EV Use Can ‘Cut Unit Cost of Electricity for Everyone’: Q&A

By Bryony Collins, BloombergNEF editor. This article first appeared on the Bloomberg Terminal

Adoption of electric vehicles can make fuller use of the existing infrastructure across the U.S. and therefore “reduce the unit cost of electricity for everyone”, according to Patricia Poppe, president and chief executive at CMS Energy Corp.

Speaking to BloombergNEF’s Stephen Munro in an interview on-stage at the BNEF Summit in San Francisco on February 5, Poppe said that charging EVs off-peak enables power plants to be used more efficiently.

The $15 billion-valued utility’s home state of Michigan has a typical summer-time peak of 7,500 megawatts, but that only occurs for 12 hours per year when air conditioning demand is very high, said Poppe. Outside of those 12 hours there is “anywhere from 3,000 to 1,500MW of excess supply”, and therefore “plenty of room to bring EVs on the grid,” she said.

Using data analytics to smart-charge EVs enables them to charge at times most convenient for the grid. So EV uptake will both bring “societal good to reduce carbon emissions” and enable the electric grid to be used more efficiently, said Poppe.

Autonomous transport will be a “market mover” and will drive the electrification of transport, said Poppe.

Watch the on-line video of Poppe’s interview here. The next BNEF Summit will take place in New York on March 25-26.

The interview below has been edited for conciseness and clarity.

Munro: Let’s start off talking about [vehicle] electrification, and specifically charging infrastructure. Regulators in Michigan recently approved a pilot plan in which CMS will lead all the state utilities in a roll-out [of charging infrastructure] and they gave you more money than was requested. So what’s behind that?

Poppe: Keep in mind that it still is a small amount. We requested $7.5 million, and we were approved $10 million, to make ready for charging infrastructure – both for residential level two and fast charging for commercial customers – whether it be shopping centers or an apartment complex.

Electricity charging infrastructure [is important] to enable the transition from ICEs [internal combustion engines] to electric vehicles.

The verdict is clear – that there’s a societal benefit to reducing emissions. This year’s the first year that more carbon emissions have come from transportation than power generation, because we have retired so much coal.

So as we transition to cleaner energy; to have cleaner transportation is an important societal move [and] we should be making that transition at the lowest cost possible. So that we can have the societal benefits of lower carbon emissions, and do so cost effectively.

So to do that, charging should be enabled off-peak and then there’s ample supply.

Q: How may that contrast, or not, with [Detroit automakers] – almost all of whose profits derive from ICE vehicles, although they’re to varying degrees involved in electric vehicles. To what extent do they share your point of view?

A: I’m the chair of the Edison Electric Institute, electric transportation committee – and we had an opportunity to meet with the automakers.

They believe that transitioning to lower emissions is good for society and that autonomous vehicles are in demand by customers. People want more screen time, not windshield time. Young people have less ambition to own a car. Things are changing for them – and so to have an autonomous, mobility solution fueled by an electric powertrain has become quite compelling.

Chinese mandates are having a huge effect. If the largest market for vehicle sales in the world is mandating an electric powertrain, and the most expensive cost in a vehicle is the development of that, you can bet that they will try to sell as many EVs as they can across the globe, not just in China. To maximize the margin on the investment they’ve made in the development of the vehicles.

Q: How do you incentivize your customers to charge their electric vehicles during off-peak times?

A: In general, our electric grid in the U.S. was designed post-world-war for the sake of the booming electrification of our nation – rural electrification, factories were starting up… So we built power plants, substations and conductors in the most economical way at that time, which was through centralization.

Today, in general across the nation, we have excess supply to serve a peak demand. And peak demand in most cases is driven by residential air conditioning.

If I turn on all power plants [in Michigan], I have 8,300 megawatts of supply – but that’s only been used about two hours in the last decade. On a typical summer peak, we may hit 7,500MW for 12 hours a year. And the entire system is designed to serve those 12 hours, because in the past we could never do anything about changing that peak. So we had to build the whole system to serve that 7,500MW of demand, while the rest of the year demand is on average 4,500MW.

So for anything but those 12 hours, I have anywhere from 3,000 to 1,500MW of excess supply. So I have plenty of room to bring EVs on the grid, as long as they’re not charging in those 12 hours [of peak demand] a year.

Not every jurisdiction is the same. South Carolina or Georgia has more A/C [air conditioning] load than Michigan, so their peak is not going to be as plentiful, but it still exists.

So with data analytics, and smart charging – where you can interrupt on peak – we can more fully utilize the existing infrastructure across our country, and therefore reduce the unit cost of electricity for everyone. So not only is it a societal good to reduce the carbon emissions, EVs can fundamentally reduce the unit cost of electricity for everybody.

That bodes well for the adoption of EVs and their integration into the grid.

The grid of the future [needs] multi-modal transportation, distributed energy resource and smart batteries in cars. Data analytics and its application to the grid is one of the most exciting transformations to happen to our industry and EVs enable more levers and optionality.

Q: Is this where your customers in Michigan want to go in terms of EV uptake?

A: Electric powertrain by itself is not a market mover. We’ve shown that over the last decade – the adoption rates of EVs for the sake of electric is only compelling to a small percentage of the population.

What I personally think is a market mover, is autonomous vehicle… Level five autonomy probably has some legal hurdles, but the idea that autonomous will happen faster than people expect is real. And autonomous will be fueled by electricity. So given that, we need to make sure the electric infrastructure is ready and then we can get the benefit of the utilization of the electric grid more fully.

Q: What’s your vision of EVs in Michigan as a rival to New York or California – or other states that we tend to think of as an epicenter [for the industry]?

A: It is happening more slowly [in Michigan]. Obviously, policy in California and New York drives it but we are open to it. What has been proven in other states is that if you have the infrastructure available, it can enable the transition. It won’t move the market – just putting in infrastructure doesn’t make people buy the cars – but it does eliminate one barrier.

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