Published 4Q Brittany Gibson Research Associate. John Gartner Research Director

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1 EXECUTIVE SUMMARY: Vehicle to Grid Technologies V2G Applications for Demand Response, Vehicle to Building, Frequency Regulation, and Other Ancillary Services: Market Analysis and Forecasts NOTE: This document is a free excerpt of a larger report. If you are interested in purchasing the full report, please contact Pike Research at sales@pikeresearch.com. Published 4Q 2011 Brittany Gibson Research Associate 0 John Gartner Research Director

2 Section 1 EXECUTIVE SUMMARY 1.1 Introduction The vehicle-to-grid (V2G) concept has been in existence for nearly two decades. The premise is that plug-in electric vehicles (PEVs) and their batteries represent a mobile power resource that can be easily upgraded to share power to the benefit of the grid. However, the underlying technologies for V2G have yet to emerge from the pilot project phase. One potential misuse of the term V2G is as a market or a service. It is not; it is a set of technologies implemented in PEVs to provide services to buildings, utilities, and grid operators. The primary purpose for adding V2G technologies is to derive revenue from ancillary services when the vehicle is not being used for transport. Secondarily, vehicle to building (V2B), which is also discussed in this report, focuses on lowering the energy cost of a building or providing emergency backup power. PEVs with V2G technology will play a role in the ancillary services market, which addresses regional power grids continual need for stabilization to match supply demand. An increasing demand for power means customers will strain resources, and the higher penetration of intermittent wind and solar power necessitates greater balancing resources. Consequently, the ancillary services market is expected to grow. Figure 1.1 V2G Applications and Participants (Source: Pike Research) 1

3 V2G vehicles have an advantage over competing centralized generation assets because they can stabilize the grid at the endpoints closer to demand. Vehicles will compete with traditional generation sources as well as with emerging technologies, such as stationary battery storage, for revenue from ancillary services such as frequency regulation and demand response. 1.2 Market Evolution V2G is currently limited to pilot projects scattered around the world. Many of these are part of larger endeavors studying the role of PEVs and wind and solar in places where renewable power plays a significant role in the generation mix. In the United States, the only commercial V2G project was headed by the University of Delaware and independent system operator (ISO) PJM Interconnection, and it successfully concluded in The data collected from these projects could influence plans for commercialization. Investments in V2G by interested parties such as automakers, utilities, and energy aggregators will be strongly influenced by the global and regional penetration of PEVs. Dozens of PEVs must be aggregated in a given area to produce sufficient power capacity to interest grid operators and industry participants are waiting for these vehicles to be in place in ample numbers before developing programs. The number of vehicles that could participate in V2G will grow from just over 100,000 light duty vehicles in 2011 to more than five million in If PEV sales do not grow as rapidly as expected, V2G investment could be delayed. Chart 1.1 Cumulative Light-Duty PEV Sales by Region, World Markets: (Vehicles) 6,000,000 5,000,000 4,000,000 3,000,000 Africa/Middle East Asia Pacific Eastern Europe Western Europe Latin America North America 2,000,000 1,000, (Source: Pike Research) Fleets of light-duty vehicles and medium- and heavy-duty trucks are the most likely early adopters of V2G. Fleets often have a more consistent availability for connection to the grid than vehicles owned by individual consumers. Trucks, with their larger battery packs and potential to deliver power more quickly to the grid, can generate much greater revenue per 2

4 vehicle than light-duty vehicles. By 2017, almost 90,000 light-duty PEVs and more than 1,500 medium- and heavy-duty trucks (including both new vehicles and retrofits) will be V2G-enabled. The Asia Pacific region will be the largest market, followed by Western Europe and North America. North America will trail both Europe and Asia in incorporating PEVs into grid services because of the lower penetration of renewables and a regulatory framework that is less encouraging of V2G. For example, utilities in the United States whose revenues are tied to the amount of energy sold could be negatively impacted if vehicles contribute to a significant shift of power demand away from the lucrative peak times to off-peak hours. Early discussions of V2G focused on the use of vehicles to store energy in bulk and make it available to the grid or building at times when electricity is more expensive. While this market continues to have potential, attention has shifted to the use of vehicles for frequency regulation. Using PEVs in frequency regulation has a lesser impact on vehicle batteries and is viewed with greater acceptance by automakers. Chart 1.2 V2G-Enabled Light-Duty PEV Sales by Region, World Markets: (Vehicles) 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 Africa/Middle East Asia Pacific Eastern Europe Western Europe Latin America North America 10,000 5, (Source: Pike Research) Participants in V2G will include vehicles that have been upgraded to V2G technology as well as PEVs that have enrolled in one-way frequency regulation and demand response programs where the charge rate is slowed or accelerated based on grid needs. The use of a PEV for V2G functions is secondary to its use in transportation, and participating in ancillary services requires the vehicle to be parked at a location where it can be connected to the grid. Our base scenario for vehicle availability assumes that vehicles are able to participate in ancillary services for 8 hours of each day for 250 days of the year. Under these conditions, the global revenue for PEVs participating in ancillary services would grow from less than $100,000 in 2011 to more than $18 million by

5 Chart 1.3 Total Ancillary Services Revenue, LD V2G-Enabled PEVs, Base Scenario, World Markets: ($ Millions) $20 $18 $16 $14 $12 $10 $8 $6 Africa/Middle East Asia Pacific Eastern Europe Western Europe Latin America North America $4 $2 $ (Source: Pike Research) 1.3 Market Challenges Ancillary services programs targeting individual consumer PEVs are unlikely to develop before the second half of the decade. This is due to a lack of interest on the part of utilities, the limited number of vehicles in a given service territory, and the complexity of monitoring and predicting vehicle availability. Employers, who can offer free charging while deriving value from ancillary services, have great potential for bringing consumer-owned PEVs into grid services. In many regions, the power market s regulatory structure has not been updated to allow the participation of companies implementing new technologies such as PEVs and energy storage or for those service companies to be fully compensated for the benefits they provide. Removing these barriers requires changes, and regional, state, and local governing bodies will work to catalyze such changes through the remainder of the decade. Retrofitting vehicles with V2G technology is more costly than installing it in new vehicles at the factory. However, automakers are not part of the revenue stream that benefits from the use of vehicles for ancillary services. Moreover, lack of consumer knowledge about the benefits of V2G will inhibit demand. Until these factors change, V2G will be limited to more costly retrofits. 4

6 Section 10 TABLE OF CONTENTS Section Executive Summary Introduction Market Evolution Market Challenges... 4 Section Market Issues Development of V2G Automaker Participation Recent V2G Developments Utility Involvement in V2G PEV Sales Ancillary Services Energy Storage and Ancillary Services V2G Market Barriers Regional Demand for V2G in Ancillary Services Markets in North America ISO Regions Markets in Europe Markets in Asia Pacific Japan Korea India China Markets in the Middle East Demand Response Virtual Power Plants/Microgrids Vehicle to Building (V2B) Demand Charge Avoidance and Peak Shaving Emergency and Backup Power Battery Charge and Discharge Rates Bidirectional Power Delivery Medium- and Heavy-Duty Vehicles Management of PEVs Smart Charging Management Data Analytics Equipment Requirements Onboard Equipment Premise Equipment Utility Upgrades Permitting Section Marketing and Commercialization V2G Applicability of Ancillary Services V2G Revenue Potential Regulation Services Demand Response

7 3.2.3 Pay-for-Performance Battery Leasing Battery Availability for V2G V2G Case Studies Amsterdam Smart City Better Place Israel and Denmark DOE-Chrysler Trucks EDISON Project Green Crossover Town Los Angeles Air Force Base Maui Smart Grid Demonstration Project MeRegio Mobil Section Industry Drivers Fleets Trucks Employers Military Expansion of Renewable Power Generation Wind Solar Energy Aggregators and Energy Service Companies Section Technology Issues Security Communications Standards Safety Standard Impact on Vehicle Batteries Section Key Industry Players AC Propulsion AutoPort Inc Better Place Bosch Coulomb Technologies Inc Daimler Dansk Energi Dong Energy Eetrex Inc EnBW Energinet.dk Envision Solar Fleet Energy Company GE Grid2Home Hitachi IBM ITOCHU Mazda Mitsubishi National Grid Nissan Motor Corp NRG Energy

8 6.24 Nuvve PGE PJM Pacific Northwest National Laboratory Ricardo RWE SAP SAE International Siemens Silver Spring Networks TARDEC Tendril University of Delaware Zam Energy Section Market Forecasts V2G-Enabled Light-Duty Vehicles V2G-Enabled Light-Duty Fleet Vehicles V2G Investment V2G-Enabled MD/HD Trucks V2G-Enabled LD Vehicle Revenue from Ancillary Services V2G-Enabled MD/HD Truck Revenue from Ancillary Services Section Company Directory Section Acronym and Abbreviation List Section Table of Contents Section Table of Charts and Figures Section Scope of Study Sources and Methodology Notes

9 Section 11 TABLE OF CHARTS AND FIGURES Chart 1.1 Cumulative Light-Duty PEV Sales by Region, World Markets: Chart 1.2 V2G-Enabled Light-Duty PEV Sales by Region, World Markets: Chart 1.3 Total Ancillary Services Revenue, LD V2G-Enabled PEVs, Base Scenario, World Markets: Chart 2.1 Light-Duty PEV Sales by Region, World Markets: Chart 4.1 Light-Duty PEV Fleet Sales by Region, World Markets: Chart 4.2 MD/HD Plug-in Trucks, Class 3-8 Sales by Region, World Markets: Chart 4.3 Cumulative Employer-Owned EV Charging Equipment Sales by Region: World Markets: Chart 4.4 Cumulative Installed Wind Capacity by Region, World Markets: Chart 7.1 Cumulative V2G-Enabled Light-Duty PEV Sales by Region, World Markets: Chart 7.2 V2G-Enabled Light-Duty Fleet PEV Sales by Region, World Markets: Chart 7.3 Vehicle Investment, V2G-Enabled Light-Duty PEVs, World Markets: Chart 7.4 Chart 7.5 Chart 7.6 Cumulative V2G-Enabled MD/HD Trucks, Class 3-8 Sales by Region, World Markets: Total Ancillary Services Revenue, LD V2G-Enabled PEVs, Base Scenario, World Markets: Ancillary Services Revenue, V2G-Enabled MD/HD Trucks, Base Scenario, World Markets: Figure 1.1 V2G Applications and Participants... 1 Figure 2.1 Diagram of Vehicle and Grid Interaction in V2G... 6 Figure 2.2 States with Deregulated Electricity Markets Figure 2.3 The European Grid s Five Synchronous Areas Figure 2.4 V2G-enabled PEV Figure 3.1 Green Crossover Town Project Diagram Table 2.1 Ancillary Services Overview Table 2.2 Comparison of Battery Utility for Ancillary Services

10 Section 12 SCOPE OF STUDY Pike Research has prepared this report to provide participants involved in the electrification of passenger vehicles, including charging station equipment and hardware vendors, utilities, auto manufacturers, electricians, local governments and community leaders, smart grid companies, and others, with a study of the current technologies and market potential for V2G. Its major objective is to anticipate the emerging market and likely future growth V2G and how PEVs can most effectively be used to support the power consumption of buildings and power delivery on the grid. The report also provides a review of major demand drivers, as well as key industry players within the competitive landscape. The report s purpose is not to provide an exhaustive technical assessment of the technologies and industries covered, but rather a strategic examination from an overall tactical business perspective. Pike Research strives to identify and examine new market segments to aid readers in the development of their business models. All major global regions are included. The forecast period extends through SOURCES AND METHODOLOGY Pike Research s industry analysts utilize a variety of research sources in preparing Research Reports. The key component of Pike Research s analysis is primary research gained from phone and in-person interviews with industry leaders including executives, engineers, and marketing professionals. Analysts are diligent in ensuring that they speak with representatives from every part of the value chain, including but not limited to technology companies, utilities and other service providers, industry associations, government agencies, and the investment community. Additional analysis includes secondary research conducted by Pike Research s analysts and the firm s staff of research assistants. Where applicable, all secondary research sources are appropriately cited within this report. These primary and secondary research sources, combined with the analyst s industry expertise, are synthesized into the qualitative and quantitative analysis presented in Pike Research s reports. Great care is taken in making sure that all analysis is well-supported by facts, but where the facts are unknown and assumptions must be made, analysts document their assumptions and are prepared to explain their methodology, both within the body of a report and in direct conversations with clients. Pike Research is an independent market research firm whose goal is to present an objective, unbiased view of market opportunities within its coverage areas. The firm is not beholden to any special interests and is thus able to offer clear, actionable advice to help clients succeed in the industry, unfettered by technology hype, political agendas, or emotional factors that are inherent in cleantech markets. 63

11 NOTES CAGR refers to compound average annual growth rate, using the formula: CAGR = (End Year Value Start Year Value) (1/steps) 1. CAGRs presented in the tables are for the entire timeframe in the title. Where data for fewer years are given, the CAGR is for the range presented. Where relevant, CAGRs for shorter timeframes may be given as well. Figures are based on the best estimates available at the time of calculation. Annual revenues, shipments, and sales are based on end-of-year figures unless otherwise noted. All values are expressed in year 2011 U.S. dollars unless otherwise noted. Percentages may not add up to 100 due to rounding. 64

12 Published 4Q Pike Research LLC 1320 Pearl Street, Suite 300 Boulder, CO USA Tel: This publication is provided by Pike Research LLC ( Pike ). This publication may be used only as expressly permitted by license from Pike and may not otherwise be reproduced, recorded, photocopied, distributed, displayed, modified, extracted, accessed or used without the express written permission of Pike. Notwithstanding the foregoing, Pike makes no claim to any Government data and other data obtained from public sources found in this publication (whether or not the owners of such data are noted in this publication). If you do not have a license from Pike covering this publication, please refrain from accessing or using this publication. Please contact Pike to obtain a license to this publication. 65