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Leonard Hyman & William Tilles

Leonard Hyman & William Tilles

Leonard S. Hyman is an economist and financial analyst specializing in the energy sector. He headed utility equity research at a major brokerage house and…

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The EV Boom Is Dead Without Proper Support

EV

Frankfurt’s car show, one of the most important in the world, this September spotlighted electric vehicles (EVs). France and the United Kingdom have already decreed an end to sale of cars with internal combustion engines by 2040. Norway is looking to do the same by 2025. And China has begun the push to electrify its vehicle fleet. In the process putting pressure on foreign manufacturers to share technology if they want to gain entry to the potentially enormous Chinese market.

Politicians, eager to claim credit for factories and jobs, have begun to make decisions about EVs--even if customers and car markets have not. Auto manufacturers in Europe, Japan and China have taken to heart government dictates regarding the eventual phase out of internal combustion engines. Large auto manufacturers are global in scale. EVs manufactured abroad to U.S. specs will eventually be marketed here whether our environmentally recalcitrant federal government encourages them or not.

The prospect for a big shift in vehicular energy consumption from oil-based products to electricity could have enormous implications for the global electric utility industry.

EVs will increase power consumption and more importantly could raise power demand during peak periods when some systems may already be straining under existing load. Britain’s National Grid, in its official report to the government, Future Energy Scenarios (2017), claimed that vehicle electrification could increase peak demand 7-14 percent by 2030 and 10-30 percent by 2050.

While we would take any 33-year forecast with a grain of salt and a dose of skepticism, we wouldn't disagree that the development of an EV load has investment implications, including one that does not seem to be getting much attention. That is, could it increase risk to incumbent utilities if all of these battery owners somehow unite and sell power to each other? Or even back to the local utility? After all, a large number of batteries synched together does resemble a power plant.

The numbers are high and the ranges are wide. Why? The higher estimated demand assumes that car owners plug in “without smart charging.” In other words, they charge at the wrong times, when everyone else is using electricity for other purposes. If that happens, the new load could strain the grid.

On the other hand, assuming usage of smart meters, clever pricing strategies and deployment of off-peak charging locations, the problem goes from systemically stressful to minor nuisance. Or if the utilities play it right, a bonanza, producing new sales during periods when sales would normally be low.

Related: Have Oil Markets Reached A Turning Point?

However, the utility (and ultimately its consumers) has to invest in the necessary infrastructure. One journalist claimed that the average British home’s wiring could not handle an electric teapot and a vehicle recharge at the same time. (Interestingly, National Grid predicted kwh sales increases from EVs over 2017 levels of only 4-7 percent by 2030 and 12-15 percent by 2050. Having to increase grid capacity by 30 percent for a 15 percent sales increase is not good business, so it is important for the utilities to convince consumers to plug in at the right times. )

Lacking a National Grid to produce an official US projection, we have to rely on studies from industry, government and interested parties that may not have National Grid’s resources or the same incentives to come up with an unbiased projection. But we can hazard an informed guess.

Demographic trends seem negative for the auto industry due to declining population growth, fewer miles driven and declining car ownership per capita. In a way, the automobile business is as stagnant as the electricity business. But the electric business has a far better regulatory scheme.

We believe kwh sales to EV owners will remain modest in the near term for three reasons: the initially slow rate at which electric vehicles are introduced into the overall car fleet, and the likelihood that heavy trucks will not have electric engines for years to come.

We estimate that EV owners will consume no more than 2 percent of electricity sold 2 percent by 2022 and 7 percent by 2027 — numbers the industry could easily manage.

But once EVs account for the bulk of the light vehicle fleet, sales to EV owners could equal r 30 percent of total current electricity sales. That incremental business, if it materialized over 25 years, would add 1.1 percent annually to industry sales, more than doubling sales expectations.

But what about demand added to peak load? The impact on electrical system usage depends not surprisingly on when EV owners recharge and the frequency of those recharges.

If every car owner were to recharge simultaneously during peak periods, peak load would more than double. With the rapid, significant investment this might imply, the electric industry might end up in worse shape than without the additional load. On the other hand, assuming that car charging behavior is spread through the week, that charging still could add 30 percent to peak demand. Utilities need to convince those recharging consumers to plug in the cars during periods of low usage, instead.

The key? Consumer education. Try to convince EV owners to recharge during off peak hours to reduce strain on the electric power generating and distribution system. But no matter when this battery re-charging occurs, the utility will have to invest in network upgrades in anticipation of not only increased usage, but also potentially changing local patterns of demand as well.

Enter public policy. As solidly investment grade corporations, the U.S.'s regulated electric utilities could easily raise capital to build this new infrastructure provided that public policy requires it. Regulators, however, are a skeptical lot. They are not likely to allow meaningful capital expenditures based merely on speculation that EV load will materialize.

The British, French, Norwegian and Chinese policymakers all have a leg up so to speak on their U.S. counterparts. The former have promised to eventually ban non-EVs. That alone will guarantee the regulators some certainty and would stimulate a market EV battery recharge.

In order to encourage comparable investment here, state governments would have to act. Getting the Trump administration to advocate for an end to internal combustion and diesel engines as a means to mitigate a climate challenge seems a stretch. Related: Trouble Is Brewing In Kurdistan

The other questions about EVs—whether miners can produce enough lithium for batteries, whether the industry needs to standardize plugs, whether the government should invest in particular technologies or policies, or even whether EVs are an optimal means to address CO2 pollution and climate change--are topics for subsequent discussion.

These are the key takeaways. The electric utility industry needs EV manufacturers to create a standard plug-in protocol (which might require government action) in order to be able to serve all customers. Also, the regulators must enunciate clear and supportive public policies that encourage EV usage and that assure utilities of the prudence of building the infrastructure.

Furthermore, to make the transition to EVs economical, regulators will need to approve electric rates that encourage car-battery charging at less stressful, off-peak times. Otherwise, vehicle electrification will either not materialize or create extraordinary and unnecessary disruption of our electricity networks.

By Leonard Hyman and Bill Tilles for Oilprice.com

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  • Henry on September 21 2017 said:
    I read article like this and come away with this. Your either first or last to the party. Make up your mind where you want to be. The author who put lots of effort into this story likely I am sure doesn't own a EV. Its like a commentator at a soccer match doing play by play who has never played the game. You get the point.....he is not qualified. The EV uses about as much juice as a hairdryer . You think if everyone power up their hair dryer its gonna strain the grid? The answer is no. What he also left out is folks charge their cars when they are in bed at night. The grid is massively underutilized then. You see all the naysayers chatting about the grid dont have a clue about the grid. Have you heard any power companies talking about grid strain? The answer is no cause its a non issue. I honestly feel for these naysayers. The same ones held onto the horse as cars whizzed by. Oh the cell phone is just a gimmick. The computer has no application other then to play games. Stock brokers will never lose their jobs. You see technology is the great eraser of long held systems. Like it or not a massive EV shift is underway. A couple of fellas writing about its issues although nice click bait are not doing a service to anyone. If they want to write about the EV then buy one and get back to me. Till then frankly your not qualified.
  • EdBCN on September 21 2017 said:
    This is just silly. Most charging is done at night and will continue to be done at night as that is when vehicles are least likely to be in use and most likely to be at their home base where they'd normally charge. These aren't gasmobiles and people won't be ''fueling up" at a station, at least not very often. So the EV revolution will be able to get very advanced without a lot of upgrade to the grid because it will mostly be fed at times of great overcapacity. Every house I build these days has a charger (or at least the power supply for one) and it's no big deal or any problem for the utility. EVs in general I think represent a double win for utilities: They get both a huge new market, and they won't have to invest much for it. The smart utilities will figure out how to get into the fast-charging station market as well, and how to use all those batteries to balance the grid.
  • Jhm on September 21 2017 said:
    This is the best growth opportunities utilities could ever hope for. They basically get to take market share from gasoline and diesel.

    On the flipside, the utilities will have competition. Other players will want in on this market and have the technology to sideline utilities.

    Suppose your a Big Box store. You've got a massive solar array on your big flat roofs, and you can get solar and wind PPAs too. So now you've got power to run your store and warehouses. You've go power to charge your trucks at both warehouses and store as the truck load and unload. You've also go some extra power, some surplus that comes and goes with the trucks, wind and sun. What to do? Set up free charge loyalty program for your customers. Bargain hunters will flock in when they know they can get big charge as they do their weekly shopping. You also have your own grid batteries to defeat demand charges when you must use some grid power.

    In this set up, the utility is simply a back up power supplier and transmission provider if you have a PPA. If this sort of business model takes off, a utility could even wind up with less energy demand than before the EV revolution. This is the risk if utilities are unwilling or unable to be more entrepreneurial.

    It is not a given that utilities will gain much from this EV opportunity. They are going to have to compete for it. Hopefully, regulators will not stand in the way.
  • RD on September 22 2017 said:
    Let the free market work. If it makes money it will happen. Subsidizing any of this stuff is insane. I'll never own an electric car ,but I can see specific areas were they make a lot of sense.
    They are the latest perpetual motion machines. 99% of the USA don't give a shit about them. If we put 100% of them on the road tomorrow it would take 20 years to get rid of ICEs. People are worried about a lot of stuff and EVs ins't one of them.
  • Claire on September 22 2017 said:
    7 percent by 2027? someone is burying their head in the sand, by then there will have been a huge shift away from fossil fuels, and the benefits of the electric car will be well understood, by everyone.

    The electric car is inevitable, and it is going to take over a lot quicker than people think.
  • Jim J Fox on September 22 2017 said:
    We believe kwh sales to EV owners will remain modest in the near term for three reasons: the initially slow rate at which electric vehicles are introduced into the overall car fleet, and the likelihood that heavy trucks will not have electric engines for years to come.

    WRONG- 1. Tesla Model 3 production will sell 10,000 per week by end 2018--https://electrek.co/2017/08/03/tesla-model-3-elon-musk-production-reservations/
    Then there's GM's Bolt & other mainstream makers committing to EV's. China leads the world.
    WRONG- 2. https://www.trucks.com/2017/05/05/trucking-industry-electric-heavy-duty-truck-growth/

    Big Oil is still in denial. Wake up before it's too late!
  • Norman clark on September 22 2017 said:
    You have to expect this from greedy people who do not care about the planet. For many, all that counts is $. Unfortunately many people don't think that their time here is limited. If they did, they would think very differently.....
  • Leonard Hyman and Bill TYilles on September 22 2017 said:
    Maybe we didn't make our points clearly enough. We don't doubt the importance of the EV market. We in fact quantify how important it could be. But an economically and environmentally successful electrification will require a beefed up grid and a charging policy that encourages off peak charging, not wishful thinking. Car owners could just as easily recharge vehicles in car parks where they work. Unless the chargers are connected to off grid sources, that could create problems. We argue that regulators and electricity suppliers must price in a way to assure that it happens. We don't subscribe to the build it and they will come philosophy toward building recharge infrastructure, either.

    Those who build will want assurance that the market will support their investment. That's why the government needs to set policy to get everything in place as rapidly as possible. Unless you assume that Tesla will build infrastructure as well as manufacturing facilities. Or that another Silicon Valley enterprise loaded with idle cash does the job. Or, even better, local businesses and distributed networks use renewables to produce the power and steal the business from the grid.

    As for the estimates of demand, keep in mind that the auto industry sells 18 million new cars every year into an auto population of 260 million. If 5% of new cars were electric in the coming five years, in 2022 only 1.75% of the auto fleet would be electric. They would require less than 1% of the grid's output. We are not interested in getting into an argum ent about how fast electrification will take place
  • wile e on September 24 2017 said:
    Moving pollution from oil to Coal while destroying entire regions of the planet for lithium is not something to be self righteous about. Long term effects of lithium are as bad as oil and possibly worse as they are permanent polluters and can not be recycled. Not to mention the long distance to get your EV(50,000 miles before you get with mining and shipping). CNG/Hydrogen fuel cells are far more suited for you "environmental" saviors. And I drive an EV, but can admit it is a poor band aide for our environment and is being abused by idiots like Elon and his overpriced Nissan with no ability to meet his own production goals. Wake up and demand a real environmental auto that does not require new billionaires. CNG/hydrogen is the network that would disrupt the environment the least. This will not set so well with the fan boys but it does not change anything.
  • Claire on September 26 2017 said:
    The title states the EV boom is dead without proper support, which of course is nonsense.

    EV's are inevitable and so is the infrastructure to support it, it will just make financial sense.

    Unfortunately it will be the death of big oil, at least as a means of running cars, lorries , busses etc.

    So the premise of this piece seems to be a little backwards as it will be ICE losing support as petrol stations close.

    Wile e, you do realise even if electric cars were to run purely on coal power, it would still be more efficient than running an individual petrol cars? And of course you conveniently forget that an electric car get it's energy from many sources, like wind or Solar which is becoming a growing part of the worlds power supply.

    With battery tech improving, electric cars will be outperforming ice cars in every way.
  • Joseph S Hale on September 30 2017 said:
    While charging at night makes sense right now in the future daytime charging will be a lot more practical. It just makes more sense to charge cars from solar energy and the sun shines during the day. This should not create a huge stress for the grid if enough power is generated locally.
    There are two things that would make this practical. The first is to have a meter on every car and the second is to have charging available at every parking space.
  • Jill James on October 03 2017 said:
    Leonard, one question you failed to name in your final paragraph is this: Is CO2 a pollutant (it's not; it's plant food and is responsible for much of the 'greening of the planet' over the past 30 years, and an increase in food production over the same period), and is it responsible for the bulk of any climate change (it's not; it's a minor GHG [0.04% of the atmosphere] and most CO2 is naturally produced, not anthropogenic [man-made].

    The alarmist position on CO2 is losing steam. Al Gore and his cronies have lost all credibility, as have many of the alarmists [Climate-gate I, Climate-gate II].

    Finally, EV vehicles burn COAL in most of the markets where governments are pushing them hardest; i.e. China. 75% of China's electric power is generated from fossil fuels, thus switching to EV's actually increases CO2 emissions, and real pollution i.e. fly ash, SO2.
  • Claire on October 04 2017 said:
    Jill, what utter nonsense, while it is true that tree's etc absorb CO2, we are outputting far more than can be absorbed by the natural enviroment, which goes into the air and is a major cause for global warming.

    While you would like to deny global warming. scientists are proving otherwise, not to mention the THREE major hurricanes to hit America this year.

    EV's do not burn coal, they run on electricity, which has many sources. Coal is always first to be bought up by people like you, who surprisingly never mention the growing renewable sector, which recently accounted for 52% UK's power needs, with days now when NON of the Uk's power comes from coal

    It is ironic you bring up China, They are driving forward with massive investment in renewables, and are world leaders when it comes to green energy.

    Finally, electric cars are unique, in the fact that the power needed to run them can be generated at home using solar, couple that with growing battery tech, your reliance on the power grid drops significantly..

    There is no denying now, we are heading for a much cleaner, not to mention quieter world.
  • Jill James on October 08 2017 said:
    Claire, your posts are nonsensical and incoherent.

    First, increases in CO2 have multiple benefits for plants, including increased growth, decreased water requirements and increased durability. Global forest cover has increased by more than 4 billion tons (carbon equivalent) since 2003, mostly due to increases in CO2 emissions (natural and anthropogenic). Furthermore, according to the FAO, food crop productivity ‘per capita’ has almost doubled in the past four decades, with almost half of this increase attributed to increases in CO2 (natural and anthropogenic). Conclusion, CO2 is a net benefit to plants, which is a net benefit to a growing human population.

    Second, you are terribly behind the curve among alarmists. If you haven’t noticed, nobody, including the most fervent alarmists, speak of ‘global warming’ anymore. The preferred term is now ‘climate change’. This was changed by alarmists to avoid ridicule after 18 years of NO WARMING! If you’re going to post here, at least stay up to date (within a decade at least) with your fellow alarmists.

    Third, EV’s most certainly do run on coal. The electric power grid is fluid, and when an EV owner charges their vehicle they do not choose where the power comes from, whether they support solar/wind power or not. As a whole, the US derives its electric power from the following sources: 32% Coal, 35% natural gas, 20% nuclear. That means that 32% of every EV charge comes from coal, whereas 0% of the fuel for my gasoline powered vehicle comes from coal. Don’t get me wrong, I’m not against the CO2 that coal emits (since CO2 is NOT pollution), but the fly ash and SO2 that are emitted.

    Fourth, who cares HTH the UK generates power. The UK is inconsequential. What is consequential are China, India, the US and other growing economies like Russia and Africa. As you may or may not have noticed, China and India are full of people, so installing any meaningful number of wind turbine in these places is never going to happen, even if wind turbines were not the highly diffuse and intermittent sources of energy they are. India produces 59% of its power from coal. China produces 58% of its power from coal. That means that about 1,400,000,000 people in these two countries source their electric power from coal. That also means that about 60% of all EV vehicles in these countries runs on COAL.

    Fifth, let’s not forget that wind turbines kill MILLIONS of bird and bats annually, according to ornithological societies in Spain, Germany, Sweden and the US. Some of these birds are endangered species. In any case, all life has the same moral value, whether a bald eagle or a pigeon.

    The fact is that wind and solar have huge weaknesses in efficiency, cost and scalability. They also exact huge environmental costs. Thus, EV car owners will be powering their cars with FOSSIL FUELS for decades to come. There is no denying this. Are you a denier, Claire?
  • Michelle on October 09 2017 said:
    That charging at the right time strategy is stupid. People will most likely charge at night duh! I think the whole EV thing will not take off, because who really wants to get stranded during an evacuation & have to wait 30 mins to recharge. Gas is so much more convenient & let’s face it we want easy & convient.
  • snoopyloopy on October 09 2017 said:
    @Michelle: Except that gas stations run out of gas in an emergency evacuation situation, as we recently reviewed with Harvey and Irma. That's at best, the same problem. At worst, it might not get refilled for days.
  • Claire on October 11 2017 said:
    LOL incoherent you say Jill,? yet are able to reply, not that incoherent then.

    Co2 is growing, this is a proven FACT, Sea temperatures are growing another scientific FACT, plants enjoying Co2 is irrelevant.

    You can call it what you want, climate change if you prefer, is real.

    Now as for coal, even if. and you already know it isn't, but even if all electric was produced from coal, a coal station is far more efficient at creating energy than an ice car, so an electric car would still be cleaner.

    But again you choose to ignore the growing renewable sector, one of the fastest growing and lucrative sectors out there, China's drive to clean energy is leading the world, and more and more of theirs and the worlds electricity is clean energy.

    As for their accepted intermitance, You must have missed the largest battery storage system just installed in Australia, which stores energy and evens out the grid.

    No they don't kill millions of birds, far more are killed by windows and cats, but far more will die if the planet does, that we can agree on.

    Renewables are now on par and better in many cases, then the cheapest energy options, the world is getting greener, and electric cars will take over a lot quicker than you think.
  • Marcus Rönningås on October 19 2017 said:
    @Michelle: I fully agree that we want easy & convient. That is one of the reasons we got the our first EV. We always wake up with a fully fueled car. We never have go through the trouble to get to a gas station.
  • Mike Nelson on October 19 2017 said:
    EV adoption will be very slow because the people who say they support it don't actually buy the cars in significant numbers. The expense of electricity will climb as electricity generation is shifted to renewables. It will not be affordable for low income people. ICE will be the practical choice for most people on the planet for years to come.

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