Take a stroll along a random street in central Copenhagen, Denmark on a sunny afternoon you may be inclined to think of the growing adoption of electric vehicles (EVs) as well under way: there are designated parking spaces, multiple EV charging points, and EVs on charge. However, this does not tell the whole story. There are many different ways in which the future of the electric vehicle may develop. One interesting aspect, which will be explored in this article, relates to the role EVs will play in energy markets.
EV adoption requires additional charging points
According to an article in the Danish newspaper, Berlingske Tidende, there were over 2,000 EVs in Denmark in March 2014 and sales are on an upward trend. However, this is nothing compared to Norway where 3,000 EVs were sold in March 2014 alone, capturing a 6.1% share of the market, or the Netherlands where one in 20 cars sold is an EV. These two markets are the global leaders in EV adoption, whereas the case in Denmark illustrates the more common trend.
Fiscal incentives have helped to stimulate the market, such as exemption from tax or VAT, and up to 50% discounts on company car tax, or free charging at public charge stations and exemption from tolls. Issues such as the cost of EVs remain an inhibitor to their adoption, but one practical component is the lack of ample public EV charging points and their standardisation.
Machina Research estimates that there were 71,000 public EV charging points at the end of 2013, a figure which is set to grow to 1.8 million by 2023, as shown in Figure 1.
High costs hamper roll-out of EV charge point infrastructure
The EV charging sector has proved volatile in recent months. There were some negative headlines at the end of 2013 with names like ECOtality, Better Place, and Fisker Automotive announcing bankruptcies. However, more positive news is emerging with companies like ChargeMaster, Ecotricity and ChargePoint increasing infrastructure deployment. ChargePoint, for instance, has implemented over 17,000 charging stations worldwide and acquired new investment to expand much further. Also, Elon Musk, founder of Tesla Motors, has announced his intention to build super charging stations across Europe. In fact, to meet the requirements of the forecast 20 million EVs by 2020, these infrastructure deployments will certainly need to start now.
Successful financing is critical to all of these plans. Where hardware cost is the main component in home charging points, keeping the cost relatively low, public charging points include such additional costs as the connection to breaker boxes or in the case of fast charger installations, higher voltage transformers. The costs of installing public charging points are significant, anywhere between four and eight times higher than domestic charging points, so early providers have needed to explore ways of limiting the capital burden solely on their businesses. One model, as launched by a leading service provider, involves handing over ownership of the charging point to their enterprise customers as a means of generating additional revenue through either direct or indirect revenue streams.
On a less cost demanding note, connecting EV charging points remains critical for billing and booking purposes, and to that end, cellular connections have provided flexibility and lower installation costs than fixed lines. Quicker and cheaper deployment, combined with in-built power sources in the charging points, underpin Machina Research estimates that by 2023, 87.9% of EV charging point connections will be connected through cellular technologies.
EV charging points and virtual power plants
The growth of electric vehicles together with the associated installation of EV charging points is picking up pace. This has significant implications for energy markets, and in particular the concept of ‘virtual power plants’.
Electricity energy markets have started to see significant changes. As more and more renewable energy resources are connected to the market, ‘greener’ and relatively cost competitive energy resources are introduced. This additional, yet intermittent (due to for example weather conditions) supply is managed through virtual power plants enabled with intelligent and real-time software solutions. A virtual power plant balances the demand and supply of energy at a grid level, and ensures a continuous and balanced supply not from one single energy producing resource but virtually thousands of resources and short term storage facilities. This has opened a substantial opportunity to explore greater flexibilities in the demand and management of electricity, including that enabled by EVs.
It goes without saying that EVs will create a significant level of additional electricity demand which needs to be addressed by energy markets. However, the good news is that this demand will have some flexibility in terms of recharging times. Furthermore, and more interestingly, when connected it will also provide an impressive resource of short-term, quick burst energy when required by markets., i.e. energy stored in batteries which could be tapped into by power companies at times of peak demand. This could secure net positive commercial trading value if suitable market conditions were achieved. Naturally, there will always be a need to strike a balance between the requirements of the owner of the vehicle (i.e. to ensure the vehicle is charged and ready to drive), the requirements of the energy market (i.e. to serve the demand side requirements) and the trading prices available.
What is important to note in this greater energy scheme is that private EV charging points become significantly more involved in the wider energy market structure. To the buyers of EVs and providers of EV charging points, there is an additional revenue opportunity.