Power Sector Finds a New Set of Customers: Cars
Giving power companies the ability to invest in electric-vehicle charging infrastructure could bolster the EV market.
Because many electric vehicles go fewer than 100 miles on a charge, the 23,000 charging stations in the U.S. are not nearly enough to meet future demand.
Lawmakers in Washington state this month passed a bill that opens up the electric-vehicle charging sector to a group of players who have thus far been mostly absent: power utilities.
The goal is to help the EV market get beyond its chicken-and-egg problem: EV charging stations are expensive to install, and there’s not yet enough of a critical mass of EVs on the road to make deploying them widely profitable; with few publicly accessible charging stations, meanwhile, many potential EV purchasers are still hesitant to trade in their gas guzzlers.
Sponsored by Republican state representative Chad Magendanz, the bill enables investor-owned utilities in the state to invest in EV charging infrastructure and pass along those costs to ratepayers, subject to the approval of the state Utility and Transportation Commission.
“We want people to be able to buy electric vehicles without regard to whether they can install a charging station at their home or afford the cost,” says Magendanz. “This is particularly directed at urban dwellers who live in condos or apartments, and need to be able to charge their vehicles at home or at work. If we can unlock that market, this could be a model for the rest of the country.”
Others have tried to address the so-called “range anxiety” that’s holding back potential buyers of electric vehicles. Several startups appeared in the 2000s to build privately owned charging networks, but viable business models have not emerged, and some, like Ecotality and 350Green, have flamed out in spectacular fashion. High-end EV maker Tesla has solved this dilemma by building its own proprietary network of free stations known as Superchargers.
“You don’t have seamless, available charging facilities, unless you own a Tesla,” says Mark Duvall, the director of energy utilization at the Electric Power Research Institute, an independent research organization for the power utility industry. “What’s lacking is consistent, adequate access to reliable charging infrastructure that’s not dependent on the kind of car you drive.”
Utilities, which already operate ubiquitous electrical grids and have the capital to invest in major infrastructure projects without an immediate return on the investment, would seem to be ideal candidates to build out charging networks. But in many states, regulators either have not ruled or have explicitly prohibited investor-owned utilities from selling electricity at retail charging stations. In Indiana, for instance, an EV car-sharing service called Blue Indy has been stalled by utility commissioners’ refusal to allow charging investments by the local utility.
According to the U.S. Department of Energy, which has invested more than $130 million to help establish a network of privately owned charging stations, there are now nearly 23,000 public charging outlets in the United States. That is not enough to keep up with accelerating demand—or, at least, to alleviate motorists’ range anxiety.
In states where such participation is allowed, utilities have been surprisingly nimble in leaping into the market: Kansas City Power & Light, for instance, plans to install 1,000 public EV charging stations in Kansas City by the end of summer 2015—in a state where total EVs number fewer than 3,000.
In California, meanwhile, the world’s largest market for EVs will soon be served by an extensive network of charging stations owned or supported by utilities. In late 2014 the state reversed its earlier stance banning utility participation in the market, and the state’s three largest utilities—Southern Cal Edison, Pacific Gas & Electric, and San Diego Gas & Electric—have proposed programs that would deploy a combined total of nearly 60,000 stations, at a cost of nearly $1 billion. If approved by regulators, those facilities would outnumber gas stations by a wide margin.
“The utilities excel at planning big infrastructure projects, at building systems that are reliable and durable,” says Duvall. “If they’re able and choose to get involved, they can provide a regional framework with uniform access, consistent pricing, and most importantly, reliability and longevity.”
Duvall and utility executives also acknowledge that EV charging could offer an important element of the business model for electricity providers. That model is changing rapidly as demand for power flattens and more consumers generate their own electricity via solar panels or other distributed resources. While regulated utilities in California are “decoupled”—meaning that their revenues are not dependent on selling more electrons—moving into the transportation market would spread their fixed costs over a broader customer base, while helping to mitigate the impact of thousands of new EVs on the power grid.
The next phase for utilities would be the growth of the vehicle-to-grid market, known as V2G: vehicles could essentially serve as mobile electricity storage devices, charging during off-peak hours and transmitting power back onto the grid when it’s needed. Once that happens, the rollout of utility-owned charging infrastructure will have benefits for all ratepayers—not just those looking to top off their EV batteries.