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Essential Energy Insights - October 2021


Plugged in to electric vehicle boom, utilities eye billions in benefits

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China's BYD is adding to America's growing electric bus fleet.

Source: AP Photo/Reed Saxon

One of the most polluted cities in the U.S., Los Angeles is stepping up efforts to cleanse its air by completely eliminating tailpipe emissions from its nearly 2,800 public buses by 2030. At the urging of Mayor Eric Garcetti, the L.A. City Council in November directed the Los Angeles Department of Transportation to transition to a zero-emission fleet by the end of next decade, following a similar move in July by the Los Angeles County Metropolitan Transportation Authority, which operates more than 80% of the city's buses.

The two transit agencies are working with the Los Angeles Department of Water and Power, or LADWP, one of the nation's largest municipal utilities, to ensure that its power grid is prepared should their fleets go all-electric, as it appears they may. After the Los Angeles County Metropolitan Transportation Authority's board unanimously set the ambitious target, the agency promptly placed a $108 million order for 100 electric buses from BYD Co. Ltd. and New Flyer Industries Inc. Garcetti called it "a big step toward our goal of having a fully electric bus fleet by 2030."

Combined with rising volumes of electric cars and the rollout of medium- and heavy-duty e-trucks, an all-electric bus fleet could help to brake or even reverse LADWP's retail sales slump in recent years. As with energy users across California and other states, Angelenos' appetite for grid power has eroded largely because of successful energy efficiency measures and on-site solar installations. The arrival of millions of electric vehicles, or EVs, could change that, creating new demand for electricity and giving utilities an important new source of revenue.

'We know the loads that are coming'

Like utilities nationwide, LADWP is eager to plug in to this emerging and dynamic customer segment. The state as a whole is on pace to have a total of 2.8 million to 4.2 million light-duty, zero-emission vehicles on the road by 2030, according to the California Energy Commission's latest forecast, released Dec. 4. That compares to about 350,000 in use in 2017. Electric trucks, equipped with significantly bigger batteries than cars, could rise to around 41,700 by 2030, from less than 1,000 this year, as electricity overtakes diesel and compressed natural gas as the fuel of choice for bus transit.

All told, the electricity required to power electric transportation in California will jump to between 12,000 GWh and about 18,000 GWh by 2030, from only about 2,000 GWh in 2017, the agency forecast.

"We know the loads that are coming," Jason Hills, LADWP's EV program manager, said in an interview. "If everybody in L.A. went electric, it would increase our electric sales by about 50%." The utility hopes to spark a move in that direction with various initiatives to boost local adoption of electric vehicles, which it views as a strategic priority and part of its long-term vision for 100% clean energy, LADWP General Manager David Wright added at a Dec. 11 conference in San Francisco.

LADWP's five-year goals for EVs include expanding sales in its service territory to 15% of all new vehicle purchases and promoting the installation of 10,000 chargers at commercial customer locations. The utility has offered $21.5 million in rebates to its residential and business customers to install chargers, including rebates of up to $4,000 per charger for commercial customers.

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EV charging must be intelligently managed to maximize the full benefits of EVs, utility representatives stressed. For bus fleets, LADWP is supporting the development of an interagency charging facility, for instance, where buses could charge at off-peak nighttime rates. It is also considering time-of-use rates to incentivize consumer charging during peak midday solar power production as a strategy to soak up over-generation, a challenge throughout the West.

Electrifying the transportation system could help decarbonize California's economy while simultaneously lowering rates through more efficient operation of the power system. But "getting people to charge at the right time is going to be critical," Hills said.

The state's investor-owned utilities are similarly enthusiastic. Sempra Energy subsidiary San Diego Gas & Electric Co., Edison International's Southern California Edison Co. and PG&E Corp.'s Pacific Gas and Electric Co. in January proposed spending more than $1 billion on transportation electrification projects. On Nov. 22, an administrative law judge issued a preliminary decision to authorize $42.8 million for 15 "priority review" pilot projects focused largely on charging electric school buses and medium- and heavy-duty transport, including delivery trucks, forklifts, airport and seaport equipment.

Unlike PG&E and SoCalEd, SDG&E proposes to own its own charging infrastructure. "At this point in the state's path towards widespread transportation electrification, we find value in testing, evaluating, and comparing a variety of models to identify and address the different barriers associated with certain market segments," the judge said.

A final decision on the pilot projects could come as early as January.

'Every single utility ... is going to have to prepare'

Driven by environmental policy goals, along with the improving economics and performance of electric vehicles, utility and transit agency engagement in electric transportation is gaining momentum around the country. "Every single utility, if they have a transit agency or a port of any size at all [in their service territory], is going to have to prepare for electrification," Kent Leacock, director of government relations for electric bus maker Proterra Inc., predicted.

In January, Proterra inked its biggest deal to date, to deliver 73 battery-electric buses to King County Metro in Seattle for around $60 million. Seattle and Los Angeles both have signed an international "clean bus declaration" pledging to order only zero-emission buses by 2025. "California is ahead but this is spreading and has the attention of utilities across the board," Leacock said. "Regardless of what is happening in Washington, D.C., this is a movement that is not getting stopped."

In New England, the Massachusetts Department of Public Utilities on Nov. 30 authorized Eversource Energy subsidiaries NSTAR Electric Co. and Western Massachusetts Electric Co. to invest $45 million in electric vehicle infrastructure in the state. National Grid USA, an affiliate of National Grid plc, has made a similar proposal to Massachusetts regulators. The company is one of 15 electric utilities that recently joined with General Motors Co. to launch a new lobbying group to promote electric vehicles and utility-owned charging infrastructure to state governments.

Billions in benefits

Many states are likely to be receptive. The governors of California, Connecticut, Maryland, Massachusetts, New York, Oregon, Rhode Island and Vermont have agreed to a goal of 3.3 million zero-emission vehicles combined in their states by 2025, and promised to work together to create the necessary charging infrastructure.

"Ultimately, the goal is to achieve very deep cuts in greenhouse gas emissions, and transportation accounts for the dominant share," said Chris Van Atten, a senior VP at M.J. Bradley & Associates, an advisory firm that is analyzing the costs and benefits of electric transportation in states around the country in a collaboration with the Natural Resources Defense Council.

In one recent report on five Northeastern and mid-Atlantic states, the firm gamed out several scenarios for electric vehicle adoption and estimated the net present value of cumulative net benefits of between $41.7 billion and $205 billion by 2050. The largest customer savings — and the biggest boost to utility revenues — would come from large-scale off-peak charging at lower prices, which also would reduce the need for system upgrades required for mass charging during peak demand periods.

"You need to devise strategies if there is to be any hope of meeting states' goals," Van Atten said. "There's definitely a lot of challenges and opportunities."