Matthew Slavin, BridgeTower Media Newswires
It might be a stretch to refer to the electrification of transportation as a holy grail, but only slightly.
The Edison Electric Institute, the electric utility industry's main trade group, calls electrification of transportation (EOT) the industry's biggest opportunity. It's not hard to see why. Bloomberg New Energy Finance projects that by 2040, annual global electricity consumption from electric vehicles could rise 3,000-fold, from six terawatt hours to 1,800 terawatt hours. Market research firm Frost & Sullivan projects electric vehicle (EV) prices will achieve parity with internal combustion vehicle prices by 2025, when 8 percent of new vehicles registered will be electric, up from 1.4 percent now.
The technology sector is on board, seeing EOT as a missing link in creating "Internet of Things" smart city connectivity. Environmentalists see EOT as a key to reducing globally warming fossil fuel emissions. Wall Street insiders are eyeing traditionally stodgy electric utility equities and stocks of makers of transformers and other electric system components needed for EOT as long-term buys.
State governments will play a leading role in forging the EOT ecosystem because their public utility commissions regulate electric utilities that own and operate the electric distribution lines, substations and associated infrastructure upon which EV charging depends. (Investor-owned utilities are regulated by PUCs; publicly-owned utilities are regulated by governing boards of directors usually composed of elected officials.) Some utilities also own nonregulated companies that operate the approximately 16,000 street-level EV charging stations installed throughout the U.S. That number that will grow exponentially.
Optimizing EOT raises a number of issues. These include:
- Identifying and quantifying potential benefits and risks EOT presents for electric utilities, their residential, commercial and industrial customers and society in general, including climate resilience;
- Identifying the infrastructure investments needed to build out the EOT ecosystem;
- Determining how the investment costs should be apportioned between utilities and nonregulated competitors, government and consumers;
- Determining whether EOT infrastructure costs should be recovered from ratepayers as a whole or only those who directly use EV charging; and
- Discussing how financial and regulatory incentives can be used to accelerate development of the EOT ecosystem, including in underserved urban areas and nonmetropolitan areas that may not see early EV adoption.
In this context, several issues are paramount.
When forging EOT policy, it's important to take a big picture view. Most states are divided into utility service areas, but the biggest gains won't be achieved until seamless connectivity of EOT infrastructure can be established not only within service areas but also between service areas both within states and between states to allow for substantial mobility. A patchwork system in which EVs can be charged in one service area but not in adjoining areas will substantially sub-optimize the benefits that EOT can otherwise bestow.
Next is the need to recognize that optimization of EOT will require massive investments in modernization of electric transmission and distribution grids. They must be strengthened so they can support the substantially higher loads implied by EOT and more seamlessly balance the nation's growing renewable energy generation portfolio. Advanced grid architecture that integrates into the bulk power system, customer-owned distributed energy resources, smart metering systems and storage technology such as battery storage and power to gas technologies will be needed.
Public support needs to be built, and will require effective media awareness campaigns to explain the benefits of EOT. As EVs gain parity with internal combustion vehicles, EOT should be presented as offering consumers new mobility choices with lower lifetime costs and environmental benefits. There's a particular need to emphasize the benefits of EOT for non-adopters consumers who choose for whatever reason not to buy electric vehicles. Showing how all customers can benefit through lower bills when utility-fixed costs for generation, transmission and distribution are spread across more kilowatt-hours needed for EOT optimization can be a persuasive message.
As with many challenges that lie at the intersection of government and business, forming a task force to make recommendations on EOT policy, regulation, finance and messaging is a good idea. The core of such a task force should be drawn from utilities, automakers, regulatory authorities and other state and local government stakeholders, EOT ecosystem trade allies, and not-for-profit public interest advocates. Involvement should be geographically diverse with the aim of getting broad-based buy-in.
A good place to start is with lessons from states that have established reputations as early adopters. Among these are: Hawaii, Maryland, California, Illinois, Ohio, Minnesota and Washington. The latter has created a $10 million fund to make matching grants to local governments or public and private electrical utilities for piloting approaches to EOT.
At more than $1.4 trillion, transportation ranks only behind health care, housing and food as a major sector contributing to U.S. gross domestic product. It will take years before the full benefits of EOT will be realized, and there's a lot of unpredictability ahead. Those that get early starts in addressing the issues will best position themselves as early beneficiaries of what may be one of history's greatest economic transformations.
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Matt Slavin in 2018 founded M.I. Slavin to provide consulting in project management, strategic planning, research and communications. Contact him at 503-619-5601 or matt@mislavin. com.
Published: Wed, Nov 07, 2018
