Electric vehicles (EVs) are set to change everything about how energy is consumed and supplied.
As a report from the World Economic Forum, Electric Vehicles for Smarter Cities: The Future of Energy and Mobility makes clear, we’re at the start of a mobility revolution. By 2040, more than half of new cars sold in the world will be EVs, with 70% of market share in Europe, and over 50% in China.
You may or may not already drive an EV. But sooner or later, you will. Certainly your kids will. Our grandchildren will look back at the gas-guzzler the way we associate horse-drawn carriages as something we only saw in the movies.
We’re at a crossroads. While the momentum of electric vehicles may be unstoppable, the road forks. One way – with plenty of EVs and minimal coordination and planning – limits the possible benefits and creates challenges for the grid. The other way, taking a more intelligent approach to EV management, could meet population and economic growth without congesting and polluting our cities. Ride-sharing, car-sharing and self-driving cars all need to be part of the plan for modern cities, but electrification of transport offers arguably the largest opportunity to transform our future.
As with any disruption, this shift from “molecules to electrons” to fuel our transportation needs will produce winners and losers. Major industries will be affected, including oil and gas, but much sooner, the automotive and power sectors. These threats can also be opportunities for the oil majors and automotive companies to adopt new business models in electric transportation, electric supply and energy flexibility management services.
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Power and mobility will converge
One word from the World Economic Forum’s report is key to understanding where the EV revolution can take us: convergence. Namely, the convergence of power and mobility.
In the future, we’ll refuel not at filling stations but at charging stations, and more often, in the convenience of our homes and workplaces without the need to drive to a fueling station.
Electrifying the transportation system offers numerous benefits, including greater diversity in the fuel portfolio, reduced dependence on fossil-based sources, lowered total cost of ownership and increased price stability. And in addition: fostering national security, energy independence and a healthier environment.
The potential benefits to the electricity sector are tremendous. By 2035, one in nine cars sold worldwide will be electric. China, India and European countries are all planning to phase out fossil-fueled vehicles. With new mobility models and technologies emerging, EV growth will be exponential. EVs will need electricity to recharge, and utilities will be eager to supply that power.
For an industry with stagnating revenues and legitimate concerns about disruption, the added income from selling electrons to charge these vehicles’ batteries is exciting. Bloomberg New Energy Finance (BNEF) calculates the revenue stream from replacing all 236 million gas-powered cars in the United States with EVs at about $115 billion.
Turning electric vehicles into grid assets
We’re only scratching the surface of the promise of electrifying transportation.
Integrating solar and wind is challenging. Due to their intermittent nature, these resources require fast-responding backup generators, which are currently fueled by natural gas – a fossil fuel. This is not only expensive, but defeats the original purpose of achieving sustainability. Through a Vehicle-to-Grid (V2G) approach, EVs represent a significant opportunity to bring more renewable energy onto the grid by managing and leveling those periods of intermittency.
Think of all those electric vehicles as grid assets; in effect, EVs are mobile storage units. Batteries on wheels, if you will. One EV can store as many as three days’ worth of a typical home’s energy usage. These batteries can store energy when it’s available and use it when it’s needed. EVs can absorb cheap energy from the grid when the wind blows and the sun shines. They can discharge that energy back to the grid during periods of peak demand. They can be cycled on and off – in response to automated price signals – when grid operators need to balance energy supply and demand. In other words, when aggregated and connected to the electricity grid, EVs collectively mimic a fast-responding backup generator – a very clean and quiet one.
The great thing is that utilities already have the capacity to do much of this. Existing EV charging management programs reinforce that these vehicles can act as a valuable source of flexible capacity and lead to higher levels of customer engagement and satisfaction. A study from the Pacific Northwest National Laboratory found that 160 million EVs could be powered entirely by pre-existing off-peak generating capacity alone.
A new dawn for utilities companies
Executing this transformation will be a challenge. Research from the Smart Electric Power Alliance (SEPA) shows that utilities are generally ill-prepared for rapid EV adoption. According to the SEPA report, annual energy use from EVs in the United States will rise from a few terawatt-hours today to 118 TWh and by perhaps as much as 733 TWh by 2030.
While utilities welcome the new load from EVs, they don’t want batteries charging when demand is highest. BNEF forecasts global electricity consumption from EV charging will reach 1,800 TWh by 2040. That would require investing more in peak capacity, incurring greater costs for equipment upgrades and potentially exacerbating air quality. SEPA’s report says many utilities risk being overrun by new peak demand unless they move quickly to adjust their systems, rates and demand-management programs.
The incorporation of more renewables will force utilities to develop core competency in flexible energy management. To meet the challenges of integrating more intermittent energy, distributed generation and EV load, utilities will also need to find a new business model. They will have to evolve from providers of commodity electrons, where the price of the commodity will continue to erode with the decline in renewable prices, and think of themselves as trusted, energy service providers across the whole spectrum for their customers. In this increasingly competitive new energy world, winners will need to find new ways to monetize differentiate new products for their customers.
Distributed assets, not just batteries and EVs, but also thermostats, water heaters, pool pumps, connected lighting systems, building management systems and billions of other Internet of Things (IoT) devices are being deployed in homes, buildings and factories across the globe. In this fourth industrial revolution, these assets will not only play a critical role in keeping the system balanced by providing flexibility when and where it’s needed, but will also enable several of new revenue streams and ways of diversifying for innovative utilities companies of the future.
For this, utilities will need to think about upgrading and digitizing both their information and operational systems. This IT/OT convergence will be necessary to accommodate a smart-charging infrastructure, innovate new rate structures to encourage load shifting to off-peak hours, and actively enable peer-to-peer energy transactions between energy prosumers.
Building a smart energy internet will mean enabling the visibility and control needed to lessen load impacts and safeguard the distribution network. Smart, or managed, charging and V2G services will supply utilities with enormous new capabilities to better control how and when EV charging happens. Utilities will also be able to remotely manage and troubleshoot charging stations, aggregate grid assets, optimize charging for demand response and collect data for measurement and verification.
We need a shared vision
If we are to meet the imperative of leaving our grandchildren with a healthier planet, we must shift to a decarbonized, decentralized and digitalized energy system, as well as an electrified transportation system.
The convergence of energy, grid-edge technologies and mobility will be critical to realizing this vision. As the World Economic Forum report warns, we won’t get there by doing business and policy as usual. It won’t be enough to simply replace our gas-fueled cars with electron-fueled vehicles.
It’s about taking that fork in the road. We need a shared vision that embraces new mobility patterns, vehicle ownership norms and self-driving technologies. By planning for the transformation of mobility and energy systems, we’ll speed the ability of cities to meet climate goals, optimize grid investments, enable innovation of services and infrastructure, and increase productivity and generate economic growth.
“We need to lead the way forward – we owe it to our families, our companies and our communities.”
This feature originally appeared in WeForum.