Electric vehicles: who should pay?
Stewart Reid discusses the options for recovering the costs of network reinforcement needed for electric vehicles, and the unintended consequences of doing so.
26th July 2016 by Networks
Previously I have talked about the popularity of Electric Vehicles (EVs) and how the industry is preparing for their increasing numbers. Whether driven by government policy, technical advances in battery technology or just through consumer choice, all forecasts suggest that their numbers will rise dramatically in the next few years.
It is absolutely clear that there will be network reinforcement costs to bear and while smart solutions will reduce the costs, they will not eliminate them. So there is an obvious question to ask: “Who should pay”?
Generally, reinforcement of networks is funded in two ways, either by sharing the bill across all the customers in that Distribution Network Operator area or the customer (applicant) who wants to add the new load, pays the cost directly. Often there is a blend of the two options.
So, for instance, if a customer buys a new EV and they want the 7kW charging option to connect in to their home, and the local network has to be reinforced (smart or otherwise), then there are two different approaches that could be taken.
The first option is where the costs are shared out across all the customers in that particular utility’s area i.e. socialised, and the applicant pays nothing. The second option is that the applicant pays a fee towards, or the full cost of, the reinforcement.
If decarbonisation is our sole goal then the first option feels, initially, like the right solution, as removing any barriers to EV uptake could only be a good thing, surely.
There is, however, an unintended consequence of this approach.
There is no incentive on the EV owner or the EV industry to consider smart options on the customer’s side of the meter or to participate in smart solutions on the utility’s side of the meter – solutions which would lessen the socialised network reinforcement cost to customers in the UK.
Smart metering and half hourly metering will provide some incentives to be smart but these are targeted at wide area system balancing needs, not at local network reinforcement..
There are plenty of options to consider: Energy storage in the home (trickle charged through the day to provide fast charging when required); in-home demand side management (switching off optional loads in the home during car charging); local demand management schemes (as trailed in My Electric Avenue) or sizing the charger to the minimum actually needed.
The second option, where the applicant pays at least a proportion of the reinforcement cost, would allow them to see a return on smart solutions like in home energy storage, or in home demand side management. This would not only reduce the cost of reinforcing networks but would also stimulate new markets, products and opportunities for customers and industry.
The second option could also incentivise participation in schemes that maximise the available network capacity through initiatives like “My Electric Avenue” that shares the available charging capacity through the night and day as cars are connected.
Another consequence of option one is the distortion of the low carbon transport market. If the network reinforcement costs associated with EV charging are invisible to the EV owner then how will this impact their choice when considering other options? Could full socialisation have a negative impact on the uptake of other solutions such as hydrogen or LPG or even public transport and cycling? Ultimately leading to us overshooting the optimal mix of solutions!
There are obviously blends of these approaches. For example, placing conditions on those who benefit from the socialisation of costs and apply a flat rate for EV connection for those who do not.
Whatever option is adopted we need to be sure that it is encouraging the customer and industry behaviour that gives us the best opportunity to decarbonise cost effectively.
As you can see this issue is complex, your thoughts on it could be down to your politics and principles rather than binary engineering choices, but it is a topic which I believe needs open discussion and agreement.
Stewart Reid, head of asset management and innovation, SSHEPD
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