The energy industry is undergoing rapid transformation. In many countries, fossil fuels and nuclear power are being phased out, and utilities are under immense pressure to integrate renewable sources into the grid.
While the share of renewables in the EU increased from 20% in 2010 to 38% of total energy production in 2020, energy providers struggle to keep up the pace and shift to green, low-carbon sources in a cost-efficient way. They need to account for renewable production variability and develop effective operational strategies to maintain energy services during periods of low supply and high demand.
Apart from the operational risk of shifting to cleaner energy sources, providers also need to consider the cost of restructuring supply and investing in renewable technologies.
Overall energy demand is stagnating in developed markets, with data from the International Energy Agency showing that consumption in the EU has hovered around 3100 TWh per year, while countries like France, Germany and Sweden have even seen as 6% drop in demand between 2010 and 2019.
While overall energy demand may fall even further, increased electrification can offer a glimmer of hope to the energy industry. EV adoption is rising fast, and so is the demand for charging infrastructure to keep our electric cars up and running.
Therefore, charging services can become a valuable new business model for the energy sector. As more and more people switch from traditional fossil fuel cars to electric vehicles, energy companies could also tap into emerging technologies to improve a whole host of grid services.
Let’s take a closer look at the opportunities that e-mobility offers to the power sector.
Opportunity 1: Incentivise off-peak charging through dynamic pricing
While many energy suppliers already have residential time-of-use plans that discount electricity late at night, they can also develop incentive schemes to encourage drivers to charge EVs during off-peak hours or take up excess renewable energy on ‘green charging’ plans.
Improved demand forecasting through separate charging tariffs
Separate tariffs for EVs would give suppliers insight into charging behaviour and allow them to cluster charging data based on geography and demographic factors. Analysing this data would allow them to improve the accuracy of demand forecasts, thereby making it easier to align demand and supply on the energy markets. This will ultimately lead to lower cost for electricity production (and thus lower consumer prices) and will allow for more renewable energy in the energy system.
With these tariffs, EV and fleet owners could set up charging preferences and dynamically respond to price signals from system operators in exchange for cheaper rates.
Dynamic pricing and the energy markets
Traditionally, transmission system operators send price signals to flexibility sources like natural gas combustion or hydroelectric plants to steer the grid frequency, and ensure it remains within a specified limit even when the demand or supply of power changes.
However, separate EV tariffs could allow EV and fleet owners to set up charging preferences and dynamically respond to price signals from system operators in exchange for cheaper rates.
The main benefit of using EVs for frequency regulation is that they that have a low ramp rate and short minimum run-time, which means that they can respond to system operators’ instructions within a matter of milliseconds. In other words, they can quickly provide the electricity stored in their batteries to meet short-term increases in demand or absorb excess supply.
Thereby, they can reduce the need for energy suppliers (BRPs) to purchase and increases their options to sell large amounts of electricity on the (sometimes expensive) real-time market in an efficient and cost-effective way.
EVs batteries also have much lower operational costs than other highly flexible power sources, which makes them ideal for flexible ramping. In the case of grid failure, EV batteries could even be co-located (just like diesel generators) to provide the power to restore generation plants, effectively offering black-start services to the grid.
Given this flexibility, electric vehicles can be seen as a perfect solution to deal with sudden surges or dips in electricity consumption and improve the stability of the electricity system.
Opportunity 2: Use smart charging solutions for load management
While expanding the number of charge stations is essential to meet the rising electric power demand for EVs, too many vehicles charging at once could cause reliability and quality issues for the local electricity grid.
Charge point operators can invest in smart charging to reduce the impact of charge stations on the grid by making optimal use of the existing electricity net. Through smart charging technology and so-called time-of-use tariffs, they ensure that charge sessions are managed for the benefit of many energy industry participants.
For example, driver incentives to charge at night, or early in the morning, can help reduce the pressure on the local grid, as energy is distributed away from peak hours. This benefits distribution system operators, as local grid capacity may remain sufficient for household even as electrification continues.
As a result, DSOs can avoid time-consuming upgrades local grid connections while minimising costs for laying new cables, installing additional switches and setting up new transformer stations.
The Dutch grid operator Enexis, for example, avoided an estimated investment of 250.000€ by using GreenFlux’s smart charging technology at their headquarters instead of upgrading their local grid connection. The potential cost savings at the distribution network (rather than building) level are of course many times larger than this – often in the tens and hundreds of millions.
Opportunity 3: Increase grid flexibility with smart charging and V2G
EV charging can offer flexibility to energy markets at almost zero marginal cost.
As electric vehicles are idle around 90% of the time, their batteries could be used for additional storage capacity. During periods of high supply, drivers on managed smart charging plans could be asked to absorb surpluses in energy production to provide additional flexibility to TSOs and DSOs.
Vehicle-to-grid technology (V2G) can take us this one step further, by allowing energy stored in EV batteries to be fed back into the grid during periods of low supply or high demand.
With the help of smart charging and V2G technology, EVs can also provide smart, decentralised storage to help the energy sector unlock the potential of variable renewable energy. While the amount of energy produced from wind and solar remains very hard to predict, with sophisticated algorithms, EV batteries could unlock a new source of flexibility that complements existing storage solutions like pumped hydro and thermal power plants.
Key takeaways:
- Energy suppliers can incentivise off-peak charging through dynamic pricing
- DSOs can benefit from smart charging, as it reduces the pressure on the local distribution grid
- Mobilising the flexibility of electric vehicles comes at almost zero marginal cost. TSOs can take advantage of this, by using smart charging and V2G to absorb supply peaks or feed energy back to the grid during periods of high demand.
