Severin Borenstein at the University of California’s Energy Institute at Haas posted on whether a consumer buying an electric vehicle was charging it with power from renewables. I have been considering the issue of how our short-run electricity markets are incomplete and misleading. I posted this response on that blog:
As with many arguments that look quite cohesive, it is based on key unstated premises that if called into question undermine the conclusions. I would relabel the “correct” perspective as the “conventional” which assumes that the resources at the margin are defined by short-run operational decisions. This is the basic premise of the FERC-designed power market framework–somehow all of those small marginal energy increases eventually add up into one large new powerplant. This is the standard economic assumption that a series of “putty” transactions in the short term will evolve into a long term “clay” investment. (It’s all of those calculus assumptions about continuity that drive this.) This was questionable in 1998 as it became apparent that the capacity market would have to run separately from the energy market, and is now even more questionable as we replace fossil fuel with renewables.
I would call the fourth perspective as “dynamic”. From this perspective these short run marginal purchases on the CAISO are for balancing to meet current demand. As Marc Joseph pointed out, all of the new incremental demand is being met in a completely separate market that only uses the CAISO as a form of a day to day clearinghouse–the bilateral PPAs. No load serving entity is looking to the CAISO as their backstop resource source. Those long term PPAs are almost universally renewables–even in states without RPS standards. In addition, fossil fueled plants–coal and gas–are being retired and replaced by solar and wind, and that is an additional marginal resource not captured in the CAISO market.
So when a consumer buys a new EV, that added load is being met with renewables added to either meet new load or replace retired fossil. Because these renewables have zero operating costs, they don’t show up in the CAISO’s “marginal” resources for simple accounting reasons, not for fundamental economic reasons. And when that consumer also adds solar panels at the same time, those panels don’t show up at all in the CAISO transactions and are ignored under the conventional view.
There is an issue of resource balancing costs in the CAISO incurred by one type of resource versus another, but that cost is only a subcomponent of the overall true marginal cost from a dynamic perspective.
So how we view the difference between “putty” and “clay” increments is key to assessing whether a consumer is charging their EV with renewables or not.
The analogy to Netflix is fascinating. As GTM points out, Netflix started out competing with Blockbuster in video DVDs, but then spilled over into video streaming (BTW, a market that Enron famously thought it could corner in the last 1990s.) So Netflix is now competing with both cable and broadcast companies. One can see how renewables could jump out of just electric service to building space conditioning and water heating, and vehicle fueling. Tesla is already developing those options.
General Motors announced the new Chevy Bolt with a 200-mile range at $30,000 after federal incentives (and less with state incentives). This range works for most households as a primary car (versus a commuter with a 40-50 mile range) and it’s in the price range of many other alternatives.
Just hooking up EV owners and not compensating them for the storage services they can provide won’t be a successful or popular idea. Rather the first step is to figure out what is the value of that storage? A new NREL study estimates that value to be about $59 per kW-year with a 33% RPS portfolio in California, increasing to $109/kW-year at a 40% RPS. For a typical EV, that could translate into $300 to $550 per year or $2,000 to $5,000 over 10 years.
Then you assess what are the incremental costs to the EV owner in reduced battery life. Note that batteries depleted 30% can’t be used for EVs any more but are still valuable for grid storage. Vendors probably can build in-home racks that store and connect the depleted batteries. Those become factors in determining the payments to the EV owners and their agents.
As for enrolling EV owners in a storage management program, it need not be cumbersome if enrollment is the default (opt-out) when buying a car or installing a charging station. (See all of the literature on the importance of opt-out vs. opt-in and status quo bias.) The auto dealer or charging administrator becomes the agent. An EV buyer might sign up for the program and not even know it. The charging process could work much like the massive distributed computing projects that harness small parts of the idle processors across millions of personal computers. All of this becomes part of the peer-to-peer transactive energy (TE) grid.
I’m not the only one asking whether California’s High Speed Rail (HSR) project is the best way to reduce climate change risk. Dick Startz from UC Santa Barbara confirmed in the LA Times my observation that creating an electric vehicle through-way along I-5 probably can serve the same purpose for much less cost, while delivering GHG reductions much sooner.
Widespread and effective charging networks are being developed that makes a high speed EV corridor feasible. Access to such a corridor might even encourage EV diffusion. As Startz writes, we should be looking for solutions from this century rather than the last.
California has about 24 million autos. The average horsepower is about 190 HP which converts to about 140 kW. Let’s assume that an EV will have on average a 100 kW engine. Generally cars are parked about 90% of the time, which of course varies diurnally. A rough calculation shows that about 2,000 GW of EV capacity is available with EVs at 100% of the fleet. To get to 22 GW of storage, about 1% of the state’s automobile fleet would need to be connected as storage devices. That seems to be an attainable goal. Of course, it may not be possible for the local grid to accommodate 100 kW of charging and discharging and current charging technologies are limited to 3 to 19 kW. So assuming an average of a 5 kW capability, having 20% of the auto fleet connected would still provide the 22 GW of storage that we might expect will be required to fully integrate renewables.
The onboard storage largely would be free–there probably are some opportunity costs in lower charging periods that would have to be compensated. The only substantial costs would be in installing charging stations and incorporating smart charging/storage software. I suspect those are the order of tens of dollars per kW.
As I was driving back from Los Angeles to Davis, I thought about how convenient it would be to turn on an auto pilot that allowed us to lock into the train of cars up Highway 99. The only reason I really had to pay attention was due to the varying speeds of the traffic. But that future may be nearer than we might think. Google’s self-driving car is getting most of the press, but in fact there are many similar technologies already on the road. In fact, there’s been some concern that drivers are already pushing the limits on current controls, but collision avoidance devices may soon be standard equipment.
Which brings us to the question: How will high speed rail fare in a world with driverless electric cars? The high speed rail travel forecast appears to assume a similar mix of gasoline-fueled automobiles; in fact, the word “electric” isn’t even in the report. On the other hand, studies show that EV market share probably needs to reach 45% by 2030 to achieve an 80% reduction in GHG emissions by 2050. And the Air Resources Board is considering regulations to implement “fast refueling / battery exchange” that would make the LA-SF trip even easier in an EV. Given the shorter life of automobiles, we might expect that almost all of the highway trips are with EVs by 2045.
We’re left with the question of what are the true emission reductions from HSR in such a world? Are we building a project that’s truly useful life is less than a decade?
Tim O’Connor of EDF writes about the benefits of transportation diversification at EDF’s California Dream 2.0. I think that fuel diversity is a useful objective, but achieving that will be difficult due to the network externalities inherent in transportation technologies. Gasoline and diesel vehicles became dominant because having single-fuel refueling networks is more cost effective for both vendors and customers, and reduce the search costs for drivers to find those stations. Think of how many fueling stations someone might have to pass to reach their particular energy source. Investing in a particular fuel requires a certain level of revenue. Note how many local gas stations have closed because they didn’t have enough sales.
For a more recent example, we can look at cell phone operating systems. Initially each manufacturer had their own system, but now virtually all phones are driven by two systems, Android and iOS, while Windows 8 keeps trying to make inroads.
We need to be very aware of the fueling network economics when pushing for new transportation energy sources. Investing in a system is as much a set of business decisions as a policy decision. One approach might be to focus on using particular fuels in a narrow set of sectors and discourage broad sector-wide use. Another might be to use a geographic focus and to set up means of interconnecting across those geographies.