A Utility Perspective

Deck: 

We’re Electrifying the Road

PUF 2.0 - February 15, 2018

PUF's Steve Mitnick: Jim, what is your company doing to electrify transportation?

Jim Laurito: First, we think, like many parts of the industry, that it is evolving. We think the electrification of the vehicle business is going to continue to accelerate over time.

We see a large market opportunity here. We see the utilities being central to the development and growth of that market. It's primarily because we own and operate the distribution grid that the electric vehicle infrastructure needs to integrate with. Not only in terms of the hardware and the distribution system, but also in terms of the software and the control systems.

We also see a central role for utilities in terms of implementation, that is, the installation and servicing of the EV charging infrastructure. That charging infrastructure is going to be central to the home or the business.

It's got to be interconnected to your service, and ultimately, interconnected to the distribution grid. The regulated utility company is there for our customers twenty-four-seven, three hundred and sixty-five days a year.

The regulated utility has to be central to the development of this huge market opportunity.

PUF: I notice you're using the term central. Tell me a little bit more about that word, central, and why it's important.

Jim Laurito: I think electricity is central to everyone's lives. The utility is central to anything that interconnects with the distribution grid in the home. All these sensors eventually will be interconnected, and they need to be centrally controlled and monitored. The utility is really at the hub of all of that.

All those devices that people see in smart homes, smart cities, and distributed generation, need to be interconnected centrally to the regulated utility for them to work most economically and efficiently. That's the future that we see, which really has us playing a central role.

PUF: Your point of view is particularly interesting because you have some ten utilities scattered all over North America. You're in a lot of different markets. Tell me how that affects your point of view.

Jim Laurito: We are in a lot of different jurisdictions across Canada, the Caribbean, and the United States. We have different regulatory nuances that we need to pay attention to. We have different customer characteristics that we need to pay attention to.

For instance, the customer in Vancouver, British Columbia does not have the same interests and characteristics, perhaps, as the customer in St. John's, Newfoundland or the customer in Tucson, Arizona.

We have become very adept at adapting to all those different regulatory nuances. We make sure that we have constructive regulatory and jurisdiction relationships, as well as good service and operational excellence for customers in those jurisdictions.

For instance, when we look at a state like New York, we are automating the distribution grid, doing really cutting-edge customer engagement activities. That's how New York's regulation framework works.

In Arizona, we're permitted to own solar and other distributed generation technologies. We're taking advantage of that there.

In British Columbia, there'll be a big market for electric vehicles adoption. We see it already, so we have initiatives in place there that we look forward to implementing.

PUF: Is there a to-do list for 2018, 2019, for your company? What do you have to do next? What is missing?

PUF Books - New Regulatory Finance

Jim Laurito: I think there's a couple of things. Through Energy Impact Partners, the private equity fund that a group of utilities are partnered in, we've made an investment in an electric vehicle charging and energy management company called Greenlots out in California.

Greenlots is one of the industry leaders in electric vehicle charging software and infrastructure. They were just recently selected to support two major facets of Electrify America's two-billion-dollar community-based EV charging initiative. Electrify America is the group that's administering the Volkswagen emissions settlement funding.

Greenlots was selected to provide both the network operating platform for Electrify America's high-speed nationwide highway network.

And to roll out hundreds of charging stations in workplaces and multi-unit dwellings in cities across the country as part of their two-billion-dollar zero-emissions vehicle investment.

Greenlots will manage community-based charging in a lot of major cities in the U.S., including Boston, Seattle, New York City, L.A., San Francisco, Sacramento, San Diego, and others. These two distinct elements, local charging and highway charging, will bring charging infrastructure where it's needed the most.

Whether driving across the country or across town, people will be able to find a user-friendly fast charger along the way. This marks a historic expansion of EV charging infrastructure that will add thousands of new chargers across the U.S. at an unprecedented pace, just two to three years.

Greenlots developed an open source software that can work with any charging infrastructure hardware. We think that's vital because, from the utilities' perspective, we're not in the business of picking winners or losers.

Customers have choice, so whatever charging infrastructure they want to install, Greenlots' technology can operate with it. Greenlots supports and enhances utilities' relationships with their customers, as opposed to getting in between them.

Importantly, it also interconnects with the utility's distribution control system for energy management for the customer and for us in the grid.

There are businesses that have started up in the EV charging sector that do not use the utility for implementation. Greenlots' strategy, partnering with the utility, is to bring the service element that no one else brings and, importantly, does not disintermediate the utility from its customer.

We believe that's the right business model for EV charging infrastructure companies because obviously, utilities already have the footprint. We have the customer relationship, and the brand loyalty. So, number one on our list is supporting this investment in Greenlots, to help them grow and expand.

Second, it's up to our operating utilities to analyze and evaluate how the pace of EV adoption is happening in their respective markets. The operating utilities need to work with their regulator to prepare a plan to upgrade the distribution grid, to be ready for that EV adoption.

We think that's a really important point. Studies estimate that once electric vehicle market penetration gets to the five or six percent range, that's the tipping point for massive investment in the distribution grid. That will be necessary to handle all the different charging system loads.

One study I've read says that you're looking at a three trillion-dollar investment globally in distribution grid investment. About nine percent of that, or two hundred seventy billion, would be in North America alone.

When you start to translate those numbers down into your local jurisdiction, you start to see that the adoption of electric vehicles beyond this five or six percent tipping point is going to be the threshold where we're going to need to make the distribution grid more robust.

It's important to get ahead of this adoption rate so that we are not playing catch-up when we get farther down the road. It's going to take some time for this adoption to take place. It's anyone's guess when we get to a five- or six-percent tipping point.

Some say five years, some say ten. We're in the business long-term. Part of our responsibility is working with the regulator to help them understand what this EV adoption would mean for our distribution grid, and how we can properly accommodate whatever pace of adoption occurs.

PUF: What should regulators and policy leaders be thinking about? What should be on their to-do list?

Jim Laurito: The good news is, when it comes to electrification of vehicles, just about everyone agrees that this is good for the economy, good for the environment, ultimately good for the customer. We don't really see a big policy debate over whether EV adoption is a good thing.

The question is, how do we prepare ourselves? Like everything else in the regulated utility business, the utility and the regulator must collaborate, work hand in hand, to develop rate and regulation strategies that accommodate the pace of adoption.

The key is opening the lines of communication about pace of adoption, what programs on a case-by-case basis are being put in place. That way the utilities know what's happening. We're working hand-in-hand with the regulator and the policymakers going down this path.

PUR Books - Principals of Energy Regulation

Certainly, there are issues around rate design in terms of vehicle charging rates and the impact on our system. Those things need to be discussed. Studies that you read talk about fast charging, slow charging.

More than eighty percent of charging is still going to take place overnight. We need to think about what that means in terms of rates for customers, making it more efficient, and utilizing the grid in the most economic fashion.

The utility and the regulator need to start the process collaboratively. So that we can develop the checklists that we need, to make sure we're there to support whatever pace of adoption occurs.


PUF 2.0 Articles: We’re Electrifying the Road

Coming Together to Plan EV Future — By Steve Mitnick, with former NARUC President Phil Jones
Electrifying America’s Buses — By Steve Mitnick, with Proterra CEO Ryan Popple
Environmental Community Looks Forward — By Steve Mitnick, with Energy Foundation’s Patty Monahan
Car Manufacturers Are Moving Fast — By Steve Mitnick, with GM’s Britta Gross
A Utility Perspective — By Steve Mitnick, with Fortis EVP Jim Laurito