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EVs Create New Value in the Energy Cloud, but Utilities Are Not Guaranteed a Cent

Jan 29, 2019

EVs 2

EVs present utilities with the single largest opportunity for load growth in a generation. However, other industries are eyeing the following alternative opportunities in the electrification of transport:

  • Sales of EVs
  • Charge station sales
  • Solar PV
  • Stationary storage
  • EV battery aggregation
  • Energy supply

Volkswagen Group is the latest automaker to make bold announcements about its plans to power homes and EVs. Its new venture, Elli (short for Electric Life), is an electricity supplier that will converge smart EV charging with a renewable power supply. Elli will target individual EV drivers and fleet operators with a portfolio of solutions. These include intelligent power tariffs, residential wallboxes, vehicle-to-home technologies that store a PV owner’s excess generation through the day, charge stations, a digital payment system for EV-specific tariffs, and energy management software.

EVs Present a Significant Risk to Utilities’ Future Revenue

Traditional energy suppliers should be afraid, as tiles-to-tyres solar PV, stationary storage, and vehicle-to-home services lie outside a monopoly market. Suppliers have little opportunity to influence the development of these services or control who competes in the market. 

Somewhat counter-intuitively, I argue that rather than present significant load growth, EVs could pose a significant risk to utility revenues. Why? The cost of charging EVs can be more than the cost installing a solar plus storage system. If primarily charged at home, EVs will add between $300-$700 to consumers’ electricity bills; annual finance payments on solar and storage systems are around $300-$500.

With automakers moving into EV-related energy services, imagine the pitch that will occur in the EV showroom, where a salesperson can offer a tiles-to-tyres system for less than the cost of charging the EV. Remember, potential customers will be sitting face-to-face with the sales rep, who will be armed with glossy brochures detailing the benefit of their system, a healthy commission, and will be backed by a finance company with €70 billion ($79.9 billion) in assets. In competitive markets, EVs will try to become the customers’ energy supplier. Utilities will only discover a customer has bought an EV once the sale has been completed. If the customer buys solar and storage from the car dealership, it is too late. Rather than grow revenues, they will be lost for at least 20 years.

Utilities Must Become Savvy to Competitive Threats

A utility is at a disadvantage when bundling PV and storage with a smart charge point. The automaker knows which customers are interested in EVs well in advance of utilities, which have no opportunity for a face-to-face meeting with a customer.

In this instance, attack is a good form of defense. In service territories with increasing penetration of EVs, utilities should heavily market a competitive product. Utilities can outflank automakers by playing to their strengths, as households will still need to source electricity from the grid, and solar, storage, and EVs are all resources that can be aggregated to offer grid services. Utilities are far more experienced at developing special tariffs and DER aggregation, but EVs present a remarkable opportunity that utilities cannot take for granted.