Tapping the Power Potential of Plug-in Electric Vehicles

By · February 04, 2015

Navigant Research estimates that roughly 700,000 highway capable, light duty, plug-in electric vehicles (PEVs) are now in use globally. This figure represents less than 1% of the estimated 1.15 billion light duty vehicles in use; however, the market for PEV technologies is growing quickly. Most luxury automakers have indicated that PEV options will be available in all model lines in the near future, and many economy makes have at least one PEV in production or are planning to introduce a PEV to the global market soon.

Reflecting this broad interest, according to Navigant Research’s report, Electric Vehicle Market Forecast, the number of PEVs in use in 2025 is expected to be 17 to 23 times greater than today. When added to the commercial PEV market, which includes medium and heavy duty vehicles, the amount of electrical load (i.e., power consumption potential) represented by PEVs will likely represent somewhere between 39 and 55 gigawatts (GW) by 2025. While this amount of power may provide some reliability issues for grid operators with high PEV concentrations, the opportunities created by integrating PEVs with the power grid are substantial.

Plug-in Electric Vehicles in Use; World Markets: 2014-2023

Plug-in Electric Vehicles in Use; World Markets: 2014-2023

Besides the fact that PEVs represent an additional revenue stream for utilities, and reduced energy costs to owners compared to gasoline-powered vehicles, PEVs also represent an asset that can be utilized to match electricity generation with grid load – further increasing their value to utilities, and further decreasing energy costs to the consumer. Known as vehicle-grid integration (VGI), this pairing can be accomplished in two ways. The first is to connect conventional PEVs to utilities so that the utility is able to optimize the flow of energy into the vehicle to the benefit of the grid – a process commonly called V1G. The other is to send power from PEV batteries back onto the grid, in what is known as vehicle to grid (V2G). V2G requires a PEV to be capable of both charging and discharging power from the vehicle’s battery, which few PEVs today are. The costs of V2G systems are higher than V1G, but they may afford a significantly greater value proposition for both utilities and vehicle owners.

Further Research

Though the potential opportunities of VGI may be significant, they are, at this stage, still theoretical. Many questions remain concerning the business case for aggregating PEVs for grid balancing services. For instance, in V1G, the window of PEV availability is limited by the amount of time the PEV is plugged in, the PEV’s state of charge, and the PEV owner’s willingness to defer charging to off-peak times. These limitations reduces the value that any one PEV may be able to provide the grid, and consequently the returns to the PEV owner may be so small as to seem insignificant. Since participation requires very little effort from the owner, though, there’s little certainty as to the level of compensation necessary to spur owner participation.

In V2G, the revenue potential to the PEV owners can be fairly significant. Average returns from a test pilot in Delaware indicated that one PEV supplying 18 kilowatts (kW) of power accrued on average about $5 per day of service. Further, a PEV participating in V2G programs is limited only by the amount of time it is plugged in –not by the battery’s state of charge, as in the case of V1G. However, the business conditions for V2G vary significantly from grid service territory to territory, thanks to differing grid regulations and market rules.

Further, the costs of V2G system development are highly dependent on automakers adopting bidirectional capability in future PEVs; that’s a frontier many automakers have avoided.

An Emerging Market

To better assess the potential of VGI, many pilot projects are underway or in development, testing a variety of approaches for PEV aggregation and paving the way for PEVs to participate alongside other demand response and generation assets in various regional electricity markets. Though VGI is being investigated globally, the majority of projects are found in the United States.

VGI Capacity as a Percentage of PEV Load, World Markets: 2014-2023

VGI Capacity as a Percentage of PEV Load, World Markets: 2014-2023

In V1G, 22 U.S. utilities have PEV-specific charging rates that incentivize residential PEV owners to defer charging to off-peak periods. In addition, a number of automakers are working in collaboration with utilities on a platform to enable PEVs to respond to utility signals to manage charging based on grid conditions. A number of automakers, including, most recently, BMW, have recently signaled interest in acting as the aggregator of PEVs in V1G demand response applications.

In V2G development, Delaware is home to the first project, Grid on Wheels, to generate revenues from the participation of an aggregated fleet of PEVs in frequency regulation markets. Since the development of the Grid on Wheels project, V2G focus has shifted to California, where the U.S. Department of Defense is outfitting two military bases (out of an eventual total of six) with a fleet of V2G PEVs. California is also the site of the first project to test the business case for V2G electric school buses.

Rest of World

Outside of North America, VGI interest is less robust. While many projects have taken place in Western Europe and various Asia Pacific countries to incorporate PEVs into smart grid technology tests, the development of markets for demand response assets generally, including PEVs, is only just emerging. One exception is Japan where PEV vehicle-to-home (V2H) applications have started to emerge.

Responding to the energy concerns stemming from the Fukushima nuclear accident in 2011, the Japanese government has backed a variety of smart grid initiatives, including one focused on V2H. Japanese automakers now offer a number of PEVs for the domestic market capable of providing power back to owner’s homes. This is accomplished through an off-board inverter, which attaches to the PEV’s DC charging port and converts the battery’s DC power to AC. The car’s battery management system is also adjusted to allow power to flow off the vehicle through the DC port.

V2H only allows a PEV to send power back to a building or residence in the case of an outage, not to the wider grid under normal circumstances. Sending power back to the grid will require greater investment in communications technologies and coordination with grid operators, utilities, and regulators. However, the development of bidirectional capability as a vehicle option is a significant step in reducing the V2G system hardware costs. The V2H systems in Japan are also being tested to evaluate the business case for decreasing commercial electricity ratepayer demand charges and the viability of grid balancing applications.

Further Afield

If the many demonstrations underway prove that the theoretical benefits of VGI are real, greater investments from automakers, aggregators, and utilities are sure to follow. The emergence of opportunities for individually owned PEVs to supplement existing energy aggregator portfolios will then spur PEV and EVSE makers supplying the mass market to offer VGI technologies as options on new purchases. If low oil prices persist, PEV VGI capabilities may become an undeniable opportunity for automakers to achieve a competitive advantage over other automakers. The progression of this track is likely to see many automakers become new players in the energy aggregation business. Navigant Research’s upcoming free webinar, “Electric Vehicles and the Grid,” on Tuesday, February 10, will examine the market drivers and challenges associated with VGI, with panelists Brett Hauser, the CEO of Greenlots, and NRG Energy’s director for alternative energy Scott Fisher. Please click here to register.

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