At the Alliance we believe utilities play vital roles in the world of EVs and their infrastructure.
Most obviously, transportation's "fuel of the future"-electricity-will be supplied by distribution utilities regulated by Public Utility Commissions rather than by today's mix of much less centrally regulated gas stations, refiners and oil companies. Unlike the oil industry, these electric utilities are governed by the universal service principle, which says they must provide reliable and affordable service to all customers regardless of income, class, or geography.
Historically, every electric utility's core competency has been to build and maintain infrastructure: poles and wires overhead and underground; critical substations; and now the growing number of smart meters, sensors and intelligence built into the distribution grid. Similarly, as EVs spread in vehicle fleets, neighborhoods and workplaces, the utility will play a key role in building and managing electrical infrastructure, integrating these large electrical loads reliably in the grid. In order to quickly respond to reliability issues, utilities need real-time data on vehicles and charging stations.
Interconnecting an EV charging station to the electric grid also brings a host of "soft costs" such as permitting, environmental regulations, and easements. The utility addresses interconnection requests from new customers such as charging station providers, so the Alliance advocates for an efficient, streamlined process to process such requests. Moreover, the utility may have a line extension tariff on file with the Commission for traditional extension of service for a new customer that may be utilized on the utility side of the meter, which could be modified for EV charging infrastructure.
Utilities also have the financial heft and engineering scale to undertake the coming infrastructure challenge. They can borrow large amounts of capital at low rates, and they are well connected to government grants and incentives. This access to stable, low-cost, patient capital will be key to meeting the massive needs of EV infrastructure over the next several decades.
The long-term perspectives of utilities are helpful as well. Utility financial and operational planning measured in decades fits well with a transformation of transportation that is certain to continue for decades. For example, utilities and Commissions can alter depreciation schedules to either meet one policy goal such as decarbonization, or to meet another such as easing rate pressures on consumers during difficult economic times. This rich "regulatory toolbox" is an enormous help in EV adoption and infrastructure development.
Pricing and Rate Design Adds Flexibility
Rate design is another key ingredient in a successful EV ecosystem. Rates for service from the utility to the charging station or EV service provider are quite complex, fundamentally based on the cost-of-service principles for the utility. Utilities perform detailed studies for rate cases submitted to Commissions, based on deep engineering and economic analyses of electrical load impacts on the distribution grid. The utility plans its generation and wholesale market purchases to meet the peak demand on the overall system caused by all of its customers, taking in to account many factors including economic trends, new customer growth, and increasingly variable weather patterns. In this sense, publicly accessible charging stations are no different from the grid's other commercial or industrial customers, so daily load profiles are used to assess rate types in much the same way.
Such commercial customers are usually assessed demand charges calculated on kW per month rather than kWh consumed. However, since the public EV charging market is nascent, the low initial utilization of these chargers can create serious economic headwinds for a charging station operator until the EV market matures. The Alliance therefore believes in developing credits or allowances (a "demand charge holiday" is an example) that offset these rate challenges during the early years of public DC fast charging stations. Many such mechanisms have been approved by Commissions to address rate design challenges, usually for 8 to 12 years. At the same time, the Alliance believes rates must be sustainable over time, and that these cost transfers between customers should be limited in term, clearly justified, and based on historically proven cost of service principles. These issues will continue to be debated and contested at Commissions and utilities across the country, with no "one-size-fits all" type of pricing or rate design.
The Alliance believes a hybrid market with a strong utility role is preferable, and many types of market models are possible simultaneously. The utility can provide the electrical interconnection and wiring to the charger, where a third-party competitive provider can take over the process of initiating the charge and billing the customer. The third-party provider usually gets a rebate for the purchase of the equipment itself while the utility provides "make-ready infrastructure" from the transformer to the meter, and often beyond to the stub. Or the utility can propose to own and operate the entire infrastructure, including the EVSE itself, on an end-to-end basis, hiring a vendor and network operator on a turnkey basis to operate the assets and interface with customers.
Utilities Serve Underserved and Rural Communities
Because of its obligation to provide universal service, the utility may be the best provider of charging services at difficult-to-serve customers such as multi-family properties, disadvantaged and underserved communities with significant low-income customers, or in less densely populated rural areas. Other types of structures are possible as well, including working with a city or municipality in a joint venture. All of these approaches to developing the market are valid, and should be assessed by the end use case for viability, costs and benefits, and providing benefits both to the consumer and to the grid.
Finally, the utility has a critical role to play in planning its own long-term future. Traditionally, in the vertically integrated states in particular, utilities carry out such planning of future loads and resources in an Integrated Resource Plan (IRP). In a decarbonizing world, this planning is essential to find the proper future mix of generation loads, EV charging loads, energy storage, and demand-side measures such as energy efficiency and demand response. However, utilities are new to working with auto OEMs, public transit agencies and vehicle fleet owners, so they have lacked the data and analysis needed to map transportation electrification. Accordingly, many utilities, state commissions and legislatures are also crafting wide-ranging Transportation Electrification Plans (TEPs) separate from IRPs. While some state agencies can plan on a more aggregated basis, only the electric utility has detailed knowledge of grid location, capability and history necessary for a thorough analysis of electrical loads. Creating a TEP and submitting it to a stakeholder process and Commission review has become a best practice in many states.