Electric Vehicle Rollouts Challenged by Cost of Charging Infrastructure and Grid Management

The report, “Changing the game: Plug-in electric vehicle pilots”, analyzed a range of electric vehicle trials around the world, focusing on pure electric vehicles (EVs) that depend entirely on charging from the electric grid. The report identified three key challenges:

* Cost: The business case for investing in public charging infrastructure is weak due to high costs and initial consumer preferences for home charging. Pilots reveal a risk that consumers may not use public charging spots at rates required to recover costs, which range from approximately $5,000 per charging station to $50,000 for units capable of fast charging a car in approximately 30 minutes.

* Control: Infrequent charging by consumers will limit the ability to control the impact of charging on power flows. Pilots show that PEVs meet the driving requirements of typical city users who may therefore not plug in their cars daily. This increases the unpredictability of charging and reduces control. Plugging in vehicles whenever parked will help grid management, easing the strain on the grid.

* Scale: While most electrification technologies work in isolation, there are too few electric vehicles in pilot areas to robustly test the technologies and their integration with each other. Grid impact will thus need to continue to be closely monitored as the market develops.

“Plug-in EVs have extensive implications for business models because they require changes in consumer behavior and can increase strain on the grid,” said Melissa Stark of Accenture. “It will be critical to improve understanding of consumer preferences and to change consumer behavior through creative incentives if utilities and service providers are to manage the impact on the grid.”

Implications of PEV business models

“Changing the game” reviews a range of business models that have varying impacts on adoption and implications for service providers.

Charging Business Models: Today’s public charging infrastructure model is needed to drive initial large scale roll outs but carries high risks due to upfront costs, unpredictable charging patterns and possibly limited demand. More profitable commercial models are needed for a sustainable PEV market. These include:

* Private charging infrastructure which will include mechanisms, such as premium charging to manage demand and battery swapping services that reduce the strain on the grid.

* The end-to-end model, where a single service provider will offer long term service contracts that remove the cost of the battery from the purchase price of the vehicle and include battery swapping as an option.

Automotive Business Models: Direct vehicle sales to consumers are being tried by some manufacturers, but the high cost of the batteries makes this option unaffordable for most consumers unless large government subsidies are offered. Leasing of cars is more attractive, spreading the high purchase price over a long period of time. Automotive manufacturers will have to invest in capabilities to manage a new service-based relationship with consumers if they are to adopt this model.

Battery Leasing Models: Some service providers own and maintain the battery, leasing it through a subscription service whereby consumers pay for ‘miles’ driven instead of electricity.

“The consumer is the most important factor in determining which business models will succeed,” said Melissa Stark. “The capabilities needed to deliver these models will be the same across the world, but the players that choose to develop them will vary. This means that standardization of technologies is urgently needed to support the varied involvement of service providers. And greater efforts will be required to improve understanding of consumer preferences.”

“Changing the game: Plug-in electric vehicle pilots” features the following case studies of EV pilots: Showa Shell’s fast charging pilot in Tokyo, Alliander’s E-Laad pilot in The Netherlands,One North East’s Plugged in Places pilot in Newcastle Upon Tyne, UK and Better Place’s Tokyo taxi battery switching demonstration. The study also examines the competitive battle between the Chevrolet Volt (plug-in hybrid electric vehicle) and the Nissan Leaf (plug-in hybrid electric vehicle).