Navigant Research Blog

EVs at Home on the Texas Range

— March 21, 2014

Selling electric vehicles (EVs) in oil-rich Texas is comparable to Nixon going to China, and the effort thus far has had similarly unexpected but successful results.  Cars that do not use gas are proving surprisingly popular in the Lone Star State, and one of the main drivers for EVs has nothing to do with the cars themselves.

Navigant Research’s Electric Vehicle Geographic Forecasts report estimates that Texas has around 5,000 registered EVs currently and that this number will grow to nearly 100,000 by 2023.  While the well-to-do from Texas’ oil & gas industry can afford the higher price of an EV, the state’s utility structure is playing a major role in supporting EV sales.

As a deregulated state, Texas allows utilities to directly participate in EV charging, which provides a new revenue stream for power distribution companies that, in other states, are focused on reducing load through energy efficiency measures.  Because they can (and because it increases their profits), utilities NRG, Austin Energy, and CPS Energy have all begun installing EV charging stations across the state.  A visible, reliable network of charging stations is essential to increasing consumers’ confidence that they won’t have to worry about getting stranded with a dwindling battery while about town.

Among the Drillers

CPS Energy’s network of charging stations helps to prevent the state from running afoul of federal air quality laws.  NRG’s eVgo network has several subscription options to reduce the cost of home and public charging.  Nissan LEAF drivers in the Houston and Dallas-Fort Worth areas also have access to free charging thanks to Nissan, which is subsidizing the NRG eVgo network in an attempt to bolster vehicle sales.   Another EV charging network growing in Texas is Tesla Motors’ SuperCharger network, which encircles the Dallas, Austin, and Houston areas.

Power providers in Texas are also interested in promoting EVs because the vehicles can help offset the variability of the vast wind resources being installed across the state, which will make it one of the largest producers in the world.  Texas’ grid operator, the Electric Reliability Council of Texas, is working with the Southwest Research Institute to demonstrate using EVs to counterbalance wind energy production in the state.

Austin Energy has made the smart decision to use only renewable energy from wind and solar to power its charging stations.  This negates the argument that EVs merely transfer emissions from the tailpipe to the smokestack of a power plant.  The city of Austin now has nearly 1,000 EVs, according to the Austin American Statesman.

Texas is also under consideration as a location for Tesla Motors’ proposed Gigafactory, which could produce batteries for hundreds of thousands of EVs.  If that happens, we’ll see even more gasless cars roaming between the oil & gas wells in Texas.

 

China Builds Bridges to U.S. EV Market

— March 10, 2014

Chinese automotive companies have long aspired to build vehicles for the U.S. electric vehicle (EV) market, without much progress.  However, recent developments indicate that Made in China could be stamped on cars stateside before long.

Chinese automakers Geely, BYD, and Wanxiang have all made investments in establishing or partnering with U.S. entities with the goal of opening China’s formidable manufacturing resources to America.  Geely, which has been the slowest among the three to approach the U.S. market, purchased Emerald Technologies in February.  The company, a startup developing electric vans and taxis, has offices in the United Kingdom and Missouri.  It will receive up to $200 million during the next 5 years from Geely to grow its business.

Geely is no stranger to EVs, having launched a successful EV carsharing joint venture in China with Kandi Technologies Group.  The Emerald acquisition gives the company access to new technology outside of the consumer passenger vehicle market, which is a common strategy for Chinese companies that do not want to take on Detroit, Japan, and South Korea head on in the United States – yet.  If Chinese-built taxis, vans, and trucks can pass all of the required safety tests and prove their reliability in the coming years, then American consumers might become more comfortable in considering them.  Geely purchased Volvo in 2010 and has been expanding globally during the past few years, including setting up shop in several countries in Eastern Europe and Latin America.

California Dreaming

BYD was the first Chinese automaker to target the U.S. market and had announced its intention to sell EVs when it established a presence in California back in 2010, but the company has yet to deliver passenger vehicles.  The latest target date for EVs in the United States from Warren Buffett-backed BYD is late 2015.  Until then, the company is focused on selling electric buses using its battery packs in China, California, Canada, and Spain.

Wanxiang has been the biggest spender from China on U.S. EV assets: the company picked up the bankrupt pieces of battery maker A123 Systems and of Fisker Automotive for pennies on the dollar.  Wanxiang recently said it would resume production of the aborted Fisker Karma (perhaps both as a gas car and plug-in electric vehicle) by the end of 2015, as well as complete the development of the Atlantic, the second EV promised by defunct Fisker.  It would not be surprising to see more acquisitions of EV-related technology firms from Wanxiang in the United States in the future.

The U.S. EV market has taken 3 years to grow to just under 100,000 vehicles, but according to Navigant Research’s Electric Vehicle Market Forecast report, over the next 3 years it will more than double –  reaching volumes that merit Chinese firms establishing North American assembly and manufacturing plants.  Chinese companies will continue to learn more about optimizing EV production at home once a domestic market begins to mature in China, and this will lead to greater efforts to tighten the bond between the two countries’ EV industries.

 

Selling EVs Becomes a Dealer Incentive

— March 5, 2014

In the ongoing debate over what is needed to enable electric vehicles (EVs) to achieve a sizable share of new vehicle sales (i.e., 5% or more) one critical group of participants is often overlooked – car dealers.  Automakers and state governments have focused primarily on developing a winning combination of incentives and regulations to get consumers to buy EVs while neglecting the importance of dealerships.  That may be changing, as the state of Connecticut has created a novel award for dealers who successfully move EVs off the lot.

In February, the state announced that, in partnership with the Connecticut Automotive Retailers Association, it has established the Connecticut Revolutionary Dealer Award.  This award will be given to the dealership that sells the highest percentage of EVs, as well as to the dealer that sells the most EVs in total.

Moment of ZEV

Unless you’re buying from Tesla Motors, dealers are the last mile in an EV purchase transaction.  Their enthusiasm for selling new technology that requires more consumer education and has less likelihood of later service revenue has, not surprisingly, varied greatly.  While in many cases consumers are sold on EVs before ever entering a showroom, the oft-maligned car salesperson can either make buyers excited about the technology features, mobile phone integration, and gas station avoidance or easily push an EV prospect toward a conventional vehicle via FUD tactics.  Automakers have learned from the experience of some less-than-thrilled dealerships to create stronger incentives, and this appears to be the first time that a state agency has incentivized dealers to sell EVs.

While the press release did not specify whether the winners will receive a financial reward, plaque, or merely bragging rights, Connecticut is wise to trumpet dealers’ important role as part of a comprehensive plan to expand EV adoption.  Since it is one of the eight zero emissions vehicle (ZEV) states committed to collectively getting 3.3 million EVs on their roads by 2025, Connecticut faces an uphill battle.  As detailed in Navigant Research’s recent free white paper, Electric Vehicles: 10 Predictions for 2014, it’s a long road from EVs being less than 1% of vehicles sold in 2013 to 10% of those sold in 2022, as required by the ZEV mandate.

For states to meet that goal, they will need multiple incentives and policies to encourage EV purchases.  Connecticut currently offers grants for municipal agencies to purchase EV charging infrastructure, though the state’s public tax credits for EV charging equipment expired in February.  The Nutmeg State would be wise to add a tax credit for buying an EV and offer EVs HOV lane access, which California has proven will get consumers lining up for EVs.  The move to recognize dealers who assist in the process is a helpful step along the way.

 

Demand Response Will Improve EV Economics

— February 17, 2014

With EVs selling in the U.S. by the thousands each month, their collective impact on the grid is getting increasing attention from utilities that are looking to reward EV owners for helping to balance power supply and demand.  EVs give power providers a new resource for smoothing peak loads and contending with the rising amount of variable power produced by renewable solar and wind assets.

For several years organizations such as the SAE, IEEE, and SGIP have been creating standards to enable smart grid equipment to communicate with EVs and their charging stations. This “smart charging” technology will delay or ramp up vehicle charging in response to changing grid conditions, including through demand response (DR) programs.  According to Navigant Research’s Vehicle to Grid Technologies report, by 2020 EVs enrolled in commercial DR programs will be able to curtail up to 272 MW of peak load in North America, which will come in handy on those hot afternoons when power demand outpaces supply.

Utilities are slowly removing humans from the DR equation through automated demand response systems.  According to Navigant Research’s recently published report, Automated Demand Response , roughly $13 million is expected to be spent on ADR globally in 2014, with investment rising to $185 million in 2023.

ADR Spending by Region, World Markets: 2014-2023

 

(Source: Navigant Research)

EVs connected to charging equipment using service provider Greenlots’ software platform will be able to participate in demand response thanks to a software upgrade.  Greenlots announced last week that the OpenADR Alliance has certified its SKY EV charging platform as compliant with OpenADR 2.0b, a standard that utilities are rallying around to send pricing information and demand response signals.

Utilities compensate demand response participants when they voluntarily reduce their consumption, which in the case of EVs could include payments to “site owners” where the vehicles charge, automotive companies (which can aggregate the power consumed by EV drivers) and the vehicle owners themselves. While slicing the revenue this way reduces the money available to EV owners, the payments could reduce the cost of vehicle charging and make EVs a more attractive purchase.

For example, employers could offer free or heavily discounted EV charging to workers who agree to participate in the company’s DR program.  Electricity vehicle charging amounts to only 25-30% of the cost of gasoline to power a vehicle, and dropping the “refueling” cost to close to zero would shorten the payback of switching to electric drive.

In the future, utilities could take advantage of this new grid-to-vehicle communications platform to prevent transformer overheating, which is expected to be the most common problem for the grid caused by the proliferation of EV charging.  However, because of the cost of adding sensors to transformers that would detect stress, utilities are likely to wait until the current installed equipment fails before replacing it with EV-friendly technology.

 

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