How networks can overcome the EV challenge

Decarbonising the transport sector is a key element of UK government policy for meeting climate change targets. Against this backdrop, the market for electric vehicles (EVs) is growing rapidly and EVs are currently leading the way in decarbonising road transport, at least for domestic and light commercial use. However, as the uptake of EVs is increasing, the impact of charging requirements on the electricity networks is becoming an issue. Might this, coupled with the existing regulation in this area, seriously hamper the adoption of EVs?

Essential to wider EV adoption is the development of the requisite charging infrastructure, particularly public charging facilities, given that home-charging is not available to everyone and given the range limitations of EVs. Public charging facilities are beginning to pop up in service stations, motorway service areas and supermarket and work place car parks, and there have been notable investments, including by the oil majors. For instance, BP recently acquired Chargemaster, the UK’s largest public charging network. As the charging infrastructure is developed, take-up of EVs can also be expected to increase. If EVs then approach price-parity with conventional vehicles, a tipping point in EV adoption may be reached, further fuelling demand for additional charging infrastructure.

However, the electricity networks were simply not designed to accommodate mass EV charging. Therefore, substantial investment in the networks will be needed as EV take-up increases and more applications for connecting charging infrastructure are received.

The RIIO price control arrangements require a network operator to estimate demand and to determine network investment requirements on an ex-ante basis. Such predictions over an eight-year price control period will be difficult to make and the network companies currently bear the risk that, if the demand does not materialise, they may not recover their network reinforcement costs. This means that there is a disincentive to make investment decisions on a timely basis before a capacity gap has actually arisen. If the decision is left until the capacity gap appears, the lead time required for network reinforcement could mean that the resulting constraints severely hamper the development of the EV market. 

In its July 2018 report, the Energy Systems Catapult recommended improvements in both demand forecasting and the network price controls. Better forecasting of the likely demand from EVs will require improved data, including information on where EVs are connected to the network. Coordination will also be needed between the operators of transmission and distribution networks, as well as with the EV sector. Ofgem will need to consider how best to accommodate the network investment requirements arising from EVs in setting the RIIO2 price controls and a more flexible approach may be needed. For example, this could mean permitting allowed revenues to rise in line with increases in EV take-up, within the price control period. 

There are however steps that the electricity distributors can take to mitigate the risks on investment decisions, by deferring the need to reinforce their networks. In its ‘Future Insights’ series Ofgem has identified a need for ‘smart charging’, meaning that distribution operators should take steps to incentivise the shifting of the time of charging away from the peak, rather than simply increasing the capacity of their networks, which would drive up costs for all electricity consumers.

Battery storage and new technological advances also seem likely to provide some assistance. For example, vehicle to grid (V2G) technology will allow flexible charging, whereby EV owners will be able to sell energy stored within their EVs back to the grid, when the vehicles are not in use. These actions should help to reduce the effects of “surge charging” where large numbers of EVs are charged simultaneously, by making sure that those without need of electrical power at any particular moment are not needlessly storing it.

As competitive markets drive the adoption of EVs and the development of charging infrastructure, some innovation seems necessary in the development of electricity networks. This will be particularly challenging for networks already experiencing revolutionary change through the process of decarbonisation, decentralisation and digitisation. Some flexibility in the network price control mechanisms and cross-sector coordination will be needed to ensure that the EV sector can continue to flourish.

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