How Utility Regulators are Preparing for Electric Vehicles

The sales of electric vehicles (EVs) continue to grow nationwide and are projected to continue to increase rapidly over the next two decades. State utility regulators are key actors in ensuring the efficient deployment of EVs and their charging infrastructure. As electric utilities make plans for investments in grid infrastructure to accommodate more and more EVs on the road, many state regulators are considering proposals from utilities to develop and operate EV charging infrastructure and structure customer rates to effectively manage EV charging.

How are utility regulators responding to the coming growth of EVs, which will impact communities and the electricity system locally and statewide?

The Council of State Governments (CSG) had an opportunity to submit questions to Chairman Asim Haque of the Ohio Public Utilities Commission and Acting Commissioner Anastasia Palivos of Illinois Commerce Commission. The questions touched on three specific areas where public utilities commissions are focusing their attention:

  1. Impacts of EVs on the electric system, utilities, and utility customers, including potential electric system benefits;
  2. What are the key barriers to facilitate wider availability of EVs; and
  3. How utilities and utility regulatory policy can impact the extent and pace of EV penetration.

Their answers, slightly edited for clarity, are produced below.

Do you believe electrification of the vehicle fleet is an important goal for your state and why?

Chairman Haque: During PowerForward (PUCO review of the latest in technological and regulatory innovation to modernize the electric distribution grid), numerous references were made to the plans of both domestic and foreign automakers to shift production from internal combustion engines to EVs. General Motors indicated that today there are more than 800,000 EVs on American highways and that annual sales from 2016 to 2017 grew at a rate of 26 percent. As EVs gain greater acceptance by customers and take on a more significant role in Ohio’s transportation system, a more substantial deployment of EV charging infrastructure will be necessary. Eventually, EV charging stations must become as ubiquitous as gas stations are today.

Commissioner Palivos: Absolutely. According to the U.S. Environmental Protection Agency, the transportation sector alone produces almost a third of the total U.S. greenhouse gas emissions. This category includes the transportation of people and goods by cars, trucks, trains, and other vehicles. The sooner we are able to incorporate more EVs onto the grid and fuel them with low or zero emission electricity the sooner we can begin cutting carbon emissions and creating a more flexible and resilient electric grid in Illinois. And, according to the American Public Transportation Association, Americans took 10.1 billion trips on public transit in 2017. Last-mile delivery services will also become increasingly relevant, as customers buy more goods online and expect faster and cheaper deliveries. If we are able to electrify fleets and delivery services, and increase passenger EV deployment, we have the potential to bring the state up to $43 billion in cumulative benefits by 2050, by reducing utility bills, carbon pollution and fuel expenses

From your perspective, what are the impacts of EVs on the electric system, utilities, and utility customers, including potential electric system benefits?

Chairman Haque: The PUCO is aware that home charging stations may have localized impacts on the current distribution grid, notably that an EV that charges during peak hours may put a significant strain on the local transformer or circuit. So far, EV adoption levels in Ohio have been concentrated in just a few neighborhoods. Given the very low levels of EV home charging at this time, there does not seem to be an immediate need for the Commission to act on this matter in the near term, but we will continue to monitor the growth rates of EV and their impacts on the distribution system. 

Based on evidence from other states, we expect to see initial adoption rates for EVs to be clustered within certain cities or neighborhoods. For example, experiences from California and other locales with heavier concentration of EVs show there could be a demand spike in the early evening as vehicle owners return home from work and plug in their cars around the same time-period. To address this challenge, suggestions were made that EVs be offered time of use rates so that EV owners have a price incentive to wait until off-peak hours to charge their vehicles.

The PUCO believes that grid modernization plans developed by our distribution utilities must address how the existing distribution grid will adapt to meet the anticipated energy and power needs of EVs, so that the societal benefits (e.g. lower CO2 emissions) associated with EV charging can be maximized. First, the utilities will need to assess how they will meet the demand associated with the growth of residential charging stations. Second, they must address the needs for both urban and corridor travel charging stations.

Commissioner Palivos: EVs are huge energy consumers, so they will have a significant impact on the electric grid, utilities, and their customers.  Whether the impact is good or bad will depend on how EV owners and utilities manage and harmonize EV vehicles with the electric grid.  EVs could put a significant burden on the electric grid if everyone charges during peak demand hours and/or when the grid is most reliant on fossil fuel generation.  Under such circumstances, utilities could face challenges regarding grid reliability, pollution could worsen, and electric costs could increase, which would ultimately fall on the customer. However, if we manage EV deployment from the outset and create sensible best practices, as it relates to for example charging infrastructure and rate design, EVs can help make the grid more reliable and resilient, without burdening utility customers. EVs could make the grid more resilient, with EV batteries serving as reserve supply of energy that can be discharged back into the grid when it is most needed.  By increasing the ability to store electricity and shift consumption from expensive peak periods to lower cost off peak periods, EV batteries may reduce utility costs.  EVs will become especially environmentally advantageous when paired with increasing deployment of renewable energy if EVs are charged with renewable energy and discharged during periods when the grid would otherwise rely heavily on fossil fuel generation.

What is the biggest barrier that stands in the way of electrification of the vehicle fleet?

Chairman Haque: During PowerForward, the Commission heard about various barriers such as lack of knowledge and education, lack of access to charging infrastructure and poor availability of EV vehicles. Through the creation of a PowerForward Collaborative, the PUCO will monitor state activity in this area.

Commissioner Palivos: There are significant barriers EVs must overcome before becoming household norms, such as insufficient charging stations, battery storage capacity, and electric grid load issues. One of the biggest challenges in the modern energy industry is optimizing our electric grid to widely and reliably distribute renewable energy.  Based on our current infrastructure, we do not have sufficient chargers to meet consumer demand.  If we want to increase the numbers of EVs on the road, we need to make sure that the appropriate charging infrastructure is available.

How can utilities and utility regulatory policy impact the extent and pace of EV penetration in your state?

Chairman Haque: Because the location of EV charging infrastructure is generally located on the customer’s side of the meter, the PUCO believes that EV charging stations should operate within the sphere of a competitive marketplace, especially for home and private business charging. At the same time, because the EV marketplace is in its infancy, there may be justification for limited utility participation in the development of EV charging infrastructure.

For example, to facilitate EV adoption across the state, EV charging corridors may be an option to allow for EVs to traverse the state without concerns of running out of charge. However, corridor route charging stations present a chicken and egg conundrum. The private market will not invest in corridor charging stations until EV traffic merits the investment, yet the development of EV traffic may be suppressed until investment in corridor charging stations occurs. The investment for a direct current (DC) fast charger is a pricey endeavor. Level 1 and level 2 chargers, which use single phase power and charge, can take several hours to charge a vehicle. Several hours to charge is not a barrier for home or workplace charging and covers the majority of uses as EV owners can plug in overnight and be ready to go to and from work the next day. However, level 1 and level 2 charging are not suitable for someone seeking to drive long distances. Fast chargers can cut the charging time down to the 30-minute range, but they require three phase electric service. Three phase service is not widely available in rural areas or outside of areas where the distribution system is designed to provide electricity for industrial or large commercial customers. While the Commission is not currently in a position to determine where urban and corridor charging stations should be placed, we hope to be a partner with the appropriate regional or state entity that is thoughtfully charting such placement and could be a facilitator in allowing utility involvement in foundational charging infrastructure for these corridors.

Commissioner Palivos: Utilities are essential in the continued efforts to increase EV penetration. We rely on their participation to work with other stakeholders to determine best practices in successful EV deployment. In fact, my office initiated a Notice of Inquiry process at the Illinois Commerce Commission on September 24, 2018.  The notice of inquiry is a process that invites public and private stakeholders to provide comments on different questions regarding EVs and we are excited to see our utilities’ and Illinois stakeholders’ participation. The notice of inquiry aims to examine EV impact on energy efficiency and grid resiliency, necessary build out of charging infrastructure and ownership models, potential rate design, and regulatory treatment of EVs.

In the coming days, CSG will post blogs that highlight how other stakeholders including utilities, state policymakers, and automakers are preparing for the coming surge in EV sales. CSG recently published an infographic outlining 8 Reasons Why Electric Vehicles Are the Future of Transportation. A report, State Strategies for Advancing the Electric Vehicle Marketplace, will also be released during the CSG 2018 National Conference in Northern Kentucky-Greater Cincinnati.