Primer on Public Policy Issues Associated with Vehicle Electrification

Overview of Electric Vehicles

In the coming months, several major car manufacturers are planning the first large-scale rollouts of plug-in electric and plug-in hybrid electric vehicles (EVs/PHEVs) in selected markets. Their efforts have been propelled by a variety of factors, including substantial federal stimulus funds directed toward the development of electric battery technology. The Obama administration has acknowledged that widespread adoption of EVs in the U.S. marketplace could dramatically reduce U.S. dependence on foreign sources of oil, lower air emissions, and foster economic growth. It could also transform the ways in which we produce and utilize energy throughout all aspects of our economy.

Today’s national fleet of about 175 million light vehicles has a total power capacity that is 24 times greater than the country’s entire electric generation system.[i]  If just one-fourth of these vehicles ran on electricity, the power they stored would rival the capacity of the entire U.S. electric generation system. Yet, experts have determined that  as much as about 70 percent of the current fleet could be replaced with EVs — depending on the types of vehicles and batteries utilized  — with minimal impact on the power grid, if they were charged at times of low demand when much of the system’s generating capacity is idle.[ii]

EV batteries offer electricity storage potential that could provide enormous benefits to the nation’s power system.  By charging primarily at night, they would help to accelerate the incorporation of intermittent renewables like wind into the grid, because wind tends to be most potent at night, when demand for electricity is low. EV batteries could also be tapped by grid operators to store power and to send it back into the grid, thereby helping to regulate electricity’s flow along transmission and distribution lines or to provide emergency generation at times when unexpected power-plant outages occur.   They could, in addition, reduce strain at times of greatest demand by supplying supplementary generating power to the grid or to the owner’s home.

In order to offer some of the most important and remunerative of these services, EVs must contain specialized vehicle-to-grid (V2G) technologies that allow for bidirectional communications and power exchanges between EVs and the grid.  While most car makers are not planning to include V2G capabilities in their near-term EV models, V2G products and services are being tested in several pilot programs that are directed by universities and research labs in collaboration with industry.

In addition to scheduled EV market releases among U.S. and foreign car makers, EVs are being promoted by various utilities, battery manufacturers, software companies, and federal, state and local policymakers, who have forecasted robust economic and public benefits from mass adoption of EVs.[iii]  All involved agree that any successful effort to spur the broad transformative potential of EVs will require collaboration among policymakers, researchers and industry stakeholders to work through a range of technological and public-policy issues. The following primer is intended as a summary of these issues for policymakers interested in advancing vehicle electrification and V2G technology.

Electric Vehicle Basics

Cost of EVs

Industry sources indicate that electric vehicle motors are far more efficient than internal combustion engines and require less maintenance. Although their sticker prices currently exceed those of equivalent gasoline-powered cars, the cost of driving EVs is expected to be lower, as the chart below shows. As gasoline prices continue to rise, the comparative savings for EV drivers could increase. These savings are expected to offset the higher initial outlay for the purchase of an EV, which is likely to exceed the cost of a gas-powered vehicle by up to ten thousand dollars, at least in the near-term.               

              Conventional Vehicles                  Electric Vehicles

Infrastructure Needs

Transmission Grid

Utility sources participating in a May 2010 meeting of the Regional Electric Vehicle Stakeholder Initiative (REVI)[v] at the Legislative Office Building in Hartford, Connecticut  said that in the near-term, the bulk power system could handle the new load created by a 5% EV market share, and that there would likely be minimal impact to the distribution system.  But they added that charging large clusters of EVs at an office park or in a particular neighborhood could create localized stress on the power system.  The installation of communication devices in vehicles or their charging stations could help to resolve this problem by allowing grid operators to control the timing and rate of charging, within limits set by vehicles owners, so as to decrease stress on distribution lines at peak demand times.  Alternately, the use of either fixed-rate differences for daytime versus nighttime hours or of time-of-use pricing could provide the necessary incentive for off-peak charging without the need for grid controls.

Battery Charging Stations

It is generally agreed that EV charging infrastructure must be as cost-effective as possible, and be based on open, universal standards.   The permitting and inspection process for installing home and workplace charging stations must be relatively seamless for customers, or it could become a barrier to the purchase of EVs.

Three levels of charging docks can be used, although only Levels I & II are practical for home use:

• Level I: 120V – Could utilize existing home outlets. Charge time: 16 or more hours for a Nissan Leaf; about half for PHEVs with smaller batteries at all voltage levels.
• Level II: 240V – Would require installation of an outlet similar to what is needed for home appliances like clothes dryers or large air conditioners. Charge time: 8 hours.
• Level III: 480V – Would require a specialized DC high power outlet for rapid charging, feasible only for public charging stations. Charge time: 30 minutes.[vi]

Availability

More than 15 major car manufacturers plan to roll out EVs within the next three years. They include the following planned vehicle introductions expected this year:

• Tesla Roadster: Available today (battery pack capable of a 245-mile driving range)

• Nissan Leaf: Late 2010 (battery pack capable of a 100-mile driving range)

• Ford Transit Connect Electric  Van: Late 2010 (battery pack capable of an 80-mile driving range)

• Chevy Volt: Late 2010 (battery pack capable of a 40-mile driving range, and a gas-powered onboard generator that creates electricity to power the engine after the battery has been depleted).

Beyond Transportation:  Broader Public-Policy Benefits of EVs

Vehicle-to-Grid (V2G) Capacities

The term “vehicle-to-grid” (V2G) refers to the communication and transfer of electricity between an EV and the power grid, enabled by the installation of specific technologies.  V2G capabilities allow EVs to perform a variety of services that not only help to improve the grid’s reliability but also generate cash for car owners. The key to these benefits lies in the functioning of a vehicle’s battery.

A typical EV contains a battery pack and a charger. The charger takes in alternating current (AC) from the grid and converts it to direct current (DC) to charge the battery.  Added components enable battery chargers to function bidirectionally, so that car owners can not only take power from the grid but also sell the stored power back when the cars are not in use.

When such cars are also supplied with two-way communication devices using Internet or radio broadcasting transmission, their batteries can cycle power to and from the grid in response to remote signals from grid operators, even while they are in the process of charging.

Vehicles without full bidirectional capabilities can also provide grid services, albeit at a more basic level.  First, they can help to integrate intermittent wind resources by charging mainly at night when wind power is most available, as noted above.  Second, they are capable of responding to communications that instruct them to briefly slow or stop their batteries from charging when grid frequency is altered by excess demand. V2G refers to technology that provides all of these services, even if the vehicles are not equipped to feed power back to the grid.[vii]

V2G Services and Economics

Experts say that the best V2G application, in technical and financial terms, would be to help grid operators balance generation and load (supply and demand) on transmission lines, thereby ensuring that grid frequency is maintained at the optimal standard of 60 Hertz (Hz).  Frequency regulation is one of several so-called ancillary services that power system operators (RTOs and ISOs) currently purchase from power plants on wholesale energy markets.  Regulation requires only small amounts of energy to be stored or generated for very brief time intervals.  But it is critical that the resources providing the service have very quick response times. Research shows that EVs can perform these services in real time, almost instantaneously, which would make them more effective than traditional power plants, which cannot change their power levels as rapidly.[viii]  EVs offer the further advantage that older, more polluting power plants that typically provide grid services could be retired, resulting in environmental benefits.

Frequency regulation is also the most lucrative ancillary service.   Studies of electricity market prices show that it is currently valued at an average of $30-$40 per megawatt hour (MWh), a payment that is made simply for the resource’s availability to provide the service, whether or not it actually needs to be used.  The actual sale of power to the grid is financially trivial in comparison.

Another ancillary service involves so-called spinning reserves, which are power plants that are placed on call to supply electricity to the grid for somewhat longer periods of time when unexpected outages of baseload generators have occurred.  Spinning reserves are at present reimbursed at an average $10 MWh on the wholesale electricity markets.  EVs could also function in this way, but the strain on batteries would be greater and the recompense less.

Other potential services include aggregating V2G-enabled vehicles to serve as a micro-grid during local power outages, and supplying power back to the grid during periods of peak demand, although these services would be far less remunerative and more stressful for batteries than either regulation or spinning reserves.[ix]

As the power system brings more intermittent renewables online – propelled by state Renewable Portfolio Standards – the need for electricity storage will increase. As noted previously, EVs could provide storage for the available renewable power that might otherwise be wasted during low-demand times, and then utilize that power for pollution-free driving as well as for the regulation services that, along with reduced operating expenses, would offset the extra cost of the car.   Storage in stationary batteries requires an independent capital investment, whereas already-purchased vehicles could be made available at little additional cost to serve these functions.  In addition, vehicle batteries that reach end-of-life conditions for transportation purposes still have 80 percent of their capacity intact and could be refurbished for use in stationary storage.

Challenges to Adoption of V2G

Several challenges preclude the incorporation of two-way V2G technology into the early rollout of EVs.

Major car manufacturers are aware of V2G technology, but few, if any, are currently working to test and advance its use in conjunction with the EV launches planned for the coming year.  Those that have been exploring it include Tesla Motors and Ford.  Tesla conducted research with PG&E in California. Ford is collaborating with Microsoft, which has developed energy software called Hohm. The software aims to help EV owners manage home energy demand, by providing them with information needed to take advantage of lower charging rates, according to the company’s Web site. Still, Ford reportedly does not expect V2G technology to be deployed in cars until 2020 at the earliest.[x]

For utilities and Energy Service Companies (ESCOs), V2G offers the benefits described above. But there are also potential obstacles, including the need to upgrade some transformers and purchase software that would enable two-way communications to manage a larger, more complex load once greater numbers of EVs have been introduced.  Widespread adoption of V2G-enabled EVs could also challenge the traditional roles of electricity suppliers, especially if intelligent software-enabled home photovoltaic systems and other forms of distributed generation begin to serve as a significant source of power for a new and potentially profitable market segment and if vehicles take over some portion of lucrative grid services.   Additionally, at high levels of EV penetration, investment for “smart grid” capabilities would be needed to manage the EV load.

For the grid, it is necessary that EVs be aggregated into large enough groups to meet minimum criteria for entering wholesale markets where ancillary services are bid.  At present, it is not clear what organizations might take on the aggregator’s role, nor have authorities put the necessary standards and regulations in place for aggregators to operate beyond the current scale of demonstration projects.

Additional barriers to the broad deployment of V2G at present include the following:

• Some state laws and utility policies do not cover net metering—that is, metering to pay for the return of power to the grid — from renewable sources other than the more familiar technologies like wind, solar, hydroelectric and biomass.  Many states also do not have the time-of-use or on-peal/off-peak pricing structures that could create an incentive for EV charging during periods of low demand.
• There is uncertainty about battery wear and tear from bidirectional power flows involved in grid regulation. Increased battery degradation due to frequent cycling would necessitate more robust battery warranties, and greater industry clarity about who is responsible for battery wear costs.
• As noted above, the cost of V2G technology would add significantly to a car’s already higher sticker price. Until the battery market reaches scale and prices decrease, this could make EVs a tough sell for customers who may not yet understand the financial benefits that could accrue from lower vehicle operating costs and from the provision of ancillary services

Pilots 

Currently, a few pilots are testing V2G capabilities. Since 2007, the University of Delaware has operated a pilot program with PJM, Pepco Holdings and EV maker AC Propulsion.  Those parties all participate in the Mid-Atlantic Grid Interactive Cars Consortium (MAGICC), a group comprising university researchers and the electric, automotive and communications industries that are developing and testing V2G technology.  Last January, Delaware-based Autoport and the University of Delaware signed an agreement to retrofit 100 V2G cars with technology developed by Willett Kempton at the University of Delaware.  Elsewhere, Tesla Motors conducted a V2G pilot with PG&E, the gas and electric utility serving 15 million customers in northern and central California. A bill introduced in Congress last year would provide funding for the U.S. Department of Energy and U.S. Post Office to equip mail trucks with the V2G technology developed at the University of Delaware.