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Driving the Grid Forward: Best Practices for Utilities to Prepare for the Electric Vehicle Boom

Published February 13, 2017

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Introduction With international goals to limit global warming levels to 2°C or less over the next several decades, the electric vehicle market has the wind at its back. However, despite lower operating and maintenance costs, the higher upfront costs of EVs can be a barrier to adoption. The answer to this challenge has resulted in everything from pooled purchasing programs to rebates to tax breaks, all of which are contributing to an increase in EV sales, with several major car manufacturers including Tesla, GM, Volkswagen and Nissan announcing the roll-out of hundreds of thousands more EVs in the next several decades.

According to the International Energy Agency (IEA), electric vehicles accounted for more than 400,000 cars on the road in the United States in 2015. While predictions for the continued growth of the EV market span anywhere from “one third of new car sales globally by 2040,” according to Bloomberg New Energy Finance to “1 billion by 2050,” according to the IEA, to “1.4 million in 2020,” according to the 2015 EV Industry Insider Report, the bottom line is clear: Utility planners have a big wave of changes ahead of them in order to prepare for the EV boom.

A greater demand on the grid might seem like a potential problem at first glance, but with EV batteries now capable of storing 30kWh of electricity, enough to power an average U.S. residential home for one day, the grid may benefit from these eco-friendly vehicles in ways never imagined before. As they anticipate impacts to the grid from the growing electric vehicle market, utilities should keep the following best practices in mind.

Creating Effective Incentives Just as utilities offer incentives for efficient equipment and building retrofits, rebates on electric vehicle supply equipment (EVSE) and the vehicles themselves are an important driver of consumer demand. Just like utilities once forged new paths with home improvement retailers like Home Depot and Lowes to create better energy efficiency programs, utilities can partner with EV manufacturers and dealerships to design programs and incentives that benefit both the grid and the consumer. Partnering with vehicle manufacturers also enables utilities to better anticipate the economic and demographic makeup of new EV purchasers, which can greatly aid in grid and infrastructure planning.

Some examples of utilities already executing this include PECO who offers rebates for EVs directly to residential customers, while Indianapolis Power & Light and Jacksonville Electric Authority offer purchase rebates on fleet vehicles for business customers. Puget Sound Energy (PSE) offers reduced cost electric vehicle supply equipment (EVSE) to commercial customers. Recent regulatory changes in a variety of states, most notably California, suggest that the opportunity for utilities to rate base (earn a regulated return) investments in EV charging infrastructure will become more commonplace. San Diego Gas & Electric (SDG&E) and Southern California Edison (SCE) are in the midst of installing a combined 5,000 charging stations across Southern California through the Vehicle Grid Integration Program and Charge Ready Program, respectively. While some major differences regarding direct utility ownership of the equipment exist between these two programs, the premise of both is that the California Public Utility Commission (CPUC) will allow cost recovery of these large investments in new EV charging infrastructure.

Utilities should also look toward local and state public partnerships to offer convenient, ancillary incentives such as access to HOV lanes, reduced rate or free city parking and lowered vehicle registration costs for EV owners. All of these benefits can be part of the complete economic value proposition marketed to customers, while also providing utilities with a unique opportunity to shape the geographic load profile of EV owners.

Rate Design Utilities should consider different types of variable rate structures that encourage EV owners to charge their vehicles when demand for energy is low and excess capacity is high. A recent report from Rocky Mountain Institute titled ““Electric Vehicles as Distributed Energy Resources” noted that “early pilot projects are demonstrating that EV-charging load profiles can be effectively shifted to off-peak hours under time-of-use pricing if the off-peak pricing is around one-third of the on-peak price.”

With these sorts of rate structures in place, customers can choose to pay more during certain times of day to charge their vehicles or be rewarded for charging vehicles during off peak times. Many utilities around the country, such as San Diego Gas & Electric (SDG&E), ConEdison, and Arizona Public Service (APS) have introduced time-of-use (TOU) rate schedules for customers with EVs. In addition to creating price signals that encourage charging at times most beneficial to the grid, these initiatives also allow utilities to separately meter the charging station, providing valuable insight into the charging behavior and use of EVs across their service territory.

While most TOU rates focus on encouraging residential customers to charge their vehicles overnight, Rocky Mountain Institute suggests that “new emphasis is being placed on workplace charging in some jurisdictions, notably California and Hawaii, where abundant solar generation makes daytime charging especially attractive.” Daytime workplace charging would also allow utilities with excess renewable generation to absorb that capacity across a distributed network of EVs rather than curtailing it. It is easy to envision how such initiatives could evolve into an energy storage network in the future. EVs could store excess capacity generated in areas with a high penetration of distributed photovoltaic solar (PV) or centralized wind and then be dispatched as a resource during peak events or evening system ramping. This would decrease the need for large investments in centralized gas generation and result in a net benefit to ratepayers.

Pairing EV Efforts with Existing Utility Programs EVs may not be a traditional energy efficiency measure, but they have the potential to benefit consumers and the utility in many of the same ways. Despite the required grid capacity to charge an ever increasing number of EVs, their proliferation gives utilities an effective way to address peak events, smooth system ramping and even regulate voltage. The flexibility of the EV load requires an extensive amount of customer outreach and education, which is an area where utility offered demand side management and demand response programs have excelled. Providing customers with interactive ways of communicating with their electric provider while proactively managing their energy use, such as through mobile apps and real-time monitoring of charges and rates, are goals that are consistent with many existing utility efforts and can play an integral role in the future of EVs.

Dynamic pricing schemes and demand response options should be offered through online portals and smart phone applications that deepen the utility relationship with customers and increase utility access to customer consumption and behavioral data. These strategies are consistent with utility business objectives to deepen the relationship with customers and increase overall customer satisfaction.

Conclusion As vehicle costs come down, battery range increases and public policy objectives continue to push EV adoption, the electrification of the transportation sector is inevitable. Electric utilities will be instrumental in this transition and EVs could be a boon to the utility business while also offering immense public benefits.

Utilities should continue to build the infrastructure necessary to integrate the expected growth of EV owners either through third party partnerships or direct investment in charging equipment. Business and multi-family customers will offer big opportunities to provide charging access to large numbers of customers. Dynamic pricing options, such as time of use rates will allow utilities to influence the load shape of the EV population while offering critical economic incentives to drivers. Incentives of convenience, such as HOV access, free parking and reduced cost vehicle registration will enhance the ease of transition for customers while utilities continue to offer rebates on charging equipment and vehicles for both residential and commercial fleet customers. Lastly, utilities should integrate EV efforts with existing energy efficiency, demand response and solar programs.

Consider all of these trends in your distribution planning now to get ahead of the EV boom.

See the article at Electric Energy Online

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