Vehicles and the grid edge: The market for EV grid services

Consider this: 60 percent of electric vehicles sold in the United States in the last year boasted a battery that was 40 kilowatt hours or larger. In contrast, the average residential stationary energy storage system is about 12 kilowatt hours.

As EV sales rise, their high capacity for energy storage is not going unnoticed by utilities, car manufacturers, and aggregators. EVs are unique in that they both consume energy and have the potential to store and feed back into the grid, a form of demand flexibility.

In the United States and other markets with growing EV penetration, organizations are eyeing the potential to use spare EV capacity as a grid resource. Pilot projects number in the dozens; however, they largely remain in the demonstration phase.

Utilities are already facing a need to prepare for the potential effect of EV grid services on distribution planning, and technology companies are seeking to predict the feature enhancements that might help them capture revenue.

In a new executive summary on grid services and EVs, we share our forecast for the potential market that these players are seeking to take advantage of.

What is V1G and V2G?

Currently, leading market players are focusing on monetizing the rate or pattern of charging through V1G, also called “smart” or “managed” charging. With smart charging (also called demand management or V1G) program for EVs, individuals and fleet owners would opt to allow adjustments to their car’s charging behavior while plugged in, or else opt to charge their car during certain desirable windows.

Looking ahead, OEMs, standards organizations, utilities, and progressive public utility commissions are considering how to lay the groundwork for V2G services. V2G would broaden customers’ ability to fully monetize excess capacity on a day to day basis by feeding power back into the grid. With V2G, EV owners would give permission for grid players to tap charged car batteries to power the grid during certain times of day.

Both types of programs fall under the umbrella of grid services.

Market potential for grid services

We have forecasted the total available market potential of EV grid services, which captures the potential size of the market if all electric vehicles participate in some form of grid services.

In our new executive summary, we share our grid services market forecast through 2030 for a low case (V1G only), a mid case, and a high case (V1G and V2G programs with higher value) to reflect the range of possible scenarios. The low case values the market at under $10b in both North America and Europe by 2030. An aggressive forecast values the market at closer to $15b for Europe and $50b for the United States by 2030.

The differential between the two cases will shrink as potential business models and technologies are explored.

EV grid services and technology

To enable control and automation of EV grid services, vehicle and charging manufacturers will have to build new communications and power management capabilities into their equipment. According to our analysis of the EV charging landscape, the next few years will be key to establishing the groundwork for these enhancements.

Both Europe and the United States will see well over 10 million EV chargers installed by 2030, an order of magnitude increase over current deployment to service growing EV adoption. This growth is pushing stakeholders to look closely at the potential for revenue from these services to determine if and when to invest in feature enhancements.

EV grid services and grid operators

Vendors rely on grid operators and utilities to push innovation and policy forward. Some utilities and utility commissions are taking steps to enable EV grid services, particularly in states with growing EV penetration.

California’s public utility commission has a dedicated fund to help utilities and their partners explore programs in the EV flexibility space. Part of the rationale for such support is that EVs could provide energy and capacity resources to the grid and use up the excess power produced by solar during the sunniest part of the day – at a lower cost than other storage options.

The state is also home to one of the largest commercial scale EV flexibility programs. As noted in one of our recent reports on DER aggregation, a company that deals in EV chargers and related software announced that it is aggregating 10,000 of its California EV chargers for V1G demand response. The company, eMotorWerks, will collect revenue when its fleet of chargers participates in demand response through a California-specific mechanism that pays aggregators for DERs.

Vehicles on the grid edge

Today, paths to revenue for vehicle OEMs, software companies, fleet owners, EV charging companies, and utilities still needs to be defined. Policy, consumer behavior, and partnership questions remain largely unanswered. Large-scale commercial programs are only now being initiated for the first time, and new technologies and business models are evolving.

We are firm in our view that grid edge players will see growing value in exploring and scaling up EV grid services programs. These players will likely sacrifice profit at first as they prove out various business models, but success could unlock millions in potential revenues.