Fleet Operators See Dollar Sign From Recharging the Grid: Q&A

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

Fleet operators will be able to earn revenue from using the aggregated battery storage potential of their electric vehicles to store excess renewable power from the grid and dispatch it when needed, Tarak Mehta, president of ABB Ltd.’s electrification business told BloombergNEF in an interview.

The “stable demand pattern” of fleets, which usually complete set delivery or transportation routes, is ideally suited for managing the supply and demand balance on the electric grid, Mehta said.

EV fleets can be charged during off-peak times and can release energy back onto the grid when demand picks up during the evening hours as householders return home and wish to charge their own EVs.

ABB is still in the early-stages of helping fleet companies transition to EVs, but has “some pilots” underway to look into vehicle-to-grid charging. Agreement with utilities on the value of power fed back into the grid and sign-off from carmakers on the charging and discharging of EV batteries will be needed before vehicle-to-grid charging can be commercialized, said Mehta.

Delivery companies including DHL Group and Unilever are already investing in electrified commercial delivery vehicles for driving in dense, urban areas.

Read the Q&A for more.

Q: What impact do you see EV charging having on the electric grid?

A: We’ve been invested in this business for close to a decade, and in the last three years there has been a significant increase in business volumes related to electric vehicle charging infrastructure – not only the chargers but also the connection to the grid.

Of late, we’ve seen a significant pick-up among the governments of the world and public transport officials, who are interested in seeing if they can switch their bus fleets from diesel to electric-powered.

We’ve done a high-profile project in Hamburg where [we have installed a] fully electric bus depot. That went live just a few weeks ago.

Q: What challenges are there in rolling out EV charging infrastructure?

A: The entire business has three challenges. The first is availability of vehicles – so we work with global automakers to help ensure that the standards and infrastructure we are putting in is future-proof. The second is infrastructure, where we work with utilities and governments to ensure that connections are secure and can handle the extra power demand coming into the grid from EVs. Thirdly, we focus on ensuring that all of this comes from renewable sources, so that it’s of environmental value.

Today, the biggest challenge remains for consumers to choose electric, but we think that will be resolved very shortly with new EV models coming to market.

The challenge still remains to connect EVs to the grid. We are working with utilities to ensure that the demand charges and infrastructure are providing higher utilization but also a more cost-efficient solution for investors in this space.

Electric Vehicle Outlook 2019 Read excerpts from the report here.

Q: How will there be a different impact on the grid from fleet charging, as opposed to lots of private vehicles charging?

A: Utilities can probably handle quite a bit of EV load on the grid – but it’s between the hours of 4 and 7pm when households come home and charge their electric cars that will pose a problem, as the amount of power required to charge an EV can be equal to an entire household’s energy needs. So calibrating energy supply during peak hours of demand will be the big challenge.

There is a significant opportunity for fleet operators to use electric vehicle batteries [to store excess renewable power when it is not needed and dispatch it to the grid during hours of peak demand]. Fleets have a stable demand pattern that infrastructure operators can use to optimize demand and supply, and reduce the cost of infrastructure.

Fleets will be one of the first business cases for putting energy back into the grid and storing it in large quantities in EV batteries that are moving – in buses, trucks or car fleets.

Q: Are you seeing any fleet companies doing that yet?

A: The first step we are taking with fleet operators is converting their depots from petrol or diesel to electric charging. In terms of putting power back into the grid – we are not there yet. We are looking for some pilots and we have a few underway, but nothing of material size.

There are some challenges with respect to utility regulators approving that business model. You need to have an agreement with a utility on the feed-in value of your power, and utilities want the capability to control when power is fed in and fed out. So it will take some time for both sides to decide on the fair value for flexibility.

Electric fleets are in their infancy in terms of volumes, because supply isn’t there and business cases need sorting out.

Q: But ultimately, you see this being a good source of potential revenue for fleets?

A: Yes, very clearly. However, carmakers also need to feel comfortable that the charging and discharging of their car batteries [doesn’t impact upon the lifetime or warranties of their vehicles].

Then comes the agreement with the utility to use [grid power] to charge and discharge the battery.

Q: There are ongoing trials for vehicle-to-grid charging for passenger vehicles though?

A: Yes there are, but from a volume perspective, the infrastructure being installed today is a one-way highway. Most cars being designed are only for power to go in, not necessarily for the power to go back out.

But ultimately, a car battery could make a house almost like a self-sustaining grid. If you can imagine that it charges during the day, and then there is still leftover capacity during the night if needed. We see lots of applications for moving power back and forth between a vehicle and the grid, but the business models required to make it work at scale are only pilots right now.

We are having confidential discussions with some of the biggest fleet operators in the world to work out the business model [for fleet charging].

The total cost of ownership of an electric fleet is the biggest area where we see progress and, once the economics there start to look good, then the secondary issue will be to resolve how to use spare storage capacity of batteries to reinforce the grid.

Q: What is the payback period?

A: It will take time for EVs to compare in cost to that of a gasoline or diesel-powered bus, truck or taxi, due to the higher battery cost. However, the total cost of ownership starts to tip on certain electric fleet applications with a two to three year return, and then the maintenance cost is lower too. Electric parts last much longer than those powered by gasoline or diesel.

Q: In what kind of application do you see the shift to electric-powered commercial vehicles?

A: We see the stop-and-start commercial delivery vehicles as probably the first [examples of shifting to electric], operating in a high-density urban environment. There are more and more examples of operators seeing the value in switching from diesel fleets to electric due to the reduction in noise and pollution.

The biggest issue is a lack of availability of commercial vehicles that are electric – in the next 12 to 24 months we see many more vehicle options coming to market.

Q: How will grid reliability be managed when full-scale EV charging gets into swing?

A: Firstly, we will need to manage when EVs are charged because if we can push charging off-peak, then that will vastly improve the situation.

We have applications where, because of the nature of the grid and low utilization of charging infrastructure, we are putting in energy storage that allows for very fast charging of cars without necessarily putting the entire load on the grid. [It means that, instead of pulling the entire 150 kilowatt demand for fast-charging from the grid, that energy can be built up over time and stored in a battery, which then supplies power to a vehicle when charging is required].

The storage helps to balance the peaks and means that infrastructure can be installed where the grid might not have capacity to take that much load. Not everywhere can you hook up six 150-kilowatt chargers and expect the grid to handle it without any problems.

Higher-density urban areas are the most likely areas to install energy storage to support EV charging, because there is very little spare capacity today to support existing loads. That’s where storage will be the most valuable and have the highest return.

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