Navigant Research Blog

How EVs Can Aid the Smart Grid

— December 8, 2014

The plug-in electric vehicles (PEVs) available today can help grid operators manage the grid – although few in use actually do.  This is not too much of a problem now, but as more PEVs populate roads, utilities are likely to become increasingly concerned with managing and making use of these mobile assets.  Today’s PEVs represent a significant increase in residential electricity demand and, if unmanaged, could cause problems with distribution-level transformers and could drastically increase demand during peak hours when PEV owners return from work and plug in their vehicles.  The effect would force utilities to make upgrades to distribution networks that would likely be passed on in the form of higher rates to consumers.

Contrarily, PEVs also represent an increase in load that could be used to capture renewable electricity generation and help balance generation with demand, theoretically making electricity marginally cheaper and cleaner.

This latter scenario would likely decrease electric bills, as the utility would be able to provide more energy through the existing infrastructure, thus avoiding transformer capacity upgrades.  Most of the technologies to accomplish this process have already been developed, and multiple companies and organizations, such as GreenLots, PowerTech Labs, and the Electric Power Research Institute (EPRI), are busy testing respective platforms for future deployment.  However, to achieve such a paradigm, utilities need to develop demand response (DR) programs that are both simple and compelling to the consumer – not an easy task.

Thin Margins

A PEV owner’s understanding of why the charging of his or her car should be scheduled or managed by the utility is not fundamental to the owner’s participation in any given utility DR program.  However, the price at which the PEV owner will choose to participate in the program is.  In other words, the more money saved, the more PEV owners will be willing to participate.  Given that, there is a problem: driving on electricity is really cheap.

Most battery electric vehicles in use have an operating efficiency of around 3 miles/kWh, and the average residential electricity price in the United States is around $0.13/kWh.  This means that if the average electric vehicle is driven 1,000 miles in a month, energy costs will be slightly over $40.  This low energy cost means the actual savings from participation in a DR program would also be low and might not justify the investment from the utility or the energy aggregator for the smart charging infrastructure.

On the other hand, investment costs are zero for the PEV owner, as much of the necessary system elements already come standard on PEVs.  They will likely be low for utilities and/or energy aggregators depending on how many vehicles participate.  Additionally, the costs and savings equation will vary widely across the United States, based on a utility’s ability to balance the grid without PEVs.  The trick for utilities and energy aggregators will be to make DR compelling enough to attract future PEV owners who may be less tech-savvy than initial PEV adopters.

 

Plummeting Gas Prices Raise Another Hurdle to Meeting CAFE Standards

— December 1, 2014

National average gasoline prices have continued to slide in the United States, down more than 10% from the same time last year.  This marks the first time in nearly 4 years that a gallon of gas has been so cheap.  While undoubtedly great news for the average consumer, who could be saving $10 to $20 per trip to the gas station, the same cannot be said for the hybrid and electric vehicle (EV) industry ‑ and, perhaps surprisingly, the auto industry at large.

Automakers in the United States are being pressed to meet increasingly stringent fuel economy requirements, organized under Corporate Average Fuel Economy (CAFE) standards.  CAFE requires new passenger cars, light duty trucks, and medium duty passenger vehicles to meet an estimated combined average fuel economy of 34.1 mpg in model year 2016 and 54.5 mpg by 2025 (compared to the 24.8 mpg new-car average fuel economy in 2013).  In order to meet these requirements, automakers will need to sell significant amounts of plug-in electric vehicles (PEVs) and hybrid electric vehicles (HEVs).  However, a drop in the price of gasoline will surely affect the sale of all types of EVs, as the connection between gas prices and EV sales is well-documented.

How Long Can They Last?

Lower gas prices simply reduce one of the main advantages of electric cars: operating costs.  If consumers aren’t saving enough money by charging their vehicle with electricity versus fueling with gas, significantly fewer consumers will be willing to deal with the extra upfront costs and charging requirements of EVs.

Horizontal drilling and hydraulic fracturing have largely been given credit for decreasing gasoline prices in the United States.  These new techniques, as controversial as they are, have transformed the country into the world’s leading petroleum producerAccording to the U.S. Energy Information Administration (EIA), America’s domestic oil production grew from 5.6 million barrels per day (bbl/d) in 2011 to 7.4 million bbl/d in 2013 and is forecast to reach 9.5 million bbl/d in 2015.  These signs point indicate that low gas prices could persist, barring any major disasters in the Middle East.

Possible Rollbacks

The U.S. government is poised to review the CAFE standards in 2017.  If gas prices stay below $3 a gallon over the next few years, regulators may have to consider either rolling back the CAFE requirements or giving the automakers more time to reach them.  The same logic holds true for the zero emissions vehicle (ZEV) states.  Eight states have signed on to introduce at least 3.3 million plug-in vehicles and hydrogen fuel cell EVs to their collective roads by 2025.  Forcing automakers to sell a specific quantity of ZEVs will become even more difficult if consumers see the economic advantages of ZEV operating costs quickly diminishing.  Ultimately, if long-term crude prices remain below $80 per barrel, regulators will be forced to become more innovative in their strategies to decarbonize the transportation sector.  Meeting emissions objectives may need to include mandates to address the fuel itself through the addition of more biofuels or refining gasoline and diesel fuels to be more efficient.

 

The Dutch Blaze an EV Trail

— November 12, 2014

With the most recent alarming report on climate change from the Intergovernmental Panel on Climate Change (IPCC), governments are once again faced with the question of how to develop policies to address the climate crisis.  The IPCC says that the unrestricted use of fossil fuels must be phased out by 2100.  For some governments, like in the United States, the challenge lies in just getting the public to agree there is a problem.  But even in the European Union (EU), where there is broad consensus on the need for action, it can be challenging to convert this into policies that will successfully drive down greenhouse gas emissions.

One challenge is setting appropriate and achievable targets based on clear-headed analysis, not wishful thinking.  Another challenge is then devising the right mix of carrots and sticks to allow the goal to be met.

The Right Place

The Netherlands’ electromobility initiative is one example of how to develop and implement an environmental policy effectively.  I recently had the chance to talk with a delegation from the Netherlands about the country’s push to promote plug-in vehicle (PEV) adoption and its successes to date.  The first and most critical step was recognizing that the country had the right conditions for PEV adoption.  The Netherlands is a small country, densely populated and highly urbanized.   The Dutch tend to be environmentally conscious already, and the country has an extensive and stable grid network (fueled mostly by fossil fuels but with around 15% renewables).  The country also has some of the highest gas prices in Western Europe, thanks in part to the highest fuel tax in the EU.

Given these conditions, the government’s belief that PEVs could find success was well-founded.  The government has set a goal of having 200,000 PEVs in the Netherlands by 2020.  According to Navigant Research’s report, Electric Vehicle Market Forecasts, total light duty vehicle (LDV) parc (i.e., vehicles in use) in the country will be 8.6 million in 2020.  Two hundred thousand PEVs would be 2.3% of the total vehicles on the road.  That may seem small, but it’s actually an aggressive target, requiring PEVs to average more than 5% of annual LDV sales over the next 6 years.   According to Navigant Research’s PEV forecasts, only Norway, Estonia, and the Netherlands have broken 1% annual PEV sales as of 2014.

Tax Relief

The Dutch government offers significant tax incentives for PEV purchases, PEV leasing, and EV charging equipment installation.  The PEV purchase tax rebate amounts to around €7,000 to €10,000 ($8,700-$12,500).  Perhaps more important, however, is the income tax relief on private use of a company car.  A significant number of cars in use in the Netherlands are company cars or cars leased for company use.  PEVs were exempt from the income tax, saving drivers as much as $5,000 annually.

At the same time, the Dutch government provides incentives for EV charging station deployment, for public and workplace use especially.  As of October 2014, there were more than 9,500 public charging points in the Netherlands.  The effort to roll out infrastructure is supported by Dutch energy and grid companies.

The policies have worked: as of 2014, annual PEV sales in the Netherlands amount to 4% of total LDV sales, and there are a total of more than 32,000 PEVs on Dutch roads.  Moreover, Navigant Research forecasts that the country will actually reach the 200,000 PEV goal by 2019, a year early.

The next phase for the electromobility initiative will see it moving beyond the early PEV adopter phase and promoting further EV charging station workplace and public deployments.  The country’s next target – 1 million PEVs by 2025 – will be a challenge to reach.  But the Dutch have proven that progressive policies can truly shift the vehicle market.

 

Will the Natural Gas Boom Help EVs?

— November 11, 2014

Natural gas is better used to generate electricity to power electric vehicles (EVs) than as a direct transportation fuel, according to a new study by Oak Ridge National Laboratory.  The study, entitled Well-to-Wheel Analysis of Direct and Indirect Use of Natural Gas in Passenger Vehicles, rates EVs powered by electricity from natural gas as being more energy efficient, less polluting, and cheaper to fuel than natural gas vehicles.

A contributing factor in the analysis is that natural gas power plants, especially combined cycle power plants, are very efficient in creating electricity, and when that electricity is used for locomotion by an electric motor, the net efficiency is higher than that of a natural gas engine.  The study assesses losses and energy used throughout the system, including leaks during transportation (from pipelines, etc.) and during compression and decompression of the gas in the case of compressed natural gas vehicles.  In the case of EVs, the study assesses power losses throughout the distribution grid, EV charging, and the power transfer to and from the battery.

As seen in the figure below, the study concludes that even a low-efficiency natural gas power plant would provide a more energy efficient source of electricity than using gasoline in a car.  The study used the Nissan LEAF and the natural gas Honda Civic GX as the baseline for the vehicle fuel efficiency.

Wheel-to-Wheel Energy Use

(Source: Oak Ridge National Laboratory)

Emissions of greenhouse gases, including CO2, are also lower in the case of EVs when either the current mix of generation sources or any type of natural gas power plant are used to create the electricity.  And, as is well known, electricity is also cheaper as a transportation fuel.  Oak Ridge estimated at time of the study that natural gas costs $1.65 per 25 miles for compressed natural gas vehicles, compared to $1.02 for electricity.

Pipeline Peril

It may seem counterintuitive that an extra step in fuel conversion (i.e., gas to electricity) would still be more efficient, but the greater efficiency of stationary gas turbines relative to small engines (as referenced here by Forbes) explains the math.

However, turning natural gas into electricity for EVs requires sufficient pipeline capacity, and a surge of EVs could overwhelm the regional grid if charging occurs at peak times.  Natural gas also has to compete with other forms of generation on price, and there’s no guarantee that the surplus of natural gas from shale would find its way into EVs, as it may simply replace coal.

The study makes the case for facilities that have combined heat and power to add EVs to the fleet instead of adding the significant cost of a natural gas refueling station.  Conversely, a significant argument for natural gas vehicles is their longer driving range and lower upfront cost.  If an EV’s driving range of 80 to 100 miles doesn’t match with the driving requirements, then the economics or efficiencies won’t matter.

 

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