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Utilities and Electric Vehicles: An all-electric match made in heaven
Posted on March 15, 2016 by Matt Pressman
Guest Blog Post: Leah Y. Parks is a journalist in the electricity industry and associate editor of ElectricityPolicy.com and Electricity Daily, and, she's an advisor to Oregonians for Renewable Energy Progress. She is also co-author of the book "All-Electric America: A Climate Solution and the Hopeful Future"*.
Dropping oil prices, fossil fuel interests, and erroneous projections cannot hold back progress of the electric vehicle (EV) forever. A recent Bloomberg article describes explosive growth, where by 2040, 35% of vehicles will have a plug. EVs are poised to take the market. The technological train is on the move, but nothing is for sure. Until we get to the point of “mass-market liftoff,” there will most certainly be roadblocks. There is great potential for the EV and electric utility industries to form a mutually beneficial partnership that can facilitate a smoother “liftoff.” Though utilities are currently not rushing to fully support EVs, it should be a no-brainer for the industry to want to encourage the full potential of the market. It’s time for the electric utility to join the effort.
There will most likely be ups and downs in the market in the next five years at least. GM’s self-destructive attacks on Tesla, naysayers, and fossil fuel interests are certain to continue to put pressure on the EV market in general and Tesla in particular.
Questionable predictions cause uncertainty in the market and impede investment. OPEC predicts that only 6% of passenger cars will run on non-oil sources worldwide in the year 2040 and the U.S. Energy Information Administration (EIA) predicts plug-in hybrid vehicles and electric vehicles will account for only 2% of the US passenger vehicles market in the same timeframe. A recent summary on concerns about Tesla’s growth by Seeking Alpha demonstrates some of the constant market pressures that can be placed on a new EV company.
Figure 2: Source, OPEC World Outlook 2015. Worldwide, “By 2040, only 6% of the passenger car stock and 5.3% of commercial vehicles will be running on non-oil fuels. without a technology breakthrough, battery electric vehicles are not expected to gain significant market share"
Additionally, competitors are continually biting at Tesla’s heels. In Indiana, for example, Tesla Motors Inc. prevailed (for the the time being) as lawmakers tabled a GM-backed bill which tried to force Tesla to establish dealerships. GM, however, is not backing down and is intent on furthering their efforts stating; “we will continue to work on this issue… nationally, and will continue to express our concern anywhere we find market participants are operating under different rules.”
Figure 3: Source, Huffington Post via DonkeyHotey/Flickr
Perhaps the most insidious threat is from fossil fuel interests. They do not want to lose their financial interests and have billions of dollars backing the industry. The Koch Industries, an energy and industrial conglomerate and the nation's second-largest privately held corporation, has $115 Billion in annual revenues behind them. A recent Huffington Post article describes how a new group lead by the Koch brothers hopes to spend $10 million dollars per year to attack government subsidies for electric vehicles and encourage petroleum-based transportation.
What We Can Do and The Electric Vehicle + Utility Partnership
Notwithstanding these negative forces, the electric vehicle industry has enormous momentum and technological advancement behind it. There are also things individuals can do to promote electric vehicles and an all-electric infrastructure.
We can, for example, buy electric cars. This is an important way to move market adoption and lead by example. We can also contact our legislators and encourage our legislators to join the Congressional Progressive Caucus which introduced a House Resolution that… calls for near zero greenhouse gas emissions in the electric sector by 2050. We can also ask legislators to go further than the caucus and to enact something in line with the legislative concept, an “All-Electric Energy Policy Act,” Dave Freeman and I developed. This type of legislation will not only encourage electric vehicles, but allow us to reach the world’s Paris Agreement goals of keeping our temperature rise below 2oC – achieving zero emissions by the year 2050 or before is the only sure way of meeting these climate goals.
Approaching legislators and being early adopters is essential, but perhaps a less-traveled avenue for supporting the health of the electric vehicle industry is to get the EVs untapped partner, the electric utility, on board. The reality is that every utility should promote and lobby for electric vehicles as if their life depends on it – because it just might.
The utility’s old 20th century structural models and the methods in which we will pay for and transmit energy are changing. As energy efficiency measures increase and private entities and companies with disruptive business models, like SolarCity, continue to put rooftop solar and storage units in homes and businesses, utilities are losing revenue. Utilities are in constant fear of a “death spiral.” Rocky Mountain Institute has a number of interesting studies on the economics and timeline of grid and load defection.
Figure 4: Source, Rocky Mountain Institute
The U.S. electric power industry, which has an under 50% asset utilization factor and faces a near zero-growth future, has an opportunity to do well by doing good. The electric car has much to offer the electricity industry. EVs offer a tremendous growth opportunity and will provide actual revenue – revenue that is fast dwindling.
It may be, but it shouldn’t be hard to sell this to utilities. Here is a chance for utilities to promote a technology that will grow their business, clean the air locally, increase energy efficiency, combat climate change, and save consumers money. Utility-owned solar and electricity-for-transportation are already becoming cost effective additions to the system.
The main hurdle for the electric car is its relatively high up front cost and, perhaps in the shorter term, the limited range. Utilities can alleviate the range problem by installing charging stations, not just downtown, but throughout their service areas. The industry could justify the investment by utilizing EVs to provide grid stabilization and off-peak consumption. EVs would add to utility revenue, improve their overall asset utilization and air quality, and reduce greenhouse gas emissions in their service areas.
Suppose utilities could also pay for and own the EV batteries for today’s electric cars. They could use them as storage when they are no longer useable for cars and remove the car manufacturers concerns about the batteries losing life from continued cycling by the utility. This would immediately make EVs more affordable.
Karl-Friedrich Lenz, Professor of German Law, European Law and International Trade Law, Aoyama Gakuin University, Tokyo was so intrigued about possible business models for utilities owning our car batteries that he wrote two blogs on the subject that can be found here.
Figure 5, Professor Karl-Friedrich Lenz, source: Lenz Blog
We can encourage every utility to do what California did. Three utilities in California last year spent two million dollars lobbying on a number of bills to promote EVs. In the end legislation was signed in October 2015 by Governor Jerry Brown, SB-350, which directed major utilities to act as an alternate fuel source and install thousands of charging stations.
One would have to be blind not to notice the relationship between our petroleum-dependent transportation sector, air quality, and climate change. Electric vehicles give the utility industry a chance to come to the rescue. Over time, renewable electricity can virtually eliminate the transportation sector’s 71% consumption of U.S. petroleum.
New 21st Century Utility Business Models and Marketing Mojo
As more distributed energy sources are put on the grid, business models for utilities will need to change and electric vehicles are an important part of the new models. New York state has made a decision to have its utilities restructure to accommodate the new forces shaping the industry. Utilities will need to also become more service oriented. A leading example is Green Mountain Power which markets energy efficiency and actually sells and leases heat pumps, energy storage, and distributed renewable generation to save their customers money. Electric vehicles and charging stations can be part of packages like these.
Our utilities and the regulators, who control their rates, should be encouraged to get their marketing mojo back. We have to remind them that utilities have a rich history of marketing. In 1926 the “Reddy Kilowatt” trademark was created to help promote electricity and electrical appliances, which even into the 1930’s, according to utilities, were not catching on fast enough.
Figure 6: The Reddy Kilowatt trademark was created in 1926 by Ashton B. Collins. Collins, with publically-owned utilities, promoted the “Reddy Kilowatt Program.” Xcel Energy Inc. currently holds the trademark.
Electric utilities can promote electric vehicles and a low-carbon home with the same verve they did the “Live Better Electrically” programs of yesteryear. The advertisement below demonstrates efforts that were part of a massive campaign. In 1956, 300 electric utilities, partnering with 180 companies, including industrial giants, Whirlpool, General Electric, and Westinghouse, started a campaign with the goal of creating one million completely electric homes and expanding to rural America. Their main slogan was, “Live Better Electrically.”
Figure 7: The “Medallion Homes” campaign was launched in 1957, the goal was roughly one million all-electric homes by 1970. The goal is thought to have been achieved: 300 electric utilities and 180 electrical manufacturers supported the campaign nationwide. Former President Ronald Reagan is seen as the spokesperson for General Electric in this Advertisement
Electric utilities and regulators have a choice: they can continue fighting a losing battle of frustrating customers who want solar panels and other self-supply. Or they can initiate a customer oriented program that might be called “Lend Us Your Roof” & “Lend Us Your Battery.” The industry should remove its defensive-minded “green eyeshade” folks and replace them with salespeople who act as advocates for customers and the services they want.
With their long forgotten promotional hat on, the electric utility industry should be able to think of many ways to make it easier to own and operate the electric cars that could add some 30% to its business in the years to come. It is time for distribution utilities to claim their right to be competitive too. But for that to happen, it will require that the utilities themselves determine a new course of action that reignites their marketing skills.
We can encourage our electric power industries to shift their way of thinking to that of taking the offensive by actually promoting products like electric vehicles and charging stations. Hopefully, they will embrace that challenge and help make our electric vehicle future happen. This is something even the utility can sell.
The electric car is clearly part of our climate solution, particularly as more and more of our electricity comes from the sun and wind. Tesla Motors and other early adopters have been leaders in helping develop this technology. Now it is time for our utility industry to join this effort.
*Some of the material in this blog comes directly from the book, “All-Electric America: A Climate Solution and the Hopeful Future,” co-authored by S. David Freeman & Leah Y. Parks where they discuss the energy transformation and impact of electric vehicles in more detail in their newly released book.
Above: (left) All-Electric America: A Climate Solution and the Hopeful Future, and, (right) Leah Y. Parks