Global automakers are going all out on vehicle electrification, with planned spends of $300 billion over the next decade, according to latest industry reports. The world’s largest automaker by sales, Volkswagen alone has announced plans to invest $34 billion on e-mobility initiatives and $57 billion on battery procurement. Alongside, massive plans have been drawn up by governments across the world to facilitate the setting up of supporting charging infrastructure.
This rush towards e-mobility comes as environmental and climate regulations have tightened around the world, and technological improvements have made electric vehicles (EVs) cheaper than ever. The e-mobility revolution is largely dependent on how the power sector will adapt to it. Several aspects need to be looked at, as transportation fuel demand shifts from oil to grid power. Energy producers and distributors need to understand the potential impact of EVs on electricity demand and hence, on the entire ecosystem of the power sector. Grid operators need to be prepared for how the grid will respond to EV demand patterns.
A key question that arises in this pursuit of clean transportation is: how will EVs be fuelled – through thermal power or clean energy? And in that context, what is the business case for the convergence of EVs and renewable energy?
As far as the impact of EVs on overall energy demand is concerned, there are a number of studies and projections that are available today. The International Energy Agency has said that 2 million barrels per day of oil could be displaced by EVs by 2040. Bloomberg New Energy Finance has forecasted that such displacement could occur as early as 2028, while a report by the Grantham Institute at Imperial College London and independent think tank Carbon Tracker Initiative has stated that it will happen by 2025. Although the timelines differ, most of the studies agree on the fact that the transport sector’s adoption of EVs will seriously disrupt oil demand. Further, the study by the Grantham Institute and the Carbon Tracker Initiative concludes that fossil fuels may lose 10 per cent market share to solar photovoltaic (PV)-powered EVs within a single decade.
Meanwhile, the jury is still out on the impact of EVs on electricity demand. Many in the industry are relying on EVs to reverse the downward trend in global electricity consumption. According to a study by the US Department of Energy’s National Renewable Energy Laboratory, EVs could drive 38 per cent of the 80 TWh per year of absolute increase in US electricity demand by 2050. Several other global-level studies also provide similar results.
However, a new report from Redburn, a UK research and investment company, suggests that the growing energy efficiency across various user categories (including lighting, heating, ventilation and air conditioning, EVs and appliances) means that the industry and investors may have to look elsewhere for a significant boost in demand for electrical power.
In India, however, the impact of the shift towards EVs, even if they become highly energy efficient, will most likely lead to an increase in overall power demand. One, it is an emerging economy with power demand increasing across various sectors. Two, any energy efficiency gains will be offset by the increase in the per capita consumption of electricity, which is currently very low as compared to global standards. A study jointly conducted by the Associated Chambers of Commerce and Industry of India and EY concluded that the overall electricity demand from EVs in India will be around 79.9 GWh by 2020 and 69.6 TWh by 2030.
That brings us to the next question of which sources of energy will be used to meet the power demand of EVs in India. Of the country’s total installed capacity of around 360 GW, the share of coal, gas and nuclear stands at around 66 per cent, while that of renewables (including hydro) is around 34 per cent. In terms of generation, however, renewables and hydro account for only about 18 per cent. In the context of e-mobility, the environmental benefit of EVs will be significant only if their power consumption is met by clean energy sources. In other words, an EV is only as green as its energy source. Besides serving the purpose of ensuring clean mobility, there are various other benefits of powering EVs through renewable energy.
Managing the load curve
Even if EV sales do not lead to a significant increase in power demand, it would likely reshape the electricity load curve. The most pronounced effect would be an increase in evening peak loads, as people plug in their EVs when they return home after completing the day’s work. The changing load curve will create challenges at the local level because the spread of EVs will most likely vary and in some cases, quite significantly. These residential hotspots and other concentration points of EV charging, such as public EV fast-charging stations and commercial vehicle depots, will see significant increases in local peak loads. To forecast changes in the load curve in residential areas, McKinsey conducted a Monte Carlo analysis study in 2018. Based on the analysis, the study concluded that for a typical residential feeder circuit of 150 homes at 25 per cent local EV penetration the local peak load would increase by approximately 30 per cent. Beyond peak load increases, the highly volatile and elevated load profiles of public fast-charging stations would require additional system balancing.
Energy players have several ways to deal with this situation. They can influence charging behaviour, for example, by introducing time-of-use electricity tariffs that can give incentives to EV owners to charge after midnight instead of early evening. Alternatively, renewable energy combined with storage could play a key role in managing this load as these installations can be set up in a more local and distributed manner. As the cost of renewable energy systems and batteries continues to decline, using this combination to even out EV-led load profiles will become increasingly attractive.
Impact on rural geographies
The latest data on capacity addition for power generation highlights India’s rapid march towards adopting solar as a major source of energy; however, the rural electrification rate in India continues to remain low. According to the Rural Electrification Corporation’s (REC) annual report, while approximately 18,000 villages were electrified from 2013 to 2017, it did not necessarily translate into 24×7 energy access for all households. Decentralised solar generation solutions, particularly mini- and microgrids, have been endorsed as a critical linkage for reliably meeting the energy needs in rural and remote geographies. These solutions not only have the advantage of faster deployment but also ensure lower transmission and distribution losses. However, the average rural household energy load, which consists of lighting, charging and fans, is not enough to make a viable business case for mini-grids. As a result, the solar mini-/microgrid sector is facing a challenge of viability with an average project internal rate of return of 8-10 per cent. This has led mini-grid developers to pursue more productive loads, alongside domestic consumption, which require more energy and can be charged a higher tariff for commercial usage. One possible load addition could be EVs. Transport infrastructure in rural areas in any case needs a major boost.
The challenges associated with improving the condition of rural mobility and the viability of solar mini-grids may find a common solution in EVs for rural areas. The charging infrastructure for these EVs presents a high potential option as a productive load for mini-grids. Furthermore, mini-grid developers can themselves support the deployment of such vehicles through rental models and create alternative livelihood opportunities for rural entrepreneurs. It will, however, be important to assess the cost-benefit for a rural entrepreneur to operate an EV. That said, with the pace of improvement in technology and declining costs, these models are poised to rapidly become more profitable. They can also help in attracting investments in the mini-grid sector from EV manufacturers looking to expand into rural markets. Despite the benefits, the marriage of EVs and renewables may not be easy due to several reasons, prime among them being the absence of cost-effective storage solutions.
Renewable energy, mainly wind and solar, as deployed today is intermittent and can only be used when the resource is available. Solar power has a well-known bellcurve for maximum possible output, with a peak around noon and falling to zero by night. It is unlikely that EVs will follow the same pattern for charging. India’s initial EVs are likely to be fleet vehicles, especially cabs, buses, etc. They are unlikely to be stationary and plugged in at midday. Even for personal vehicles, much of the charging may take place at home, especially overnight. The only way to resolve this situation would be to have ubiquitous EV charging infrastructure. But building such infrastructure in India is more difficult than in many other countries due to land and grid limitations. It could be argued that overnight charging is good in many ways as it would make use of off-peak power.
Moreover, during night hours, less expensive, lower-speed charging may suffice, precluding the need for expensive fast-charging technology. But overnight charging rules out the use of solar energy, except in a yet unproven model of battery swapping, which may be geared more towards select fleet vehicles.
One solution to this problem could be an inbuilt solar charging plant within an EV. This concept is not far from being launched. A Germany-based start-up, Sono Motors, is hoping to bring a solar-powered electric car into the market in 2019. The firm is developing a car that can be recharged while it is being driven. Called Sion, it has solar cells integrated into the bodywork, which allow it to generate power to run the vehicle. Sion will have 330 solar cells on the vehicle’s roof, bonnet and sides, and its battery system will offer a range of around 250 km (155 miles) before it needs recharging. It can be charged via solar power, at conventional power outlets or through other electric cars. With greater advancements in technology, more such solutions are likely to come up in this space.
However, energy storage will be central to the successful growth of renewable energy use for powering EVs. Policymakers, therefore, need to not just devise an energy storage plan and set targets but also take decisive action if the country is to effectively tap the opportunities in both EVs and renewables. 