include: (1) lower transportation fuel costs to customers, (2) reduced transportation sector carbon emissions, (3) cleaner air and lower negative environmental impact form vehicle use, (4) reduced health-care costs, and (5) improved statewide economics and job creation.
As consumers and businesses embrace transportation electrification at different rates, electric utilities face a decision: take a proactive stance or maintain a “wait and see” approach.
One key success factor gleaned from existing transportation electrification program initiatives is the integration of separate workflow stages into a cohesive program. Utilities can optimize process workflow by clearly defining key status points, team roles, and handoffs between stages, as well as by identifying bottlenecks between stages. Workflow management is critical when it comes to tracking status. Lack of clarity among the internal utility program team members about a status of a customer EV project leads to accumulated time delays, uncertainty, bottlenecks, and even frustration for the end-customer. Software solutions can be deployed that present a visual iconic dashboard to deliver a consistent status indicator to drive accountability and efficiency, reduce customer dropout, and maintain customer satisfaction. Carefully vetted business case analysis tools like the one below can also provide customers with the information they need to justify a transportation electrification program commitment. For instance, an effective Business Case Analysis Tool compares the costs of converting fleets to EVs an or installing EV charging infrastructure against the benefits of enabling critical business and sustainability decisions.
To help improve the operational effectiveness of transportation electrification programs, several lessons have been learned from experience to date. A few examples include:
- MARKETING AND CUSTOMER TARGETING. Maximize the efficiency of internal staff by leveraging analytics on customer data to discover customers with the “right fit” and supply internal sales teams with optimal candidates.
- CUSTOMER ELIGIBILITY AND APPLICATION PROCESSING. Ensure alignment to program goals with accurate site and customer eligibility reviews such as cost per site and minimum charging stations, validated by site visits, legal and technical review.
- BUSINESS CASE CALCULATOR. Enable a clear economic justification for both the utility and the customer via business case tools that tabulate customer and site attributes, providing guidance to customers on how to approach a TE cost analysis.
- TECHNICAL ASSESSMENT. Empower engineering teams to efficiently assess utility infrastructure costs per site, enabling the customer to more easily comply with electric codes, Americans with Disabilities (ADA) compliance, easement issues, and metering requirements.
- CONTRACTING AND LEGAL CONSIDERATIONS. Communicate with the customer to inform them of key contractual terms, ensuring clarity on commitments and easement requirements prior to engaging customers in final binding contracts.
- CONSTRUCTION DESIGN. Align utility construction and engineering teams to manage risk, execute designs, permits, and cost assessments to obtain approvals needed to commence installation of EV charging infrastructure.
- INTEGRATION OF EV CHARGING INFRASTRUCTURE/UTILITY VALUE ALIGNMENT. Support the long-term objectives of the utility with a post-installation process that aligns the new EV load to maintain grid reliability.
Delivering on the future of TRANSPORTATION ELECTRIFICATION
Electrifying the transportation sector brings significant opportunities to utilities as well as customers. By implementing a holistic approach to integrated transportation electrification program management and applying best practices from early experiences in the industry, proactive utilities will be poised to succeed in transitions to electrified transportation. By employing an integrated transportation electrification program plan, utilities can embrace EVs and replace fragmented processes with unified cross-departmental efforts that can deliver customer satisfaction and overall stakeholder value.
(Jan. 2020). “The Rise of Transportation Electrification.” Natural Gas & Electricity Journal. 36/6, ©2020 Wiley Periodicals, Inc., a Wiley company.
 EIA. (2018, May 16). U.S Energy Facts. Retrieved from EIA: https://www.eia.gov/energyexplained/?page=us_energy_home
 McDonald, L. (2018, October 27). Retrieved from Clean Technica: https://cleantechnica.com/2018/10/27/us-electric-car-range-will-average-...
 EEI. (2018, November). Electric Vehicle Sales Forecast and the Charging Infrastructure Required Through 2030: http://www.edisonfoundation.net/iei/publications/Documents/IEI_EEI%20EV%...
 Hagerman, Shelly. The Rise of Electric Vehicles Presents Opportunities for Drivers and Electric Utilities. October 18, 2019. https://blog.westmonroepartners.com/the-rise-of-electric-vehicles-evs-presents-opportunities-for-drivers-and-electric-utilities/