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.