ELECTRIC VEHICLE CHARGING: OPTIMIZING PRICE AND REDUCING POWER OUTAGES AT PUBLIC CHARGING STATIONS

“A major buildout of fast-charging stations likely would help drive greater adoption of electric vehicles, experts say. But it’s extremely difficult for public charging stations to turn a profit because of volatile fees, called demand charges, that many electric utilities charge their commercial customers.” Areg Bagdasarian, energy analyst²

Public fast charging stations for electric vehicles face some of the same utility “demand charges” that are now prevalent in most commercial building rates. Conventional ratemaking likely will not lower demand charges to levels that will be acceptable to the public, which will not tolerate variable, high rates for charging their electric vehicles. Similarly, charging stations will be subject to the same power outage problems facing the electric grid. On-site battery storage at charging stations could be the technology solution that addresses both the demand charge and power outage problems, results that require dedicated policy and market development strategies to be put in place.

Updated August 2018.

Issues

The future of electric vehicle (EV) charging stations, especially those with high power, quick charging technologies known as direct current fast chargers (DCFC), must be ubiquitous, reliable, and cost effective in public places easily accessible from major roads and highways.

While there are many issues that must be resolved to create that infrastructure, two major challenges are getting too little attention, and that might undermine those long-term goals. And for both, batteries—onsite energy storage—could provide some unexpected solutions.

Recent evidence shows that electricity costs at DCFC stations may be largely driven by utility demand charges in many regions, particularly at those stations with lower rates of utilization. These might make EV charging costs exorbitant in some utility territories, making it difficult to develop a sound business model for building out charging infrastructure.

This problem was identified in a recent report (“EVgo Fleet and Tariff Analysis”) by Rocky Mountain Institute (RMI) (3). According to the report, which was funded by EVgo, utility demand charges are “a significant barrier to the development of viable business models for public DCFC [direct current fast charger] network operators” (4).

The RMI report indicated that demand charges for some public charging stations constitute nearly all its operating costs:

With today’s EV market penetration and current public DCFC utilization rates, demand charges can be responsible for over 90% of electricity costs, which are as high as $1.96/kWh at some locations during summer months. (Emphasis added.)

In one example from the RMI report, the charging infrastructure company EVgo had a charger that generated a monthly bill of $1,938, of which $1,362 was demand charges. That’s likely a very unprofitable charger. According to the RMI author, this means there is “no business case” for public charging with such high utility demand charges.

If the future of clean transportation will be electric vehicles, utility demand charges are a major market barrier that must be addressed for the success of that energy transition. But that’s not all.

Electrifying the transportation system also exposes vehicle transit to the same power outage problems that plague the electric power system, where there are thousands of outages a year across the country. If EV charging stations are unreliable and susceptible to frequent electric power loss, EV owners will not accept the risks of driving and finding stations out of service, without electric power needed to recharge their cars.

In-depth analysis or comprehensive studies on the problem of EV charging stations and power outages are not readily available, and few reports about this issue have written by advocates for this technology option. It is odd that such a consequential problem is not receiving any serious attention. The best coverage that we could find was a 2009 article in The New York Times that asked, in the context of electric vehicles, “what if there is a blackout?” The expert from a new start-up gamely answered, “a long blackout is unlikely” (5).

With EV transportation, we are importing all the power outage issues from the electricity sector to the transportation sector. That shift is a major one that deserves a great deal more attention, and the lack of analysis is more than problematic. If the entire transportation fleet is to be electrified, as has been proposed, the existing, growing problem of power outages in the electric generation sector should be a key issue in the discussion about transportation electrification. That does not seem to be the case.

For both demand charges and power outages, the conventional solutions are not satisfactory. As to high demand charges and fuel costs, many experts simply say utility rate design will solve the problem. In the case of charging station resiliency in the face of power outages, there seems to be no attention paid to it in the literature (6).

Opportunities and Challenges

People with EVs will want reasonably priced electricity to be offered at times of their choosing at the public charging stations of the future. They will want the same ease and accessibility of the current fuel delivery system, the gas station, at EV charging stations. They also will want stations to run all the time and to provide power for their vehicles at reasonable costs. In both cases the installation of onsite battery storage could solve those problems in ways preferable to some proposed solutions.

On the question of utility demand charges, many reports indicate that this can be addressed with new forms of rate design. According to the authors of the RMI report, the cost of fast charging should be equivalent to the cost of gasoline, and new forms of rates should reflect that cost:

As state legislators begin to craft legislation defining the role of utilities in deploying, owning and operating electric vehicle charging stations . . . it is critical that utility tariffs for EV charging support, rather than stifle, the shift to EVs. Utilities, their regulators, and EV charging station owners and operators must work together to provide all EV drivers especially those without home and workplace charging options access to reliable EV charging at a rate competitive with the gasoline equivalent cost of $0.29/kWh. Put another way, it should be possible for DCFC operators to sell power to end users for $0.09/mile or less, while still operating a sustainable business (7).

Some rate design proposals suggest that utilities should use a variety of time variant pricing in rates, or utilities should simply eliminate demand charges for public charging stations (8). A good summary of this issue by the Lawrence Berkeley National Lab captured the sentiment for rate design solutions, which relies in part on pricing to encourage drivers to charge their EVs at low peak hours—suggesting public chargers would be best use at night or other low peak hours when demand charges are lower. Such “time of use” pricing would:

…encourage drivers to charge during hours when the electricity grid has spare capacity or to alleviate local distribution-level constraints, rather than exacerbating the system-wide peak demand (9).

This is the view of many advocates for EV charging infrastructure. The RMI report noted here suggests that the operating costs should be recovered entirely out of these volumetric rates rather than demand charges. In other words, many advocates are arguing for an entirely new rate treatment for EV charging stations that do not typically now apply to peak load demand charge recovery in buildings across the United States.

This type of approach, based on time-of-use rates where the cost of charging a vehicle varies widely throughout the day, may be an acceptable solution for slower charging devices, those commonly found at homes and businesses. If a vehicle is going to be plugged into a charger for hours at a time, overnight or while at work, consumers may choose not to charge their EVs during a few high-cost hours.

But this type of rate solution is unlikely to work for DCFC, when people are in route and need their vehicle charged up within minutes. The choice of waiting an hour or paying three times the normal rate — just to power their EVs when they need to — will be unacceptable to most vehicle owners.

In case theoretical rate design schemes may not work for fast charging infrastructure, it might be useful to look at technology solutions like battery storage that could be employed if such new ratemaking is not forthcoming and utilities continue to impose demand charges for public charging stations in the future.

In the first instance, it is difficult to see how these rate solutions alone would work in practice.

First, expecting customers to use public charging stations only at night time or at other low peak-demand hours seems to be a basic non-starter for building out the market based on customer choice and accessibility. Customers will expect a certain level of consistency in electricity pricing throughout the day and from location to location when charging their vehicles, as there is with gasoline pricing today.

Second, based on what we know about demand charges for building applications and utility rates, variable rates are not the typical solution adopted by utilities to deal with demand-related costs at the commercial and industrial level. It is unclear why advocates are assuming utilities would voluntarily abandon the use of demand charges for EV stations in favor of volumetric rates. Even if utilities were convinced to abandon demand charges and, instead, embrace a time-varying rate structure, battery storage could be used to help ensure a consistent charging price for customers.

Third, analysis by the National Renewable Energy Laboratory has indicated that, even at low levels of EV adoption, clustering of residential vehicle charging could result in significant increases to localized peak demand, which would require upgrades to the electricity distribution system (10). This means that if a few EV owners in a neighborhood decide to charge their vehicles at the same time, the system could become over-loaded without expensive upgrades to infrastructure. Rate design provides no solution to this problem.

The only reliable way to reduce demand charges and bring the cost of EV charging down to reasonable levels is through on-site battery storage — the same solution that is used to reduce demand charges in commercial building applications.

This was one of the conclusions from a report by the California Energy Commission and the National Renewable Energy Laboratory assessing the impacts of EV charging projects for California (11). The authors stressed that DCFC should be “managed with appropriate electrical service and distributed generation and storage resources to effectively prevent system overloading and to avoid utility peak demand charges.” The report estimated that EV charging would result in a 1 gigawatt increase in system demand for electricity.

The solution would be for each public charging station to be equipped with on-site battery storage and, in some cases, solar, in the same way that buildings are now seeing such systems installed. Of course, this does raise issues about siting, available space, and related questions about whether these locations could be suitable for such onsite applications.

McKinsey consultants also advanced storage as a solution to the issue of demand charges:

Demand charges can be as little as $2 per kilowatt all the way to $90 per kilowatt; paradoxically, they tend to be higher in states where BEVs [Battery Electric Vehicles] are more popular, such as California, Massachusetts, and New York. In a high-charge state, with no cars charging at the same time, the monthly demand charge could be $3,000 to $4,500. For the BEV owner, that could translate into $30 to $50 per [charging] session, plus the cost of the actual energy. Customers just will not pay that. There is a way to resolve this conundrum: stationary battery storage (12). (Emphasis added.)

McKinsey notes that there is a pressing need to expand the existing fast charging stations in the country quickly, which now total fewer than 2,000 stations. Solving this economic problem is critical to get those stations to scale and to support future EV markets across the country. Right now, there are more than 150,000 gas stations in the country, so closing the EV charging station gap must happen soon if the EV market is to take off and compete with gasoline powered vehicles.

In a recent filing by a coalition of advocates for an EV charging station infrastructure plan, a demonstration project with one or two on-site storage for public charging stations was proposed (13). EVgo, which participated in the charging analysis by Rocky Mountain Institute arguing for rate design solutions, now has two charging stations with batteries designed to manage on-site demand in operation in California (14). To create more accessible and affordable public chargers, storage will have to become an embedded design feature, and planners should be encouraged to move beyond demonstration project strategies. In Europe, a massive fast-charger network is being planned in conjunction with 2 gigawatts of battery storage (15).

The added benefit of battery storage and solar PV, in addition to cost reduction, is that on-site solar+storage could help alleviate the problem of power outages. Customers simply will not tolerate the unavailability of electricity when they need it to re-charge their cars.. They will not accept power outages at EV charging stations, period.

And apart from average customers, there is a risk that critical-use transportation such as ambulances, fire trucks, police cruisers, and virtually every other mode of transportation requiring reliable service could now be subject to the vagaries of power outages and disruptions in the electrical service to EV charging stations.

It is unacceptable to leave those risks unaddressed. This is especially so given the amount of revenues at issue.

Americans spend around $325 billion per year on gasoline (16). If the entire gas power car fleet were converted to electricity, and utilities were to acquire that revenue in the form of electric sales from EV charging, it would essentially double the electric utility revenues (now about $381 billion) they now enjoy (17). The National Renewable Energy Laboratory is already forecasting that EVs could result in a 38 percent increase in demand for electricity over the next three decades (18).

Whether those numbers turn into a roughly equal transfer of revenues, the point remains: there is enough money to build a resilient charging system to avoid these problems. Onsite storage at EV charging stations should be an essential feature of system design to address reliability for critical transportation services.

Actions

Policymakers should encourage EV charging industry leaders to install on-site solar+storage as technology solutions to reduce or eliminate demand charges at public charging stations. To date, several providers such as Tesla, EVgo and Volkswagen and have indicated they plan to install on site technology solutions to address the problem, rather than to rely only on future favorable rates as the solution (19). One new European partnership announced in early 2018 states that “customers will from now on be able to combine photovoltaics, power storage and electric vehicle charging” (20).

Policies should be designed to encourage on-site storage as a design feature in DCFC systems going forward, including system design costs with storage and solar, for both utility price control and reliability. Public incentives and other policy options should be adopted to encourage such far-reaching technology solutions on site (21).

Policymakers and EV infrastructure planners and consultants must better understand real world prices from demand charges and analyze how storage paired with DCFCs could reduce EV charging prices for customers. Further, these technology options should be addressed in tandem with the real-world analysis of time-of-use rates or other volumetric pricing proposals—and the effect on market uptake with customers encouraged to charge at low peak times under that new rate regime.

Siting for EV charging stations with on-site storage should be aligned with electric power storage implementation plans and policies—so public EV infrastructure and storage systems can be co-located with commercial and industrial, community, affordable housing, and other public energy storage systems in buildings.

Any state decisions relying on public analysis using public funds must consider how EV charging infrastructure design is subject to the risk of power outages and incorporate that analysis in both funding and design decisions. This is a serious matter that deserves much more attention at the state, regional, and federal level. Studies should be conducted of how power outages could affect system reliability for public EV charging. At a minimum, charging stations serving critical transportation services should have on-site storage as a mandatory design feature (22).

Works Cited

(1) Unlike the ten main topics, this section is probably the most preliminary of those discussed. It is not based on a direct and applied engagement by CEG with these issues, as with the others, but from a literature search, analysis and conversations with industry, policymakers and NGO parties. We acknowledge some of our views need refinement and deeper analysis, and it might well be wrong or not reflect the nuance of advocates more deeply engaged on these matters. But we thought the topics were so timely and in need of review that it was worth writing our views now. We welcome any competing views on these topics to sharpen our understanding going forward.

(2) Bagdasarian, Areg, “Steep Utility Fees are Killing Electric-Car Charging Stations,” GreenBiz, January 12, 2018, www.greenbiz.com/article/steep-utility-fees-are-killing-electric-car-charging-stations.

(3) Fitzgerald, Garrete and Chris Nelder, “EVgo Fleet and Tariff Analysis,” Rocky Mountain Institute, April 6, 2017, https://d231jw5ce53gcq.cloudfront.net/wp-content/uploads/2017/04/eLab_EVgo_Fleet_and_Tariff_Analysis_2017.pdf.

(4) Fehrenbacher, Kati, “Report: Public Electric-Car Chargers Are Being Crushed by Demand Charges,” Greentech Media, April 6, 2017, www.greentechmedia.com/articles/read/public-electric-car-chargersare-being-crushed-by-demand-charges.

(5) Galbraith, Kate, “Electric Cars: What if There’s a Blackout?” The New York Times, February 23, 2009, https://green.blogs.nytimes.com/2009/02/23/electric-cars-what-if-theres-a-blackout.

(6) Battery storage also offers a solution for expanding EV fast-charging infrastructure to locations not equipped for 3-phase power. For these types of remote or underserved locations, which can be common along highway corridors, battery storage may represent a much lower cost alternative than upgrading the system to serve the high-power loads necessary for quick EV charging.

(7) Ibid, n. 4.

(8) Ibid, n. 4.

(9) Elkind, Ethan N, “Plugging Away: How to Boost Electric Vehicle Charging Infrastructure,” UC Berkeley School of Law’s Center for Law, Energy & the Environment and UCLA School of Law’s Emmett Institute on Climate Change and the Environment, June 2017, https://www.law.berkeley.edu/wp-content/uploads/2017/06/Plugging-Away-June-2017.pdf.

(10) Muratori, Matteo, “Impact of Uncoordinated Plug-In Electric Vehicle Charging on Residential Power Demand,” Nature Energy, Volume 3, pp.193–201, January 22, 2018, www.nature.com/articles/s41560-017-0074-z.

(11) Abdulkadir, Bedir, et al, “California Plug-In Electric Vehicle Infrastructure Projections: 2017-2025: Future Infrastructure Needs for Reaching the State’s Zero-Emission-Vehicle Deployment Goals,” California Energy Commission, March 6, 2018, https://efiling.energy.ca.gov/URLRedirectPage.aspx?TN=TN222986_20180316T143039_Staff_Report__California_PlugIn_Electric_Vehicle_Infrastructure.pdf.

(12) Knupfer, Stefan, et al, “How Battery Storage Can Help Charge the Electric Vehicle Market,” McKinsey & Company, February 2018, www.mckinsey.com/business-functions/sustainability-and-resourceproductivity/our-insights/how-battery-storage-can-help-charge-theelectric-vehicle-market.

(13) Walton, Robert, “Maryland is 290K Shy of Its EV Goal; Can a Broad Stakeholder Process Get It There?” Utility Dive, March 7, 2018, www.utilitydive.com/news/maryland-is-290k-shy-of-its-ev-goal-can-abroad-stakeholder-process-get-it/518496. The demonstration projects are outlined at page 48 of the proposed Maryland EV infrastructure plan. See “Petition for Implementation of a Statewide Electric Vehicle Portfolio” from PC44 Electric Vehicle Work Group to the State of Maryland Public Service Commission, January 19, 2018, http://webapp.psc.state.md.us/newIntranet/Maillog/content.cfm?filepath=C:%5CCasenum%5CAdmin%20Filings%5C200000-249999%5C218613%5CFINALPC44EVWorkGroupLeaderProposal(1_19_18).pdf.

(14) Lambert, Fred, “EVgo deploys fast-charging station powered by used BMW i3 battery packs in the US” Electrek, July 12, 2018, https://electrek.co/2018/07/13/evgo-fast-charging-station-used-bmw-i3-battery-packs/.

(15) Deign, Jason, “Pivot Power Plans Massive UK Supercharger Network Paired With 2 Gigawatts of Batteries” Greentech Media, May 23, 2018, https://www.greentechmedia.com/articles/read/pivot-powers-plan-to-fund-a-u-k-supercharger-network.

(16) The Associated Press, “Utilities Worry Charging Electric Cars Could Cause Some Power Outages,” NJ.com, November 23, 2010, www.nj.com/business/index.ssf/2010/11/utilities_worry_charging_elect.html.

(17) U.S. Energy Information Administration, “How Much Gasoline Does the United States Consume?” U.S. EIA Frequently Asked Questions, Accessed March 23, 2018, www.eia.gov/tools/faqs/faq.php?id=23&t=10.

(18) Walton, Robert, “EVs could drive 38% rise in US electricity demand, DOE lab finds,” Utility Dive, July 10, 2018, https://www.utilitydive.com/news/evs-could-drive-38-rise-in-us-electricity-demand-doe-lab-finds/527358/.

(19) Grover, Sami, “Tesla to Triple Superchargers by End of Next Year,” Treehugger, August 3, 2017, www.treehugger.com/cars/tesla-triplesuperchargers-end-next-year.html. See also, Lambert, Fred, “Tesla Plans to Disconnect ‘Almost All’ Superchargers from the Grid and Go Solar+Battery, Says Elon Musk,” Electrek, June 9, 2017, https://electrek.co/2017/06/09/tesla-superchargers-solar-battery-grid-elonmusk/. Volkswagen’s plan in California suggests it will install onsite storage at some public stations; at p. 4 in Volkswagen Group of America. “VW California ZEV Investment Plan: Cycle 1, Public Version,” California Air Resources Board, March 8, 2017, www.arb.ca.gov/msprog/vw_info/vsi/vw-zevinvest/documents/vwinvestplan1_031317.pdf. Subsequent VW plans have been submitted to the state of California to install about 50 highways chargers. See: “Volkswagen Settlement – California ZEV Investments,” California Air Resources Board, December 11, 2017, www.arb.ca.gov/msprog/vw_info/vsi/vw-zevinvest/vw-zevinvest.htm.

(20) Ryan, Conor, “IBC Solar and EVBox Partner on Combining Solar with Electric Vehicle Charging,” PV-Tech, February 15, 2018, www.pv-tech.org/news/ibc-solar-evbox-announce-partnership-to-combine-pv-energyelectric-vehicle.

(21) Trabish, Herman, “How Solar Owners’ Post-Hurricane Demand for Batteries Could Impact Utilities,” Utility Dive, February 15, 2018, www.utilitydive.com/news/how-solar-owners-post-hurricane-demandfor-batteries-could-impact-utilitie/516806.

(22) Perhaps it might be argued that such concerns should not apply to public charging stations that serve the general public but that storage is important for only stations located at fire houses, police stations and hospitals, places where EVs serving those sectors would charge. That might be the case, but it’s not clear that this kind of planning is occurring at any level that is public and transparent.

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