A surprising key to unlocking the electric vehicle market: Utilities

There’s no doubt about it: Electric vehicles are on the rise. But for every story about the inevitability of electric vehicles, there’s another one about the barriers. Cost, charging, and consumer awareness stand in the way of a mainstream electric vehicle market. Then there are questions about how green the electricity is that powers them.

One increasingly important – and perhaps unexpected – leader in the quest to figure things out may be your local electric power utility. The tide is quickly turning among these companies from fretting about electric vehicles as a problem to betting on their success. But why?

Utilities are starting to see how the flexibility of electric vehicles can turn them into an asset for making the grid more efficient and profitable. Electric vehicles use an astonishing amount of power. A Nissan Leaf driven 60 miles a day would consume as much electricity as an average household in California. With energy efficiency and rooftop solar leading to slower electricity sales, this new source of revenue could be critical for utilities trying to grow.

The challenge lies in managing the timing for charging the cars. Thousands and thousands of electric vehicles all plugging in at the end of the workday just as solar panels are generating less power could stress local distribution grids. This could force expensive grid upgrades and increased use of inefficient, dirty “peaker” generating plants.

But most electric vehicles don’t need all night to charge, so with smart planning and technology, the charging could take place at times when power is cleanest, cheapest, and in lowest demand. As the share of intermittent wind and solar power increases, this kind of demand flexibility will be even more important for utilities. Electric vehicle charging could act as a buffer, smoothing out the peaks and valleys from renewable energy that otherwise cause electricity prices to fluctuate wildly on the wholesale markets – in come cases, power companies have literally paid utilities to use their electricity.

Leading utilities are recognizing this potential and are moving to capture the benefits from having more electric vehicles on the grid. As a first step, many utilities are using “time-of-use” rates to push charging to late in the night, when demand is low, saving drivers money at the same time. Utilities from British Columbia to Germany are partnering with automakers, software developers, and universities to incorporate new, smarter charging technologies. This could enable coordination between charging and renewable energy generation. Even better, future electric vehicles could even send power back to the grid during periods of high demand, acting as batteries for renewable energy. Electric vehicle charging can also be paired with energy storage (perhaps even from used electric vehicle batteries!) to reduce grid impacts.

When utilities get engaged, they help knock down consumer barriers to electric vehicles. Time-of-use rates and smart charging can provide cheaper electricity, saving money for drivers, utilities and all ratepayers. Studies from E3 and MJ Bradley show how off-peak vehicle charging can generate significant benefits by better employing existing grid infrastructure and reducing the use of peaker plants. With one-way or two-way smart charging, utilities could use vehicles’ batteries to provide “ancillary services.” By helping to stabilize the grid, these vehicles could generate hundreds of dollars annually.

To capture these benefits and help alleviate charge anxiety, utilities from Québec to Copenhagen have built expansive public charging networks. In addition, utilities are getting actively involved in educating prospective consumers about electric vehicles and their benefits.

As awareness of these benefits increases, utilities all over the world are helping more drivers to plug in. In the United Kingdom, the Electric Nation project is testing smart-charging programs with more than 500 electric vehicles across the country. ElaadNL, a coalition formed by several Dutch utilities, is working with Renault to install 1,000 public solar-powered smart charging stations with battery storage around the city of Utrecht in the largest smart charging demonstration we are aware of. California utilities have been at the cutting edge of vehicle-grid integration and are even giving direct rebates to customers to defray the upfront cost of electric vehicles through the state’s Low Carbon Fuel Standard program.

We have tried to capture a handful of these moves in our literature review of utility best practices. We found that utilities have a vested interest in accelerating the transition to an electric vehicle fleet. They are finding creative ways to get involved, including partnering with automakers, researchers, and software companies to orchestrate innovative trial programs.

However, to take full advantage of electric vehicles, utilities must reassess rate structures, invest in smarter infrastructure, and improve outreach and communication with potential drivers. For their part, regulators should reassess utility revenue regulations and rules for charging-station ownership. They should promote investments in distributed energy resources, including vehicle-grid integration. If these things happen, utilities can help make electric vehicles cheaper, cleaner, and more convenient in just a few years.

But what about the electrons that actually power the vehicles? The electricity that utilities distribute has actually become a lot cleaner over the past few years, reflecting market forces, renewable energy requirements, and carbon mitigation policies. The share of U.S. electricity generated from coal went from 45% down to 30% just from 2010 to 2016, with wind and solar power seeing massive growth. The same story is taking place all over the world. As a result, electric vehicles are already far cleaner than the most efficient conventional gasoline vehicles, and even cleaner than the most efficient hybrids in most cases.

This trend is likely to continue for decades, with electricity all over the world continuing to decarbonize. We crunched the numbers to show what that means for the lifecycle carbon emissions from electric vehicles. In the figure below, we compare the findings with emissions from internal combustion engines, which also continue to get cleaner. We applied electricity source projections from the International Energy Agency and assumed that conventional vehicle emissions will improve by 4% a year in compliance with efficiency standards.

As shown in the figure, electric vehicles will continue to have lower CO2 emissions than combustion cars (right axis) as the grid mix changes (left axis). Of course, the situation will vary around the world. In China, where coal will most likely still be the largest power source in 2030, driving an electric vehicle will contribute around three-quarters as much CO2 as a combustion car, while in Europe it would create just a third. Of course, when utilities pair renewable energy streams with electric vehicle charging, electric vehicles will be even cleaner. A nice perk is that as electricity generation gets cleaner over time, an electric vehicle effectively gets cleaner with age – not the case for combustion cars!

Figure 1
Electricity generation sources and corresponding well-to-wheel CO2 emissions of electric vehicles, compared with increasingly efficient combustion vehicles.

Consumers win when utilities are bullish on electric vehicles. Utilities win when more cars plug in. The environment wins when more people choose electric cars and charge them using clean energy. So, yes, utilities are quickly becoming key players in the electric vehicle industry – good news for all of us.