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Edison Under the Hood

Can utilities put EV batteries in the rate base?

April 2012

Thomas Edison once hoped to make a fortune in the auto business—selling electric cars.

Of course it never happened; he and Henry Ford tried and failed to bring a low-cost electric car to market. They scuttled the project after investing $1.5 million toward the effort—more than $32 million in today’s dollars. Edison’s nickel-iron batteries just couldn’t match the performance of Ford’s petrol-powered bang-bang.

Since then a century has passed, and gasoline and diesel vehicles still own the road. Yet battery technology has come a long way, and despite some inevitable challenges and setbacks, electric vehicles (EV) appear on course to provide a competitive option within a decade.

For utilities, this trend presents a choice: should we view EV batteries as type of fuel tank, which we’ll be happy to fill up for drivers? Or should we view them as part of the electric infrastructure, and therefore a potential utility asset?

Our choice could make all the difference for the EV market. Utility involvement in the battery value chain, through either rate-base or lease financing, could transform EV batteries from a burden for drivers into an opportunity for the grid—and for utility investors.

Mobility, Scale, and Cost

The idea of utilities owning batteries should come as no big shock; companies like Duke, AEP, and Hawaiian Electric already are installing large-scale battery storage systems to smooth out variable output from wind and solar plants, and generally to support grid voltage. Under the vehicle-to-grid (V2G) scenario, EV batteries could serve the same purpose, on a grander, distributed scale. But as sexy as that idea might be, it raises technical issues that will complicate and delay its implementation. Fortunately, we don’t need V2G in order for batteries to become a valuable utility asset.

In a world where markets quickly are evolving to treat demand-response (DR) as the functional—and financial—equivalent of generation, smart charging can accomplish just about everything V2G can accomplish, but without discharging the batteries. A fleet of plug-in vehicles will create a distributed load, and smart charging technology will make a large portion of that load interruptible at any given time—in ways that don’t impede the driver’s requirements for a fully charged battery.

However, smart charging can be accomplished without the utility owning the battery, right? Utilities don’t own customers’ air conditioners, why should we own their EV batteries?

The answer is complex.

First, consider mobility. The appliances most often interrupted in DR programs remain rooted in one spot. They’re connected to a single meter, and they run on generally predictable usage patterns. EVs, by contrast, are fickle. They move around the grid. Their charging behaviors and locations are sometimes predictable, but not always. If such a variable load doesn’t mesh smoothly with the utility distribution system, then bad things will happen—overloaded equipment, network outages, angry customers, and costly system repairs. Integrating a dynamic EV load will require more sophisticated data analysis, system control, and transaction management than any AC