Recently Rick Bush started a conversation thread regarding electric vehicle (EV) prosumers on his "T&D Minute" video blog. This retriggered my thoughts on how investor-owned electric utilities and our regulators may miss the boat on capturing this market for the long haul.
EV prosumers are likely to fall into three categories: environmentally conscious, financially motivated and a combination of these two. I will focus mostly on the latter two categories, but most of my thoughts also cover the environmentally conscious, as well.
Although EV prosumers seem futuristic for most of the U.S., actions taken now to become the "provider of choice" and to build trust with EV owners will set the stage for the future EV prosumer market. Prosumers will be seeking value-added offerings and services. U.S. prosumers also will seek simple solutions with little thinking or action required. Time-of-use (TOU) rates or rebate systems meet these requirements today. TOU rates are the simplest offering utilities and our regulators can adopt today. Lack of TOU or other utility incentives create an environment for non-utility aggregators to sweep this market away, potentially without the environmental benefits provided by utility models.
Before we get to a prosumer market, we need to address the charging market. I believe the best way to influence EV charging is via price incentives. If every kilowatt-hour is priced the same, there is no financial incentive for the typical residential consumer to charge off-peak. Most utilities hit their summer daily peaks in the early evening hours, just when EV owners arrive home from work and it’s convenient to plug in before heading into the house for the evening. Although utilities love the new load and revenue from EVs, this charging behavior will drive infrastructure spending to cover this added demand during peak hours. In the current regulatory market, utilities will invest in infrastructure and earn on it the old-fashioned way. Most would agree this is not optimal, particularly when shifting EV demand is relatively simple.
Done properly, TOU pricing provides the appropriate financial incentive to shift demand off-peak. I envision three tiers — peak, shoulder and super off-peak (really inexpensive). This allows the utility to serve the new load (with new revenue) without the burden of infrastructure investment. This load would be served with base-load generation versus engaging peakers. Again, this is focused on actions to take now, while base-load generation is predominant.
Competing with the TOU concept are demand response (DR) programs and incentives. On an individual basis, customers can participate in utility DR programs focused on reducing peak demand and frequently receive an incentive. This usually requires customers to be engaged enough to respond to some type of signal from the utility, that is, some thinking or complex automation required. This is where a creative aggregator can step in to simplify the customer’s life, vilify the utility and create an "artificial" DR event having a worsened environmental impact.
This would be fodder for a classic Dilbert. The aggregator markets the "simple life" to customers: "Tired of your utility telling you when to charge your EV? Let us pay you and allow you to charge whenever you want." And the aggregator provides equipment and services to control EV charging. They guarantee a full charge by morning and all the customers have to do is plug in when they get home. All this while the aggregator provides an distinct incentive payment, a tangible item.
Here’s the kicker: The aggregator now controls charging demand and can participate in DR programs or other demand markets. The aggregator ensures that all of its load is on during peak and then it reduces load to receive payment for DR. This is somewhat an artificial load increase, like when a retailer (artificially) marks up the price 30%, then offers a 25% discount (feel good pricing). Without TOU, the customer does not pay the utility more to charge on-peak, so the aggregator only provides financial upside for the customer. [For the record, I have nothing against aggregators, but business incentives may be in conflict with environmental goals in this instance.]
This creates history with the aggregator as a value-adding partner who also keeps life simple. When EV-2-Grid arrives and EV customers become prosumers, they are likely to turn to their trusted provider to keep their life simple and "stick it" to the utility.
Again, TOU is the defense (and offense) for utilities to financially incent EV owners to charge off-peak. Since it’s simply time-based, it is relatively easy for customers to delay charging and provides incentive to shift other easily controlled load off-peak, as well. Utilities can offer services to help customers manage charging against TOU, such as simple timers or web-portals; all still relatively simple. Additionally, the utility can market the environmental benefits.
My assessment is based largely upon current conditions for both utilities and EV owners (mostly outside very progressive markets). Without TOU or some other incentive, there’s little motivation to charge off-peak. Remember, the easiest thing to do is to plug in when you get home, either at or heading into summer peak. ♦
Bill Menge is the director of T&D technology for Kansas City Power & Light, responsible for automation, standards, mapping, drafting and systems support groups. Previously, he led KCP&L’s end-to-end DOE SmartGrid Demonstration Project; headed KCP&L’s Asset Management and Distribution Automation; and oversaw completion of the T&D infrastructure portfolios under KCP&L’s award-winning Comprehensive Energy Plan. He joined KCP&L in 2006 after spending 20 years with Exelon Corp. in both Illinois and Pennsylvania.
