Navigant Research Blog

Winter Cold Shows Value of Plug-in Vehicles

— December 27, 2013

Over half a million utility customers in the northeastern United States and Canada were without power Christmas Eve following major snowstorms and frigid temperatures earlier in the week.  By late Christmas day, utilities in Michigan, Maine, and Toronto had returned power to many affected by the outages, but as of December 26, thousands were still without power.   Twenty-seven deaths were attributed to the storms and resulting power outages.  Many of the deaths were caused by traffic accidents and by carbon monoxide (CO) poisoning stemming from diesel generator use.  Though cold weather can reduce the driving range of plug-in electric vehicles (PEVs), future PEVs with bidirectional power capabilities could have significant value in cold weather climates.

The U.S. Consumer Product Safety Commission reports that an estimated 200 people in the United States die from CO poisoning associated with fuel-burning heating equipment every year.  CO poisoning is more common in winter months than summer months and is especially dangerous during power outages when diesel generators kick on to supply power to homes.  CO detectors are the best way to prevent CO poisoning, but the adoption of PEVs with bidirectional power capabilities can add security.

Generators On Wheels

Japanese PEV automakers Nissan and Mitsubishi have spearheaded the development of bidirectional systems, alongside the companies’ respective PEV models, the LEAF and i-MiEV.  These systems attach to the vehicle’s DC charging port and convert the DC power from the battery to AC power, which is compatible with the common home electrical system.  The Nissan system provides up to 6 kW of power and the Mitsubishi system can provide 1.8 kW.  Old fashioned incandescent light bulbs are rated between .04 kW and .06 kW, so these systems can keep the lights on for quite some time in the event of an outage.  Unfortunately, these systems are currently only available in Japan.

In the United States, development of PEV bidirectional capabilities has been focused almost entirely on fleet vehicles.  Vehicles developed by VIA motors, Electric Vehicle International (EVI), Boulder Electric Vehicle, and Smith Electric Vehicle are being used by fleets for various applications – primarily using bidirectional systems to enable fleets of PEVs to participate in grid operator-managed frequency regulation markets.  However, utilities have grown increasingly interested in the technology for emergency response applications.

A Nissan LEAF may be able to provide power to one home, but a utility-owned commercial PEV could supply power to an entire neighborhood.  VIA motors and EVI have developed PEVs for this purpose with power output capacities from 15 kW to 100kW.  These vehicles can not only get technicians to downed lines and damaged equipment but can also provide power to cold, dark homes.  A bidirectional PEV, whether in a garage or at the distribution transformer, can reduce the need for CO-emitting diesel generators for backup power support.  PEV automakers pioneering bidirectional capability as an option on their vehicles will be wise to bring their products to markets in outage-prone regions.


EIA Foresees Fossil-Fueled Future for Transportation

— December 20, 2013

The U.S. Energy Information Administration (EIA) released an early version of its Annual Energy Outlook (AEO) for 2014, depicting an energy future overwhelmingly shaped by the development of new oil and natural gas reserves.  Cumulative production of natural gas from 2012 to 2040 in the AEO2014 report is about 11% higher than in AEO2013, reflecting the continued growth in shale gas production from increased horizontal drilling and hydraulic fracturing.

Some of the highlights for transportation-specific forecasts from AEO2014 include:

  • Light-duty vehicle (LDV) energy consumption will decline sharply through 2040, due to slow growth in vehicle miles traveled (VMT) and accelerated improvement in fuel efficiency.
  • Energy consumption in the transportation sector overall will decline from 26.7 quadrillion Btu in 2012 to 25.5 quadrillion Btu in 2040.
  • Electric vehicles, including battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs), and hybrid electric vehicles (HEVs), will account for just 7% of total vehicle sales in 2040 (This sharply contrasts with Navigant Research’s report, Electric Vehicle Market Forecasts, which forecasts the same 7% penetration being reached by 2020).
  • LDVs powered by gasoline will remain the dominant vehicle type, retaining a 78% share of new LDV sales in 2040, down just 4% from an 82% share in 2012.

It is important to note that this reference case scenario released by the EIA is limited because it assumes current laws and regulations will remain generally unchanged through 2040, which is a shortsighted assumption.  For example, even major U.S. oil companies, such as ExxonMobil and ConocoPhillips, are already including a price on carbon emissions in current business planning.  Exxon reported that it anticipates a cost of $60 per metric ton of carbon by 2030.

Additionally, we have seen the rapid development of California’s zero-emission vehicles (ZEVs) mandates in recent years, which is pushing the automotive market toward 1.5 million ZEVs in California by 2025.  With nine other states expected to follow California’s lead, there’s no telling how much these mandates and a potential carbon tax will increase the market for electric vehicles – but there’s no doubt that it will have a significant impact that is largely unaccounted for in the EIA’s Outlook.

Finally, the EIA’s less than bullish outlook for clean transportation technologies is based largely on its assessment of future gasoline prices.  The EIA predicts that the real end-use price of motor gasoline in the United States will decline to $3.03 per gallon (2012 dollars) in 2017, then will rise to just $3.90 per gallon in 2040.  This conservative forecast may be underestimating the increasing difficulty and financial cost of drilling for unconventional oil sources, such as oil sands and extra heavy oil, as conventional oil reserves, which are generally easier and cheaper to produce, continue to diminish.  While the world is certainly not running out of oil, it is running out of oil that can be produced easily and cheaply.


EVs Integrate With the Smart Grid

— December 20, 2013

More than 1 million plug-in electric vehicles (PEVs) will be on American roads by 2017, according to Navigant Research’s Electric Vehicle Market Forecasts report, which in aggregate has the potential to increase or extend the peak load on the power grid.  However, thanks to new onboard technology for smartly managing vehicle charging, they will become a considerable asset to the power grid at little cost to utilities.

Automakers don’t want PEVs to be disruptive to the power grid, and they do want consumers to pay as little as possible for electricity; therefore, many companies are integrating technology to make their vehicles responsive to the grid.  For example, GM’s new 2014 Cadillac ELR includes hardware and software enabling the vehicle to receive and respond to grid pricing and performance data via the vehicles’ OnStar’s telematics system. The smart grid features on the ELR include:

  • Demand response: An API is included that will be used for a future opt-in service that enables customers to save money on energy costs by turning off charging in response to signals from the electric grid.  GM hasn’t said anything about if or how customers will be compensated.
  • Time-of-Use rates: Via OnStar, the ELR can receive dynamic time-of-use pricing from utilities and select and send a rate plan to the vehicle to simplify scheduling of charging times.
  • Charging data: GM will collect EV data, including locations, to direct customers to charging stations, while also allowing them to provide information to utilities about potential load scenarios.
  • Aggregated services: GM will enable ELRs to coordinate charging with energy aggregating companies to better match electricity demand to supply in a specific geographic area.

GM is not alone in adding grid features; Ford, Chrysler, and others are also looking to work with (and get money from) grid operators by tracking when, where, and how vehicles charge.  As described in Navigant Research’s recent report, Vehicle to Grid Technologies, the most popular vehicle-to-grid application will be demand response, in which energy customers voluntarily reduce demand when the grid is stressed.

Utilities will look with favor on PEVs because, unlike purchasing stationary energy storage to balance the grid, the batteries within the PEVs don’t cost the utilities anything; they only need to develop an adequate method of compensating vehicle owners.

The Cadillac ELR is a range-extended vehicle that can travel up to 37 miles on battery power alone, and up to 340 miles with the gas engine providing additional power to charge the batteries.  The ELR also comes loaded with safety features such as lane departure warning, forward collision warning, and other systems that are part of the suite of emerging autonomous vehicle features, which are described in Navigant Research’s Autonomous Vehicles report.  While other PEVs offer automatic regenerative braking or multiple settings that will slow the car and capture energy, the ELR includes small paddles on the steering column.  It will be interesting to see how consumers respond to braking by hand rather than by foot.

With a base price of “only” $75,000, the car isn’t much more expensive than the gasoline-powered Cadillac CTS-V Coupe ($64,900), and will compete with the $72,400, 265-mile range Tesla Model S.


Enforcement Report Highlights Demand Response Compliance Issues

— December 19, 2013

The Federal Energy Regulatory Commission (FERC) released its 2013 Report on Enforcement in November.  It includes the highest number of demand response cases of any Enforcement Report to date, showing that compliance with DR programs is coming under increasing scrutiny.  These cases, which involve violations of DR rules and lack of oversight on program management, have resulted in multimillion dollar penalties or settlements.  The penalties are often orders of magnitude greater than the original over-compensation, so it’s far more than a matter of just paying back what you owe and calling it even.  Furthermore, some of the penalties have been levied against end-use customers and even individuals in DR programs, so clearly the FERC feels that its jurisdiction goes beyond DR aggregators.

Several of the cases occurred in ISO New England (ISO-NE), which may point to the complexity of rules for DR participation there.  First, and largest in magnitude, is the Day-Ahead Load Response Program investigation.  The FERC found that two large paper mills and an energy procurement consulting company engaged in fraudulent inflating of customer load baselines in order to increase payments.  One of the companies has settled with the FERC for a $10 million civil penalty and $2.8 million disgorgement, or paying back undeserved revenues.  The other parties have multimillion dollar penalties outstanding, including $1.25 million against one individual whom the FERC claims to be a mastermind of the scheme.

Undue Diligence

The second ISO-NE related case involved a settlement between the FERC and EnerNOC.  The FERC claimed that EnerNOC failed to exercise adequate due diligence and resolve significant data quality issues for five assets it registered as DR, thereby inducing overpayments from the ISO and violating the due diligence requirement in the ISO’s tariff.  The settlement resulted in a civil penalty of $820,000 and $656,806 in disgorgement of unjust profits.  EnerNOC also agreed to develop a comprehensive compliance program and to submit to compliance monitoring.

The FERC also evaluated Connecticut Light & Power Company’s (CL&P) compliance with DR programs within ISO-NE and found that CL&P did not properly account for revenues associated with its conservation and load management programs and did not accurately record demand reduction data in its reporting system; however, there are no penalties associated with this case at this point.  The one case outside of ISO-NE occurred in PJM, where the FERC came to a settlement with Comverge on a claim that Comverge registered a large customer for a load reduction amount it knew the customer could not reliably achieve and then instructed the customer to artificially increase its electric load prior to a test event in order to demonstrate a larger load reduction.

No Free Passes

As described in Navigant Research’s recent report, Demand Response Tracker 4Q13, DR is becoming a bigger part of the reliability solution for the electric grid.  That means DR providers and customers must be aware that greater responsibility is required and higher risks must be managed. In the early days of DR, baseline and program rules were being refined and there may have been some loopholes that were exploited. These days, the FERC and RTOs rely more on DR to run the grid and will not give free passes to intentional or inadvertent infractions.


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