By Scott Shepard, Senior Research Analyst with Navigant Research’s Transportation Efficiencies program
Vehicle-grid integration (VGI) is a topic that tends to be at the fringes of coverage of transportation electrification. Developments in the VGI field are often overshadowed by Tesla Model 3 delivery timelines or by the range specs of the next-generation Nissan LEAF. Regardless, VGI is a critical component in actualizing transportation electrification’s potential, especially for medium- and heavy-duty vehicles.
If VGI reaches its full potential, it could create a revenue stream that erases energy costs for plug-in vehicle owners, making the purchase of a plug-in over a conventional vehicle that much more attractive. VGI does this by enabling EV owners to participate in programs and markets for grid balancing, such as frequency response. The most advanced form of VGI is vehicle-to-grid (V2G), in which the EV delivers power back to the grid, increasing both the amount of time it can provide balancing services and the amount of money it can earn for its owner.
BMW has been effective at showcasing the potential benefits of VGI to EV owners through its ChargeForward program in the San Francisco Bay area. In the first phase of the program, BMW used unidirectional VGI technologies (also known as V1G), and offered handsome rewards to a small group of i3 owners who allowed BMW to manage their charging. The second phase (now under way) reduced the reward size (which is still substantial) and expanded the population of eligible BMW owners to include those who own PHEVs.
The primary goal of BMW’s program is to assess the critical unknowns of VGI economics – owner participation rates and per-vehicle and per-kilowatt revenue potential. These unknowns have hampered VGI development since mass-market plug-in vehicles were developed. It should be noted that the rewards to the ChargeForward participants were heavily subsidized by BMW to incentivize participation. That is to say, BMW’s program is not sustainable at current reward amounts. Similar returns for future residential VGI programs are unlikely.
Years have been spent on lab tests and pilot fleets (like BMW’s) to scope out what sustainable VGI business models may look like. Finally, the prospects for such business models appear to be heating up. The latest development is the acquisition of San Francisco Bay area-based charging station manufacturer and charging service provider eMotorWerks by major international utility Enel.
Better known in North America for its subsidiary, EnerNoc, Enel has long been at the forefront of VGI development in Europe. The company launched one of the first V2G pilot projects in Spain through its subsidiary Endesa, and partners with Nissan to offer one of the only global commercial V2G solutions for fleets. Enel and Nissan have now deployed V2G systems in the UK and Denmark. The acquisition of eMotorWerks is of particular note because eMotorWerks has made a name for itself in a brief amount of time as an innovative developer of VGI-enabling hardware and software solutions. For Enel, eMotorWerks bolsters its charging services portfolio and introduces it to the North American EV market, which may encourage a resurgence in fleet vehicle electrification.
Although EVs have made significant gains among small cars, growth outside anything bigger than a crossover has been limited. Bigger vehicles require bigger batteries, and every incremental gain in battery size expands the premium between the EV and its gas-burning alternative. The payback is on energy and maintenance costs, but to realize it the vehicle must be used frequently. Range limitations (a product of battery size and long charging times) make frequent use difficult. VGI can dramatically change the business case for electrification, especially when used on fleet vehicles with low and regular utilization schedules.
School bus fleets are particularly attractive in this regard, consequently the market for electrified and integrated school buses is making exciting progress. Coming off a series of school bus V2G demonstrations in California, US bus maker Bluebird debuted two electrified models with V2G capabilities in mid-2017 (scheduled to go on sale in 2018). Canadian bus maker Lion also introduced an electric V2G-capable bus offering in early 2017.
The market for grid balancing services, which drives VGI developments, is not relatively large in any global region, but that is not a limitation. For instance, total EV charging capacity in major EV markets will surpass grid service market size in the near future, but only a fraction of EV charging capacity can and will be made VGI-capable. That which is VGI-capable will be limited by the amount of time a vehicle is plugged in or charging. Given these constraints, in an upcoming report on VGI, Navigant Research projects that, with over 43 million plug-in vehicles on the world’s roads in 2026, VGI’s share of the grid service market would likely be well below 1% in all regions. The outgrowth of these developments will be far more effective for moving EVs than for displacing other competing grid-balancing assets. There is much room to grow for VGI developers.