- Aug 24, 2022 9:19 pm GMT
This item is part of the Electrification of Transportation - August 2022 SPECIAL ISSUE, click here for more
The electrification of transportation industry in North America over the next two decades will cause a transformation of both. These changes will be on a scale the marketplace has not seen since the Industrial Revolution or the invention of the Internet. The internal combustion engine (ICE) has a rich history of innovation and inventions going back over 160 years. Etienne Lenoir is credited with developing the first commercially successful a gas-fired liquid fueled engine installed into a vehicle. It was powered by a turpentine derivate. Today, roughly $1 Trillion dollars is spent annually on hydrocarbon-based vehicles. Comparatively, the annual retail value of electricity sold in the US is just under $400B (prior to runaway energy costs and inflation). This foreshadows a massive collision of two critical global market segments: transportation and electricity.
The mandates and incentives for the electrification of this sector is aggressively shifting the focus of Automakers to the supply chain, production, deployment, and support for Electric Vehicles (EVs).
Over the next dozen years, dollars previously dedicated to ICE vehicles, fueling, and infrastructure will convert to an electric counterpart. Several of the largest automotive OEMs including General Motors and the Volkswagen Group have committed to a date certain when they will no longer manufacture internal combustion engines and are fully committed to an all-electric future. Ford said it expects 40% of its global vehicle volume to be fully electric by 2030. In North America, the Ford Mustang Mach-E already has found early sales success with nearly 6,600 sales. Plus, the all-electric Ford Transit is set to go on sale late this year, and the recently unveiled all-electric F-150 has already registered 70,000 reservations. Ford plans to reach a 600,000 global EV run rate by late 2023. Ford already has sourced 70% of battery capacity to support 2 million+ annual EV global run rate by 2026; plans to localize 40 GWh per year of lithium iron phosphate capacity in N.A. in 2026
These automobile companies are in the process of transforming themselves from transportation manufacturing companies to becoming some of the largest and most powerful energy companies in the world. Much like the way Apple recognized communications networks are able to unlock much greater value than voice and text services; they successfully leveraged data services to dominate the personal computing and applications industry. Automotive firms can readily move to dominate the merged electrified transportation and electricity industry.
Indeed, Bloomberg recently indicated that over 5% of new vehicles sold in the US were electric and if the US follows other countries, 5% becomes the tipping point for a classic S curve adoption of new technology.
Today the transportation industry and electricity industry operate much like two separate ecosystems. The maturity of the liquid fuel industry has a well-established supply chain that includes exploration, production, markets, refinement, distribution, and retail with dominant players that, to a large extent, control the price at the pump. Similarly, the electricity supply chain of fuel supply, generation, transmission, distribution, and retail is well-established, having upward of 3000 distribution entities and over a hundred DOE qualified energy service companies (ESCO) providing varying level of products and services in the United States.
It is inevitable that these two ecosystems will need to rapidly migrate into a harmonized ecosystem. This will be needed not only to ensure adequate capacity and infrastructures for delivery of energy for charging of vehicles but also the much more complex use cases of vehicle to grid (V2G) where vehicles are leveraged as mobile batteries. This capability will become one of the most important grid connected distributed energy resource (DER) assets by providing resources to the grid itself. In addition to the bidirectional electron flow, data to and from vehicle will be used to drive countless use cases for grid management and optimization and drive consumer value.
Figure 1 Unlocking value propositions with Ecosystem Convergence. Source: Kitu Systems, Inc.
Further complicating the traditional generation and distribution challenges and the mobility of EV’s is geography. The mass adoption of EV will require requisite, accessible and pervasive charging infrastructures not only where drivers live, but where they work and shop. These sites will likely have their own sets of energy service locational challenges.
To illustrate just one of the use cases where the merger of the electrified transportation and electricity systems will be required, consider what happened in ERCOT on May 10th of this year. It was a very hot day in Texas, as it has been much of this summer. Generation and transmission resources in ERCOT were under stress with load peaking at around 70,000 MW. ERCOT has Nodal Pricing, meaning it prices transmission congestion into its pricing model. Consider the illustration below which is pricing heat map for ERCOT on May 10th. Just Southwest of Houston there was a wholesale market price of -$7000/MWh because there was a must run cogeneration plant which drove local electricity prices substantially negative. About 80 miles away in a heavily congested node there was a simultaneous price of +$7000/MWh, a swing of $14,000/MWh!
Figure 2: Texas Pricing Heat Map
This clearly indicates the importance of not only knowing when to charge your battery on wheels and in the near future, when V2G is implemented, but also where to charge or discharge your mobile energy resource to the grid.
As recent as July, the Texas grid was under even more stress with peak load approaching 80,000 MW. All available demand response resources were called upon including a request by ERCOT for residential customers to turn up their thermostats, and Elon Musk even called upon Tesla owners in Texas cease charging during the day to avoid grid failure. These reactionary ad hoc measures illustrate the lack of visibility, predictability, and interconnection between these two colliding industries.
These ecosystems must, to their mutual benefit, merge now. Today, many areas of the US are simply not equipped to support the additional load brought on by an electrified transportation industry. The severity of a complete blackout in ERCOT, sure to be catastrophic both economically and loss of human life, would have consequences on a global scale.
Strong efforts are underway to bring these two ecosystems together. As in the case of Apple, which has created a market cap of over $2.6 Trillion by being on top of its ecosystem, there will either be a “Battle Royale” to become the leader of this merged transportation/energy ecosystem. The leader of this new merged ecosystem will provide customers with cohesive energy services that support all of their connected appliances, most importantly their batteries on wheels. These assets will be aware of their location on the grid, the price of their consumption, and the optimal performance schedule for electrical usage. Currently, as is demonstrated in strained energy markets such as ERCOT, the entities needed to support this transformation are faced with a plethora if protocols, resulting in the proverbial “Tower of Babel,” having to manage upwards of 5 different point-to-point standards for each use case, this complexity will stifle scalability, and innovation, while also increasing the number of surfaces that will require implement cyber security measures to ensure adequate protection in this enterprise.
EVSE equipment manufacturers, retailers, service providers, aggregators and regulators are but some of the additional actors that will have a growing role in the new EV ecosphere. Consider, for instance, few if any automobile dealers today actively contact the distribution utility of their EV customer during their sales closing process to either inform their utility about a new load or to determine if there is sufficient hosting capacity to support vehicle to grid services.
The impact of EVs will, by necessity, require new business processes, stakeholder interactions and dependencies, and will require a common system for data acquisition, information dissemination and cyber assurance.
Kitu Systems, Inc. (www.kitu.io), a leader in behind the meter generation and resource aggregation, has already demonstrated that it can provide a single communication layer upon which these end-to-end services can be built. Founded on the use of industry accepted and adopted standards that is core to many Distributed Energy Resource (DER) programs that have been implemented in California (e.g., Rule 21) and Hawaii (e.g., Rule 14H), their ecosystem harmonization platform recognizes the value in integration, harmonization, and cyber assurance.
Clearly racing ahead with a fragmented, the ineffective use of and reliance on limited protocols and the networking of multiplicity of point to point solutions, is not the way to implement this. Following that path is an unstructured approach that will ultimately hinder the progress that is needed to align these industries in concert and enable them to be ready to meet the electrification goals of the nation. That is why a unified platform such as Kitu Systems make sense not only now, but in the future. The vision and progress that that Kitu has demonstrated proves that success can be achieved with the harmonization these ecosystems and tools that are there to meet the needs of stakeholders. This will be more evident as even more and more stakeholders beyond the automotive and energy industry become involved in this transformation.
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