Electric vehicle cost-effectiveness
Jul 18, 2016 Dr Peter Harrop
In June 2016, Dr Nancy E. Ryan, Energy and Environmental Economics, Inc., and collaborators issued a paper Electric Vehicle Cost-Effectiveness and its Implications for Utility Program Design.
They quantified the costs and benefits associated with plug-in electric vehicle (PEV) adoption in Seattle, WA under a variety of economic, behavioural, and rate design conditions. They developed a methodology for evaluating net societal and ratepayer benefits from PEV adoption, and found that PEV adoption is consistent with Washington's goal of 50,000 PEVs by 2020. This produces $83 million in net ratepayer benefits (in net present value terms) over the lifetime of these vehicles. They demonstrated that PEVs can provide a net benefit to both utility ratepayers and society at large, and that PEV adoption is unlikely to trigger widespread distribution grid upgrades.
Plug-in electric vehicles (PEVs) interact with the electricity system in a way that is unique among distributed energy resources. Unlike other distributed energy resources such as solar and energy efficiency, PEVs add to total electricity load instead of reducing it. Increasing total load distributes utility fixed costs across a greater number of kWh, giving PEVs the potential to reduce electricity rates for all ratepayers regardless of PEV ownership status. For utilities, PEVs represent a new revenue stream that helps counteract the recent stagnation in electricity demand growth.
Conversely, PEV charging may require utilities to procure additional generation capacity and upgrade distribution infrastructure sooner than planned. If programs are not put in place to encourage charging in off-peak hours, PEVs can drive up peak demand and its associated costs. In an extreme case, PEV adoption could even increase rates since the cost of new grid infrastructure is charged to all ratepayers.
Utilities across the USA have begun developing PEV-related programs that aim to maximize the benefits these vehicles provide while anticipating and minimizing the costs. As of June 2015, 28 utilities in 15 states have established time-of-use (TOU) tariffs specifically for PEVs. Kansas City Power and Light has built a network of over a thousand public EV chargers around Kansas City, and the three investor-owned utilities in California have submitted proposals to the California Public Utilities Commission for similar projects on a larger scale.
In order for a utility PEV program to be effective, the utility must have access to accurate estimates of the costs and benefits that ratepayers and PEV owners will incur under a given PEV adoption scenario. Energy and Environmental Economics, Inc. (E3) has developed a cost-effectiveness model that quantifies the cost-benefit balance of PEVs from various stakeholder perspectives. It presents the lessons for utility program design that come from applying this model to a case study in Seattle, Washington. Its work focuses on identifying the key determinants of PEV cost-effectiveness and how they can be incorporated into the program design process. Together, they provide insight into three key questions:
1. What are the costs and benefits associated with PEV adoption? Are PEVs cost-effective, and from whose perspective?
2. How much can a utility spend on measures to promote PEV adoption without creating cross-subsidization of PEV owners by ratepayers who do not own PEVs?
3. How robust are these findings to variation in exogenous economic conditions, PEV adoption rates, charging patterns, and rate design?
Its case for this study is Seattle City Light (SCL), a municipal utility serving 415,000 customers in and around Seattle, WA. SCL retained E3 for help in forecasting the grid impacts of future PEV adoption as well as the potential for PEV support programs in its territory. The time period for this study is 2016 through 2030, with costs and benefits accruing out to 2040 when the last cohort of PEVs completes its ten-year lifetime.
Here are highlights of the work. Costs and benefits are included in the societal and ratepayer tests. A third perspective not covered in this paper is that of the PEV owner. Also, note that the societal test presented in this study includes only explicitly monetized costs and benefits. It is possible to expand the test to include non-monetized benefits such as health and energy security improvements from reducing fossil fuel use; this would increase net PEV cost-effectiveness.
IDTechEx observes that studies across the world rarely show any grid problems from EVs. This study adds interesting measurement of overall economic benefits to the community. Consideration of the health benefits would make their overall case even more compelling. US consumer behaviour has been positive as with Tesla 3 flood of orders but sadly far more drivers are moving to large vehicles and sticking with gasoline. In IDTechEx ongoing interviews, there is real concern about the possible impact of a Republican government. We are repeatedly told that too many Republicans are in denial about both global warming and deaths and injuries from local emissions from vehicles. IDTechEx is impartial in the matter.
Top image of Dr. Nancy E. Ryan source: Energy and Environmental Economics, Inc