7 minute read 7 Jun 2018
electric car charging station

Why the rise of electric vehicles will mean more to utilities than increased sales

By

Benoit Laclau

EY Global Energy Leader

Experienced energy leader and advisor.

7 minute read 7 Jun 2018

Beyond increased electricity sales, utilities need to consider the risks and opportunities to compete.

Just 0.2%. That was the extent of global electric car stock as a percentage of all passenger light-duty vehicles in circulation at the end of 2016. It’s a tiny fraction in the context of the estimated 1 billion plus cars on the road. But with the total number of electric vehicles (EVs) doubling from 1 million in 2015 to over 2 million in 2016, the pace of EV adoption is clearly accelerating. 

Mass production improvements and research and development, particularly in the areas of high energy and power density batteries, are resulting in lower battery costs – down 70% since 2010. This trend is set to continue, and we anticipate that EVs without subsidies or incentives will reach cost-parity with their traditional rivals sooner than we think.

Climate and emissions concerns have also brought the adoption of EVs to the forefront this year. The governments of some of the biggest automotive markets around the world have declared their intentions to embrace EVs to take dramatic steps to curb emissions. 

France and the UK will look to ban the sale of gas and diesel-powered vehicles by 2040. And China, the largest auto market in the world, publicly started charting a plan for an all-out ban on vehicles powered by combustion engines. 

The implications are profound. New research by Bloomberg New Energy Finance (BNEF) projects that by 2040, 55% of new car sales and 33% of the global car fleet will be electric.   

Effect of EV growth on grid security

For the power and utilities sector, the growth in EVs really matters. In my last blog, The countdown to digital reinvention for utilities, I identified that a first significant “tipping point” is only a few years away, when the cost of residential solar and battery systems will reach cost parity in several regions

“EVs will create a game-changing “tipping point” in the evolution of the energy system that will require significant investment in new infrastructure.”

Similarly, EVs will create a game-changing second “tipping point” in the evolution of the energy system that will require significant investment in new infrastructure. This will determine the way future power networks are designed and controlled. 

As active loads, EVs increase the demand on the network during charging. But it is recognized that the growth in the EV market won’t cause utilities companies concerns regarding total nationwide electricity demand. 

Across Europe, for example, our analysis indicates that total power consumption will increase by around 5%, and 4% in Australia by 2050. Instead, the challenges are centered at a local network level where there is a risk of overloading residential transformers.

A single plug-in electric vehicle (PEV) with a 240V, Level 2 charging system consumes about 7kVA. With most residential transformers only built to manage between 10 and 50 kVA, there are concerns that several EVs charging simultaneously could overload the transformer – or even take it offline. 

Residential transformers are particularly at risk of overload during peak hours, especially if there are multiple EVs in a neighborhood.  

With annual EV sales expected to be in the tens of millions by 2030, the consequences for the local power system are significant. Uncontrolled EV charging (i.e. where there are no controls/incentives in place to modify load scheduling) is likely to coincide with evening peak demand – users will tend to charge their vehicles as soon as they get home from work – which will add to the pre-existing peak load and may take distribution voltages outside the acceptable range. 

Creating value from EV flexibility

Leveraging the flexibility of EVs can help manage the impact of charging them on the grid: 

  • Dynamic pricing: “Time-of-use” rates can be introduced to encourage drivers to charge their vehicles at off-peak times to avoid higher electricity bills. Dynamic pricing forms an essential part of effective demand-response programs and the optimization of the digital grid.
  • Design and governance: Properly designed and controlled EVs can offer ancillary services such as supply/demand matching and support the supply network, for example by providing reactive power support. 
  • “Smart charging”:”, The intelligent charging of electric car batteries, can be used to incentivize drivers to charge EVs during periods when supply from renewable energies is at its highest, thereby reducing the demand for fossil fuel powered plants. 
  • Workplace charging: A possible solution to managing high volumes of intermittent renewable generation coming online during peak daytime hours, providing much needed stability to the grid.
  • “Smart” algorithms: AI enabled algorithms can take into account a huge number of parameters, such as weather and user patterns - managing a high volume of data to help predict charging patterns.

Beyond variable power consumption, there is also a huge untapped potential of vehicle to grid (V2G) connectivity. Millions of EVs amount to millions of batteries that could be integrated into the system, providing more opportunities to manage and optimize the grid. Smart charging can enable EVs to act as decentralized storage resources that can benefit the power system as a whole and minimize, or eventually avoid, grid reinforcements.

“Millions of EVs amount to millions of batteries that could be integrated into the system, providing more opportunities to manage and optimize the grid.”

Recent EY analysis for clients in Europe indicates that the majority of today’s EVs are generally under-utilized during the day, left in car parks. However, as autonomous EVs start to enter the market, utilities could potentially make it attractive for vehicle-owners to authorize their AEVs to automatically travel to certain neighborhoods, and to “plug the gap” when high loads are expected and the vehicles are otherwise not in use.  

On the home front, as the adoption of domestic power storage and solar systems expands, consumers will be able to store energy and charge vehicles at times that avoid peak-hour charges. Several utilities are already looking at what possible compensation models may be required to optimize consumer behaviors.

Getting ahead of the EV wave

EVs can deliver numerous benefits for customers, power systems and society as a whole. Access to real-time vehicle-side-data enables better decisions and efficient deployment of demand response programs, while ensuring vehicles always receive the charge they require. But there are also considerations such as how this “behind the meter” storage will interact with grid scale storage to optimize/balance the grid and mange usage peaks. EVs and electric utilities are therefore intrinsically linked. 

“Utilities must prepare for the future by taking a combination of firm, “no regrets” positions against large uncertainties, and essential investment “must dos” for developments that are here and now.”

In response, utilities must prepare for this future by taking a combination of firm, “no regrets” positions against large uncertainties, and essential investment “must dos” for developments that are here and now. To do this, utilities must:

  • Recognize the scale and pace of change, and assess the benefits that EVs can bring. They should start thinking now about how EVs can be integrated into current strategy and investment decisions. 
  • Assess new business model opportunities, such as owning or servicing batteries and ensuring they are always optimally charged at the best price, or ensuring they act as virtual power plants for the home or office.
  • Work with regulators to implement policies that help engender a more dynamic pricing strategy, which allows for the distributed charging of EVs across the entire off-peak period.
  • Explore opportunities to expand EV charging infrastructure, and benefit from owning charging stations and their subsequent power sales.
  • Imagine the possibilities of converging with adjacent industries, using EV-generated data to open up vast new commercial opportunities. 

Electric vehicles are coming – and accelerating fast. Doing nothing is not an option! Oil and gas companies, car manufacturers and other online retailers are already entering the battery and EV storage market with more capital, more understanding of the customer and better data and software management.

It is in utilities organizations’ best interests to take a forward-thinking, proactive approach to increasing EVs coming onto the grid.

Please continue to let me know your thoughts and take part in the debate @EY_PowerUtility/#EYEnergy.

For more of my perspectives on the energy future, visit Energy Reimagined. Find more EY insights on the power and utilities sector here.

Summary

Getting ahead of the EV wave will allow utilities to understand the impact of EVs on the grid, the potential solutions they could deliver– before they are needed.

About this article

By

Benoit Laclau

EY Global Energy Leader

Experienced energy leader and advisor.