Energy Efficiency Markets LLC

Electric vehicles: A win for Detroit and EE

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Courtesy of Courtesy of Energy Efficiency Markets LLC

At this week’s Detroit Auto Show, electric vehicles are on top. Two of the year’s highest-rated cars are electric. The plug-in hybrid electric Chevy Volt was awarded this year’s “Car of the Year,” just beating out the all-electric Nissan LEAF.

But regardless of which car wins, the message is clear: electric cars are generating a lot of excitement. It’s not just the auto industry that will benefit. The EV industry offers growth to other industries as well, including the energy efficiency sector.

Utilities win because a growing electric auto fleet means more use of electricity to replace gasoline. GM sold between 250 and 350 Chevy Volts in December and Nissan has sold fewer than 10 LEAF sedans in the past two weeks, which means utilities need to begin thinking about how they will manage growing demand as more EVs hit the market. One way utilities can manage additional load is through energy efficiency programs, special energy pricing rates, and demand response.

Both GM and Nissan are selling their electric vehicles in selected test markets. The utilities in these test markets have been preparing energy management strategies and are now starting to collect the first real electric vehicle energy data. “Our role is to do everything we can to make EV's successful,” said Chris Chen, market development manager for San Diego Gas and Electric, a test market for the Nissan LEAF.

The new data will tell utilities when consumers are charging their electric cars and how much their use will affect the grid. Because less energy is generally used at night, the existing electric infrastructure and power load can accommodate the extra energy required from electric vehicles, at least for a few years, if customers charge at night as expected. Utilities plan to encourage customers to charge their cars at night and to manage energy use to maximize the current grid’s potential.

One utility, San Diego Gas and Electric, is trying out three rate-incentive pricing schemes in different areas of its service territory. “We are trying to see if lower off-peak rates will encourage different charging patterns,” said Chen.

Another utility, DTE Energy in Michigan, is educating consumers about energy use and time-of-day rates through special energy workshops and sessions for businesses, partners, and consumers, said Jeff LeBrun, principal marketing analyst at DTE Energy.  Michigan is also the headquarters to several battery manufacturers, which are growing along with the electric vehicle industry. LG Chem, one Michigan battery company, is the chosen manufacturer for both the Chevy Volt and Ford’s electric Focus, set to be released later in 2011.

Utilities such as San Diego Gas and Electric are also looking at demand response programs designed specifically for electric vehicles. As more and more vehicle charging stations are installed, demand response programs can help manage surging energy loads and peak loads. It’s likely the demand response market will develop with the electric car market.

But how fast will the electric market grow? Will your next car likely be electric?

Right now, utilities project that electric vehicles will develop slowly because car companies are limiting the number of units sold and are gradually ramping up production.  A slow-growing industry is good for utilities, which have time to test different electric vehicle adoption and energy management strategies. Limited expansion is good as long as consumer demand continues. About 50,000 people are on waiting lists for electric vehicles.

Consumers will adopt electric vehicles as long as utilities make the transition to ownership a positive experience. In many ways the success of the electric vehicle industry ultimately depends on the utility’s ability to manage energy and promote energy efficiency, thus being able to provide electric vehicle owners with the proper energy infrastructure and simplicity that they demand.

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