Navigant Research Blog

Tackling the 2 in V2G

— January 16, 2018

EV adoption is speeding up around the world, and while electrification offers emissions reductions and other benefits, it creates new challenges and opportunities for grid operators. Navigant Research expects that EVs will make up 5% of the global market for personal vehicles by 2024, and that collective charging requirements will add 160 GW of demand to electricity systems as owners switch from filling up to plugging in.

Vehicle-to-grid (V2G) technologies seem an obvious and low cost alternative to ramping up generation in the face of new demand from EVs. Why not use EV batteries to shift and shave demand peaks during the 95% of the time they sit unused? But making V2G a reality requires significant infrastructure and software developments, and EV owners must also consent to allowing grid operators access to batteries for flexibility services.

Integrating EVs Requires New Technology

If EV batteries are to be called upon for V2G, they first need a physical connection to the grid that supports two-way charging infrastructure, which are not yet widely available. However, major automakers like Honda are already developing two-way charging stations with V2G in mind, and deployment is likely to increase as more EVs hit the road.

Once two-way charging infrastructure is in place, the vehicle-station pair needs a software solution for monitoring grid signals and managing power flows. IBM and TenneT are collaborating with sonnen and Vanderbron to pilot a blockchain-based V2G platform that can adapt to conditions on the grid, such as congestion or oversupply of wind power. The blockchain records the locations and identities of devices involved, exchange volume, and other details as a secure and verifiable basis for settlement with the EV owner.

Consumers Need to Be Compensated for V2G Risks and Services

Technology is only half of the equation—EV owners also need to participate. Owners that participate in V2G take on the risks of doing so, and should expect to be compensated for providing flexibility, services, and for potential wear and tear of the vehicle’s battery (though there are conflicting views on this). Owners will also require guarantees that integrating will not cost drivers the use of their vehicle in emergencies or other situations.

In the short term, compensation might provide enough incentive for owners to adopt V2G. One study estimated the value of flexibility services from £600 to £8,000 ($800 to $10,800) of income each year for vehicle owners. Whether the income is a sufficient counter to real or perceived risks will likely vary with a customer’s individual situation, which constrains the potential of V2G.

The Rise of Mobility as a Service (MaaS) Could Help Maximize V2G Potential

Evolving vehicle ownership models could have a huge effect on V2G. In a world where consumers access on-demand fleets of EVs owned and operated by an MaaS provider rather than owning vehicles, many barriers to V2G adoption disappear.

Since demand for MaaS vehicles is likely to be cyclical, with lower demand during midday when grid congestion demand is higher, a portion of the fleet can be parked and plugged in to act as a buffer for the grid. Utilities and grid operators could partner with fleet owners to ensure that some fraction of the electrified fleet is grid-connected at any given time, providing the grid with a reliable pool of flexible resources in exchange for a new source of revenue. The service provider pools customer demand, and any effects on vehicle battery performance become a straightforward business cost.

As is often the case, the challenge is getting from here to there. Navigant Research can help—check out our latest report on the future of MaaS.

 

In an Age of Digital Disruption, Cities and Utilities Must Work Closer

— December 19, 2017

Energy transformation will force the industry to reassess existing value propositions and identify new revenue streams. Until recently, this value lay in single technologies—such as smart meters or solar PV. However, the industry is recognizing value in the convergence of technologies that have historically been treated separately. These technologies might not currently sit within a utilities’ existing area of influence. The potential convergence of EVs, automated driving, smart transportation networks, charging infrastructure, metering, and billing could create huge opportunities for utilities. The industry should keep an eye on disruption in other industries, particularly transportation and smart cities.

Utilities Must Identify Where Value Will Be Created

Kodak is an often cited example of how companies can fail in periods of industry disruption. Kodak developed the first digital camera and owned many patents related to digital photography. Yet, it failed to recognize where the future of digital photography value lay. It believed that digital photos would still be printed on Kodak paper and did not consider a future where users would share digital images online.

There are many lessons that utilities can learn from Kodak, primarily that nothing within business models can be taken for granted. No part of the value chain is immune from the risk of future irrelevance. Every company must consider where the future value will lie in the energy transition. For many, this will focus on helping customers reduce their power consumption, instead of supplying more power. ENGIE UK and the Netherland’s Eneco have both stated their intentions to shift to this service-based approach. The industry has also recognized the growth opportunity in supplying power to EVs and the associated vehicle-to-grid services.

There Is Significantly More Value for Utilities beyond EV Recharging Infrastructure

However, I would posit that utilities have not yet recognized the potential value that lies beyond EV charging infrastructure, supply, and grid services. The automotive industry is undergoing a period of disruption arguably greater than what utilities are experiencing. As city leaders are increasingly concerned about pollution and congestion, cities such as Paris, Athens, Madrid, and Mexico City have announced bans on the most polluting diesel vehicles by 2025. The UK, France, and China have announced bans on the sale of all light duty internal combustion engine vehicles in the next 20 years.

While EVs will play a large part in the shift away from petrol and diesel and offer an opportunity to utilities, there is significant value to be gained by the most ambitious utility. Decarbonization is just one part of automotive disruption, and we are starting to see a shift in trends of car ownership. Increasing numbers of urban residents are turning their backs on car ownership. Singapore has legislated that there will be no net increase in car ownership after 2020. Auto manufacturers are investing millions in automated vehicles, which could hugely disrupt ownership models and, consequently, the taxi and car hire industries.

Utilities Must Work Closer with City Leaders

City leaders—keen to improve air quality and reduce traffic congestion—could be the primary driving force behind a shift to shared ownership and automated models. However, they will need partners to deliver the sophistication of smart transportation services. Utilities have an opportunity to provide the recharging infrastructure for EVs, so it is not inconceivable that they can manage additional infrastructure, such as the metering and billing of automated vehicle use, predictive maintenance of vehicle fleets, fleet asset management services, and more.

Over the past decade, I have witnessed (at least some) utilities’ reluctance to cooperate with smart city programs. However, the concomitant digitization and disruption of electricity and transport create a strong argument for cities and utilities to work closer for their mutual benefit and the benefit of citizens. Navigant Research recently published a list of recommendations for utilities to work closer with city leaders.

 

Putting Blockchain in Its Proper Context

— November 10, 2017

Coauthored by Stuart Ravens

If blockchain evangelists are to be believed, it is going to be big. The so-called Internet of Value will disrupt and decentralize our financial system, healthcare, and electric grids. The massive, centralized powers-that-be will not make it out of this transformation intact.

The truth? There is something out there with significant potential to decentralize much, but not all, of our societal infrastructure. Is blockchain the magic ingredient used in decentralization? No, not really. As Bitcoin expert Andreas Antonopoulos notes, claiming that blockchain is the factor that creates decentralization is like claiming that wings alone are responsible for aviation … but put wings on a building and it still won’t fly.

What Guarantees Trustless, Immutable Decentralization?

Released in 2009, the Bitcoin platform revolutionized decentralization by making every transaction 100% verifiable by every participant without having to rely on anything beyond the software it runs on. It also prevents anyone from meaningfully gaming the system. Andreas Antonopoulos spells out four key pieces of Bitcoin that—only in combination—lead to a fully decentralized and immutable application:

  1. A blockchain ledger that is distributed throughout the system and can be validated by any participant.
  2. A consensus algorithm that is open and subject to precise and consistent rules.
  3. A reward of real value for properly validating the next block, (importantly) paid in bitcoin.
  4. A competition that determines who gets to validate the next block and receive the reward. Critically, each competitor must pay a significant cost in computing energy as an entry fee.

Similar levels of decentralization are critical to proving asset, identity, or land ownership. However, there are many instances when decentralization or immutability need not be so strict, including when:

  • Only partial decentralization is needed.
  • Specific actors can be trusted.
  • Access to the ledger should be closed.
  • The ledger may require (limited) editing.
  • There are no rewards for validation.

Given individual application requirements and significant practical issues with implementing Bitcoin (e.g., mining costs, limited transaction throughput, and validation latency), blockchain solutions have been developed that rely on different structures and consensus mechanisms. Their properties fall within a wide range of decentralization and immutability.

Blockchain Does Not Guarantee Bitcoin Superpowers

Although blockchain is an underlying technology of Bitcoin, it is wrong to equate all blockchain-based solutions with Bitcoin—yet, this happens frequently. There is a risk that such misinterpretation will confuse and disappoint potential customers, and wasted resources will lead to negative press.

Utilities keen to investigate blockchain must ensure they get the right qualities, and enough of these qualities, to satisfy their requirements. They must also understand that each custom combination of consensus, trust, risk, and reward remains unproven until it has been tested at scale.

As the common component of many distributed data and/or asset systems, blockchain is becoming the de facto term for trustless, immutable decentralization. However, this is often not the case. Unfortunately, there is presently no competing term that covers the range of features and characteristics of products that include blockchain.

Navigant Research believes the industry must be more circumspect about blockchain. While there are some attractive use cases for the technology within the utility industry, there are many issues that must be resolved. Potential users should add a caveat emptor to their optimism. Navigant Research will publish a series of blockchain reports in the near future that will investigate the consequences of these issues in greater detail.

 

Utilities Must Take a Pragmatic Approach to the Energy Transformation

— July 27, 2017

Few will dispute the fact that the industry is undergoing significant change. The shift to clean and distributed energy sources and the adoption of EVs will force significant changes to the way distribution companies run their businesses. However, much of what is written on business transformation can be high level. If everything that is written on the subject is to be believed, then there are huge utility transformation projects occurring across the world. While there is certainly a lot of activity, projects are typically targeted at specific areas rather than businesswide.

Transform Business Models via Planning

As discussed in Navigant Research’s Distribution Utility Transformation Strategies report, which highlights some of the leading examples of business model transformation within distribution networks, transformation does not happen overnight. Rather, it is a decade-long process that requires careful planning and a staged approach. There are many different drivers for transformation, including increasing competition, business process efficiency improvements, a renewed focus on customer experience, new product and service development, and the incorporation of distributed energy resources (DER). These drivers will affect utilities in different ways; the most striking difference is between competitive and monopoly markets.

Create a Vision for the Future

One key takeaway is that as with any large-scale project, utilities must set out a vision for their future businesses and a roadmap detailing how to achieve this goal. Companies cannot do everything all at once, so they must place their bets wisely and invest in projects that deliver the biggest returns. In addition, organizations cannot underestimate the contribution a strong stakeholder engagement program can make to a project’s success.

Develop an Actionable Roadmap

As a result, each utility’s transformation will be different and will happen at different times—and at different rates. Digital Utility Transformation Best Practices builds on some of the recommendations provided in Navigant Consulting’s “Energy Cloud Playbook” to offer best practices for creating an actionable roadmap for transformation. Most utilities will not be able to avoid the inevitable forever. Therefore, they must plan now for their future businesses. The right strategy will help utilities navigate political uncertainty; manage market-specific regulatory policies; access project finance from skeptical and conservative shareholders; and confront legacy issues such as corporate culture, a lack of skills, and outdated technologies.

The latest reports published in Navigant Research’s Digital Utility Strategies Research Service provide specific details on different utilities’ transformation projects. They discuss and compare initiatives in California, New York, the United Kingdom, Italy, and Australia while also providing some practical advice to organizations embarking on their own transformation projects.

 

Blog Articles

Most Recent

By Date

Tags

Clean Transportation, Digital Utility Strategies, Electric Vehicles, Energy Technologies, Policy & Regulation, Renewable Energy, Smart Energy Practice, Smart Energy Program, Transportation Efficiencies, Utility Transformations

By Author


{"userID":"","pageName":"Utility Transformation","path":"\/tag\/utility-transformation","date":"1\/21\/2018"}