The Power Utilities and Electric Transportation

I had a very engaging experience at the EV and the Grid Summit in Los Angeles yesterday, which I suppose I can sum up with the following bullet points about the overall unique (and unenviable) position in which the power utilities find themselves:

• Offering a commodity delivered across an aging infrastructure; they spend $4 billion annually in repairs and upgrades

• Seeing declining utilization due to self-generation, energy efficiency solutions, and conservation (they spend $400 million annually convincing consumers to buy less of what they sell)

• Living in a “decoupled” environment, meaning that they make money not by selling more product, but by investing in infrastructure that their regulators deem to be necessary (even in the face of this declining utilization)

• Delivering their product via a grid that was designed to be one-way (generation -> transmission -> distribution -> consumption), all of which happens at precisely the same time, giving rise to the expression: “We tailor-make every kilowatt-hour of electricity for our customers”

• Needing to accommodate two-way flow of electrons wasn’t considered when the grid was established, and it’s not a piece of cake to retrofit

• Dealing with the imperative to decarbonize electricity by integrating variable resources into the grid-mix, which normally means a great deal more work and expense

• Negotiating with regulators who will not let them raise rates to counterbalance grid defectors, especially insofar as those who can’t defect tend to be the poor and the elderly–those least able to deal with rate hikes.

• Living in a world in which there will be far more change in the next 10 years than there was in the last 100

• Understanding that any solution that has the potential to come to the rescue has to have enormous scale (given the U.S. electrical consumption of 5.4 terawatts).

OK, now, with all this, is there any possible glimmer of hope?  Yes, it’s electrical transportation.  If we make the migration from oil to electrons, we have a phenomenon that can bolster the demand for electricity at a scale that will turn all this around in fairly short order—and not a moment too soon.

But unfortunately, it’s not that simple; there are numerous complications that slow this process; we’ve seen this over the last five years with an EV demand curve that has been less robust than the one most of us had hoped to see.  Here are a few of the complexities the industry faces:

• Disproportionate demand.  Last year, 45% of all EV sales were in California, and this figure is growing where it should be falling; EV ownership has been lackluster in the rest of the country.  Part of this makes sense, of course; in “vertical” cities like New York, the best electric transportation is the subway; there is little point in convincing people in Manhattan to buy EVs.

• Running Counter to Other Social Interests.  We also want to discourage VMT (vehicle miles traveled), rather than stuff more cars on our already congested roads.

• Poorly Designed Incentive Programs.  The effectiveness of incentives varies from place to place, as a fellow from BMW (Germany) was explaining about his country that had designed a program that was fairly unappealing, where the Norwegians had hit the nail on the head.  (In Norway, one in three new cars is electric. In the US, it’s one in 100.)  The point is that incentive programs needs to be customized.  Colorado has a great program but it’s impossible for consumers to understand.  What will get San Francisco moving?  Offer free parking.

• Flagging Support from Government.  As a spokesperson for GM said, “This is a marathon, and we’re at mile five, the sucky point; we’re already feeling beaten up, but we have 21 more miles to go.”  The backing from the federal government is sunsetting; we need continued education that EVs need support.

I guess what we’re seeing is that this is indeed a marathon, and the oil companies are going to fight it every inch of the way.