Plug-in Electric Vehicles A Utility Regulatory Discussion

Transcription

1 Plug-in Electric Vehicles A Utility Regulatory Discussion Watson Collins, P.E. Manager, Business Developmentelopment June 27,

2 Objectives to today s discussion on Plug in EV charging infrastructure 1. Fundamentals - Share information on the dollars and cents of this business 2. Market Forces - Discuss the market forces currently at play on the EV charging infrastructure 3. Market Structure Discuss market structure of the EV charging infrastructure and role of government in relation to market structure 4. Utility Regulation Identify known utility regulatory issues that will need resolution before the market goes mainstream 1

3 Overview of NU s plug-in electric vehicle efforts > Worked to ensure vehicles arrive in NU s service territory Connecticut one of seven states for Volt launch Connecticut t & Massachusetts setts included in five markets for BMW Active E pilot Connecticut & Massachusetts signed MOUs with Nissan Connecticut & Massachusetts included in Ford Focus Electric launch > Member of Connecticut s Electric Vehicle Infrastructure Council, established in 2009 by an executive order from the Governor of CT. > Founder and chair of the Regional Electric Vehicle Initiative (REVI) along with NSTAR, National Grid, UI, CMEEC, MMWEC. Group developing a paper on metering electric use of plug-in electric vehicles. > Installed six Level II (240 V) charging stations at NU facilities. 2 > Pursuing a comprehensive & multi-phase utility research program. Current research project focused on away-from-home charging Future pilot testing to include residential charging Proposed study of charging in large metropolitan area (w/nstar)

4 Fundamentals: Understanding the relative infrastructure costs and benefits Center of public dialogue (newsmakers) Level II (240v) cost to equal or exceed the cost of business Level II (240v) locations Fast DC recharging expected to be many times greater the cost of Level II (240v) installations Many businesses have an interest in providing charging station availability to their customers. Our experience indicates $10,000 to $20,000 for each Level II (240v) station Public Curbside & Pathway Workplace, Retail & Parking Garages 1 station per 1,000+ vehicles? 1 station per vehicles? Home installations are required for recharging and are the least cost Level 1 (120v) recharging outlets may already be in place Automaker programs plan around $2,000 per location for Level II (240v) installations Home & Fleet 80%+ of the Charging g 1 station per vehicle 3

5 Fundamentals: Home recharging Utility Customer = EV Driver Home recharging provides the EV driver with recharging certainty 4

6 Fundamentals: Workplace, Retail & Parking Garages 5 Utility Customer EV Driver The site sponsor / utility customer can view the EV recharging as an attraction / amenity to their current business operations

7 Fundamentals: Public locations? EV Driver As a stand-alone business it s unclear who develops the infrastructure 6

8 Fundamentals: The business case for away-from-home recharging is challenging (optimistic case) Costs Installation Cost $10,000 Revenues Energy Sales $600 (4, /kwh) Levelized Cost 20% Annual Levelized Cost for Asset $2,000 Energy Costs $600 (4, /kwh) Annual Revenue Requirement $2,600 Annual Profit / (Loss) ($2,000) 7 The EV service provider would need to charge 65 / kwh to break even

9 Fundamentals: The business case for away-from-home recharging is challenging (pessimistic case) Costs Installation Cost $20,000 Revenues Energy Sales $300 (2, /kwh) Levelized Cost 35% Annual Levelized Cost for Asset $7,000 Energy Costs $300 (2, /kwh) Annual Revenue Requirement $7,300 Learning curve effect is not likely to reduce installation costs since most costs are site specific Annual Profit / (Loss) ($7,000) The EV service provider would need to charge $3.65 / kwh to break even 8

10 Market Forces: The market will work through a natural progression of customer segments % OF CUSTOMERS THE CHASM TIME Early Adopters (Visionaries) Fast Followers (Influencers) Early Majority (Pragmatists) Late Majority (Conservatives) Laggards (Skeptics) Early Adopters Fast Followers Early Majority Influencers from each stage help convert next stage 9

11 Market Forces: A mix of vehicle electrification technologies are expected DOE JD Power Automaker production 2020 Market Shares Expected EV Shares BEV (3%) BEV (3%) PHEV (60%) BEV (40%) PHEV /HEV HEV (97%) (75%) PHEV (22%) Most projections indicate that conventional hybrids and plug in hybrids (including extended range) are likely the majority of Electric Vehicle sales (relative to pure battery only vehicles) 10

12 Market Forces: Various beliefs exist in this early stage around EV infrastructure making policy consensus more difficult Increased Costs, Risks, Lack of Readiness, etc.. Pathway Fast Charging Battery Swapping nfrastructur re Focus of I Destination rid Weighted Plug-in Hybr Workplace, Retail & Parking Garages EV Serv vice Providers rid Services V2G & Gr Home Fundamental Approach Installers Benchmark (with Utility AMI & Automaker Apps) EVSEcentric Prospective / Exploratory 11 Technology Approach

13 Market Forces: The synergy of home overnight recharging Recharging overnight is the common denominator Consumer Realities Environmental Benefits Electric System Optimization > Most economical > Plug-in vehicles have low > Given the existing recharging costs emissions infrastructure, only the last > Daily driving is typically > Overnight generation in 20 feet need to be built less than 40 miles total New England substantially > Capacity exists on the > Parked for hours while cleaner than daytime utility system in overnight you sleep periods > Not going to gas station: > Plug-in vehicle recharging unexpected consumer can reduce electric rates if benefit done right (broader cost allocation) 12

14 Market Structure: What can economic theory say about the role of government intervention > Market failure is a concept within economic theory wherein the allocation of goods and services by a free market is not efficient. > Market failures can be viewed as scenarios where individuals' pursuit of pure self-interest leads to results that t are not efficient i that t can be improved upon from the societal point-of-view. > Market failures are often associated with public goods externalities non-competitive markets (monopoly power or natural monopolies) principal-agent i problems information asymmetries > The existence of a market failure is often used as a justification for government intervention ti in a particular market. 13

15 Market Structure: Screening for market failure in EV charging infrastructure Public Good Not likely Infrastructure not likely to meet criteria of nonrival and non-excludable Externalities Not likely Assuming electric pricing is efficient Monopoly (market or natural) Information Asymmetries Possible 1)Technology, membership systems, and site control could lead to market power in away-from-home infrastructure in certain situations 2) Underserved markets possible due to cost of infrastructure Possible Since electricity in not a visible product consumers may not be able to assess quantity, price, and other performance aspects Visible ibl Gas Pump (1920s) 14

16 Market Structure: Now is the time to shape the market structure of EV charging infrastructure > While the federal grants have funded early EV charging infrastructure unintended consequences have arisen Many states and communities that didn t get funding feel as though they have to fund local infrastructure. But the infrastructure is not a public good. The federal dollars went to EV service providers instead of entities with site control which could be creating market power for those vendors. > Environmental and economic development policy objectives are at play and intersect with EV charging infrastructure developments > EV charging infrastructure is an edge technology and it s not always clear who s in charge (Environmental, Utility Regulatory, Economic Development agencies, Transportation, etc.) > Setting the rules of engagement now can address possible market failures 15

17 Environmental Policy: Securing the environmental benefits #1 Transportation policies Low Carbon Fuel Standards (in development) will create market-based incentives for low-impact alternative fuels in the transportation sector. #2 Policy coordination Many programs could be involved in plug-in vehicles. Renewable Portfolio Standards (RPS) Regional Greenhouse Gas Initiative (RGGI) Zero Emission Vehicle mandates (ZEV) Corporate Average Fuel Economy standards (CAFÉ) Opportunities to evolve existing policies, such as RPS, to benefit the PEV industry and consumers. Coordination of sector specific programs, being sensitive to secondary impacts that come from the sector shift in emissions. Incentives need visibility of benefiting consumers. f CO2 per year Millions of tons of Carbon Emissions in New England Millions of tons of CO2 per year Transportation Space heating Power generation Source: Environment Northeast and NU analysis. 25 Industrial Process 16 Waste & Agriculture 210 Total 16

18 Utility Regulation: Optimizing existing utility investments #1 Capacity of chargers Lower capacity chargers (1.4kW and 3.3kW) are not likely to cause significant utility impacts. However, the placement of the high capacity (10kW and above) chargers in residential locations is likely to impact the utility system. Ratemaking policy for distribution upgrades associated PEV recharging and utility demand charges may need to address high capacity charging locations. #2 Metering & Smart charging Metering approaches defined (submeter, facility meter, etc.) More testing is needed for different off-peak recharging approaches: Is off-peak charging centrally controlled, or controlled by the consumer using price signals, offering time-of-use rates? Are time-of-use rates for just the vehicle or the whole house ss electricity usage? #3 Interoperability The franchise utility can t interface with multiple closed systems. Open systems based on common standards needed. #4 Utility notification of charging locations Utilities can accommodate if we know when and where. #5 Consumer protection Important to preserve the fuel cost advantage of electric vehicles for consumers, given the high first cost of the vehicles and various recharging issues. 17

19 Utility Regulation: Many utility policies seek to reduce kwh sales at a time when EV charging will increase kwh sales > EVs improve energy efficiency in the transportation sector Internal combustion vehicles are only 15 20% efficient EVs are highly efficient (80% plug to wheels) > Decoupling disassociates a utility's profits from its sales of the electricity Policy makes the utility indifferent to selling less product and improves the ability of energy efficiency and distributed generation to operate within the utility environment Decoupling also may also create similar incentives for EV charging > Energy efficiency goals that only measure system-wide kwh reductions should also deduct EV charging volumes because EVs are also an efficiency improvement 18

20 Thank you 19

21 20 Backup Slides

22 21 WHERE ARE THE CARS?

23 HOW ARE THEY DRIVEN AND WHERE DO THEY REFUEL? < 2 miles < 2 miles < 2 miles 22

24 MYTH versus REALITY or SUPPOSITION versus DATA Popular beliefs and Media focus How will we deal with consumers natural range anxiety? Where do we need to locate public charging infrastructure so people will be comfortable they can refuel? Do we need to invest in high capacity/ high speed charging (even DC) to replicate the filling station model? 23

25 Market Forces: EVs and public infrastructure caught in hype cycle Hype Cycle > Wall Street looking for a pure-play in the EV industry > Startups and equipment players positioning themselves > Utility structure not leveraged to hype cycle > Policy and government initiatives playing into cycle? Is the emphasis on infrastructure misplaced? > McKinsey research indicating that t initial iti adoption will not be inhibited by limited public charging facilities > Vehicle availability is expected to be constrained (IHS study) > However, the garage orphan may actually be a real issue > Disillusionment will set in at some point 24

26 Why EV charging doesn t fit well into other widely available transaction systems High Transa action Value Low 25 Low EV Charging Service Parking Meters Transaction Systems are largely driven by the business needs EV Charging Session Vending Machines Parking Garages Transaction Volume Retail stores, gas stations, restaurants, etc. Transit systems EV Service providers are generally approaching the transaction problem by seeking recurring monthly revenues instead of addressing the technology / standardization issue because it fits their business model better High Credit card systems work when at the transaction volume or value are high (you have enough margin to pay for transaction fees) Credit card processing fees can be between $0.30 and $0.50 per transaction EV service providers are seeking to collect anywhere from $0.50 to $0.75 per kwh, perhaps even more How will these developments impact EV adoption and utilities?

27 How will consumers interact with this technology? What will EV drivers want: Connected car, EVSE and/or utility meter? Customizable user interface, likely to be handled through preferred cloud. Communications between the various clouds? Is it necessary? Communications standards well underway for communications between the EV and utility meter 26