EV market is opening doors for sustainable utility business models

A holistic approach to EV charging development could prove to be beneficial for utility business models.
Published: Mon 22 Aug 2016

Transportation infrastructure has always been built around liquid fuels so there has never been any need for electric utilities to get involved with this sector. But this is set to change now that the global market seems to be exploding with some very viable electric-drive alternatives.

The need to offer an end to end energy solution

The technological transformation, spurred mostly by policy support mechanisms and battery developments, highlights a bigger opportunity for utilities to take a piece of the transportation market share. [Global electric vehicle outlook-four perspectives.] There are now better batteries, faster charging options and proven EVs on the road. Virtually every vehicle manufacturer is building a full electric or plug-in hybrid model.

Apart from rolling out a few charging stations or developing the occasional plan for how to manage large amounts of EVs on the distribution network, the evolution has occurred mostly independently of the electric utilities. They have been mere observers to this evolution. We wrote recently about Tesla’s aim to offer an end to end energy solution, starting with the “car that you drive and the energy that you use to charge it, and would extend to how everything else in your home or business is powered… You would be able to deploy and consume energy in the most efficient and sustainable way possible, lowering your costs and minimizing your dependence on fossil fuels and the grid.” [Tesla seeks to become first ‘vertically integrated energy company offering  end to end products’.]

But this will have to change if utilities want to snap up EV opportunities for themselves and  create additional revenue as a result.

Utilities best placed to boost EV market

By proactively accelerating the widespread adoption of EVs and plug-in hybrids, the electric industry could take advantage of a significant share of the revenue from the transportation energy market. According to the United Nations, in the US alone, EVs could make up 100% of vehicle sales within fifteen years.

While there are challenges such as uncertainty around range, insufficient vehicle-charging infrastructure, vehicle cost (often as a result of the pricey batteries) and consumer confidence, utilities can put consumers’ minds at ease by a faster deployment of infrastructure and consumer education.

In fact, utilities are best placed to manage infrastructure needs and to enable a better understanding and acceptance of EV technology. This can be carried out by utilities offering free long-term financing for at-home high speed charging stations when a consumer buys an EV – utilities will benefit by having access to low cost capital and direct billing to consumers. A partnership between a utility and an EV manufacturer could open the door to more innovative financing options (e.g., an EV with loan payments collected as part of an energy bill). The easier financing could boost adoption and consumer knowledge will be enhanced simply through plan promotion.

A good example of this type of promotion is investor-owned US utility Consumers Energy which plans to provide its electric customers, who purchase an electric vehicle, a US$1,000 "reimbursement incentive" toward the installation of a 240V home-charging station. Consumers Energy also plans to install a network of EV charging stations across the state-60 direct current fast-charge stations and 750 alternating current stations which would create power network-connected routes across the Lower Peninsula.

The utility has recognised the long term opportunities in EV promotion: Brian Wheeler, Consumers Energy spokesperson says: “Continued adoption of EVs can help boost our automotive state and the economy of Michigan as a whole.”

Another point for utilities to consider is that rebates for EV buyers could be recovered over the life of vehicle use through increased electricity sales.

In instances where utilities generate excess off-peak energy, some of this could be provided to EV consumers at a lower cost. When it comes to demand response, a new Navigant Research report, Electric Vehicle Charging Impacts, highlights that there is a growing trend amongst utilities to move towards encouraging the plug-in EV (PEV) market development to improve load management and grid operations.

Scott Shepard, senior research analyst at Navigant Research, says that the mobile and flexible aspects of PEV load can be used to benefit utility business models if utilities approach charging service programme development holistically. He says that comprehensive charging services and smart grid technologies will allow utilities to manipulate their loads to suit various utility initiatives that may include renewables integration or peak load management. [Electric Vehicles-grid disaster or opportunity?]

As utilities address consumer anxiety and infrastructure challenges, it will become possible for utilities to become major market leaders in the electric transportation sector-an opportunity that was never on their list before!

Further reading

Navigant Research-Electric Vehicle Charging Impacts

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