Navigant Research Blog

For EV Range, 200 Miles Changes Things

— July 23, 2015

The rapid growth of plug-in electric vehicle (PEV) sales in the last 4 years has slowed in the United States as of late. Low gasoline and diesel prices have likely had an effect, but more likely, the slowdown is coming from a lag between the introduction of next-generation models and the clearing of first-generation inventories. Notably, second-generation PEV development is focused on significant range increases at lower costs, which will greatly impact the PEV market as well as create interesting implications for infrastructure developers and electricity providers.

The most near-term second-generation introduction is the Chevrolet Volt, which is slated to enter production in August. Besides the significant redesign of the vehicle body, the Volt’s all-electric range has been extended by 12 miles and the price starts around $34,000. This is $7,000 less than the original 2011 Volt. Further afield, Nissan has announced its intention to increase range of the next-generation LEAF beyond 200 miles. The second-generation LEAF is not likely to be introduced for quite some time, however, it is rumored that some of the battery technology designed to achieve this 200-plus mile range will feed into the 2016 LEAF, assisting that vehicle in breaking the 100-plus mile all-electric range mark.

When the second-generation LEAF is finally introduced, it won’t be alone. 200-plus mile all-electric range introductions are expected from Tesla and Chevrolet at price points from $30,000-$40,000. Similarly, some premium brands, specifically Audi, are likely to introduce 200-plus all-electric range vehicles to compete against Tesla’s large sedan and SUV platforms. The introduction of these vehicles makes all-electric drive a more viable option for a larger population. However, it also drastically changes things for electric vehicle service providers by increasing demand on a per-vehicle basis and expanding that demand to intra-city locations.

Longer Range = More Use

Most battery electric vehicles (BEVs), aside from the Model S (which already has a 200-plus mile range), are acquired as the second vehicle in households with two or more vehicles, and use is limited by vehicle range. Initial studies on average annual vehicle miles traveled (VMT) for BEVs have indicated that these limited-range BEVs travel around 9,650 miles a year. Meanwhile, light duty vehicles average around 11,250 miles.

However, for the Model S, average annual VMT is higher than for the average BEV. Last month, Tesla was the first automaker to announce that drivers of the Model S have surpassed 1 billion all-electric miles, with 68% of those miles being driven in North America. This equates to roughly 13,200 miles per Model S sold in the United States and Canada through May 2015. Given estimates on Tesla’s U.S. monthly sales, the average Model S has been in service for over 1.3 years. This means average annual mileage is around 10,400 (or 7% more than other BEVs).

Granted, Model S owners have great incentives to drive often, as the Supercharger network makes long-distance travel fuel costs free. Yet, these drivers also have the benefit of a vehicle that can get them to the network stations. Soon enough, owners of non-Tesla’s will, too, and these vehicles will need their own networks.

 

Nissan Enters the Energy Storage Market

— June 19, 2015

Since Tesla debuted the PowerWall in late April, two other automakers, Daimler and Nissan, have announced plans to bring similar products to both the commercial and residential energy sectors. Daimler announced in early June that it’s offering a storage plant of up to 20 kWh that will begin shipping in September. The next week, Nissan announced it will deploy second-life vehicle batteries for commercial energy storage markets through partner Green Charge Networks. The first system is set to be placed this summer at a Nissan facility to offset demand charges. These three announcements are important indicators of trending automaker revenue stream diversification. However, Nissan’s announcement is far more important as an indicator of a strengthening business case for plug-in electric vehicle (PEV) ownership.

Outside of automotive and mobile device applications, stationary batteries can provide energy cost savings to homeowners through energy arbitrage and increased rooftop solar utilization. The same applications are true for commercial entities. An additional use is to draw power from the batteries during peak energy consuming times, which minimizes the monthly demand charge, significantly cutting electricity bills. Further, batteries can be used by aggregators to participate in grid service markets, as BMW is doing in the Bay Area. Though these opportunities have existed for some time, the high costs of batteries have made these investments risky.

Minimizing Risk

To minimize risk, some companies are developing ways to utilize PEV batteries when the PEV is parked. This reduces the total investment, as battery costs are borne by the PEV owner, but it also reduces returns, as a PEV’s primary function is mobility and the PEV owner requires compensation. Utilizing a PEV battery in such a fashion strengthens the business case for PEV ownership; however, the technological and logistical requirements of these business models are complex.

Nissan’s and Green Charge Network’s development of a business model for a second battery life is another approach to harnessing the full potential of vehicle batteries, though without the logistical complexities inherent in utilizing a battery while it’s still in the vehicle. Theoretically, the success of this type of business model would likely increase the value of PEVs already in use and/or play into innovative automaker financing schemes that bake second-life battery value into PEV purchase costs. Both of these strategies would be a significant step forward in strengthening the business case for PEV ownership in high volume economy class vehicle segments.

 

China PEV Market Coming of Age, Bypassing Hybrids

— June 17, 2015

With the largest market for new vehicle sales at over 23.5 million in 2014, significant smog issues, and lofty goals for plug-in electric vehicle (PEV) and hybrid sales growth, China has long been seen as the biggest global opportunity for plug-in and hybrid vehicles. That hope has failed to materialize, with PEV sales through 2013 never surpassing 20,000 and hybrid sales far weaker. However, signs of a robust PEV market in the country are finally emerging, with 2015 sales figures indicating around 28,000 PEVs sold through April, just a few thousand less than the nearly 32,500 sold in the United States during the same period.

These figures are encouraging, but it should be noted that many of the PEVs sold in China would not qualify as highway-capable vehicles in the United States; therefore, these comparisons aren’t exactly apples to apples. Regardless, for hybrids like the Toyota Prius, there isn’t much to say except that compared to the number of plug-in options now being sold in China, there are few hybrids.

Toyota and Honda have long tried to jump-start hybrid sales in the country, but dismal sales figures have been consistent. Since 2005, Toyota has only sold 90,000 hybrids in China. In late April, Toyota once again announced it was doubling its efforts through two new hybrid platforms scheduled to be introduced sometime this year as part of a grand strategy to make hybrids account for 30% of the company’s sales in the country. Given Toyota’s goal of doubling current annual sales in China, this 30% could mean up to 600,000 hybrids annually.

Good Luck

Though sales of hybrids still outpace PEVs in most major markets globally, market share is beginning to lag in established markets while PEV sales continue to grow, specifically in the United States. In fact, since the beginning of 2014, monthly sales of hybrids in the United States have fallen in every month, with the exception of May 2014. It is likely that more expensive PEVs with significant energy cost savings and lucrative government incentives are cutting into the established PEV market share. However, it’s also likely that less expensive fuel efficiency gains through stop-start technologies, engine downsizing, and vehicle light-weighting alongside low oil prices are also having an impact.

Monthly Hybrid Sales, North America: 2013-2015

Scott Blog Chart

(Source: Navigant Research)

Caught in between low-level, inexpensive fuel efficiency improvements and expensive alternative fuel options with significant incentives and energy costs savings, the plugless hybrid business case is eroding. Prospects for the platform are not likely to improve, as stop-start technology is likely to permeate rapidly through the global automotive industry and PEV costs continue to decline. In China, the steady flow of new PEV introductions alongside growing interest in stop-start batteries could negate hybrid interest altogether, making Toyota’s 30% hybrid by 2020 goal difficult—if not impossible—to achieve.

 

Tesla Introduces a Missing Piece for PEVs

— May 15, 2015

In late April, Tesla announced the expansion of its product line beyond cars to include battery systems for homes and utilities. Called the Powerwall, the system can store 7–10 kWh of energy and respective costs are $3,000 and $3,500. Adding a battery to a home enables greater utilization of solar generation and of off-peak pricing in time-of-use (TOU) rate plans. For utilities, the home system may be considered a threat because it enables consumers to bypass services entirely; however, it also presents opportunities to mitigate potential energy management problems stemming from the rapid increases in residential solar installations and plug-in electric vehicle (PEV) adoption happening now.

Challenges

The grid is constantly being monitored to match electricity supply with demand. As demand fluctuates throughout the day, resources are ramped up or down in response to keep grid frequency within a narrow range of around 60 Hz. The more reliable generation resources are in responding to shifts in demand, the more cost-effective the grid is. Traditional generation resources like nuclear, coal, and natural gas are dependable generators; however, renewable resources like solar are not, because generation depends on the weather. This means that solar requires additional grid resources like batteries to backfill lapses and absorb spikes in generation.

PEVs can create additional problems because most can consume up to 6.6 kW from home electrical infrastructure. The most power-intensive appliances in a home (clothes dryer, dishwasher, or oven) can use from 2 kW to 5 kW. While there is enough energy produced by the grid to supply massive amounts of PEVs, there may not always be enough power (instantaneous energy). So the challenge created by PEVs is the collective charging behavior of a 9-to-5 workforce that plugs in at the end of the work day.
In the near term, this behavior is a threat to distribution-level transformers in neighborhoods with high PEV concentrations. In the long term, this may exacerbate problems stemming from widespread solar generation, as the sun will be setting when people are plugging in. The theoretical lapse in generation and leap in consumption will require grid operators to ramp generation assets quickly and significantly; not a cheap or easy exercise.

Solutions

The root cause of the above challenges is that most electricity is consumed almost immediately upon generation because there are few storage resources on the grid. The PEV itself can be a solution, as grid operators can manage battery charging; or, in more advanced PEVs, the car itself may be able to supply power back to the grid. In both cases, the PEV owner is compensated financially and most of the costs of adding grid-level storage are avoided by the electric power sector. Pilot programs utilizing PEVs for such services are already underway. However, there will always be limits to these services, as PEVs are not always plugged in, don’t always need a charge, and sometimes do need to charge regardless of compensation.

Enter the home battery. Though the upfront costs are high for the homeowner, there are multiple economic benefits that may be had by both the owner and the utility. As mentioned above, it enables lower energy costs for the homeowner, and for the utility, a home battery can directly mitigate the challenges posed by intermittent residential solar generation and PEV charging at the distribution and generation level. Even more than that, it provides an opportunity for energy aggregators and utilities to incorporate homeowners into lucrative grid-service markets in a manner that is more reliable and consistent than PEV integration into these same services. Though reservations have been significant early on, the $3,000–$3,500 price point will be a hard sell to individuals in the mass market; it’s unlikely home batteries will exhibit similar gains to PEV and residential solar market growth without some financial incentives from utilities and/or governments, both of which stand to benefit from this technology.

 

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