This report is available for download here.
It’s a great time to be in the market for an electric vehicle (EV). Customers have never had as many EV options, at as many price points, with as much support infrastructure in place as they do today. During the last decade, the number of plug-in vehicle models available for sale has grown to more than 20, just as battery costs have decreased by 70 percent, and the number of EV charging stations across the U.S. has climbed to more than 16,000.
And this growth trajectory for EVs is likely to continue, especially with the Obama administration’s announcement in July 2016 of actions to accelerate deployment of EV charging infrastructure. These developments are helping to alleviate fears of range anxiety and alter common consumer perceptions of EV affordability and applicability—making a future of EVs as more common fixtures in home garages, in office parking lots, and along the country’s highways a reality much sooner than we might think.
However, the growth rate for EVs and the locations where they are charged is likely to vary by geography, with adoption rates materially higher in certain areas compared with others. While new sources of concentrated load growth from new EVs can pose challenges to the distribution system and to electricity customers—affecting grid reliability and increasing electricity costs—they also can provide considerable benefits. For example, technologies available today allow EVs to act as demand response resources and to assist with the integration of renewable energy onto the grid by managing when and where they charge.
Electric utility regulators have the opportunity to proactively design the policies needed to avoid these risks and unlock those benefits by using EVs as grid assets. They also can enable utilities to mitigate the impact of EVs on electricity demand peaks, helping to ensure the continuous supply of safe, reliable power as new demand from EV charging comes online.
Integrating conversations with stakeholders across the country, Rocky Mountain Institute’s new report, Driving Integration: Regulatory responses to EV growth, describes how regulators and legislators in California and Washington engaged early and proactively in navigating these issues, setting up the conditions to kick-start the EV market. Based on these experiences and conversations, the report highlights regulators’ options and trade-offs in enabling EV deployment and integration.
Designing EV Integration Policies
While some states are passing legislative mandates requiring utility regulators to support EV deployment and integration, other regulators foresee potential risks and opportunities from new EV loads and are acting proactively. To the extent that electric vehicles will increasingly become important electricity system assets, utility regulators have an important role: to give forethought to utility investment decisions and design policies that enable EVs optimal integration into the grid.
These smart charging policies, like effective rate design, siting, planning, and aggregation rules, provide regulators with mechanisms to support EV integration in their utility oversight roles:
● Rate Design and Siting: Utility regulators should work with the utilities within their jurisdictions to provide EV customers access to rates and signals that encourage drivers to charge their EVs when energy demand is low but significant supply is available. These use patterns help to avoid on-peak charging demand that creates a need to use and build more infrastructure. In California and Washington, utilities are experimenting with time-of-use rates and, in the case of San Diego Gas & Electric, more dynamic rates that reflect hourly wholesale electricity prices, local distribution constraints, and the availability of renewable energy. However, these grid-supporting rates will need to be balanced with customer-oriented rates, which are both easy to understand and to interact with, and with charging station siting in the convenient locations that encourage EV adoption.
● Planning: Utility regulators can ensure that EV integration is included in utility planning processes, including the benefit-cost analysis of planned infrastructure upgrades. This is especially true as regulators evaluate the benefits and costs of utility investments in the communication systems that can send price signals, and the infrastructure that will enable optimal EV deployment.
● Aggregation: Aggregating EV charging is a promising way to provide demand response and other grid services by taking individual, often geographically dispersed, EVs and bidding them into the grid as one resource. For aggregation to be successful, utility regulators need to work with stakeholders to define the EV resource—determining how to measure it, who can claim ownership, and how to manage communications with that resource. Utility regulators should then develop and adjust rules and standards in concert with grid operators to support EV aggregation.
The dynamic and unpredictable growth of load coming from new EVs will challenge the traditional modes of planning and decision-making used by utilities and their regulators. As these technologies and markets evolve, EVs will undoubtedly require a much more adaptive approach than the existing electricity sector regulatory framework, which uses cost-of-service regulation to oversee utilities’ investments in large, capital-intensive infrastructure with long depreciation schedules. In responding to these changes, regulators will need to develop a more comprehensive understanding of new customer behaviors, business-model viability, and system-architecture needs. Policy experimentation through more frequent, assertive use of scalable demonstration projects can help to nimbly navigate emerging issues in rate design, utility roles, and market rules for aggregation.
As the EV ecosystem continues to grow and more Americans take their EVs onto the road, policymakers are beginning to account for the effects of this growth on the electric grids they oversee. California, Hawaii, New York, Maryland, Nevada, and Oregon are only some of the states that now are initiating proceedings and discussions on EV deployment and integration. With more states and communities adopting climate goals, alongside new national EV initiatives and emerging market trends, EV growth is projected to continue to grow dynamically and in geographically concentrated areas well into the future. Utility regulators will continue to have a critical role to play working alongside utilities and other stakeholders to proactively optimize EV integration.
Download the report here.