At the end of many corporate financial statements, there is a phrase that reads something to the effect that “past performance is no guarantee of future results.” This seems like an appropriate cautionary message to keep in mind when considering any predictions for the electric vehicle (EV) market, at least in the short term. The COVID-19 pandemic wildcard, on top of uncertainties over tax credits and other incentives, has clouded up many forecasters’ crystal balls.
Longer term, however, analysts remain bullish that falling battery costs and growing greenhouse gas concerns will lead to a rapid uptick in sales later in this decade. Bloomberg New Energy Finance (BNEF) sees EV sticker prices coming even with those of traditional internal combustion engine vehicles around 2025. At that point, the many other advantages EVs offer consumers could come to the forefront. Particularly, ongoing maintenance costs are notably lower for EVs, providing savings that last the lifetime of the vehicle.
With the market set to grow significantly over the next decade, electric utilities are digging into the benefits and challenges EV adoption could bring to their local distribution systems. With electricity demand falling otherwise, this entirely new product category offers utilities a way to grow revenues, possibly without raising customer rates. However, successfully integrating EVs in large numbers also will require significant planning to ensure charging power is available when and where drivers need it. Researchers suggest there are ways to meet these new demands without wholesale upgrades to utility grids. But there’s still a lot of work to be done to ensure the system improvements and rate structures needed are in place once the market resumes its upward trajectory.
Market slow, but options growing
For all automakers, 2020 will represent a slowdown, thanks to the impact the pandemic is continuing to have on automakers’ operations and consumers’ willingness to spend. BNEF anticipates global passenger vehicle sales to drop 23% over 2019 figures this year, with growth not returning to 2019 levels until 2025. EVs are expected to do modestly better than gasoline-powered vehicles, with 2020 sales dropping a slightly less awful 18%. However, the EV market is expected to recover more quickly, with global market share expected to hit 7% by 2023, up from the current 3%.
Benjamin Gardner, president and co-founder of Northeast Group, a Washington, D.C.-based infrastructure research firm, agrees with this assessment.
“In the short term, over the next year or even two to three years, there will be negative impacts,” he said. “Factories have shut down and supply-chain disruptions have created delays. Also, price-conscious consumers are watching their spending. However, we believe that the electrification of transport is a trend that will continue, and longer-term projections of EV sales are largely unchanged.”
U.S. automakers sold approximately 329,000 EVs last year, according to InsideEVs, an industry-tracking website. This figure is actually down 8% over 2018, but the reduction could be due to the 2018 bump from Tesla’s finally making delivery on large numbers of its incredibly successful Model 3 sedan. That vehicle remains the most popular EV on the market by far, despite an initial list price of $50,000. The entry-level model now is listed at $37,990 on the company’s website. InsideEVs estimates 2019 U.S. Model 3 sales topped 158,000 last year. By comparison, Toyota sold only 23,360 of the second-place Prius Prime.
Car buyers’ EV options will expand significantly over the next several years. For example, 2020 should see the launch of Ford’s Mustang Mach-E SUV, along with Volvo’s first EV, the XC40. Chevrolet is expected to debut a new version of its Bolt in 2021, featuring the company’s proprietary Ultium batteries, developed in partnership with LG Chem. Toyota has just introduced a plug-in hybrid version of its popular RAV4 SUV, though supplies are limited.
Several notable EV-only nameplates also are hitting U.S. roads this year, including Polestar, produced by Volvo’s Chinese parent company, Geely. And Rivian, a U.S. company collaborating with Ford on an electric F150, has plans to introduce its own pickup, the R1T, by the end of this year. Also, Nikola Motor broke ground this summer on an Arizona plant intended to build battery- and hydrogen fuel cell-powered semi trucks in the next two to three years.
Of course, vehicles are just half the equation when it comes to electrifying U.S. roadways. All those cars and trucks need access to charging at home and on the road. Currently, there are just over 26,000 public charging stations, offering more than 84,000 connections. The vast majority of these, almost 68,000, are level 2 chargers, according to the U.S. Department of Energy’s Alternative Fuels Data Center. These devices can take an overnight connection to fully charge an EV from empty. There are also approximately 15,000 more DC fast chargers, which can charge some vehicles up to full capacity in 20 to 30 minutes.
A number of efforts now are underway to dramatically increase drivers’ access to commercial chargers. Electrify America, the nation’s largest nonproprietary DC fast-charging operator, recently announced it will have two cross-country fast-charger networks up and running this year. The first, which tracks Interstates 15 and 70 from Washington, D.C., through the Midwest and Rocky Mountain states to Los Angeles, was completed in June. The second, across the southern United States, was planned for completion by September, running from Jacksonville, Fla., to San Diego. Stations are, on average, about 70 miles apart, and the company already covers most of the East and West coasts. Hundreds more stations are planned for the next two years.
“Electrify America expects to install, or have under development, approximately 800 total charging stations with about 3,500 DC fast chargers by December 2021,” said Rob Barrosa, the company’s director of utility strategy and operations. These include locations in 29 metro areas and 45 states. “The majority of stations have, on average, five chargers that range in power levels from 150 kilowatts (kW) to 350 kW.”
The vast majority of EV owners that live in single-family residences also have chargers at home. In fact, that’s where 80% of charging now occurs. As a result, one can anticipate the number of level 2 home chargers be sold over the next decade will track EV sales closely.
Commercial and residential charging will pose challenges for utilities’ distribution systems as more drivers decide to ditch gasoline. For commercial operators, especially those with fast charging equipment, current utility rate structures can mean unsustainable demand charges. These are the surcharges commercial customers pay related to their highest energy-use period of any given month. An Electrify America station typically requires a 1- to 2-megawatt (MW) connection.
“Current commercial utility rates were never meant for the type of charging experience that ultra-fast EV charging networks deliver to customers,” Barrosa said, noting how these rates can quickly add up based on isolated incidents of high demand. “We recently filed public comments that demonstrate how a one-time event of six vehicles charging at the same time for 15 minutes could set an annual utility demand charge exceeding $250,000 at one of our sites. This is not a sustainable model.”
Growing residential adoption raises different questions, especially as vehicles become concentrated within neighborhoods.
“The weak link in the system here is distribution transformers,” Gardner said. “Typically these serve about five to 10 households each. If EVs are clustered on the same distribution transformer and are all charging at the same time, along with other household appliances running, this could create problems.”
Additionally, EVs could add to a utility’s capacity woes if owners automatically plug in to recharge as soon as they get home from work. This timing would coincide with many regions’ peak demand periods. Though this isn’t a problem, yet, in most areas, it could become an issue as more drivers decide to go electric. Residential level 2 chargers commonly draw 6–7 kW, though some can range up to 20 kW, according to Gardner.
“If you look at annual electricity usage, an EV typically accounts for roughly one-third to one-half of a households annual electricity consumption,” he said. “This can vary significantly, depending on a host of factors, but this is a pretty good yardstick.”
To address the potential for local transformer bottlenecks and system-wide capacity shortfalls, utilities are working with regulators to develop time-of-use (TOU) rate plans and explore direct utility management of customers’ charging operations. Simply shifting when charging begins or spreading it out over a longer period could help address issues with minimal added investment.
“EV charging is relatively easy to move around, so long as the vehicle is ready when the driver needs it,” said Jason Frost, associate with Synapse Energy Economics Inc., a Cambridge, Mass.-based energy research group.
TOU rates send the right price signals for EV drivers who rarely drive their batteries down to zero capacity and typically only need to charge a little bit every day.
Off-peak charging provides multiple other benefits that could help curtail electricity costs for all customers, Frost said. Utilities pay premium prices for energy generated during these periods and also for use of transmission lines during such times. Both expenses can drop substantially midday and overnight. Pushing new EV charging demand into those periods could help hold rates down for all of us, regardless of the kind of car we drive.
“There’s potential for EVs to actually reduce rates for customers, because of the ability to spread fixed costs over more kilowatt-hours sold, overall,” he said.