Time to put pedal to the metal
Utilities are the key to electric vehicle expansion
WE GENERALLY THINK of Eversource, National Grid, and other utilities as the providers of the electricity we need to keep the lights on. That they are, but over the next 20 years they will also increasingly become the folks we rely on to power our cars, buses, autonomous vehicles, and pretty much all other means of transportation. When it comes to how we move people and goods, tomorrow’s public utilities and electric vehicle charging stations will replace the oil companies and gas stations of today.
There is broad consensus in the scientific and climate research community that transformative change in the “fuel” we use to run our transportation system is critical to avoiding the most damaging consequences of climate change. Carbon emissions from the US transportation sector now exceed those from all the coal- and gas-fired plants in the country combined. In Massachusetts, transportation represents 40 percent of our greenhouse gas emissions. It is increasingly clear that the emissions goals established in the Paris Climate Accord and the dramatic greenhouse gas reduction standards required by Massachusetts law cannot be achieved without a fundamental transformation in how we power our vehicles. Electric vehicles—in combination with renewable, carbon-free electricity generation—represent the most economically efficient and environmentally impactful near-term opportunity to achieve that transformation.
Electric vehicles also represent a tremendous opportunity for electric utilities to deploy new, sustainable business models at a time when they face a declining customer base, shrinking revenue, and an uncertain and, potentially, perilous future. The estimated annual net present value of electricity sales for electric vehicles could total more than $100 million in new utility revenue by 2030, according to Michael J. Bradley and Associates. That’s good for the utilities and their shareholders. And it’s good for their residential, industrial, and commercial customers who will share in those benefits in the form of reduced electricity prices and a cleaner, more reliable grid.
For utilities to achieve the full benefits of the electric vehicle lifeline, however, they need to step up their game and put forward considerably more meaningful approaches to advancing clean energy transportation technology than they have to date. And there is an immediate need—and opportunity—for the Massachusetts Department of Public Utilities to write rules that will encourage, reward, and, in some cases, require them to do so.
Fortunately, current regulatory proceedings now provide the Commonwealth’s utilities and the Massachusetts DPU an opportunity to join the party and meaningfully advance our own electricity vehicle efforts here, and, by doing so, to write the next chapter in what has been the Commonwealth’s quite remarkable, decade-long, clean energy success story.
Electric vehicles are coming. There are going to be a lot of them and they are likely to be here sooner than most people think. In just the last few months, England, France, and India have all put in place a ban on the sale of new carbon-powered vehicles by 2040. China, where electric vehicles sales were up 70 percent last year, is about to do the same. In the United States, sales of electric vehicles have roughly doubled year-to-year each of the past five years. Most industry analysts believe they will account for more than one-third of all vehicles on the road well before mid-century.
There are a number of reasons why. The cost of batteries, the single most expensive component in an electric vehicle, has been reduced by two-thirds in the last five years. Costs are being driven lower and are forecast to make unsubsidized electric vehicles cost-competitive with internal combustion engines in the next decade. Car manufacturers across the globe see the electric vehicle future. BMW and Jaguar will have an electrified option for every one of their models by 2020, a year after Volvo and two years before Mercedes. VW alone plans on introducing 50 new 100 percent electric models by 2025 with an electric vehicle version for all of its more than 300 models by 2030. Improvements in vehicle range (the Chevy Bolt goes 230 miles per charge), performance (Porsche and McLaren are track-testing 600-plus horsepower road cars), and growing consumer awareness that operating and maintenance costs are already lower than those for internal combustion engines (the drivetrain for the Chevy Bolt has 120 fewer moving parts than in a conventional car) are all forces leading to rapid electric vehicle adoption.
The state’s utilities and the Massachusetts DPU are way behind in taking advantage of these market forces. It has been five years since the DPU began efforts to modernize the grid and to investigate the path toward the utility’s role in a cleaner, smarter, more efficient delivery of electricity at a lower cost to ratepayers. So far there has been plenty of talk but precious little action. It took two years for the state’s utilities to submit their initial modernization plans—including more than $1 billion in near-term investments. Key elements of those plans, with substantial benefits and costs to ratepayers, include efforts to advance the adoption of electric vehicles. Now, three years later, things are finally coming to a head. The DPU is expected to issue its findings on the electric vehicle portions of the plans in the next several months.
The utility plans take us only a short distance and at a slow pace when the road is long and the need to reach our destination speedily is critical. While the utilities propose some preliminary steps to accommodate electric vehicles, in a number of important ways they fail to fulfill the full measure of the economic, environmental, and societal benefits electric vehicles provide. The DPU has a number of steps it can take to do something about that.
One of these steps—allowing utilities to own the charging station infrastructure itself and not just the wires, as they have proposed in Massachusetts—will go a long way to reducing one of the principal barriers to further electric vehicle adoption—range anxiety.
Over the past year, a team of graduate students at Harvard’s Kennedy and Business schools began analyzing the economics of public charging stations in Rhode Island. The researchers focused on the utilization of charging stations, specifically how often people would use them and how much money they would generate in sales. Among the study’s findings: utilization rates in Rhode Island would need to be at least five times higher than they are today for public fast-charging stations to be economically viable and attractive to private investors. This creates a chicken-and-egg scenario where motorists will come if you build the stations, but no investor will build them because no one is coming. The researchers concluded that if the objective is to reduce range anxiety by creating a network of accessible, time-efficient, meaningfully scaled charging stations, the private marketplace alone is not the answer.
The right answer is a greatly expanded role for utilities, including ownership of the charging stations themselves. Ratepayers are among the principal beneficiaries of a well-planned, cost efficient, environmentally effective charging infrastructure. And, in a state with a no-new-taxes ethos, ratepayer investment is the only practical way to pay for that infrastructure.
Utility ownership of the charging infrastructure has proven controversial and vexing for regulators in other states. Private equipment and service providers and many clean energy advocates, including the Northeast Clean Energy Council and the Acadia Center, fear that allowing utilities to own the actual charging infrastructure will provide utilities a competitive advantage and inhibit the private marketplace. But ownership of the fewer than 500 public charging stations in Massachusetts today is by and large dispersed among dozens, if not hundreds, of entities—from Whole Foods to universities.
Virtually all of these stations serve fewer than three vehicles at one time and have a charging time at least three-times those of fast-charging chargers. This isn’t the critical infrastructure we need. And, importantly, the station owners don’t want to be in the business of owning and servicing the kind of large-scale charging stations required for an accessible, efficient station network. A competitive, transparent, carefully structured procurement in which utilities own the stations and procure the necessary equipment will bring structure to the equipment marketplace and, with it, lower costs for system users. And, it will get those stations built on an accelerated timetable and thereby make a meaningful difference in reducing anxiety about electric vehicle owners running out of juice.
Utilities are uniquely positioned to address several other substantial challenges facing cost-effective electrification of transportation, challenges where unfettered market forces are also insufficient to achieve the full societal benefit of electric vehicle adoption. Two of them are where to deploy charging infrastructure and how to maximize its use. Utility ownership is the surest road to meeting these challenges and maximizing charging station value, but the DPU needs to use these proceedings to hold the utilities to a higher standard than they have set for themselves.
Electric vehicles use a lot of electricity. Charging just three electric cars is the equivalent of adding an extra household to the grid. If projections on electric vehicle adoption come true, the nation will need more than 1 trillion kilowatt hours of electricity to keep them moving. Increasingly, this will be renewable, carbon-free energy from off-shore wind facilities; in-state expansion of solar; and imported hydro. All are needed to meet the state’s legal obligations to generate 25 percent of its electricity from renewables by 2025 and 80 percent by 2050 This demand for electricity will create the need for expensive distribution system upgrades to maintain grid reliability. Getting the locations for large-scale charging systems right has multiple benefits, including a smoother daily demand curve, a reduction in the need to off-load renewable resources during peak production times, an increase in the sale of off-peak energy, and cost-effective integration of a greater percentage of renewables into the distribution system. Achieving these benefits is not easily done.
It won’t be done well, if at all, if the utilities are not in the lead. No one knows the grid better, and no one is better positioned to develop a state-wide charging station network plan, in consultation with key stakeholders. The DPU should exercise its authority to require such an effort.
Similarly, the temporal benefits of using charging stations for load management, including peak shaving and energy storage capability, are best realized through full utility engagement. In particular, time-of-use rates are key to encouraging charging at times when surplus generation capacity is available and discouraging charging when demands on the utility grid are high. The utilities have failed to include time-of-use pricing and other critical demand-management tools in their plans. Here, too, the DPU should exercise its authority to require them to re-file with plans to do so.
Many of the benefits associated with greater utility leadership are related to capabilities that utilities already possess. Their lower cost of capital and longer return expectations position them as the most cost-effective means of financing the network infrastructure for fast-charging stations. Servicing the charging infrastructure for electric vehicles is a natural extension of the existing operations and maintenance capabilities of utilities. The relationships utilities have with their customers can also be leveraged to great advantage in terms of consumer education, financial incentives, and customer billing. It’s time for them—and the DPU—to put these efforts into gear and step on the “gas.”
Research efforts at the Kennedy School and nascent programs elsewhere in the country are pointing the way for the use of performance-based incentives to spur utility efforts for clean vehicle adoption. These incentives have been used effectively for the state’s energy efficiency programs, programs that are run by the utilities and consistently ranked in the top three most impactful efficiency programs in the country. Incentives can and should also be used to reward utilities for their critical role in helping Massachusetts achieve best-in-class status for environmentally effective, cost-efficient adoption of electric vehicles.
One of several opportunities for doing so—and one of the fastest near-term means of getting more electric vehicles on the road—is by rewarding utilities for accelerating efforts to electrify their own fleet vehicles. National Grid’s fleet of nearly 10,000 vehicles alone travels more than 70 million miles a year consuming some 11 million gallons of fossil fuel. Edison Electric Institute has set the modest goal for its utility membership of annually replacing 5 percent of fleet vehicles. National Grid is seriously assessing options for exceeding those goals. But the DPU should require and reward all of the state’s utilities for achieving measurable advances well in excess of the voluntary standard. Similarly, DPU should incent the utilities to develop and execute on plans that will help spur adoption of electric vehicles by other fleet operators.Over the last decade, Massachusetts has written a remarkable clean energy success story and has the carbon reductions and clean energy jobs to prove it. It’s time to write the next chapter.
John DeVillars is chairman of BWC Holdings LLC/BlueWave Solar. He recently concluded a senior fellowship at the Harvard Kennedy School’s Mossavar-Rahmani Center for Business and Government where he explored the enhanced role utilities can play in a clean energy economy, including leading a study group entitled “How to Get Out in Front of the Mob and Call it a Parade: What Utility Executives and Those Who Regulate Them Can Do to Advance Clean Energy.”