The growth of electric vehicle adoption brings with it a timely opportunity for utilities to boost revenue, build sustainable load growth, and increase customer engagement opportunities.
Plug-in electric vehicles (EVs) are gaining ground. According to the International Energy Agency, in 2018 the global electric car fleet increased by 2 million from the previous year, nearly doubling the number of new EV sales. Despite EVs holding a small overall share of total vehicle sales, their growth pattern is undeniable. This is especially true when considering the stage that has been set for the industry: favorable climate policies, EV cost reductions, and government incentives.
The growth of EV adoption brings with it a timely opportunity for utilities to boost revenue, build sustainable load growth, and increase customer engagement opportunities. But time is of the essence. Utilities must act now to proactively confront impending policy issues, preclude future load balancing concerns, and prepare to meet rigorous emissions-reduction mandates.
Promoting sustainable load growth
Gas and electric utilities are facing ominous revenue loss and load reduction forecasts. This is due in part to many governments enacting beneficial electrification policies, such as eliminating natural gas usage in both new and existing buildings. Another factor is consumers increasingly supplying their own energy with distributed energy resources (DERs).
Enter EVs, which offer a golden opportunity for utilities to reverse declining revenue growth and counteract a variety of other threats to their business model. The fundamental idea is remarkably simple: EVs will increase customers’ electric usage. For example, the estimated annual energy use of a battery electric Chevy Bolt is about 3,500 kilowatt-hours (kWh) per year. When compared to the estimated energy use of a household of three—roughly 6,000 kWh annually—the revenue gains from EVs are evident.
Customer education and load balancing
An increase in electricity use is a clear win for utilities. However, the U.S. Department of Energy estimates that 80% of EV charging is done at home. Assuming this pattern holds, utilities must take steps to ensure the sustainable growth of this important source of future revenue. Large-scale EV adoption would create a massive increase in the amount of energy pulled from the grid as people come home at the end of the day and charge their cars. In the worst-case scenario, a simultaneous EV charging surge could leave consumers in the dark. In a less severe situation, prevalent EV adoption would necessitate major grid and infrastructure investments to offset potential EV charging during peak energy times of day.
To confront this challenge, utilities can work to educate customers about the most economical time of day to charge their EVs. Utility rates can be confusing, as any DER or time-of-use customer can tell you. Utilities should clearly outline the financial benefits of charging vehicles during off-peak (i.e., cheaper) times. Educating customers can also enhance load balancing, which is the process of shifting nonessential energy usage to off-peak times to maximize grid stability. By adjusting customer behavior to charge EVs when energy usage is lower, the electrical grid can function properly without unexpected surges from large-scale EV charging during peak times.
Innovation as a customer engagement strategy
The possibility of increased energy usage from EVs should spur utilities to encourage further EV adoption. Progressive utilities can support EV growth by exploring, developing, and pioneering methods that are mutually beneficial to customers and their own business model. Potential advantages for utilities include increasing customer engagement while simultaneously balancing the grid load and growing revenue. Additional features could include:
- Testing managed charging programs that automatically send signals to businesses to charge EV fleets at the cheapest times of day, allowing them to stay below costly electrical load thresholds.
- Offering an EV-specific electric rate to engage customers—both residential and commercial—and encourage load shifting.
- Piloting innovative uses of EVs, such as vehicle-to-home programs that allow an EV’s battery to act as an energy storage system for a home during blackouts.
- Covering partial or full costs of EV charging infrastructure (in residential and multi-family homes, businesses, retail centers, and public venues) to help customers overcome concerns about charging their cars.
- Assisting with the upfront infrastructure costs of large-scale adoption of EVs in transit and business fleets to address concerns about electric bus reliability and integration to the grid.
Utilities can increase engagement opportunities with their customers by testing pilot programs and EV-centric rate structures. This will become increasingly important as customers are gradually turning to self-generation or shifting to other electricity-purchasing options, such as community choice aggregation.
Meeting climate mandates
The impacts of climate change become more apparent each day. Local and state governments are increasingly enacting stringent greenhouse gas (GHG) emission- and energy-reduction mandates to combat these effects. According to the U.S. Environmental Protection Agency, 29% of GHG emissions in the U.S. come from transportation, the highest percentage of any sector.
By supporting EV growth, utilities can meet their own mandated reductions and be a valuable partner to local governments that need to hit decarbonization goals. Utilities can see numerous benefits by promoting the electrification of vehicles in their service territories. These include:
- Marketing and public relations opportunities for utilities to show their commitment to the local environment.
- Business and job growth in local communities.
- Getting ahead of anticipated climate mandates that may require more aggressive—and costly—future investments.
Despite their silent motors, the arrival of EVs has been anything but quiet. But there’s no need for utility executives to fret about this disruptive technology. Progressive utilities can work together with the EV industry and local governments to create innovative strategies that mutually benefit customers, the environment, and their bottom lines.