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May 27, 2021

How the Electric Vehicle Will Finally Drive the Smart Home to Integrate With the Smart Grid

EVs will be a big part of the solution to the peak load problem by bringing us into the era of the grid interactive home.

By: Rick Rys


The quantity of batteries that have gone into electric vehicle (EV) production is nearly 20 times the quantity that has been installed for grid energy storage. EVs are expected to dominate car production within 10 years, and utilities are keenly aware these EVs would create a big problem when most of owners start charging their cars about 5-6pm, coincident with historic peak loads. The smart grid cannot solve this problem without the cooperation of the grid interactive smart home. Rather than creating a problem, EVs will be a big part of the solution to the peak load problem by bringing us into the era of the grid interactive home.

Lacking a penalty on carbon emissions, it has been estimated that once batteries for EVs reach about $100 per kw*hr, the EVs will present better value than fossil fuel powered cars, and the switch to EVs will sharply accelerate. The advantages of EVs is not immediately apparent to a population that yearns for returning to the old normal. We tend to forget that ICE (Internal Combustion Engine) engines are terribly inefficient, with 70% of the energy in the fuel lost out of the radiator and hot exhaust, and they generate roughly 3 pounds of CO2 per pound of fuel burned. Adapting to a pandemic is stressful for most people but adapting to EVs will be a surprisingly pleasant adaptation.

With 30,000 miles on my EV, it has been amazingly easy to live with. No gas stations, no oil changes, no check engine lights, and virtually nothing to maintain, it would be hard to imagine going back to an ICE engine car. Where lithium battery cost has declined from about $1180 per kwhr in 2010 to under $156 pe kwhr average in 2020, we are quickly reaching the point where the cost of an EV will be compelling. The cost of Contemporary Amperex Technology Co., Limited (CATL)’s cobalt-free lithium iron phosphate battery packs has fallen below $80 per kilowatt-hour. CATL’s low-cobalt NMC battery packs are close to $100/kWh. CATL also claims they have new lithium batteries that will last 1.2 million miles at a slightly higher price.

Car companies that have been producing EVs in quantity and have invested heavily into improving battery performance, energy density, and reducing the cost of manufacture have an early lead and a cost advantage as battery cost is a big part of the cars cost. Tesla EV batteries are estimated to last 300,000- 500,000 miles (1,500 charge cycles) and would cost $5000-$7000 to replace. Tesla’s newest lithium ion battery technology was revealed in September, and it claims to allow more than a million miles (4,000 charge cycles) and lower production costs, which means that vehicle costs will continue to fall. With this new battery technology, the evolution of digital car technology, the emergence of fast DC charging infrastructure, low carbon electric power, and the compelling performance and safety, EVs will quickly become the car of choice.

Electric Utilities Are Very Interested in Your Electric Vehicle Battery

According to a July 2020 EIA report “Battery Storage in the United States: An Update on Market Trends,” at the end of 2018, 869 megawatts (MW) of power capacity, representing 1,236 megawatt hours (MWh) of energy capacity, of large-scale battery storage was in operation in the United States. These grid batteries are already dwarfed by the power and energy available in EV batteries. With so much new non-dispatchable renewable grid power, it gets expensive for utilities and grid operators to provide power in the 5-9pm peak load period.

This is why EVs hold the key to a smart grid interacting with a smart home, or as a minimum a smart EV charger. Vehicle-to-grid, or V2G, is already a standard feature for electric vehicle fleets, like school buses or delivery vehicles, and utilities have their eyes on the huge amount of stored battery energy they need and are willing to pay for. Passenger EVs are an obvious target, as that is where most of the batteries are. It is no major technical problem to convert the DC power in an EV to AC power that could feed a home or push power out to the grid, and new EV batteries with a long life and many charge cycles could easily be put to work by utilities that otherwise need to build new generation, transmission, and distribution infrastructure to service peak loads.

Peaking power plants are built for this service, but often sit idle 95% of the time. These plants are paid a premium for their ability to be available on short notice. Paying for these peaking plants and the wires that carry that power can be 50% of the cost of your purchased energy. Transmission and capacity charges show up on your electric bill and those costs can be slashed if power demand can be cut during the peak load times. Thousands of smart grid-interactive homes could change the regional load profile and reduce the big investments in generation and wires that utilities and grid operators would otherwise need to make. These avoided costs could be a source of income for owners and tenants of grid interactive homes.

Grid Energy Storage is an Unsolved problem

If there was a low-cost way of storing electric power, or a low-cost way of providing power on demand, utilities would be less interested in operating your EV battery, but utilities would still be concerned about when EV owners charge, as it impacts the utility investments to reliably meet peak loads. The problem is there are no great solutions for low cost grid energy storage yet.

There have been many demonstration projects for Carbon Capture, Utilization, and Storage (CCUS) for use with coal or natural gas power generation, but costs remain too high for widescale adoption. There has been a lot of activity with green hydrogen to store electric power chemically. The hydrogen cycle involves creating hydrogen with electrolyzers, and then compression and storing it before conversion back to power with fuel cells. The overall efficiency of this process (about 35%) is very low compared to storing power in batteries and discharging them (about 95% efficient) when power is needed. Pumped hydro is about 95% of current grid energy storage with efficiency of about 70-80%, however, there are limited locations and complex environmental issues for large scale expansion. There are possibilities to operate existing hydro plants for energy storage, but these hydro plants were not designed for such high-power intermittent operation. While there are many options for solving the peak load issue, there is no single cost competitive solution today. In this market arena of high cost options, lithium batteries proved their worth when PJM grid operator was able to demonstrate that lithium batteries high power output and fast response was able to provide frequency regulation services. This ancillary service market is especially important as coal and nuclear power plant shutdowns have reduced available inertia and the spinning reserves their steam turbines once provided. As lithium battery costs declined, they have branched out of frequency control and proven useful for load shifting applications.

It should be noted there is incredible research into grid scale energy storage and especially battery energy storage. It is highly likely new low-cost batteries, made from low cost materials, that have long life will eventually be developed for grid storage. Such batteries need not be light weight or compact like EV batteries, but for the next few years it appears that lithium battery production for EVs will dominate battery manufacturing. See these articles by this author:

The Smart Grid Interaction Obstacles Are Significant

How the grid interactive home evolves is not completely clear. The recent emergence of long-life lithium batteries is only one driver, but there is a compelling business case for putting many of those batteries to work when they are not pushing cars around. While there is a utility need, and EVs can be part of the solution, there are complex economic, political, and technical problems to solve in an industry that is not known for sudden changes.

It was only in February 2018, that the Federal Energy Regulation Commission (FERC) issued Order No. 841 requiring system operators to remove barriers to the participation of electric storage resources in the capacity, energy, and ancillary services markets. Each ISO/RTO under FERC jurisdiction was required to revise its tariff to include market rules that recognize the physical and operational characteristics of electric storage resources and to implement the revisions upon FERC’s approval of tariff compliance. As of May 2020, all ISO/RTOs had filed multiple tariff revisions, but none have been fully approved by FERC.

With three isolated electric grids, multiple federal agencies, multiple ISO/TSO/RTO grid operators, and state and local regulations, it is a complex problem to write the regulations that will allow individual homeowners to fairly compete in these markets. Even if a person could push power from their EV or solar battery into the grid on this hot summer day at 5pm, there is no incentive for them to do so. Nor is there an incentive for them to defer EV charging until after 9pm or during the sunny part of the day when peak loads have subsided. In the US, none of the EVs available have enabled V2G for passenger EVs. The increased charge cycles on an EV battery will impact battery life and would need to be factored into battery warrantees. There is no great technology leap needed to convert 350 volts DC in an EV battery to AC power, although smart chargers with WiFi connected interfaces with new fun videogame-like applications on your smart phone, tablet, or web page are still in short supply. Here is where cooperatives and aggregators have an opportunity to build the technology and business models that will allow the new grid interactive power consumer/generator to manage and automate their smart home.

Will New EV Batteries Finally Get the Smart Grid And the Smart Home Working Together?

Homeowners mostly have taken the electric grid for granted. They complain about the high cost of power and many have installed efficient appliances, but it is a new concept for a homeowner to be an active partner with the utility in real time. With many homeowners moving to EVs that will have the latest lithium battery technology, there is a window of opportunity where the utility and the homeowner could work together, and both can save money. The pace of regulations and reform occurs slowly in this industry, and without strong federal leadership, this opportunity to reduce the cost of power and improve grid reliability will take some years to materialize.

In ISO New England’s 2020 state of the grid report it is clear they are forecasting EV growth and working on demand response. ISO New England and regional stakeholders have been working on market enhancements, known as Energy Security Improvements, or ESI, that will go into effect in 2024. ESI introduces strong market-based compensation for new energy and reserve services. While individual homeowners are not able to bid into such markets, there is a great opportunity for cooperatives and aggregators to act as brokers and collect large groups of homeowners to act as a group. Of course, without vehicle manufactures supporting V2G EV, owners are limited to scheduling charging and scheduling the operation of other high load equipment, like hot water heaters or HVAC systems. With different regulations in so many regions and countries, progress can be slow. It was not until PJM proved the use of lithium batteries for frequency regulation that many other utilities and grid operators adopted the technology. Introducing new markets and technology has some risks, which keeps many utilities watching to see if more innovated utilities get it right.

How the smart grid-interactive home evolves is not completely clear, but it is clear there is plenty of opportunity for utilities, grid operators, and homeowners to save money and opportunities for cooperatives and aggregators to make, if fun and profitable for homeowners to participate with the grid operation in real time. The recent emergence of long-life lithium batteries without competitive grid energy storage options is likely to be a temporary situation, as there are so many new technologies that are emerging that have not had the benefit of improving manufacturing efficiency from volume production. The lithium battery manufacturers have a temporary advantage due to the economy of scale and many iterative improvements. The grid interactive home appears to be inevitable as most every home is connected to the internet and cell towers, with smart phones, tables, and computers nearby, and shifting loads is inherently less costly than building peaking plants and wires that are idle 95% of the time.

Rick Rys
Senior Consultant, ARC

Rick Rys is a senior consultant at ARC. He performs research into and consults with clients on technology areas such as energy management, advanced process control (APC), simulation, and optimization.

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