Five Ways Utilities Can Gain From Building Electric Vehicle Charging Infrastructure
Energy Innovation: Policy and Technology, ContributorOct 10, 2017
News about internal-combustion engine bans and automakers announcing new electric vehicle models seem to indicate an electric transportation future is here. But while EVs are more and more economically appealing to utilities and drivers, regulators and electricity sector stakeholders need smart policies to remove barriers to EV adoption .
A new Rocky Mountain Institute (RMI) report, “From Gas to Grid,” lays out how government officials and state regulators can tackle one of the biggest challenges facing an electrified future: building EV charging infrastructure to meet anticipated consumer demand.
States that move forward on policies facilitating EV growth will reduce consumer costs, lower emissions, and help their utilities grow. Those that don’t could face a sudden need to build expensive generation and infrastructure to maintain grid reliability and keep customer costs low.
Early Days Of EV Transition Mean Policy Changes Now Can Have Outsized Impacts
The EV acceleration is hard to miss. Sales jumped 36% in 2016 compared to 2015, and increased at a compound annual growth rate of 32% over the past four years. According to RMI, 15 EV models are now available for less than $30,000 after tax credits, 10 of those models have at least a 50-mile all-electric range, and several models can already go more than 200 miles on a single charge.
Bloomberg New Energy Finance (BNEF) projects U.S. EV sales will pass 640,000 annually by 2021, as costs fall and automakers roll out additional options. Ford expects 13 new EV models on the road by 2022, GM will have 20 new EV models by 2023, and Volkswagen wants an electric version for each of its existing 300 models by 2030.
Bloomberg New Energy Finance’s EV forecast through 2025
Even with fast-expanding availability, EVs composed just 1% of all new U.S. light-duty vehicle sales in 2016 and fleet turnover rates are slow – meaning we’re in the early days of deployment, and action taken now can have major impacts down the road. Smart policies to expand charging access can help sales ramp up while expanding grid flexibility, reducing power costs, and integrating cleaner electricity.
“If we plan and implement strategies to manage charging before there is widespread EV adoption, we can shift the electricity demand of EVs into the valleys – the off-peak hours – of the grid load profile,” said RMI co-author Chris Nelder. “This could optimize the entire electricity system, reduce the cost of electricity for all consumers in the long run, and allow us to integrate a larger share of wind and solar than might have been possible otherwise, by using EVs to soak it up.”
Utilities Will Be Key To Expanding EV Charging Infrastructure
Electric utilities have a major role to play in expanding EV charging infrastructure, and can benefit from owning charging stations and their subsequent power sales. The International Council on Clean Transportation recently reported a statistically significant link between grid-connected EV infrastructure and vehicle electrification– meaning utilities are key to EV adoption.
Still, consumers won’t buy an EV if they can’t charge it quickly and cheaply. While the U.S. currently has 16,000 EV charging stations spread across the country, most of them are Level 1 or Level 2 chargers which can take between 6-24 hours to fully charge a battery. And, the National Renewable Energy Laboratory estimates America needs at least 8,000 Level 3 fast-charging stations to provide a minimum level of urban and rural coverage in a low-deployment scenario, and at least 100,000 stations in a high-deployment scenario.
“It’s not enough to simply give utilities reasons to build charging infrastructure,” said Nelder. “We need to ensure that public funding of utility-owned infrastructure achieves the desired results – that the charging stations are well-used, and meet actual mobility needs at the lowest possible cost.”
In short, it’s time to overcome charging infrastructure barriers and seize the outstanding economic opportunities of EVs .
A range of stakeholder economic benefits from EVs
Barriers To Building EV Chargers And Policy Solutions To Overcome Them
RMI’s report outlines major barriers to deploying EV charging infrastructure, and recommends solutions for policymakers to help utilities deploy chargers at the lowest possible costs with the greatest possible benefits.
Bring down the cost of chargers: The three major types of EV chargers have widely varying costs, from $5 for an extension cord to plug into a wall for Level 1, to up to $6,000 for commercial public installation of Level 2 chargers, or up to $300,000 for a Level 3 charging station. RMI suggests government and utilities establish rebates or incentives for homeowners or businesses to install Level 2 chargers. RMI recommends expanding “patient capital” for Level 3 chargers through municipal/green bonds, long-term purchase agreements, allowing utilities to rate-base infrastructure costs, or offering tariffs to shift costs from private installers and owners onto the general rate base.
Convince regulators investments are worthwhile: While EV ownership is growing and infrastructure efforts are underway in states like California, Colorado and New York, regulators in other states may not see justification for allowing utilities to invest in infrastructure and recover costs through rate-basing. RMI suggests distributing the costs of building EV charging infrastructure across utility rate bases, but ensuring those investments are recovered through performance-based regulations.
Familiarize utilities with charging infrastructure investment: Utilities seeking to add charging infrastructure may need to present unfamiliar and complex cost-benefit analyses to regulators including hard-to-quantify benefits like demand response, emissions reductions, and load shifting. With uncertainty about EV deployment, these utilities may instead choose to invest in easily understood projects like energy efficiency. RMI again suggests applying performance-based regulation to utility charging infrastructure projects to incentivize investments by rewarding social benefits without exposing ratepayers to undue risk, and recommends regulations rewarding utilities for benefits like ancillary services or demand shaving.
Balance the costs and access of infrastructure: EV charging infrastructure costs have been concentrated among EV owners and a few developers or utilities, which can limit public interest in expanded charging infrastructure. Charger access can be concentrated among wealthier communities, which feeds range anxiety and can slow EV sales. To overcome both challenges RMI recommends regulators encourage utilities to use their low costs of capital to install and own charging stations, extend public financing to charging infrastructure, provide rebates to low-income consumers, and ensure projects are equally located in disadvantaged communities.
Integrate balkanized charging station networks: America’s existing EV charging network was developed in a bottom-up manner by multiple independent entities without planning for interoperability, which creates challenges for roaming across networks analogous to traveling across various state toll roads. RMI recommends regulators and utilities adopt the free and open-source Open Charge Point Protocol to support interoperable information exchange for transactions and charger operations.
Moving Past The EV Chicken And Egg Quandary
EV adoption has faced a “chicken-and-egg” quandary of hesitation to build charging infrastructure until more vehicles are on the road, and hesitation to buy EVs until more chargers are available, but the expansion of new models and EV cost declines mean it’s time to move past the old paradigm.
Consumers who drive EVs love them and their potential benefits to utilities, the environment, domestic energy security, and the economy can’t be ignored. By aligning utility regulation and public financing, policymakers can seize the outstanding opportunity of electrified transportation.