The role of utilities in transport electrification in the US
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Industry
- Energy, Resources & Utilities
Rebalance the energy equation
Highlights
- The government policies and affirmative actions, coupled with customer awareness about a clean and green future, have set the stage for a faster-than-expected growth of electric vehicle adoption in the US.
- While vehicle OEMs are the obvious and natural key players, utility companies are more strategically placed to lead the transport electrification and battery ecosystem from the front.
- Transport electrification is the need of the hour, and being in the right place at the right time with the right strategy is critical. Utilities that are stepping up efforts with the right tech partner will be regarded as pathfinders in the future.
In this article
The electric vehicle evolution
In what can be called a paradigm shift in transportation, electrification is expected to peak earlier than predicted in the US.
The US government is electrifying its 650,000-strong fleet, building an additional 500,000 public charging stations, and investing USD five billion in battery research, according to data from the International Council on Clean Transportation. These policies and affirmative actions, coupled with customer awareness about a clean and green future, set the stage for a faster-than-expected growth of the transport electrification and battery ecosystem. Key stakeholders in the ecosystem, such as utilities, automotive OEMs, and fleet companies, are putting electrification at the core of their strategies.
Key drivers of EV adoption in the US
When it comes to market penetration, the US has varying rates of electric vehicle (EV) adoption.
Let us explore some of the key drivers that have contributed to this accelerated attention that EVs have received in the US:
Policy
- Strict emission standards: President Biden rejoined the Paris Climate Accord in February 2021, showing that the US is serious about pursuing its emission standard goals and achieving net-zero. Multiple US states are actively adopting a program called the Zero Emission Vehicle (ZEV) mandate. The California Air Regulation Body (CARB) has designed the ZEV program to help the state achieve its emission goals.
- EV subsidies: There is a constant effort to increase the subsidies provided for EV-related businesses. At present, there is a cap on subsidies of 200,000 units sold by an original equipment manufacturer (OEM). A bill for eliminating this cap is being discussed, and President Biden has proposed $100 billion for customer rebates. These massive behavioral nudges are incentivizing OEMs and users to increase EV adoption further.
Technology
- More EV models across segments to match demand: Studies have shown that the EV models in production will touch 240 in the next two years. As several auto OEMs enter the EV passenger vehicle market, the gap in model availability and production of HCVs and MCVs will be filled rapidly. Companies like GM and Ford have committed to fully electric pickup trucks. GM is also planning to set up more than 2,700 fast chargers along with its partner EVgo. OEMs are investing in EV startups for their technological expertise. For instance, Rivian, an auto manufacturer established in 2009, raised a Series E funding of USD 2.6 billion in early 2021, despite the COVID-19 slump.
Environment
- Environment-conscious customers: Drivers, especially young ones, are extremely conscious of environmental issues. A recent survey by Consumer Reports, a US-based nonprofit consumer organization, shows that over 70% of respondents in the US think that EVs will decrease pollution significantly and have shown keen interest in EV purchase. Moreover, the increasing number of choices in EV models is contributing to the growth curve.
In the right place at the right time
While vehicle OEMs are the obvious and natural key players, utility companies are more strategically placed to lead the transport electrification and battery ecosystem from the front.
Policy changes have driven multiple utilities to transform from an enabler to an active ecosystem player. Patterns that have surfaced during this evolution include:
- Dedicated eMobility units: Many American utilities are setting up dedicated teams for transport electrification and related services. Utility leaders like Southern California Edison (SCE) are actively hiring to build these teams and ensure they have the right product. IDC survey predicts that 20% of revenue growth would be from previously unrelated industries. One such major industry is transport electrification.
- Multi-party partnerships: Electric utilities are partnering with multiple core actors such as EV OEMs and charge point operators (CPOs) to deliver more value to their end customers. For example, Duke Energy and five other utility companies have formed The Electric Highway Coalition to set up a network of DC fast chargers.
- Investing in distributed energy resource management system (DERMS): Utilities serving large cities are investing in DERMS and related technologies to ensure enough supply to match the sudden demand from increasing EV adoption. Significant investments are being observed in demand response (DR), virtual power plants (VPP), and other related platforms. For example, SCE has already invested in a robust grid management system.
- Partnering with IT companies: Technology plays a key role in enabling the transition to an ecosystem player. Transitioning to electrification would require the upgradation of existing modules, the development of new processes, and collaboration with multiple other players in the ecosystem. The right technology partner would help with the transition and ensure a smooth scale-up.
The way forward
Transport electrification is the need of the hour and being in the right place at the right time with the right strategy is critical.
Utilities that are stepping up efforts with the right tech partner now will be regarded as pathfinders in the future. Companies that wait and watch may miss the bus (quite literally!).
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