How California utility regulators are turning electric vehicles into grid resources
Nw numbers show California’s peak demand will stress its grid more than previously thought, and in response policymakers are pushing ahead with an unexpected solution: electric vehicles.
In 2015, California’s grid needed as much as 10,091 MW of quick-responding resources to meet a three-hour load spike in the late afternoon and early evening. During the day, the state’s abundant rooftop solar keeps electricity demand flat, but it rises quickly as the sun sets each evening and residents return home from work.
As soon as 2019, that demand spike could be almost 14,000 MW, according to a recently-released report from analyst ScottMadden.
Using natural gas peaker plants to meet that load would impede the state’s plan to cut greenhouse gas emissions. And stationary storage, even with California’s landmark storage mandate fully met, would provide insufficient ramping capacity. But electric vehicles (EVs) — already a benefit to utilities for the power demand they provide — could offer the grid something more.
If EV sales rise fast enough to meet Gov. Jerry Brown’s goal of putting 1.5 million zero emissions vehicles into service by 2025, EV battery storage could be an answer to the challenge of peak demand, according to a paper from California’s Alternative Fuel Vehicle regulatory proceeding.
“As net load decreases during midday and increases in the evening, the longer and steeper ramp up after sunset will require generators to respond quickly, according to the California Public Utilities Commission (CPUC) Vehicle-Grid Integration (VGI) white paper.
The EV batteries plugged into smart charging stations can be “fast acting resources” to meet grid needs, the CPUC paper reported in 2014. Those needs have been nicknamed the “duck curve” because a theoretical graph of them devised in 2011 looked like a duck, with the sharp, late-day ramp up in load as the neck.
The need to respond to that fast ramp is now more than theoretical. “The belly of the duck curve is much bigger, which means the ramp is steeper and that requires more fast ramping resources,” Swami Venkataraman, a senior vice president at Moody’s Investors Service, told Utility Dive on the sidelines at the recent Edison Electric Institute Financial Conference.
EVs plugged into smart charging stations are flexible load, especially with electricity price signals that influence when and how charging is done, Venkataraman said. “The utilities can use that flexibility instead of natural gas peaker plants to manage the duck better.”
By absorbing excess electricity in the middle of the day and reducing the amount of EV charging during the peak demand period, EVs can ease the pressure on the system by “making the size of the ramp smaller,” echoed Chris Nelder, lead author of “Electric Vehicles as Distributed Energy Resources,” a recent paper from the Rocky Mountain Institute (RMI).
If California gets all the pieces in place, it could show how other states can use electric transport to integrate renewable energy with less fossil fuel use, added RMI senior associate Rachel Gold.
Such policies could increase the EV value proposition, boost sales, and increase the opportunity for private sector EV charging station providers. They would also be a new reason for utilities to support EVs and push to get into the business of building EV charging stations, presenting new questions of equity and fair competition for regulators across the country.
The EV need and opportunity
EVs integrated into the transmission-distribution system can be a resource that reduces costs for grid operators, the CPUC’s VGI paper reports. With properly structured policy, those cost savings could be returned to EV owners. The improved EV value proposition could drive transportation electrification and deliver more environmental and system benefits.
The California Independent System Operator raised concerns in 2013 that the conventional power system would be unable to accommodate the duck curve ramp in demand imposed by California’s very large solar penetration.
Without more flexibility, solar penetrations as low as 20% could require curtailment of 30% of the state’s solar generation, potentially eliminating its cost-effectiveness and putting California’s 50% renewables mandate out of reach. But grid-integrated distributed energy resources (DER), including distributed solar, battery storage, and EVs would “allow maximum use of the solar resource.”
The ScottMadden research shows the challenge has become bigger since 2013. Reseachers found the maximum three-hour ramp was 6,245 MW in 2011, 8,049 MW in 2013, and 10,091 MW in 2015. That is an average maximum ramp increase of 962 MW per year.
Without considering solar growth or technology and market changes that could alter the trajectory of solar adoption, the annual maximum ramp in 2018 would be 12,977 MW and in 2019 it would be 13,939 MW, according to ScottMadden.
The worsening duck curve would be driven largely by utility-scale solar growth, increase ramps throughout the year, and would be most severe on the weekends, the researchers reported.
Even without the potential system impacts from EVs, their deployment offers a huge opportunity, particularly for utilities, Venkataraman said.
If California gets to its target, EVs will account for over 50% of annual electricity sales growth in the state by 2025 and two-thirds of annual growth by 2030. By 2030, he said, EVs would be 5% of all electricity sales in 2030.
Moody’s assumed non-EV load would grow at 0.5% per year in the same period, but if it remains at the even lower growth rate utilities have seen in recent years, “EV-related load will only be more important for the sector,” the paper points out.
As a significant driver of load growth, the EV market would expand opportunity for both independent power producers (IPP) and utilities, Moody’s argues.
“IPPs face weak cash flows in California due to low natural gas and power prices and a glut of renewables,” Moody’s reports. “Anemic power demand growth also contributes to the challenged outlook.”
California’s big three investor owned utilities — Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas and Electric (SDG&E) — “are much less sensitive to power volumes owing to the presence of a decoupling mechanism,” Moody’s adds. But “there is substantial ongoing capex in the grid independent of EVs (PG&E and SCE are each spending over $5 billion annually).”
This benefit would allow utilities “to spread these costs over growing sales volumes…[and] mitigate tariff increases for customers,” Moody’s reports.
The bargain will not be as good for the Los Angeles Department of Water and Power (LADWP) and a handful of other municipal utilities in California, Venkataraman said. Unlike the state’s three dominant investor-owned electric utilities (IOUs), some munis are reconfiguring generation portfolios with as much as 40% coal, but do not want to take on any more capital expenditure than is necessary.
“To reduce coal cost-effectively, LADWP wants to decrease load, so if EVs increase load, it makes the transition more difficult and expensive,” Venkatamaran said. “They will probably have to invest in more renewable energy and natural gas infrastructure.”
There could also be enormous emissions reductions and health benefits if California gets to its ZEV target, Moody’s reports. “By 2030, emission reductions could be 12% annually and cumulatively worth $725 million.”
The significant reduction of non-CO2 pollution as a result of cutting carbon emissions could reduce the state’s health insurance costs by $200 million or more, Venkataraman said.
“Cleaner air will also improve productivity and quality of life over the long-term, increasing the state’s in-migration and boosting the economy,” Moody’s adds.
The transition to electrification could cost California $3 billion in gas tax revenues by 2030 but that is less than 3% of the state’s annual $114 billion budget and can be offset in the normal budget-making process, Venkataraman said.
Moody’s study of California’s EV market was prompted by the fact that the state is half the U.S. EV market and a quarter of the global EV market, Venkataraman said. The policy work being done in the CPUC’s Alternative Fuel Vehicle docket to get the state to 1.5 million ZEVs by 2025 could be a template for other states.
“Future duck curve sightings may well occur sooner than we think in states with growing utility-scale solar, such as Arizona, Georgia, Nevada, North Carolina, or Texas,” the ScottMadden paper observes.
To reach its EV penetration target, annual new vehicle sales in California would have to go from 2015’s 3% to 15% in 2025, Moody’s reports. That is a growth rate of 18% per year through 2020 and a 25% per year growth rate from 2021 to 2025.