Navigant Research Blog

Integration of EVs Becoming a Priority for Utilities

— September 26, 2017

Utilities are rapidly coming off the sidelines and tackling the opportunity to integrate EVs head on. Sales of plug-in EVs (PEVs) in the United States have reached nearly 120,000 units so far in 2017, up 28% from the same period last year, according to HybridCars.com. Utilities are more actively planning to accommodate the growing numbers of cars plugging in at residences, workplaces, and in public spaces. Utilities also are working toward using the largely controllable load to balance renewable generation assets.

PacifiCorp Making Moves

In Oregon, PacifiCorp reached an agreement with the Oregon Public Utility Commission (Oregon PUC) and other stakeholders to invest $2 million in EV charging infrastructure that will include the “incorporation of emerging technologies, such as renewable generation, energy storage or direct load control.” PacifiCorp joins fellow Oregon utilities Portland General Electric and Avista in piloting EV charging investment in order to better serve EV drivers and provide more flexibility in managing the grid.

Developments in Ohio and California Enable Integration

In Ohio, AEP and a group of stakeholders reached an agreement to provide rebates of up to 100% for installing charging stations. The $9.5 million deal will include both Level 2 and DC fast charging stations, including a provision to spend 10% in low income communities. Pending approval, the spending plan would be implemented as part of the Smart Columbus electrification program that will coordinate with power provider AEP Ohio’s efforts to increase the amount of renewable generation.

In the PEV leading state of California, utilities and automakers are working to standardize and expand vehicle-to-grid integration. The Vehicle-Grid Integration Communications Protocol Working Group is developing recommendations for the California PUC in response to an earlier executive order that mandates that EV charging be integrated into grid operations. The working group is expected to complete its recommendations in October 2017.

Revenue Rises in Next 3 Years

By 2020, annual EV charging services revenue in the United States will reach $900 million, according to Navigant Research’s report Electric Vehicle Charging Impacts. By necessity, utilities will play a pivotal role in delivering and managing the power delivered to PEVs. Due to the flexibility in timing when vehicles are charged, and their benefits as mobile energy storage units, utilities increasingly view EV charging as integral to management of distributed energy resources (DER).

EV charging services company eMotorWerks is building products to integrate charging into grid operations The company, which according to ChargedEVs is working with Pacific Gas and Electric and Sonoma Clean Power to intelligently manage its EV charging units, has reduced the price of its smart charging stations by $50.

Learn about PEV Integration

A great place to learn about how PEVs are being integrated into grid operations is the EVs & The Grid Summit, which will be held October 17-19 in San Francisco. The event will feature panels focused on the impacts of fast charging and utility EV rate programs, and I will be moderating a panel on regulatory programs from across the United States.

 

Taking the EV Mainstream

— September 19, 2017

The plug-in EV (PEV) is rapidly evolving to become a viable mainstream option for almost every car buyer. As ever with automobiles, there is no silver bullet solution. This year there are several unique variations on how best to serve the needs of drivers seeking to minimize energy use as the PEV landscape matures. Navigant Research’s EV Geographic Forecasts report projects 50% growth in North American PEV sales this year and market share of between 7% and 11% by 2026.

Design is always a matter of balancing priorities. Priorities can depend on the target market, how the vehicle will be used, and budgets.

Tesla’s Approach

Tesla is trying to build on the premium brand image it has cultivated while creating the impression of going mainstream. The Model 3 has been promoted as an affordable long-range EV with a price starting at $35,000. That will yield a spartan car. Most customers will actually be paying far more to include current options, bringing the price to at least $59,000, with additional performance options to be added later.

GM

General Motors (GM) took a different approach with the Chevrolet Bolt, opting for maximum possible electric range and utility while keeping the base price under $30,000 (after federal incentives). Even including all options, the Bolt is still less than $44,000 before incentives. While some reviewers have criticized the hard plastic interior, the vehicle’s real-world range, handling, and utility have garnered very positive feedback.

Hyundai and Nissan

Hyundai and Nissan, by contrast, have veered even harder toward trying to maximize the value proposition of their respective EVs. The Hyundai Ioniq Electric and Nissan LEAF both have starting prices before incentives below $30,000 and even highly equipped models will still only hit about $36,000.

The Ioniq, built on a dedicated electrified platform with hybrid, plug-in hybrid, and battery-only flavors, went for maximum efficiency with a slick five-door hatchback body strongly reminiscent of prior-generation Toyota Priuses and a moderately sized battery. Hyundai aimed to keep both cost and weight down with a 28 kWh battery, less than half the capacity of the unit in the Bolt. With its modest weight and low drag, that’s enough for 124 miles of driving range and a leading efficiency of 136 MPGe combined.

After trying out a slightly futuristic design with the original LEAF, Nissan decided it needed a more conventional look in order to get an audience beyond early adopters. While the five-door hatchback configuration and basic dimensions are carried over, the LEAF now incorporates contemporary Nissan design cues both outside and in the cabin. Aside from the propulsion system, it’s now just an ordinary compact hatchback. With a more efficient drivetrain and battery that has grown from 30 kWh to 40 kWh, the LEAF is now expected to go at least 150 miles on a charge, double what it did when it debuted in 2010.

Chrysler

Fiat Chrysler, which has long derided EVs, has now opted to build on one of its core strengths with the Pacifica Hybrid. Like Nissan, FCA is focusing on the ordinariness of the driving experience with its plug-in hybrid minivan. The key distinguishing feature is that it has 35 miles of real-world electric driving range, enough to meet most daily commuting needs without burning any gas. But as a family hauler that might be used for road trips, no additional planning of where to stop and charge is required.

Buyers of vehicles that burn fossil fuels have long had choices ranging from tiny sports cars to full-size trucks. We’re now reaching the stage where those that want to avoid gas stations have choices at increasingly affordable price points as well.

 

The Demise of the Uber Leasing Program

— August 22, 2017

Recently, Uber announced that it will discontinue the vehicle leasing program it has offered to drivers for the past 2 years. Average losses of $9,000 per leased vehicle were cited as the reason, but this only serves to highlight the problem that independent transportation network companies (TNCs) like Uber, Lyft, and Didi are likely to face as the transition to automated vehicles (AVs) begins. Companies that currently operate with minimal physical assets, relying instead on independent contractors, will face a huge challenge surviving as standalone businesses when confronted with building or buying massive fleets of costly AVs.

The leasing program was designed to provide drivers operating on the Uber platform with access to new, well-maintained vehicles at a relatively affordable price that also included unlimited mileage and free maintenance. For passengers, knowing that a ride won’t be a broken-down rattle trap makes using the service much more appealing. Many of the drivers operating on these services don’t have the financial wherewithal to get a loan or a lease on a new vehicle, so the program seemed like a great path toward earning more money.

Since Uber doesn’t manufacture vehicles, it has to acquire them before leasing them to drivers. Wall Street banks loaned the company $1 billion in 2015 to get the program launched, but Uber’s lack of vertical integration means added costs at every level in the value chain. Losses originally projected to be about $500 per leased car increased 18-fold. This is not a formula for a building a sustainable enterprise.

Not Just Uber

Uber is not the only company acquiring cars. Following General Motors’ (GM’s) $500 million investment in Lyft in early 2016, the automaker launched Express Drive to provide low cost rentals of GM cars to Lyft drivers. Unlike Uber, GM has a ready supply of relatively new off-lease vehicles available. GM tapped this supply for Express Drive as well as its more traditional carsharing service, Maven, that also launched in 2016.

Like most other automakers, GM has a captive finance arm through which it could fund the program at lower cost than Uber. Repurposing off-lease vehicles for these mobility services reduces the supply of used vehicles in the market, helping residual values. Having these relatively new vehicles in the field also exposes people to contemporary GM products that may have a marketing benefit. The network of thousands of GM dealers can provide maintenance and repair services, something for which a TNC would likely have to pay a premium. In spring 2017, GM added Maven Gig, which provides similar low cost rentals to drivers on platforms beyond Lyft.

Vertical Integration Is Key

GM may be losing some money on the current Express Drive and Maven Gig programs. However, unlike the TNCs, the automaker is profitable and can afford to subsidize this effort. Doing so also helps to reduce potential losses in other parts of the business. For a TNC without this level of vertical integration, it’s unlikely such a program would aid in reaching net profitability in any realistic timeframe.

The same factors that benefit an automaker in this regard also come into play when looking at the deployment of automated mobility services. If Uber has to pay Volvo or some other automaker for very expensive vehicles, plus cover insurance maintenance and fuel, even eliminating the cost of drivers may not lead to profits. It’s likely that only acquisition by an automaker can save TNCs from extinction. Yet, that may only happen if their inflated valuations collapse.

 

Utilities Bet on Open Standards for PEV Charging

— August 10, 2017

Electricity as a transportation fuel has only been used in a few mass transit platforms like light rail that are large-scale megawatt consumers. These platforms have highly predictable load patterns, and these electricity consumers are generally visible to utilities because their load is large enough to require utility coordination on infrastructure development. The next step in transportation electrification, happening now, is the advent of light duty, individually owned plug-in electric vehicles (PEVs). This is a step toward less predictable load shapes and less load visibility (not good from a utility perspective), but also one toward increased load and theoretically highly flexible load (which is good).

Understandably, utility interests in this new load have varied largely as a function of expected PEV adoption in a utility’s territory. Since the emergence of mass market PEVs in 2010, many utilities were skeptical of the potential for PEVs, in part because many initial market adoption forecasts turned out to be highly optimistic. However, with over 6 years of market development in the books that have witnessed marked advances in PEV capabilities alongside reduced costs—exemplified by the Chevrolet Bolt and Tesla Model 3—utilities are coming around to the realization that a PEV strategy is a must. The latest example of this need is an investment from Energy Impact Partners (EIP) in the EV charging services company Greenlots.

This investment is an important indicator of utility interests because EIP is a utility investment group that represents a network of 47 utilities in 12 countries and this is its first investment regarding EV charging services. The investment is especially significant because Greenlots, which offers EV charging and energy management solutions, is one of the more vocal proponents of an open standards-based approach to charging network development.

In a sense, Greenlots is championing a system analogous to cell phone services in which the equipment (cell phone) is not tied to a service provider (e.g., Sprint, Verizon, etc.), allowing charging station owners to switch between service providers as they see fit. This is not the way PEV charging services originated. Many early installations were and continue to be tied to a manufacturer’s hardware and management software platforms. When or if these manufacturers fail (as happens with emerging markets), their installed equipment can become ineffective.

Beyond the concern of stranded charging units, the evolution of PEV charging encompasses a variety of services for which no one company is likely to have the best solution. Therefore, vendor lock-in could be detrimental to preventing obsolescence. Equipment-agnostic services can include the dynamic management of PEV load in time with grid operator pricing signals, the discharging of power from vehicle into infrastructure, vehicle energy information interfaces for consumers, and streamlined payment and transaction management systems, among others. Flexibility among major consumers (utilities, energy service companies, and/or property owners) to pick among such solutions can reduce costs while enhancing the ability to share data from multiple services.

 

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