Utilities around the world are considering how they will manage demand of an increasingly electrified world. Across the globe moves are afoot to drive, among others, the electrification of transport and/or the use of electricity to heat water or buildings.
National Grid on the US East Coast has recently revealed plans to cut emissions by 80% below 1995 levels by 2050. Part of this plan calls for the electrification of heating, “converting nearly all of the region’s 5 million oil-heated buildings to electric heat pumps or natural gas.”
Plans also include the goal of putting 10 million electric vehicles on the roads of the US northeast, accounting for half of the vehicles on the road in that region.
Transportation Electrification Accord
The drive to increasingly electrifying the transport sector is actively being promoted by the Transportation Electrification Accord (TEA), a collective of local, national and international utilities, government representatives and others aiming for the increased use of electric vehicles and charging infrastructure in the US.
Vehicle manufacturers, Honda and General Motors have recently joined the TEA, with General Motors committing to having 20 new electric or hydrogen vehicle models in production by 2023. Original signatories to the TEA accord include: Exelon Corp., National Grid, Pacific Gas & Electric (PG&E), Siemens, Ceres, Sierra Club, Natural Resources Defense Council, Edison Electric Institute, Eversource Energy, Southern California Edison (SCE) and others.
Says Chris Budzinski, director of utility strategy at Exelon Utilities: “It’s not just about charging the vehicles; it’s about charging them smartly. It’s critical for utilities to play an active role and help design these programmes. We know our systems well. We know where the opportunities are on our system.”
Impact on utilities
As the electrification of transport in particular grows, we consider: what are the impacts of the electrification of transport on utilities in general?
- Electrification of the transport section could provide utilities with new business opportunities, in addition to redressing the issue of falling demand. McKinsey analysts estimate that up to 2% of electricity demand could be driven by the adoption of EVs.
- Increased ability to manage grid peaks and fluctuations through vehicle-to-grid opportunities
- Utilities have the opportunity to set an example by converting their existing fleet of vehicles to electric stations both within cities and along motorways.
- The utilisation of flexible and time of use tariffs will further help utilities smooth the demand curve during peak periods.
- Increased electricity demand will require significant investment into distribution capacity and grid strengthening, in addition to the infrastructure requirements for EV charging stations.
- Grid strengthening will need to be carefully planned in order to avoid overloading the grid in certain areas where EV uptake is higher than in others. A lack of insight into this demand could lead to stranded assets and mismanaged investments.
- A failure by utilities to embrace or facilitate the entrance of EVs into their business model could see competition from non-traditional companies i.e. Tesla, adding additional pressure to an already challenging situation.
- As more EVs appear on the roads, what plans will governments make to recoup lost tax revenue from fuel sales, and will this lead to new taxes being imposed on electricity sales for EV charging?
Regardless whether electrification of transport is championed by the utility, local or national government or the motor industry itself, the number of manufacturers making provision for EVs within their production plans means the utilities have two immediate options. Take the opportunity to be ahead of the curve by proactively embracing electrification of transport, or take the risk of playing catch up with the entrance of private sector players with a different take on the customer/utility relationship.
Did we leave any opportunities or challenges out? Contact us directly to add your voice to this discussion.