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February 29, 2016
Plug-in electric vehicles: Putting utilities in the driver’s seat

Plug-in electric vehicles (PEVs) currently represent only a very small part of the auto market in the United States. As a result, it’s easy to see why most utilities have to date not given them much attention. However, as multiple factors—growing environmental awareness, lower purchase and running costs and, thanks to the likes of Tesla, a growing “coolness” factor around the vehicles themselves—push toward higher consumer adoption, utilities should start to sit up and take notice. According to Accenture’s New Energy Consumer survey research and econometric PEV adoption models, the demand for electric vehicles will increase sharply over the next five to 10 years. More than half of consumers surveyed said they are considering an electric vehicle for their next car purchase, representing a continuing opportunity for energy providers to increase revenues and engage consumers. And PEVs not only represent a new source of demand to compensate for energy efficiency and direct generation (e.g., solar) but also offer utilities the opportunity to position themselves as innovative—and potentially—clean energy leaders.

So what do the numbers tell us? Every additional 1,000 PEVs on the road will consume an additional 4,000 MWh of annual load. Put another way, the average US household consumption of 11,000 kWh is the same as roughly 2.5 PEVs. And that potential increase in demand comes at a time when households are pursuing local forms of generation, such as domestic solar installations, that demand less from the grid. But aside from providing a new source of demand, PEVs also offer considerable flexibility. Peak charging times for PEVs, typically during off-peak hours (overnight for residential and morning/evening for commercial), are almost the exact inverse of the highest demand from domestic use. And in the future, the ability of PEVs to store and discharge power could make them a valuable part of the grid itself.

A number of convergent trends point to a future marked by much higher adoption of PEVs—both in the United States and Europe. The total lifetime cost (including purchase net of incentives, maintenance, and fuel) for an electric vehicle is now more or less within the range of the average commuter conventional automobile. Over the next five years, we will see significantly lower PEV initial vehicle costs driven by plummeting battery prices, making PEVs a comparative bargain. And the “coolness” factor is being accelerated by companies like Tesla, whose highest specification model performs like a supercar but with energy consumption lower than a small family car. Range anxiety is being addressed by rapidly improving battery performance and gradual growth of more prevalent and higher-capacity charging infrastructure. Added to these are environmental concerns now moving from sentiment into action. Governments too are promoting cleaner forms of energy. There are incentives in place in many US states. In Europe, measures such as vehicle tax or local congestion charging are reduced or waived completely for PEV owners.

This is a market to which utilities need to pay close attention. In our view, there are a number of simple steps they can take to proactively raise their profile and get involved in what could be a key growth platform for the future. At the simplest end of the spectrum, utilities can support the charging infrastructure, tariffs and commercial arrangements that electric vehicles require. They can educate their customer service staff to address the needs of PEV owners. At the other end of the spectrum, utilities can take an active role in shaping regulatory initiatives and incentives to boost adoption, and help to educate and raise consumer awareness. We will take a deeper dive into this topic in a future blog post.

By starting now, utilities can be in the position to successfully drive this new value proposition, instead of sitting in the passenger seat while other players speed ahead of them.

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