Electric vehicles (EVs), which include both all-electric and plug-in hybrid electric vehicles, represent a bold new frontier for utilities—the opportunity to increase demand and potentially even reverse the trend toward lower electricity sales.
Here’s the situation: Most areas of the United States are suffering from slowing and even negative growth in electricity demand due to increasing energy efficiency and more distributed solar photovoltaic (PV) generation. But EVs offer solid purchase in a slipping market: According to a report by SmartGrid, “EVs offer utilities an entry into a sector of the economy that accounts for 28 percent of the country's energy consumption.” With their hyper efficiency, EVs’ advantages are two-pronged for utilities: They lower total energy use and emissions even as they increase electricity use.
And that’s just the tip of the benefit iceberg. Because most EV charges occur at home, each EV increases the average household's electricity demand by roughly 30 percent, according to the Energy Information Administration. Plus, EV charging tends to happen at customers' homes during the night, outside of peak periods of demand for electricity. It’s a time when most utilities have excess power available on the grid, which translates into large net economic benefits to the utility and its customers. The off-peak charging improves a utility’s load factor and boosts sales during low-demand times.
In the ultimate win-win, the additional revenue generated by the increased sales more than offsets the cost to generate and deliver the additional power.
Right now, EVs are in a transitional phase, slowly moving from early adopters to a wider customer base. There are many reasons for consumers to find EVs an attractive option. A switch to EVs cuts unhealthy air pollution that fuels and hastens climate change. EVs can also provide a boost to the regional economy and promote energy independence, two major feats. EVs have so much to offer, but only if they make up a much larger share of the market than they do today.
Electric utilities play an important role in growing and shaping the market for EVs. Here are four steps they can take to encourage EV adoption.
- Offer more charging stations.
To boost the number of charging stations and bolster EV owners’ confidence in their driving range, utilities have offered rebates and incentives for residential and commercial charging stations. A number of utilities are now installing and operating their own publically available charging stations and taking a leading role to ensure there are enough charging stations to support significant growth in EV ownership. GoodCents® field services teams are available for EV charging station installation throughout North America.
- Offer special EV rates.
For more than a year, at least 28 utilities across the country have offered special EV rates to their customers. Even more popular is the best practice of time of use (TOU) rates for EVs. Over 200 utilities offer TOU rates to their residential customers that could help to encourage off-peak charging of EVs. For a cutting edge example, the California utility SDG&E will soon institute a first-in-the-country real-time pricing structure, with information accessible via smartphone, which will encourage charging during off-peak periods when electricity's cost is lowest.
- Remove demand charges for transit companies.
While electric buses have higher capital costs than traditional diesel transit buses, they are much less expensive to operate. But high demand charges at peak times can make electric buses a significantly less viable financial option. If utilities offered special demand charge tariffs or no demand charges at all for transit companies operating electric buses, it would go a long way to encourage the widespread adoption of electric buses. Xcel Energy in Colorado offers a non–EV specific commercial rate, and the Hawaiian Electric Company (HECO) offers commercial customers who provide EV charging two rates that remove or mitigate demand charges.
- Offer flexible rate design.
What is the best way to meter the additional electrical load from an EV? In certain cases a whole house rate makes better sense, and in others an EV-specific meter offers a better financial incentive. Utilities should consider offering both whole-house and EV-only TOU rates to the customer, letting each individual decide on a rate plan that makes the most sense for them.
On top of aforementioned action steps, there are several more compelling reasons it may make sense for utilities to be more directly involved in the development of charging station infrastructure.
First, utilities are well positioned to take a long-term approach to EV charging infrastructure buildout in the same manner as they take a long-term approach to building power plants or transmission lines.
Second, they are well-versed in making large-scale investments and amortizing the investment over a long period of time. This allows utilities to consider installations in underserved areas where the private sector has not yet stepped in.
And third, due to their knowledge of load management, utilities are uniquely positioned to set up fast charging stations with minimal demand charges—and they understand how to reduce stress on the distribution system.
