Electrification: The Demand Wave Created by Electric Vehicles and Appliances
It’s time for those in the energy industry to address the challenges and opportunities of the growing electricity demand.
By Thomas Gros
We are just now at the beginning of an unprecedented wave in electricity demand growth. As electric vehicles replace gas-fueled vehicles, and as electric home appliances displace gas and oil-fired home appliances in the push to decarbonize, the load on the power grid will increase materially. Utilities, power generators, retail electricity providers, and other firms should take steps now to capture the opportunities and overcome the challenges.
As a young engineer working for the Edison Illuminating Company of Detroit, Henry Ford began experimenting in his spare time with gasoline engines on his Quadricycle. When he met Thomas Edison in 1896, Edison encouraged him to continue his experiments. Twelve years later, Ford’s Model T made its debut, and the global automobile industry, propelled by internal combustion engines, was born. It would take nearly a century for the industries founded by Edison and Ford to come together and transform personal transport once again — this time based on electric propulsion.
Electric Vehicles, or EVs, are an increasingly familiar sight on the roads of Asia, Western Europe, and the Americas. In the fourth quarter of 2021, EVs and hybrids accounted for 11% of new car sales in the US, according to the Energy Information Administration. Gartner estimates that six million EVs will be built across the globe in 2022, a 50% increase over 2021. As the total cost of ownership of comparable EV and gas-powered models gets closer, forward EV sales are projected to increase, and in many scenarios, dramatically.
The opportunities arising from electricity demand growth to charge these EVs are significant for utilities, power producers, and other firms. Providing a few key numbers illuminates the discussion:
- There are more than 111 million automobiles in the US, with over 14 million in California alone.
- A standard Tesla Model 3 is equipped with a 50kWh battery, and a Tesla Model S battery is 100kWh.
- According to the Energy Information Administration, the average US retail price of electricity in 2021 was $0.1372/kWh.
Using the Tesla S example above, the consumer would pay just under $13 for a typical 20%-to-100% charge (80kWh x $0.1372/kWh/85% efficiency). If half of the 111 million cars were EVs like the Tesla S, and they charged twice weekly, US EV charging revenue would be almost $75 billion annually. Think of that as a funds transfer from the corner gas station to the local power utility.
According to the US Census, two-thirds of Americans live in houses, so it’s reasonable to assume that most EV charging will take place in garages overnight. This creates new opportunities for residential time-of-use (ToU) pricing options and demand response programs that help to defer EV charging to off-peak periods. The charger itself is a new hardware/service opportunity that could be linked to provide backup power from the EV battery to the connected home. It also has the potential to be linked to roof-mounted solar panels or used to extend the output of a nearby community solar array.
For EV owners without access to a garage, utilities and other firms have the opportunity to create private charging networks in apartment complexes, public charging networks, and workplace solutions.
EVs also present challenges, including significantly increasing the burden on transmission and distribution (T&D) infrastructure and generation assets already stretched by renewables-induced intermittency. Consider these two points:
- A Level 2 EV charger — the type mounted on the garage walls of many EV owners — operates at 240 volts and can draw up to 80 amps — which would be the largest circuit breaker in almost all US homes.
- Assuming a battery charging system efficiency of 85%, a Tesla S battery will charge from 20% to 100% in about 4.9 hours. If the charger were connected to a 40-amp circuit — the amperage used to power a double wall oven — charging time would increase to 9.8 hours.
The timing of these extended 40 to 80-amp incremental loads presents an additional challenge: as the end-of-workday rush hour wanes, the charging rush begins, just as (or soon after) solar generation falls to zero.
EVs are the single most significant element in the drive to electrification, but there are other incremental loads that will connect to the grid over the coming years. As natural gas, propane, and heating oil begin to be phased out in the de-carbonizing economy, the home appliances they fueled (e.g., heating systems, hot water heaters, clothes dryers, ovens, cooktops, outdoor grills, pool heaters) will all be replaced by their electric cousins. Each of these is a significant load. Taken as a portfolio and added to EV charging, they represent a massive increase in residential demand. Indeed, a house that had met all its thermal load with natural gas appliances that transitions to all-electric appliances could easily triple its peak demand on the electric grid — and that’s before adding an EV in the garage.
So, what steps should utilities, power generators, retail electricity providers, and other firms take to prepare for electrification?
- Start planning now. Electrification is inevitable, but the path is uncertain. As a result, we like to build a portfolio of data-based scenarios that cover the range of possibilities, calibrated against data from those facing the challenge ahead of the US — namely Europe, which had about 5.6 million EVs on the road at the end of 2021.
- Roll out innovative consumer products now. Retail products that help shift load can be introduced and fine-tuned ahead of the demand wave. Time-of-use (ToU) pricing offers in retail products are a good starting point. Residence-level demand response products — either triggered by the utility or by the consumer reacting to ToU price signals — also make sense to us. Leverage web applications to increase the efficiency and attractiveness of the new offerings and iterate based on data collection and analysis. Use web-based tools to communicate with retail customers, engaging them in the approach and (in competitive markets) increasing customer stickiness.
- Invest in systems that maximize operational flexibility. From T&D to plant maintenance to customer billing systems, the more flexible you can make your systems, the more likely they will be able to perform in a more complicated and highly uncertain future.
Returning to that fateful meeting in 1896, we can only wonder if it had gone on a bit longer, would the Model T have had a vastly different motor under the hood?
Explore this topic further with additional articles in the series:
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