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Utilities Want to Provide EV Fleet “Advisory Services.” Should Regulators Approve?

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As the electrification of vehicle fleets goes mainstream, fleet owners are facing a gauntlet of challenges, starting with engaging their electric service provider. The utility response of providing “advisory services” is both creative and presents new challenges for utility and air regulators.

Advisory services, whether offered by utilities or third parties, are designed to educate and enable fleet managers. The goal is to fill the gap between what fleet managers already know about transportation and what they need to know about electric transportation.

RAP recently facilitated a conversation on this topic, inviting a representative of a school district, a utility company, and several third-party transportation service providers to discuss their perspectives and better understand the challenges.

In our webinar, “So, How Does This Work Again? The Role of Advisory Services in Fleet Electrification,” Timothy Shannon, transportation director at the Twin Rivers, Calif., Unified School District; Matt Stanberry, managing director at Highland Electric Fleets; Ann Xu, founder and CEO of ElectroTempo; and Jason Peuquet, strategy and policy manager of clean transportation with Xcel Energy, shared their perspectives with RAP’s Camille Kadoch.

From my perspective as a former utility commissioner, I was asked to serve as the “respondent” and identify the pertinent regulatory issues.

Reviewing Advisory Services Proposals

At first glance, the expansion by utilities from offering a commodity to offering professional services may seem unprecedented. But actually, advisory services are a more visible form of what utilities used to refer to as “marketing key accounts,” a focus that utilities regularly had that helped them stay in touch with sizable commercial and industrial customer segments, and for which they were allowed to recover reasonable expenses.

The point here for regulators is not that this is different, but instead that this is more overt, and coming at regulators in a more robust and comprehensive manner. Advisory services also have a component of market development, a similar quality found in demand-side management programs. Note that third-party support to help utilities better serve fleets is not so different than the energy auditing support that contractors provide energy efficiency programs.

So what have we learned from those experiences, and how do we apply what we’ve learned in this context? This history can help regulators understand how to proceed when a utility says it wants to engage in these ways, that it will incur costs for which it wants recovery, and possibly even that it seeks earnings on those costs.

What is the right regulatory construct to apply here and what needs to change? The slide below provided by Xcel’s Jason Peuquet, does a good job of illustrating the range of comfort to discomfort of the regulatory process in this context. On the right-hand side, regulators are comfortable with rate design. We’ve had a 100-year history with that. Advisory services the new phenomenon over on the left about which we are less certain. The pieces in the middle come with a different levels of comfort.

Meeting Fleet Customers' EV Needs

Source: Xcel

Costs and Benefits

Electrification means that a utility is creating new load. But the regulator still has a key role to determine the answers to two questions: Is the utility proposal creating the kind of load that is appropriate? And is the load being managed effectively from a system benefit perspective? The regulator needs to ask:

  • What is the utility aspiring to do or become?
  • How does this new service change the utility’s current role as a public service?
  • Does investment in advisory services align with existing regulatory principles — i.e., are these investments just and reasonable? And are they least cost?
  • How should costs be allocated — i.e., who pays for them, and why?
  • Do today’s costs deliver future societal benefits, however difficult they may be to quantify?

A narrow interpretation would focus on who is the cost causer and what they should pay. That would put all the burden back on the fleet services. That is fine, and internally consistent in a narrow framework.

But recognizing that we are working in a broader arena, we acknowledge that we are not just making investment to help fleets. We are doing “demand creation.” This puts the regulator in a position to look at today’s costs that are known and knowable, and at future benefits that are speculative and uncertain — although we know they are out there. How do we get comfortable matching today’s costs with future benefits? Those benefits range from consumer savings, to lower-cost grid management, to the many societal benefits like reduced air emissions and improved health outcomes.

21st Century Load Forecasting

At the same time regulators need to recognize that doing this work — letting utilities build load through advisory services — ushers in a new aspect of load forecasting. Fundamentally, the regulator-utility relationship will need to further evolve. Effective regulatory oversight of load forecasting requires greater engagement of the utility, with lines of inquiry such as:

  • Will advisory services requests be strategic and narrow, seeking only to develop certain types of load?
  • What kind(s) of load do you want?
  • Do you just want maximum growth, no matter where it comes from?
  • Where on your system do you want it?
  • At what time of day do you want it?

Requests for approval of advisory services will bring with them a new complexity about understanding load. So, this is not only an inquiry into costs and benefits (both short- and long-term); it is also a challenge into understanding how the utility is changing its relationship with certain customers — from the traditional provision of a commodity, a blended commodity and service-based relationship. The regulator is confronted with understanding that this service-based customer engagement is interwoven into utility decisions concerning capital asset investments in infrastructure. For it is through effective advisory services that these capital assets become viable and reasonable assets.

Finally, in this world where the utility has the onus to make and justify these proposals, it is the regulator’s role to ensure that the utility is clear in what it aspires to become. And this will require even more questions for regulators to raise:

  • How does this service fit in the utility’s portfolio?
  • What is the utility’s longer-term sense of itself as a commodity and service provider?
  • Is the regulatory called to assist them and nudge them on their way? Or on the contrary, is your task to “keep them in their lane?”
  • How am I going to manage the commission’s relationship with that utility into the future?

One way or another, transportation electrification represents a new set of evolutionary forces upon the utility-regulator relationship. Awareness and preparation will make the ride more enjoyable.

Electrifying last-mile delivery: A total cost of ownership comparison of battery-electric and diesel trucks in Europe

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Europe’s increases in online shopping and delivery over the last two years show no signs of waning. Parcel delivery vehicles make up one of the most significant heavy-duty vehicle segments by volume in Europe, recording a market share of 11% in 2020. Fortunately, their predictable schedules and relatively short routes make last-mile delivery vehicles a prime candidate for electrification. In fact, electric delivery trucks will soon be cheaper to use than diesel trucks.  

The International Council on Clean Transportation and RAP break down the various vehicle costs for electric trucks, the energy and network expenses for charging them, and the availability of purchase premiums in six major European cities. In some scenarios, electric trucks reach cost parity with diesel vehicles yet this year. Without the support of these premiums, parity is delayed until 2025 or even 2030 in some cities. 

Based on this comprehensive analysis, the authors conclude that battery-electric trucks are economically viable today, given the currently availability of purchase premiums. Other important aspects to consider when electrifying last-mile delivery fleets include choosing the appropriate battery size and reducing operational costs through smart charging of the vehicles. 

Policymakers have the ability to advance electrification of electric delivery trucks by: 

  • Implementing a national bonus-malus tax scheme to finance purchase incentives for zero-emission trucks. 
  • Imposing emissions charges on all diesel vehicles entering low- and zero-emission zones in city centres. 
  • Deploying ‘smart’ charging infrastructure in urban logistics depots. 
  • Requiring Member States to implement time-varying electricity and network tariffs to ensure affordability for logistics operators electrifying their fleets. 

Electrifying last-mile delivery: Battery-electric delivery trucks soon cheaper to use than diesel trucks in Europe

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Decarbonisation of the heavy-duty vehicle segment in Europe is crucial to curb greenhouse gas and pollutant emissions from the transport sector. Last-mile delivery trucks for city logistics are a promising application for electrification given their low daily mileages and the opportunity to recharge at depots when not in use. However, it is still unclear how these electric delivery trucks compare to their diesel counterparts from an economic perspective, considering overall cost of usage. Moreover, the large-scale deployment of electric delivery vehicles raises questions about how this additional charging demand can be integrated into local power grids and what it will cost. 

A joint study from the International Council on Clean Transportation and RAP quantifies the total cost of ownership of battery-electric last-mile delivery trucks in six European cities and compares it to existing diesel truck fleets. The analysis considers the cost of the trucks, purchase premiums, and a detailed breakdown of charging expenses, including power and network tariffs. The study also provides policy recommendations to overcome the cost difference between these two vehicle types and to foster the use of electric delivery fleets. This fact sheet offers a brief overview of the report’s results.

Boosting the EU energy savings obligation

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As part of the Fit for 55 legislative package, the European Commission proposed a recast of the Energy Efficiency Directive in July 2021. The recast includes significant changes to the Directive’s cornerstone article on the energy savings obligation, Article 7 (now Article 8). As a next step, EU legislators – the European Parliament and the Council of the EU – have to agree on a common text. The energy savings obligation in Article 8 requires EU Member States to trigger a certain amount of energy savings among end users. Getting the specifics of this obligation right is vitally important for Europe’s energy transition.

RAP’s Marion Santini, Samuel Thomas and Louise Sunderland analysed the negotiations on Article 8 on 15 June 2022, to assess three critical requirements: the energy savings rate, the exclusion of fossil fuel technologies and the energy poverty sub-target. They identify the important issues and options for decision-makers who are looking to align the Energy Efficiency Directive with climate neutrality, energy security and equity goals.

Power System Blueprint

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Accomplishing climate neutrality by 2050 requires a zero-emissions power sector by the mid-2030s. Securing a decarbonized power system early will unlock pathways for the whole economy. One of the biggest challenges to accomplishing this ambitious goal is time—we have a need for speed if we want to meet decarbonization goals by 2035.  

This is why RAP has created the Power System Blueprint, an interactive website that allows visitors to view different options for decarbonizing Europe’s power system. The Blueprint lays out how to design the regulatory context to achieve a clean, reliable, equitable and affordable European power system by 2035. RAP pulled together the latest insights for supporting regulators, NGO’s, governments and anyone interested in the decarbonization pursuit. 

The Blueprint is designed as a schematic of regulatory solutions linked to six important central principles. In the suite of regulatory solutions (also known as factsheets),you will find comprehensive information, the most important regulatory steps and further reading. 

The decarbonization of the power sector can be done by 2035 but will require a rapid and systemic rethink of the existing European power system regulatory landscape. Within the Power System Blueprint website, you’ll find solutions to some of the some of the largest tasks we face working within this tight timeframe.   

Blueprint logo

Securing Benefits from Transportation Electrification

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​In a presentation for the New Mexico Public Regulation Commission’s Transportation Electrification Summit, David Farnsworth discussed the value of electrification as a flexible grid resource as well as the benefits from data tracking and use of advisory services.

The joy of flex: Embracing household demand-side flexibility as a power system resource for Europe

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To meet its 2050 climate goals, Europe will need to purge its power sector of carbon emissions by the mid-2030s. This means integrating renewable energy resources such as wind and solar at an unprecedented scale and pace. Only one path allows for rapid decarbonisation while maintaining a reliable energy system, minimising system costs and increasing energy democracy. We must ensure that customers have the incentives and tools they need to adjust the flexible portion of their electricity use in ways that are beneficial for the system.

Flexible resources are essential to balance supply and demand and make best use of renewable generation.

In addition to climate impacts, the most recent energy price crisis has underscored the urgent need to release Europe from gas dependency — and therefore from exposure to gas price volatility — by progressing swiftly to a clean, efficient and electrified energy system.

This paper focuses on the greatest untapped source of flexible demand across Europe: household flexibility. Households can increasingly shift how and when they use electricity, without compromising utility or comfort, thanks to new digital technologies and storage. Yet, as the users with the lowest individual electricity use, they often face the greatest barriers. If enabled effectively, through inclusive access to flexible assets, markets and retail offers, there is an opportunity to improve energy services and reduce costs, which is particularly important for low-income and vulnerable households.

For household demand-side flexibility to take its rightful place in the energy transition, swift and concurrent effort is needed on multiple levels of policy and regulation. Underpinning this process is the principle that demand-side flexibility is more than an individual customer right; it’s a vital, cost-effective power system resource that should be valued as such.

Europe needs a cohesive regulatory strategy to create the infrastructure that will enable large-scale, aggregated customer flexibility. As a starting point, this paper presents a five-point action plan for scaling up household flexibility in Europe, with specific recommendations for carrying out each action.

  • Action 1: Create robust tools for measuring and valuing customer flexibility.
  • Action 2: Incentivise flexibility through energy market price signals.
  • Action 3: Ensure a level playing field for demand-side resources.
  • Action 4: Accelerate installation of flexible assets in homes.
  • Action 5: Make flexible actions easy and safe for customers.

By investing now in strategies that wholeheartedly embrace household demand-side flexibility as a power system resource, Europe can avoid paying a much higher price later.

Evaluation Methods for Grid Investments and DERs

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​In a webinar for the New Mexico Public Regulation Commission, John Shenot explored cost-effectiveness methods and the increasing applicability of benefit-cost analysis for grid modernization investments and distributed energy resources.

Where Do We Go From Here: Visions for a Clean Heat Standard

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In a webinar discussion, panelists discussed efforts across the country to put in place clean heat standards or other mandates for reduction of emissions from thermal end uses.

A Strategic Clean Flexible Load Reserve

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​At a UC Davis Energy and Efficiency Institute meeting, Carl Linvill discussed flexible load as a grid resource and highlighted steps to build an effective strategic flexible load reserve.