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Episode #72 'Keys to Developing Successful Utility EV Programs' with Kevin Hernandez, Partner at ScottMadden [an Energy Central Power Perspectives™ Podcast]

Gone are the days where electric vehicles are oddities, come are the days where they are mainstream and impacting the grid. From charging stations dotting the interstates to Super Bowl commercials from many automakers touting their electric models to regulations that continue to make EVs more accessible, the pivot point in the industry is nearby, if not already here. While that’s a tremendous sign of progress in terms of electrifying transportation, it’s a point in time that’s created anxious board rooms in utilities across the country as power providers assess what their role in this new future will be and how to ensure they are best prepared.

Understanding how a utility’s customers and service territory fits into the overall EV adoption curve can help alleviate this anxiety and instead put companies in control of their EV future. These utilities recognize the opportunity that EV programs can mean for their offerings to customers and the flexibility they have in operating the grid, though doing so will be no small feat. That’s where experts like Kevin Hernandez, Partner at ScottMadden, come in. Kevin and his team have spent years preparing for this moment and have already assisted early moving electric power companies to design utility EV programs that will be successful and long-lasting. Kevin joins host of this episode, Matt Chester, to discuss what the roadmap to the EV future needs to be for utilities and how they can start planning for it today, even if those plans are starting at square one.

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Thanks to the sponsor of this episode of the Energy Central Power Perspectives Podcast: ScottMadden

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TRANSCRIPT

Matt Chester: 

Hello, and welcome to this week's episode of the Energy Central Power Perspectives Podcast, the show that brings leading minds to discuss the latest challenges and trends, transforming and modernizing the energy systems and the utility industry of the future. And a quick thank you to ScottMadden, our sponsor of today's show. Now, let's talk energy. I'm Matt Chester, Energy Central's community manager and host of today's podcast, coming to you from Orlando, Florida. The past decade has no doubt been landscape shifting for EVs. With the market evolving from just being extremely pricey, Tesla's rarely seen typically the play thing of the wealthy, to today, where nearly all major automakers either have an electric model or are coming out with one shortly, and prices are getting ever more affordable for households across the country.

Matt Chester: 
While this shift is clearly a win for the automakers, the utility companies still have much planning and preparations to do. Once EV ownership reaches the pivot point it's expected to in the coming years, we're looking at the largest single expansion to electricity demand in the history of the power sector. More generation will be needed, additional transmission infrastructure will be necessary, and the utility companies will need to think through all sorts of brand new issues, how to efficiently deploy charging infrastructure, what sort of incentives can help spread out the load from charging as best as possible, and how rate structures will need to be refined for this new status quo.

Matt Chester: 
Joining me today to highlight the important work being done in this area is Kevin Hernandez, partner at ScottMadden. Kevin co-leads ScottMadden's community of practice on the Grid Edge. And over the past decade, he's used his expertise to assist energy industry clients in thinking through the challenges associated with grid transformation, energy storage, and most importantly, for our conversation today, transportation electrification. This is actually Kevin's second appearance on the Power Perspectives Podcast, having previously appeared in Episode 54: Preparing Utilities for the EV Revolution. That episode was one of the more popular ones of 2021 and we weren't able to dive into all of the important topics on utility EV programs. So, it was only appropriate to have Kevin back so we could dive in deeper. Kevin Hernandez, welcome to today's episode of the Energy Central Power Perspectives Podcast.

Kevin Hernandez:
Hey, thanks, Matt. It's a real pleasure to be back with you. Appreciate it.

Matt Chester: 
Absolutely. We're thrilled to have you again. And so, Kevin, why don't you set the stage for us here? We're talking about utility EV programs, but why do utilities need to have such programs, and in general, what do they look like?

Kevin Hernandez:
Well, hey, Matt. And so, thanks very much. So, what we've seen over the last couple of years and really accelerating over the past 12 months has been this development of utility EV programs really across the country. And to begin, these were driven by one-off regulatory requirements or pilot projects. But as regulators and state governments have established clean energy goals, most of those or many of them at least, are including transportation electrification in those goals. And more and more utilities are needing to develop internal programs and teams internally to manage the EV integration.

Kevin Hernandez:
So, as a result, there's just been this wide range and types of programs being undertaken and driven by just a variety of different approaches that are really happening at the state level. Regardless of the directions those are taking, eventually EV adoptions will require all the utilities to plan on EVs on their systems in some way or another. And for some, that may mean taking proactive action and drive EV adoption among their customers. For others, it might just be more about ensuring that EV charge is not going to impact the grid in some way. In either case, it's important for utilities to begin developing plants and programs now, thinking ahead for how they'll manage those EVs on their systems.

Matt Chester: 
So, we have some utilities and some regions that are certainly further ahead than others in preparing for this EV revolution. For a power provider who's starting from scratch, right at the beginning, though, what are the questions that you recommend they need to be asking before diving in?

Kevin Hernandez:
Well, I'm really glad you've asked that question, because I think it's easy for utilities to look to some of the big, well publicized programs and say, "That doesn't apply to me." In most cases, it doesn't. We tend to look at some of these big, well known programs that are out there, particularly some of the West Coast and others as best in class. But what might be best in class for a program like that and maybe an urban West Coast utility, wouldn't be a terrible idea for a rural Midwestern co-op for instance. So, the first question that we encourage our clients to think through is, what do you want your program to do? What do you want to get out of it? Having a clear vision of what you want your EV program to achieve is really central to developing initiatives that deliver those desired results.

Matt Chester: 
So, it sounds like you can't just copy and paste from another power provider who's done it first, but what can you learn from the implementation of other utilities that've done it first, where you can maybe mold it and customize it to be more specific to that new utility's needs?

Kevin Hernandez:
Yeah. I think that's an important point to make. We would definitely encourage and advocate utilities to look at their peers, for example, as what works and what doesn't work. And it's really important that EV programs be designed to fit the customer makeup and service toward his territory. But for instance, utility whose service territory is largely rural, may have a large portion of customers who live in a single family homes, maybe, or with off street parking. Those EV programs are going to look a lot different than those with more urban service territories with maybe higher numbers of customers living in multi-unit dwelling, such as apartment buildings and probably without off street parking.

Kevin Hernandez:
So, there are a lot of great programs out there, and there's a lot of really interesting ideas to pull from. We encourage our clients to do that, to take part in industry groups, to coordinate with peers, get lessons, learned. Ultimately, however, in developing programs that are accomplished each individual utility's' goals, we want those utilities to pull from those examples, but tailor those to the customer makeup and to the service territory that is their own.

Matt Chester: 
Yeah, that makes a lot of sense from the industry perspective, but I'm sure the regulatory landscape factors into all this as well. So, how do utilities need to be looking at policy, whether on the local state or even federal level?

Kevin Hernandez:
Well, yeah, absolutely right. Regulatory landscape always factors in, you're absolutely right. And one of the reasons we see such a variation in EV programs across the country is just for that reason, because the different approaches that are being taken by states and regulators with regards to EVs. In some, regulators have made it clear that they really want utilities driving EV adoption. And they do that through outreach education programs and incentives and other types of things, maybe drive public charging infrastructure and other things. However, other states have been a little more guarded and a little more reserved in driving EV growth, and particularly, with regards to the utility's role there.

Kevin Hernandez:
The approach taken by the regulars then is really key for determining not only what programs to pursue, but from a utility perspective, also how big should the program be. What size should it be? Who should it serve and how can those program costs be recovered importantly? So, as we've talked about it before when we spoke last time, one of the real challenges with building out charging structures, the question of who pays for that. And in some areas, it's going to be more accepted that EVs and EV charging infrastructure represents a big public benefit. And there may be more permissible to pass those costs on to a larger group of customers.

Kevin Hernandez:
But in others, there's some real trepidation to funding commercial charging or system upgrade with rate payer dollars. So, I think we really have to take into account, just as you mentioned, the regulator's perspective and the context, the regulatory framework and environment, which the utilities are operating.

Matt Chester: 
Absolutely. And many of the considerations that we mentioned at the top of this conversation for utilities who are leaning into EVs for the first time, they're familiar. Things like rate structures, infrastructure development, things like that, that have always been a part of the utility landscape. But others are going to be brand new. For example, utilities never had to really worry about commute times of their customers. What are some of the key new types of data that utilities should be thinking about now? And how do successful programs start that gathering process for the very first time?

Kevin Hernandez:
Yeah. It's really interesting. I think, obviously, many utilities are looking at EV adoption rates as a primary metric for how they should build their programs. And I think there's some pros and cons to that. First, rates of adoption are for the most part low across much of the US. And so, you have to take that for what it's worth. However, that doesn't really necessarily mean that there is going to be low adoption in the future. And so, I think there's a potential, we may be losing something of a burning platform when we look at low adoption rates today, rather than in the future.

Kevin Hernandez:
But we also may not be seeing the potential for fleet adoption, which is as you and I have talked about before is something we think really not enough attention is being paid to. So, understanding where EV adoption rates are today, but also modeling those and looking at those from different perspectives in the future is important. Beyond EV adoption rates though, having an understanding of just where on utilities electric delivery system, impacts of EV charging under those different levels of adoption might have some impacts, is another area where utilities can begin to have some understanding and start to gather that data.

Kevin Hernandez:
And depending on their system, it may uncover need to begin thinking about, well, how is EV load built into our system planning in our capital planning process and into our system forecasts? Other data points that are really interesting to me are really focused around the customer. And you mentioned it with driving distances and commute times, and it's those types of things that really not traditional utility customer relationship there that are really going to drive a lot of what customers need and what utilities can provide in terms of these programs.

Kevin Hernandez:
For instance, for a utility whose goal is to drive EV adoption among its customers, understanding trends and attitudes are really important, understanding how EVs might affect customer behavior, such as you mentioned, those commute times or the amount of time customers spend traveling within the service territory. Whether there are people coming into the service territory from other utilities, like we see in some commuting situations. So, a lot of interesting things there that are unique and different are important to start to get a bit of a handle on.

Matt Chester: 
Excellent. And we've talked also a lot about how to engage with the outside aspects of the utilities, the customers, the equipment installed, but what about internally? Since many utilities, I presume, don't really have any sort of electric transportation department, a longstanding one, how should leaders look at establishing these programs for their first time?

Kevin Hernandez:
Yeah, thanks, Matt. I'm glad you brought that up, because one of the things we hear consistently from customers is that the number one thing utilities can do to facilitate EV growth and EV integration is to have a dedicated EV team in place to interface between customer and the technical experts within utility. And we're recognizing not every utility's going to be able to staff two dozen people to manage these kinds of processes. But even having a single person who can be the EV point of contact or the person that customers go to for EV questions and even people within the company you go to with those EV questions is important.

Kevin Hernandez:
As utilities begin to develop more robust EV programs and are charged with implementing incentives or other regulatory mandates, having that team in place to manage those programs within the organization really becomes critical. We've talked about before how electric transportation, at least in our view may become a new class electric customer. And I think having people in place and having a team that's familiar with the needs of those customers and some of the differences between those customers and traditional commercial customers and traditional residential customers is going to be important.

Matt Chester: 
So, Kevin, I know a lot of your answers on the questions we've discussed come from firsthand experience in how ScottMadden has developed their model and use it to help implement EV programs at your utility partners. Can you share what the process looks like when a utility first approaches you and your team about helping get their EV program off the ground?

Kevin Hernandez:
Yeah, sure, Matt. As you might have guessed from our conversation, one of the first things we want to know is whether or not the utility has a good sense of what it hopes to accomplish with the program. And even for companies that believe they know what that is and maybe have some ideas, we find it's really useful to have some early conversations with leadership and other stakeholders inside the utility to clearly articulate what its EV program, its EV goals and objectives would be. And oftentimes, what we found is that seeing those on paper and getting that internal stakeholder buy-in, causes the organization to reevaluate, is this really what we want to do? And what's unique about our approach is that it's focused on identifying those strategic goals and outcomes early, and those things that the utility really wishes to pursue and then developing the plans to accomplish those goals, given the context in which the utility operates.

Kevin Hernandez:
So, rather than taking a list of programs that may exist elsewhere or a maturity model that grades utilities on how evolved it is, our approach first asked whether or not the company has those clearly defined goals, and then are those goals tailored to the service territory and to the customer makeup of that company. So, we have established our future vision. So, the next thing we like to do is establish the context. And what I mean by that is we want to use data to paint a picture of what the utilities customer makeup and the service territory characteristics, those driving patterns we talked about, needs and behaviors, EV adoption growth reductions. You want to get an understanding of those things to establish really a common set of facts that we can use to build those programs from.

Kevin Hernandez:
So, then what we have is a vision of where we want to go, a common starting point for everyone in the company. And it's very easy then for us to help build a set of programs and initiatives that get utilities from that point A, that current state where we are today, to where we want to go in the future.

Matt Chester: 
Excellent. That's really helpful to hear. And so, let's end the conversation with something actionable for our utility listeners. To that decision maker at a utility who is inevitably listening in, and they feel that maybe their organization is behind the curve on setting up their EV programs, what advice do you have for them? What's step one they should take from here?

Kevin Hernandez:
Well, really, I think it's two things, and I'll kind of be a little bit repetitive here, but look at your strategic EV objectives. Are they well defined? Are they well understood throughout the organization? How are they driven by regulatory mandates or state goals? Will those strategic objectives change over time or how will those change? What will cause them to change? And then second, it's about understanding that context. And again, these needs that customers may have from a transportation perspective, may be different than some of the needs that we're used to serving. And what are EV adoption projections expected to be over maybe the next five or 10 years? And how are those different maybe than what we're seeing from those national trends or national models? What are the things that will move the needle for customers within the service territory, within a specific customer group? And then ultimately, how is EV charging going to impact utility and impact the utility's ability to meet its customer needs?

Kevin Hernandez:
So, those are the important questions to ask because I really think that they form the basis for everything that comes after. And really, this is a case that doing some of the work upfront in preparation and understanding where you want to go, where you're starting from, lays the ground work for all that comes afterwards. And one last thing here in that, a successful EV program, at least in our view, it's not going to be the one that copies the programs that may have been in the news or may have read about or copy's some other goals, but it's really going to be the one that's tailored to each utility's service territory, and to the customer makeup that utility serves. Doing that and starting with those clear goals, I think is key to success.

Matt Chester: 
Well, Kevin, this is once again a really informative and eye opening conversation. We're happy to have you as one of Energy Central's go-to gurus for all things about utility EV programs. And with this sector evolving so quickly, perhaps we should just go ahead and pencil you in for another check-in in an episode in 2023. But for now, thank you so much for your insights. And we look forward to you and our community members, keeping these important conversations going at energycentral.com. So, thank you so much, Kevin.

Kevin Hernandez: 
Well, thank you, Matt. And again, it's been a real pleasure and always appreciate the opportunity to have these conversations with you.

Matt Chester: 
Absolutely. And you can always reach Kevin through the Energy Central platform where he welcomes your questions and comments. And we also want to give a shout out of thanks to the podcast sponsor that made this episode possible. So, thanks to ScottMadden. ScottMadden is a management consulting firm serving clients across the energy utility ecosystem. Areas of focus include transmission and distribution, the Grid Edge, generation, energy markets, rates and regulations, corporate sustainability, and corporate services.

Matt Chester: 
The firm helps clients develop and implement strategies, improve critical operations, reorganize departments and entire companies, and implement myriad initiatives. Once again, I'm your host, Matt Chester. Plug in and stay fully charged in the discussion by hopping into the community at energycentral.com. And see you next time at the Energy Central Power Perspectives Podcast.

 

About Energy Central Podcasts

The ‘Energy Central Power Perspectives™ Podcast’ features conversations with thought leaders in the utility sector. At least twice monthly, we connect with an Energy Central Power Industry Network community member to discuss compelling topics that impact professionals who work in the power industry. Some podcasts may be a continuation of thought-provoking posts or discussions started in the community or with an industry leader that is interested in sharing their expertise and doing a deeper dive into hot topics or issues relevant to the industry.

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The Energy Central Power Perspectives™ Podcast is hosted by Jason Price, Community Ambassador of Energy Central. Jason is a Business Development Executive at West Monroe, working in the East Coast Energy and Utilities Group. Jason is joined in the podcast booth by the producer of the podcast, Matt Chester, who is also the Community Manager of Energy Central and energy analyst/independent consultant in energy policy, markets, and technology.  

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Thanks once again to the sponsor of this episode of the Energy Central Power Perspectives Podcast: ScottMadden.