Research Roundup: EV Reports from EEI and UBS

Two new research papers released in recent weeks shed light on the real potential of electric vehicles to upend traditional energy systems as we currently know them. The first report, from Edison Electric Institute, lays out an unambiguous business case for why the power sector needs vehicle electrification to take off and should take various aggressive measures to help expedite their widespread adoption.

EEI also provides an overview of vehicle battery cost projections, with the most optimistic outcomes placing battery cost per kilowatt-hour at around $200-300 in 2020.

In EEI’s view, plug-in vehicles make good business sense for utility fleets in the near term, with short payback periods and lifetime operational cost savings. But there’s much more to it. EEI writes that between 2007 and 2012, retail sales of electricity in the United States across all sectors dropped 2 percent. At the same time, the American Society of Civil Engineers gives our energy infrastructure a grade of D+ and stated that 3.6 trillion of investment is needed by 2020 to maintain and improve the grid. Furthermore, the aging grid is more vulnerable than ever to weather events and cyber-attacks. Stagnant growth and rising costs are a deadly combination for the utility industry. EEI states, “today’s electric utilities need a new source of load growth—one that fits within the political, economic and social environment. Electrification of the transportation sector is a potential “quadruple win” for electric utilities and society, and will enable companies to support environmental goals, build customer satisfaction, reduce operating costs and assure the future value of existing assets.” The report concludes that, “The bottom line is that the electric utility industry needs the electrification of the transprotation sector to remain viable and sustainable in the long term.” But there’s another way that electrification could play out—one that ultimately might be a bigger win for consumers, but would worsen the outlook for the utility industry. Investment bank UBS sees a scenario unfolding where consumers can utilize solar, batteries, and electric vehicles to effectively “opt out” of the current grid, and experience tremendous energy savings. In their view, steep declines in cost of solar panels and large batteries are going to enable new applications, and leveraging the technologies against each other makes them viable without subsidies. Here’s how:

According to their model, homeowners who make an initial investment in solar panels, a stationary battery, and an electric vehicle will break even within six to eight years, followed by approximately 12 years of “free” electricity and transportation fuel. The report states, “One can leverage the EV purchase with an investment in a solar system and a stationary battery. By doing so, one can optimize the self-consumption of solar power and minimize the ‘excess waste’ of solar electricity.” Authors urge readers to "join the revolution" and move away from the current model of dependence on fossil utilities and overpriced liquid fuels. This scenario is the opposite of what Edison Electric Institute wants to happen. In this case, the stationary and electric vehicle batteries can store electricity from a home’s solar panels, utilize that energy at night or during periods of low sunlight, and also meet the household’s transportation fuel demand. However, UBS does state that this shift still represents a “net opportunity” for utilities. They argue that while it’s true that there will be an accelerated paradigm shift away from large-scale conventional power plants, even a 20 percent EV/PHEV adoption rate would only add five percent to power demand, which would likely be offset by energy efficiency gains in other areas. On the other hand, the opportunities for utilities present themselves in terms of smart grids and decentralized backup power generation. Despite UBS’ optimism, it seems hard to see how these gains would offset the massive demand reduction. Importantly, the UBS report focuses mostly on European markets, where liquid fuel costs are significantly higher due to national gasoline and diesel taxes. At the same time, many parts of Europe have much lower sun exposure than the United States. Either way, both reports paint a picture of how electric vehicles will cause massive transition and disruption to transportation and electricity markets, and in both cases, consumers are likely to benefit.