Navigant predicts rapid growth in vehicle-grid integration revenues

Dive Brief:

As electric vehicles (EVs) become more common, Navigant Research expects them to increasingly be used as grid resources capable of soaking up excess renewables, managing peak demand, providing capacity and frequency regulation.
Advanced systems for vehicle grid integration (VGI) will enable direct control of EV charging — and in some cases, discharging — which the firm believes will push grid service revenues to $1.4 billion by 2030. Technical challenges and concerns regarding battery degradation remain a hurdle, however.
At the utility level, managing EV charging via time of use (TOU) rates can help address ramping issues on distribution systems. More advanced use cases include frequency regulation, voltage management and the ability to provide day-ahead capacity.

Dive Insight:

For now, electric vehicles remain a small portion of both overall cars on the road and electric demand. But with rapid increases expected in emissions-free vehicles, utilities see them as both an opportunity and potential threat to the grid, according to Navigant.

There are a little more than 1 million electric vehicles on U.S. roads today, but the Edison Electric Institute, which represents investor-owned utilities, has projected 7 million will be on U.S. roads by 2025. And Bloomberg New Energy Finance sees EVs making up 28% of global light-duty vehicle sales sometime shortly after 2025.

Analysts at Navigant say the growth of EVs will assist the rapid rise of VGI resources and ultimately revenues. In particular, because wide-scale adoption of EVs "presents significant increases in electricity demand that local distribution assets may have difficulty handling," according to the analysis.

The firm's recent report projects VGI revenues accrued from grid service markets to rise rapidly between now and 2030, to represent 7% of the EV charging services market in that year. That's up from about 1% of revenues today.

"It does have a steep ramp, largely because it is seizing on a different type of opportunity," Scott Shepard, senior research analyst with Navigant Research, told Utility Dive. While many clean energy technologies are pushed ahead by regulations and policies, he said VGI "is largely an embedded efficiency within the vehicle that is relatively easy to capture."

Navigant believes the proliferation of wireless communications standards in vehicles will enable more basic forms of VGI, such as managed charging, with relative ease. More "sophisticated" forms that could include bi-directional power flows back to the grid will require additional work.

"More research is needed to determine impacts on battery degradation and local distribution loads," according to the report. And then grid operators will need to address "burdensome or limiting regulations such as minimum capacity and interconnection requirements among others."

But the end result is likely to be steady growth in the resource and benefits back to consumers.

"Ultimately the benefits all flow back to the customer in some form or fashion," largely in the form of reduced costs, said Shepard. While the customer benefits can be more clear for utility programs aligning charging with off-peak rates, other services will likely mean third-party aggregators initially see the financial benefits.

"The primary example is frequency regulation markets," Shepard said. "There the revenue is initially captured by the aggregator. ... But that revenue will show up to the customer in some form."

In the United States, several utilities are rolling out TOU rates to incentivize charging during off-peak times. But more advanced programs are also in the works: Enel X has aggregated 30 MW / 70 MWh of EV capacity as a virtual battery supplying the California ISO's day-ahead and real-time capacity markets.

Advanced VGI projects have been rolled out in Japan, the Netherlands, United Kingdom and Portugal, according to Navigant.

"We're at a very early stage in the industry," said Shepard. There are potential misalignments, between utility ramping management and some advanced uses like day-ahead capacity, he added. "But we're not going to see a lot of the potential impacts of the misalignment for a really long time."

"The best way to address these issues is to get better visibility into chargers and grid distribution assets," Shepard said. "From there, develop ways to value those assets."