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Power Generation Initiative Updates

Evolving Business Models: Electric Utilities Enter the Transportation Sector

Published on 21 Apr 2016  |   Written by    |  

Electrification of Transportation & Electric Vehicle Infrastructure Investment by California Utilities


Introduction – Emerging Electric Utility Business Models & Electrification of Transportation

In January 2013, the Edison Electric Institute released a report, Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business, warning of disruptive factors reducing revenue streams and threatening the electric utility business model. These factors include, increased usage of distributed generation and intermittent renewable energy resources, growing need for demand side management technologies, and slower growth in electricity demand.

In the following three years, the disruptive factors have only grown. While many utility business models will emerge from this disruption, there are two underlying components this evolution: (1) the transition from simply a power provider to service or grid management provider; (2) the need to find new customers and demand for power generation.

The transportation sector is in the early stages of its own evolution, which will enhance the emerging business model of electric utilities. The electrification of transportation could greatly expand the grid management capabilities of utilities, and has the potential to significantly increase electricity demand.

Electric utilities have a keen interest in expanding electric vehicle (EV) charging infrastructure to both enhance their ability to manage the grid and attract new customers. In many regions of the country, utilities and public utility commissions (PUCs) are hesitant and uncertain about entering the transportation sector. Nevertheless, in California, utilities are charging ahead with pilot programs to directly invest in the build-out of EV infrastructure.

The electrification of transportation will greatly expand the grid management capabilities of electric utilities. EVs, connected to smart charging stations, are a form of grid-interactive infrastructure that can store excess energy generation, discharge that energy back to the grid, as well as provide ancillary services such as frequency regulation.i These grid management services will enable increasing percentages of electricity generated from distributed, intermittent, renewable and low carbon resources.

The electrification of transportation also has the potential to significantly increase electricity demand. Some studies have estimated that if all light duty vehicles were electrified, power sales would rise by about 25 percent, increasing utility revenue by $100 billion per year.ii A recent analysis by Bloomberg New Energy Finance (BNEF) estimates that EVs will account for 35 percent of new vehicle sales by 2040 and consume 10 percent of all the electricity produced in 2015. As of March 2016, 428,816 EVs have been sold in the U.S. since 2011.iii

Eight states from the Northeast and West Coast signed a Memorandum of Understanding (MOU) on October 24, 2013 to put 3.3 million zero emission vehicles, including EVs, on the road by 2025.iv At COP21 in December 2015, these eight states announced the creation of international Zero Emission Vehicle (ZEV) Alliance with an ambitious goal of making all passenger vehicle sales in their states ZEVs by 2050.v Collectively, these eight states comprise about a quarter of the nation’s vehicle sales;vi vehicles that if connected to the grid, would lead to a noticeable increase in electricity demand.

California – Leading the Electrification of Vehicles & Utility Engagement

California has been a leader in power generation from renewable energy resources and electrification of the transportation sector. California has a 50 percent renewable portfolio standard by 2050vii and a goal to put 1.5 million ZEVs on the road by 2025.viii Almost half of EV sales in the U.S. since 2011 (196,447) have been in California.ix Creating a cleaner electricity market and fueling the transportation sector off the grid is a vital strategy for California to meet its goals of reducing greenhouse gas emissions (GHG) to 1990 levels by 2020, and 80 percent below 1990 levels by 2050.x Transportation accounts for 37 percent of GHG emissions in California, the largest single source of emissions in the state.xi

In order to meet the ambitious ZEV and climate goals, California will need to significantly increase the amount of EV infrastructure, specifically at homes and workplaces, where 98 percent of EV charging takes place.xii The California electric utilities have been looked to as potential investors in EV infrastructure. Earlier this year, the California Public Utility Commission (CPUC) approved pilot projects by San Diego Gas and Electric (SDG&E) and Southern California Edison (SCE) to directly invest in EV infrastructure and rate base it. Both of these proposals are modest in scale, and involve some level of third party ownership and operation of the charging infrastructure.

The initial proposal by Pacific Gas & Electric (PG&E) to build 25,000 EV charging stations for $654 million was rejected by the CPUC as being too large. PG&E has submitted a proposal to build 7,600 charging stations, which is currently under review by the CPUC.xiii

Below are summaries of the EV infrastructure pilot programs for SDG&E and SCE:

San Diego Gas & Electric (SDG&E) – Power Your Drive Programxiv

  • Amount of Chargers
    • 3,500 charging stations
  • Type of Chargers
    • Level 1 and Level 2 charging stations
  • Location
    • 350 locations – Apartments, condos and work places (not public charging)
    • At least 10 percent in disadvantaged communities
    • Minimum of 10 charging stations at each location
  • Ownership/Management
    • SDG&E will own, operate and maintain the charging stations. 3
    • Using third party vendors tprovider charging equipment and operating systems thelp send the information directly tthe driver and gather the data based on consumption
  • Overall Cost of Program
    • $45 million
  • Payment Methods
    • Hourly rate encourages off-peak charging
    • No cost for installation of the chargers; but will be a participation payment fee;
      • The CPUC is expected tmake final decision on the payment fee by the middle of 2016
    • Two billing options:
      • Bill to Owner: The apartment or business pays for all drivers as an amenity
      • Bill to Driver: The cost is paid for by the drivers, individually charged via their SDG&E bill

Southern California Edison (SCE) – Charge Ready Programxv

  • Amount of Chargers
    • Pilot Project – Up to 1,500 charging stations
    • Post Pilot Project – Request approval for plan to install 30,000 charging stations
  • Type of Chargers
    • Level 1 and Level 2 chargers with integrated or external network capabilities;
      • All Level 2 charging stations must be able to support demand response
  • Location
    • Long time dwelling locations including workplace, multi-unit dwellings, fleet and destination centers where vehicles are generally parked for at least 4 hours
      • Minimum of 10 charging stations per site
    • At least 10 percent of the charging stations tbe installed in disadvantaged communities
      • Minimum of 5 charging stations per site
  • Ownership/Management
    • SCE provides and owns the electrical infrastructure transformer, meter, panel, conduits & wires
    • Participating customers own, operate and maintain the charging stations;
  • Overall Cost of Program
    • $22 million for pilot project
    • $355 million for 30,000 chargers
  • Payment Methods
    • All costs of electrical infrastructure covered by SCE; SCE offers 25‐50 percent rebate against charging station base costs (hardware and installation)
    • Customers responsible for related costs including electricity, maintenance, networking

 

Endnotes:

i See Tony Markel. “PEV Grid Integration Research Vehicles, Buildings, and Renewables Working Together.” Electric Vehicle Grid Integration. National Renewable Energy Laboratory. July 29, 2015. http://www.nrel.gov/docs/fy15osti/64757.pdf

“New York State Grid-Interactive Vehicle Study: Roadmap.” NYSERDA. December 2015. https://www.veic.org/docs/resourcelibrary/veic-grid-interactive-vehicle-roadmap-report.pdf

iiMichael Shepard. "The $100B prize: Why EVs are the opportunity of the century for utilities." Utility Dive. April 5, 2016. http://www.utilitydive.com/news/the-100b-prize-why-evs-are-the-opportunity-of-the-century-for- utilities/416373/?mc_cid=643c279a67&mc_eid=2d799f5a24

iii California Plug in Electric Vehicle Collaborative. http://www.pevcollaborative.org/

iv ZerEmission Vehicles. North East State Coordinated Air Use Management (NESCAUM). http://www.nescaum.org/topics/zero-emission-vehicles (Eight states include: California, Connecticut, Maryland, Massachusetts, New York, Oregon, Rhode Island and Vermont)

v “International ZEV Alliance Announcement.” The International Zero-Emission Vehicle Alliance. December 5, 2015. http://zevalliance.org/content/cop21-2050-announcement

vi ZerEmission Vehicles. North East State Coordinated Air Use Management (NESCAUM). http://www.nescaum.org/topics/zero-emission-vehicles

vii http://www.energy.ca.gov/renewables/

viii 2013: ZEV Action Plan: A Roadmap Towards 1.5 million zero-emission vehicles on California roadways by 2025. Governor’s Interagency Working Group on Zero-emission Vehicles. https://www.opr.ca.gov/docs/Governor's_Office_ZEV_Action_Plan_(02-13).pdf

ix California Plug in Electric Vehicle Collaborative. http://www.pevcollaborative.org/

x Climate Change Programs. California Air Resource Board (CARB). http://www.arb.ca.gov/cc/cc.htm

xi Kate Galbraith, "California Leads on Climate Policy … But Alsin Greenhouse Gases." KQED Science. November 28, 2015. http://ww2.kqed.org/science/2015/11/28/california-leads-on-climate-policy-but-also-greenhouse-gases/ xii "Plugged In: Understanding How and Where Plug-in Electric Vehicle Drivers Charge Up" Department of Energy.

December 2, 2015. http://energy.gov/eere/articles/plugged-understanding-how-and-where-plug-electric-vehicle- drivers-charge

xiii Anne C. Mulkern. "Group of Calif. lawmakers opposes utility's EV charger plan" Climate Wire. April 20, 2016. http://www.eenews.net/climatewire/2016/04/20/stories/1060035933

xiv San DiegGas & Electric – Power your Drive. http://www.sdge.com/clean-energy/electric- vehicles/poweryourdrive http://www.pevcollaborative.org/sites/all/themes/pev/files/PEVC%20Power%20Your%20Drive%20Program%203- 29-16.pdf

xv Southern California Edison – Charge Ready Program. http://www.edison.com/home/our-perspective/charge- ready-a-plan-for-california.html http://www.pevcollaborative.org/sites/all/themes/pev/files/20160329%20Charge%20Ready%20overview.pdf

 

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