Wednesday, January 23, 2019

State Regulators Hear Challenges, Promise of Electrification

By Rich Heidorn Jr.

SCOTTSDALE, Ariz. — The Electric Power Research Institute says electrification of transportation and buildings could boost U.S. electric load growth by as much as 52% by 2050. That’s 1.2% per year.

Wilson | © RTO Insider

“Compared to 2005 to 2015, that’s a lot. … Compared to the 1990s, that’s not much,” said Tom Wilson, EPRI’s principal technical executive, who briefed state regulators on the organization’s April 2018 National Electrification Assessment at the National Association of Regulatory Utility Commissioners’ Summer Policy Summit last week.

The promise of electrification, and the challenges to achieving it, were recurrent themes at the NARUC conference, which attracted more than 800 regulators, utility officials and others.

Charging Infrastructure

Speakers said reducing electric vehicles’ costs and increasing charging infrastructure are among the biggest obstacles to reaching the top end of EPRI’s forecast (its “Transformation” scenario, which assumes a $50/ton CO2 price in 2020).

electrification charging infrastructure NARUC

Transformation scenario projections for U.S. total final energy by fuel (left) and electric demand by sector (right). | National Electrification Assessment, EPRI

“We have to get cost out of the vehicle without sacrificing durability, reliability,” Britta Gross, General Motors’ director of advanced vehicle commercialization policy, said during a dinner panel sponsored by the Brattle Group on the sidelines of the conference. “The next four or five years will be crucial.”

Gross | © RTO Insider

Former NARUC President Phil Jones, now executive director of the Alliance for Transportation Electrification, decried the “woefully inadequate” vehicle charging infrastructure during the Brattle panel and an earlier NARUC session on the effects of electrification.

Jones said developing DC fast-charging infrastructure will be challenging for regulators because the system is likely to see low utilization rates initially. That will call for creative rate structures, said Jones, who served 12 years on the Washington Utilities and Transportation Commission.

“The problem is demand charges kind of kill the business case for that. So, for utilities to put that into a proposal, you all are going to have to grapple with that,” he told the regulators. “Do you spread those costs out over two years, five years, 10 years?”

Gross said the U.S. has only 1,300 DC fast chargers, which can deliver 50 kW and provide a 90-mile charge in 30 minutes. “We need 10 times as much DC fast charging and 20 times as much Level 2 charging,” a 240-V AC outlet that can charge in 5.5 hours.

“Benefits accrue at scale,” she said. “How do we get there?”

Utilities’ Role

The Brattle panel focused on whether utilities should help build some of the infrastructure.

High level overview of modeling results | National Electrification Assessment, EPRI

“Absolutely they should [be involved] … because there are market failures and gaps today,” Jones said. “The infrastructure we have through the non-utility competitive model today is totally insufficient in each of the states that you live in. Do the utilities need to do everything? No, but the utilities in our view … have a very important role in catalyzing the market.”

Attorney Paul Afonso, a board member of Braemar Energy Ventures, disagreed with Jones’ declaration that the market has failed. Braemar has invested $141 million in ChargePoint, which builds EV charging infrastructure.

Afonso | © RTO Insider

“We can’t condemn [the market] to failure before we get it to start,” he said. “The utility has a relationship … with their customers that’s unique. … There need not be, nor should there be, disintermediation between that. So [ChargePoint is] working with pilots in Columbus with [American Electric Power]. That [charging] station [is branded] AEP. And it’s our network that runs the network software.”

Weiss | © RTO Insider

Brattle principal Jurgen Weiss said European regulators have generally opposed utility ownership of charging infrastructure. “There are lots of potential players out there. It’s entirely understandable how it could be a competitive service — in the long run. But we’re not in the long run; we’re hardly in the short run. … We’re trying to get something to scale.”

Weiss insisted the need for capital is so large there will be room for investments both by utilities and private capital.

“It’s worth considering utilities being part of this game for the next ‘X’ years, and then … we can collectively reconsider whether this is not a flourishing competitive market,” he said.

To overcome range anxiety, drivers need to know charging stations are available “even if they will never use” them, Weiss continued. “We will probably need to build more than we need.”

Indeed, according to Gross, 95% of vehicle charging currently occurs at home or work. How the charging network is marketed may be more important than its size, she said.

“If you could just find a way to tell a story better with 20 stations around your state, it’s a lot better than wasting your money on 200 stations. … In Michigan, if every DC fast-charge station was near a lighthouse in Michigan you’d [say], ‘Oh, I know what that means,’” she said. “Storytelling can go a long way to raising the perception of the availability of infrastructure without having to make it ubiquitous.”

Jones said the development of charging infrastructure has been hurt by proprietary charging systems that “can’t talk to each other.”

Jones (left) and McGill | © RTO Insider

“It reminds me of the telecom days 10 to 15 years ago. So, we have Tesla with a proprietary system. We have many … vendors building out proprietary systems, both on the network management side — the back end — and even on the front end, we have plug issues.”

Jones said regulators should insist on open standards as a condition for ratepayer-funded investments by utilities.

Utilities also will have a role in planning systems, Jones said. “We have the West Coast electric highway. This was politically driven by the governors and state [transportation departments]. They decided [to use] DC [fast charging]. … Has that been incorporated into the utility [integrated resource plans] in Oregon, Washington and California? No. … We have the Electrify America Network that’s building out a charging infrastructure on its own. Is that coordinated with the [state] commissions? … No. … From a planning standpoint it’s kind of a mess, so I would just posit that the utilities have a big role to play.”

Jones said several states are leading the transition to EVs, naming Michigan, Maryland, Ohio, Washington, California and Oregon.

Role for Oil Companies?

From the Brattle audience, Betty Ann Kane, chair of the D.C. Public Service Commission, asked why service stations haven’t jumped at the chance to install charging stations.

Gross said oil companies have shown little interest “in what feels like a logical answer.”

Jones said his organization has talked with the American Petroleum Institute and National Association of Convenience Stores.

“They are studying the opportunity … but they aren’t coming around to the realization that this is a real opportunity. And in fact, in many states in the Midwest, they are opposing us. … And others in the industry are kind of aligning with the oil and gas interests to oppose utility investments in this infrastructure.”

Weiss was blunt. Oil companies “want to slow this [transition away from gasoline-powered cars] down as long as they can,” he said. “The oil companies are going to come around. The question is how quickly.”

New Value Proposition

Weiss said EV proponents need to change the way regulators look at benefits and costs, noting that electricity purchases represent only 1.6% of disposable income. “There’s just not a lot of money in there compared to the [fuel cost] savings [of] changing from internal combustion engine car to driving an EV. … You probably don’t even have to look at greenhouse gases” as a benefit.

Levin | © RTO Insider

Emily Levin of the Vermont Energy Investment Corp. raised a similar concern in a second NARUC session on energy efficiency’s role in electrification.

“The boundaries we’ve drawn in a lot of cases around energy efficiency programs are too narrow, in having goals around kilowatt-hour savings,” she said. For example, EE programs on heat pumps “often don’t count the fuel savings, the gas or the oil savings. … They only count the increment of savings from an efficient heat pump over a baseline heat pump. … They’re leaving a lot of savings on the table.”

She called for “next generation” goals that consider carbon emissions or focus on peak demand reductions rather than baseload cuts.

Lazar | © RTO Insider

In the same session, Jim Lazar, senior adviser for the Regulatory Assistance Project, recalled his work on projects 30 years ago that concluded that natural gas space and water heat were superior to electric space and water heat for new construction. “But then heat pumps weren’t very efficient. Heat pump water heaters weren’t available. Wind and solar were not real grid resources,” he said. “Every assumption we made in those papers is now obsolete.”

Now, he said, the most efficient new homes use too little energy to justify both natural gas and electric service connections.

Carter | © RTO Insider

Sheryl Carter, director of the Natural Resources Defense Council power sector, briefed regulators on the findings of the organization’s 2017 study outlining a strategy for reducing greenhouse gas emissions by 80% by 2050 from 1990 levels through increased efficiency, electrification and renewable generation. It envisions electricity supplying 45% of all energy needs, up from the current 20%.

NRDC says its strategy would increase U.S. energy costs by only 1%, an annual cost of $22 billion that it says would produce more than $154 billion a year in health and environmental benefits.

In an earlier NARUC session, Chris McGill, vice president of energy analysis and standards for the American Gas Association, criticized those who want to quickly eliminate fossil fuels.

“What problem are you trying to solve?” he asked. “Is natural gas no longer a good consumer value? Do we no longer have an enormous resource base? Do we no longer have a huge legacy infrastructure? … Natural gas use in the household here in the U.S. accounts for 4% of greenhouse gas emissions … a pretty small target.”

McGill cited an AGA-funded study that found a “policy-driven” electrification of the residential sector would cost $590 billion to $1.2 trillion by 2035, the equivalent of $572 to $806/ton of CO2.

“When I hear discussions around electrification — that it’s going to happen very quickly … and it’s not going to cost anybody anything, I believe that is preposterous.”