How Electrifying Trucks Can Help Roadside Neighborhoods Breathe Easier

We know that electrifying trucks, as we wrote last month, can reduce significant amounts of air pollution; it can also have significant health benefits, particularly for frontline communities. Analysis by Alexander Meitiv and Ann Xu for Texas A&M’s Transportation Institute finds that, by electrifying just 40% of existing, predominantly diesel-fueled medium-and heavy-duty vehicles in the eight-county Houston area, Texans could avoid more than 21 tons of nitrogen oxides (NO_x) – over a quarter of the 80 tons a day emitted per day by Greater Houston’s on-road traffic. This could be achieved by electrifying a little over 60,000 medium-and heavy-duty vehicles, about 1% of all the vehicles in greater Houston.

This is big news for all areas in non-attainment for ozone under the Clean Air Act, a serious public health and economic challenge. But it is especially big news for people living near highway corridors, because electrifying the same vehicles also reduces fine particle emissions by nearly 20%.

Fine Particulates Are Deadly

Tailpipe emissions from medium- and heavy-duty diesel trucks contain significant amounts of fine particle pollution, also referred to as “PM_2.5.” PM_2.5 are particles that are 2.5 microns or smaller that are produced along with partially combusted fuel and from other pollutants like nitrogen and sulfur oxides. (To get a sense of just how small 2.5 microns is, the diameter of a human hair is around 50 microns.)

The World Health Organization’s International Agency for Research on Cancer characterizes PM_2.5 as a carcinogen, and for decades, we have known that PM_2.5 causes premature mortality. In the proceedings of the National Academy of Sciences research indicates that roughly 100,000 Americans per year die from fine particle pollution.

In spring 2020, public health researchers at Harvard issued a study further illustrating the danger of particulate pollution. They found that the pre-existing conditions that increase the risk of death in those with COVID-19 are the same diseases that are affected by long-term exposure to air pollution, and that a small increase in exposure to PM_2.5 leads to a large increase in the COVID-19 death rate. Emissions from medium- and heavy-duty vehicles, a major source of PM_2.5, should be of grave concern and raise a red flag.

Who Is Affected?

Low- and moderate-income (LMI) communities and communities of color, especially those located near transportation corridors, are disproportionately affected by transportation-related emissions of PM_2.5. Meitiv and Xu’s analysis finds that the proximity and exposure to truck-related emissions in certain neighborhoods “leads to environmental justice questions related to air pollution and public health.”

LMI communities are often located in very close proximity to roadways because property values in those areas are likely to be lower . The CDC has found that racial and ethnic minority communities, foreign-born people, and people who speak a language other than English at home represent the highest percentage of people living within 500 feet of a major highway.

As illustrated in the following figures, people living in close proximity to roadways in the Houston-Galveston region are subject to long–term exposure to these pollutants. Figure 1 shows a census block map organized by percentage of low- and moderate-income (LMI) residents. As the legend suggests, the darker the shade, the higher the percentage of LMI residents in each block.

Figure 1: Census Block Group Map of Percentage of LMI Residents

Figure 1 shows that in Houston’s surrounding communities – the northwest, northeast and southeast quadrants – neighborhoods are home to 50–100% LMI residents. Even in the city’s southwestern suburbs (lighter shade), where the relative percentage of LMI residents is low, there are still neighborhoods where the proportion ranges between 20% to as much as 50%.

The Strategy: Electrify Medium- and Heavy-Duty Vehicles

The most effective way to improve air quality for communities near roadways, according to the EPA, is to “reduce the emissions of each vehicle on the road and the number of vehicle miles driven.” Vehicle electrification can reduce emissions. And Meitiv and Xu’s research illustrates how the electrification of medium- and heavy-duty vehicles can be especially effective.

Figure 2: PM2.5 Concentration Reduction From 40% Heavy-Duty Truck Electrification

In their analysis, the authors found that (1) heavy-duty long-haul electrification reduces emissions along major corridors, whereas (2) medium-duty short-haul electrification reduces emissions across secondary roadways, especially on the west side of Houston. Figure 2 illustrates reductions of PM_2.5 concentrations (the lighter colors) across Houston and the surrounding areas produced by the electrification of 40% of heavy-duty trucks in the region. In addition, emissions reductions from electrifying heavy-duty trucks can be seen along major corridors in the region, including routes to Galveston to the southeast, Lake Jackson to the south, and Bay City to the southwest.

Figure 3 illustrates reductions of PM_2.5 concentrations (the lighter colors) produced by the electrification of 40% of medium-duty trucks in the region. Most notable are PM_2.5 emissions reductions in the areas to the west and the northwest of Houston, on secondary roads and, similar to the effects produced by electrifying heavy-duty trucks, on major corridors as well.

Figure 3: PM2.5 Concentration Reduction From 40% Medium-Duty Truck Electrification

Conclusions

Electrifying trucks can reduce air pollution significantly and produce public health benefits, particularly for frontline communities. Texas A&M Transportation Institute’s analysis identifies major benefits in NO_x reductions by electrifying a fraction of diesel-fueled vehicles on Houston’s highways. They also found an important co-benefit of the same truck electrification strategy: Electrification reduces deadly PM_2.5 emissions by 20%. Not only is this good news for overburdened Houston neighborhoods near roadways, but it also has positive implications for similar communities throughout the United States.

A European Green Deal for heat – Smart sector integration is key

The EU is currently reviewing its 2030 climate targets and has put forward a Green Deal for Europe. It is unsettling to see that the package of measures says nothing about heat, despite its critical importance for meeting Europe’s climate goals. Heating in buildings is responsible for almost a third of total EU energy demand. And most of that heat is met by burning fossil fuels.

The transformative challenge of decarbonising heating should not be underestimated. It will require strategic, ongoing policy and governance support. It requires a well-coordinated approach that cuts across several areas — buildings, individual and district heating systems, the power sector and existing heating fuel supply infrastructure.

Neither energy efficiency nor low-carbon heat technologies alone can achieve decarbonisation. A combination of the two is the most economical and practical approach. While there are uncertainties around the ideal technology mix for the future heating sector, it is clear that energy efficiency and electrification will need to play a significant role. It remains to be seen whether this will involve individual heat pumps or district heating networks powered by renewable electricity fed through large-scale heat pumps.

Recognising the increasing synergies between different sectors, the European Green Deal announced a strategy for smart sector integration by mid-2020. A new report by the Regulatory Assistance Project (RAP) develops four pragmatic principles to achieve clean heat through smart sector integration and a suite of policies to help deliver them.

Put “Efficiency First”: Regardless of the low-carbon heat technology adopted, energy efficiency is critical. It reduces heat demand, thereby lowering total system costs and the investment required to decarbonise heat. Efficiency also enables electrified buildings to act as a flexible grid resource, ensuring that low-carbon and zero-carbon heating systems operate at higher performance. By reducing demand for, and the associated costs of, zero carbon heating, energy efficiency can also support a more socially equitable heat transformation.

Recognise the value of flexible heat load: We can integrate a growing share of renewables and mitigate avoidable increases in peak load by viewing the additional electric loads drawn for heat as a potential flexibility service. Electrified heat has the potential to be very flexible and provide demand response by using the building and district heating networks as a thermal battery.

Understand the emissions effects of changes in load: If a larger share of heat is electrified, the emission intensity of electricity gains increasing importance. The carbon emissions per unit of electricity consumed differ significantly over the course of a day. Electrified heat can take advantage of this by consuming electricity when there is more zero-carbon electricity on the system and avoiding peak hours when emissions are typically the highest.

Design tariffs to reward much-needed flexibility: Electricity tariffs should encourage the use of electricity when it is most beneficial for the power system and for reducing carbon emissions. Electricity pricing is an important approach to encourage flexibility and deliver economic benefits to consumers for their willingness to shift their consumption.

To address the urgent need for heat decarbonisation, these principles should form the foundation of strong EU and national policies, including:

Step up energy efficiency building upgrades through more ambitious targets and policies: This will require an increase in the energy efficiency targets set in the Energy Efficiency Directive and more ambitious policies at the national level.

Phase out carbon-intensive heating systems: Regulatory measures have a track record of success and, given the required pace of decarbonisation, it will be necessary to eliminate inefficient and carbon-intensive heating systems. This can be achieved in EU legislation through the Ecodesign Directive and the Energy Performance of Buildings Directive and at the national level through building codes.

Phase out subsidies for fossil-fuel-based heating systems: Many energy efficiency programmes still support the installation of new fossil-fuel-based heating systems. In light of the lifetime of heating technologies, this practice needs to be discontinued.

Implement well-designed and well-funded financing mechanisms for energy efficiency and low-carbon heat: Particularly households with limited capital will need financial support to invest in and comply with regulations phasing out carbon-intensive heating systems. Member States should scale up existing and implement new financing mechanisms.

Ensure fair distribution of costs between different fuels: Most of the costs of the energy transition are currently allocated to electricity. This will result in misguided incentives, especially as the power system gets cleaner. The upcoming review of the energy taxation legislation in Europe offers an opportunity to ensure a fairer distribution of costs between the different fuels.

Encourage the flexible use of heat through time-varying prices: Consumers who operate their heating system flexibly should be rewarded for the benefits they provide to the power system and their contribution to avoided carbon emissions. This can be achieved through the introduction of time-varying prices.

This is a pivotal time on the road to clean heat. If applied in isolation, none of these recommendations can deliver progress at the scale needed to meet our climate targets. When harmonised, however, we can decarbonise heat and unlock the many associated benefits for the energy system and society as a whole.

A version of this article originally appeared on Foresight Climate & Energy.

Electric Cars Are a Lot Like Water Heaters

People unfamiliar with electric cars often fear that a blossoming of EV ownership will bring chaos to the electric grid. For example, I recently spoke with the manager of a beach resort who was fearful of adding an EV charger, thinking it would create a huge additional power load. She didn’t realize that even a minor impact is largely avoidable.

How can this be so? First, electric cars require remarkably little electricity. They use about the same amount per year as an electric water heater, and we have about 60 million of them in the US today. Even the usage patterns are similar, with most usage in the early evening. The really good news is that EV charging — like electric water heater charging — can be controlled into low-cost, low-emission hours on the electric grid.

The table below compares the maximum demand, load shape, and annual usage of electric water heaters and EVs:

They don’t look alike, but they definitely act alike from the perspective of an electricity grid.

These are figures for a typical water heater (apartment or single-family home) and a typical electric car (Nissan Leaf, Chevy Bolt, or Tesla 3).  An electric UPS or FedEx truck, or electric semi-truck is a different animal altogether for EV charging (as is a laundromat or municipal swimming pool from a hot water perspective).

So, the impact of millions of electric cars is likely to be very manageable, even without direct control of when the cars charge — about the same as water heaters. But it only takes two to three hours of charging a day to serve the typical commute and errands of the typical EV owner. While we do need high-voltage “fast” chargers along freeways to enable longer trips, 90% of the time cars stay within their home range, and can be charged overnight at home or during the day at work.

Most people with EVs come home from work, plug their car in, and by morning it’s fully recharged. They don’t really care whether the three hours’ charging they needed occurred from 6 to 9 p.m. or 2 to 5 a.m., as long as they are ready to go by morning. But from a grid perspective, it matters a lot: late afternoon and early evening are peak periods for electricity grids, and adding EV charging during those hours can be very expensive for the power system.

Both water heaters and EVs need to be charging two to three hours on a typical day. We can minimize their impacts — and costs — by concentrating those few hours into the lowest-cost, lowest-emission part of the day.

This is why time-of-use (TOU) rates for EV charging are so important. Nearly every electric car comes with a built in “charge controller” that can be programmed to charge only during specified hours. If the driver comes home at 6 p.m., but sets the charger to come on at midnight, he or she will still have a fully-charged car by morning.

Burbank Water and Power, a municipal electric utility near Los Angeles, offers an optional TOU “whole-house” rate for homes with electric cars. The table below compares this rate with Burbank’s standard rate to show the cost a customer would incur under each to charge an EV with 300 kWh during off-peak periods. (This assumes the customer uses at least 300 kWh per month for other household lights and appliances, and would thus be in the second block of Burbank’s standard rate.)

Water heaters can also benefit from TOU rates; in fact, millions of homes in the rural Midwest already have electric water heaters on TOU rates. Instead of programming an EV charger, water heater customers on TOU rates can simply install a timer to ensure that the water heater charges when power is low-cost and low-emissions.

A Better Way: Smart Charging

While TOU rates are a good way to serve these loads, the next generation of EVs and electric water heaters will provide even greater opportunity. They will be able to use advanced electronic controls to turn charging on and off as grid conditions and wholesale market power prices vary through the day. This capability will become increasingly important to the grid as wind and solar become a bigger part of the power supply.

For example, in Hawaii, where wind is available overnight and solar during the daytime, a smart water heater charger might power the water heater from 3-5 a.m. and 11 a.m.-2 pm, while the actual hot water usage would be concentrated from 5-8 a.m. and 5-8 p.m. The tank holds enough hot water that the consumer never notices — even the smaller tanks often found in apartments and condos in the Aloha State work well with twice-a-day charging. Similarly, in California, where solar power is concentrated in the middle of the day, utilities are experimenting with workplace EV charging to take advantage of this low-cost, low-emission power. By contrast, Texas has lots of nighttime wind energy, the incentives there will be to charge overnight.

Smart charging can greatly ease the impact on the grid of existing electric water heaters, and of the growing number of EVs. By ensuring that both are not charging at the same time, utilities can avoid distribution transformer upgrade costs. (This cannot be achieved with TOU rates alone, since the same low-cost period would apply to both.) A smart rate design, included in RAP’s Smart Rate Design for a Smart Future, offers the incentives needed:

This rate design, by imposing a small $1/kW/month system infrastructure charge, provides an incentive to separate the charging of the water heater from that of the EV, while the TOU rate provides an incentive to get both jobs done during the off-peak window. But the system infrastructure charge is not so large as to punish the customer who has occasional high usage the way a more traditional $6/kW demand charge would do. The critical peak charge provides a powerful incentive not to charge either the EV or the water heater when the grid is under stress.

A smart charging app for an EV will let the owner request either an “economy” charge that makes sure that it’s done in a low-cost period, or an “urgent” charge for rare occasions when he or she really needs it. Similarly, a water heater could be set to use high-cost power only when an override button is pushed (e.g., when houseguests cause more hot water usage than normal).

Electric cars and electric water heaters certainly look different. But they offer similar opportunities to reduce fossil fuel dependence, similar opportunities to take advantage of low-cost, low-emission resources on the electric grid, and similar opportunities to save consumers money when charged in a smart manner.

Back to the beach resort: When the manager learned that an EV uses about the same amount of power as a water heater, she relaxed; the resort already has dozens of electric water heaters. We found that the resort’s maintenance shed had an existing 50 amp 240V circuit for a welding outlet inside that had not been used in its 12-year history. Moving that outlet outside at the cost of only a $200 electrician bill — and adding a $300 40A charger made charging available to EV owners visiting the resort. I used it recently for my Kia Niro, taking turns with another guest who charged their Tesla X. An honor box lets EV owners pay for the power we use and help pay for the charger over time. A few bucks at a time.

Don’t throw money for heat decarbonisation out of the window

Last winter, I visited friends in London, who live in an old Victorian house. When I arrived for dinner, they told me that we could not use the kitchen as it was too cold. The radiators were running at full capacity, but most of the heat they generated leaked directly out of the house. It was impossible to keep the temperature above 10 degrees Celsius, even though the outside temperature was only a few degrees below zero. We ended up eating our dinner in the living room in front of the fireplace, the only room in the house warm enough to be comfortable.

That evening made me think about the challenge of decarbonising heat. It is sometimes said that by electrifying everything or using green gases like hydrogen or biogas, we could solve the problem. In other words, if we change the supply, but not the nature of the demand. Also, in the case of my friends’ house, electrifying the heating system or switching to green gases would reduce the carbon emissions associated with heating.

We need a combination of low-carbon heating technologies and energy efficiency improvements to decarbonise heat.

But this myopic solution ignores a very basic problem in that it would be difficult and wasteful to heat the place to a comfortable indoor temperature by changing the heating system alone. Perhaps with an oversized heat pump or boiler and additional or significantly larger radiators it could be sufficiently warm. Compared to a house with a decent energy performance though, the investment cost would be considerably higher.

What is more, such an approach would also create costs for the energy system as a whole. An oversized heat pump would be a drag on the power system. Wasting valuable green gases and renewables, much needed for other purposes, would be foolish.

This is, of course, an extreme example. But it demonstrates that we need a combination of low-carbon heating technologies and energy efficiency improvements to decarbonise heat. It is the obvious answer.

Ideal technology mix

Efficiency heat decarbonisation

This means that energy efficiency is a necessary condition for successful heat decarbonisation. Proponents of an approach that relies exclusively on energy efficiency, however, are also mistaken. While it might be technically possible to retrofit existing buildings to a passive house standard, it is neither economical nor practically feasible to do so at scale or within the timescales required. In many, if not most, cases, a combination of energy efficiency and low-carbon heat will be the most cost-effective and practical solution. I call this efficient heat decarbonisation.

This message has not got through to enough stakeholders and policymakers or it is assumed that energy efficiency will just happen autonomously. I recently attended a meeting where participants presented scenarios for decarbonising heat by 2050. They assumed that energy demand would stay broadly flat, that no improvements would be made in the energy performance of the buildings to be heated in 2050.

Instead, they discussed a number of technology options, including electrification and hydrogen, assuming that the uptake would be significant both in terms of pace and scale. It remains a mystery to me why it would be easier to electrify millions of heating systems or to convert the gas grid to hydrogen rather than install cost-effective energy efficiency measures.

The key question for policymakers is not so much about what the exact technology mix should be, but how uptake can be achieved at scale and in a sensible way that makes full use of the economic potential of energy efficiency while promoting the lowest carbon heating options available. The alternative is to pursue a decarbonisation agenda at considerably higher cost to consumers and the economy. This is neither practical nor desirable. Let’s not throw money for heat decarbonisation out of the window.

A version of this post originally appeared in Foresight.
Photo: Jan Zappner for co2online.

Renovating Energy Policy to Encourage Beneficial Electrification

RAP’s recent papers on the beneficial electrification of space heating and water heating draw a picture of great potential. Electrification of these fossil-fueled end uses could cut carbon emissions significantly while saving consumers money and providing power system operators with a useful resource.

Several pieces of effective frameworks that states can use to navigate the transition to electrified end uses have already been developed:

• Building energy codes set minimum standards for new construction and major renovations, which make buildings cheaper, healthier, and safer to live in;
• Federal standards for furnaces, water heaters, and other home appliances ensure higher levels of energy efficiency; and
• Incentive programs offer consumers a rebate or other financial reward to update their space and water heating.

But much like a house with an old furnace and a leaky water heater, these policies need attention. In some cases, existing regulations and standards don’t account for technological advances, such as the ability to integrate appliances with the grid. They also don’t do enough to elevate far cleaner fuel sources above fossil fuel counterparts. And some policies actually discourage electrification even though it can provide significant benefits.

To successfully “renovate” policies affecting electrification, state regulators and policymakers must first review their existing policy structure and ask how current standards and programs work—or don’t. Let’s consider several policy levers and barriers related to the three framework pieces listed above.

Building Energy Codes

Building energy codes help lower energy bills and reduce greenhouse gas and other air emissions, and they can accommodate or even promote electrification. New construction is an ideal opportunity to deploy new technology, because the entire costs of space conditioning and water heating systems are incremental. Older codes can serve as barriers to innovation, however, and should be updated.

First, codes should require high thermal efficiency for building envelopes. This maximizes the ability of efficient space heating and cooling technologies—cold climate heat pumps being prime examples—to work cost-effectively and well. Second, in most climate zones, codes can be improved to require high-efficiency electric space heating and cooling and water heating in new construction. As an intermediate step, codes can mandate that new homes be “all-electric ready,” meaning that the electrical panel is sized to safely handle all-electric space conditioning, appliances, and electric vehicle charging.

Appliance Standards

The U.S. Department of Energy and the Environmental Protection Agency (EPA) periodically update appliance standards for furnaces and water heaters, enabling purchasers to capture significant energy savings. The Energy Department’s standards require appliances to meet certain efficiency levels, while the EPA’s Energy Star program encourages even greater efficiency. Both these programs can also encourage, or hinder, beneficial electrification.

As technology improves and the grid management benefits of flexible load become ever more apparent, standards could require appliances like water heaters to be grid-controlled. Adding Wi-Fi or another way to connect to the internet would enable water heaters to provide demand response, load shifting, and ancillary services to the grid. States and utilities could also deploy “plug and play” communication devices that allow grid operators to remotely monitor and control the water temperature—in effect, the state of charge—in the water heater.

Additionally, the Energy Department and EPA programs compare the performance of appliances to other models that use the same fuel type. This approach masks the economic, environmental, and grid benefits of switching from a fossil-fueled appliance to an electric one. States that follow federal standards in their own programs should be aware that the current same-fuel-only comparison can reduce their ability to electrify, similarly reducing the benefits available to their residents. One solution is for standards to compare appliances across all fuel types.

Incentives and Other Programs

Incentive programs are widely used around the country to encourage consumers to adopt various end-use technologies. The structure of these programs can foster or obstruct beneficial electrification. Incentives may be an important driver during the early stages of electrification, when incremental costs are declining but have not yet reached parity with fossil-fueled technologies.

Programs can be run by utilities, third-party energy efficiency providers, or governments (through rebates, loans, or tax incentives). Steele-Waseca Cooperative Electric in Minnesota, for example, offers a program that combines community solar with controlled water heating. The incentive: Participating members can subscribe to solar power at a substantial discount and receive a new grid-integrated water heater for free. In the supply chain, midstream and upstream programs can also encourage greater penetration by helping to ensure that efficient appliances are readily available.

Most incentive programs are either agnostic about the fuel being replaced or they target replacing an electric heating unit with a more efficient one (e.g., a heat pump). Fuel-specific energy efficiency incentive programs that don’t allow or include switching from fossil fuels to cleaner electricity may be a barrier to electrification. States can address this by taking a holistic approach to policy renovation and adopting fuel-neutral incentive programs.

Getting Started

State policy and regulation affects the prospects for beneficial electrification of buildings in various ways. And major policy renovations, like home renovations, require time and materials. In a future post, we will discuss how various state energy policies and rate designs play a crucial role. But for now, we hope this discussion gives states some ideas for how and where to “break ground” on projects to make way for these innovations, ensuring that electrification is beneficial to consumers, the environment, and the grid.

EVs’ Rise Doesn’t Need to be Auto Dealers’ Demise

Some argue that the growth of electric vehicles will be the end of auto dealerships. Car dealers today derive significant revenues by providing parts and service for the internal combustion engine (ICE) vehicles they sell. If EVs, with their far fewer moving parts and far lower maintenance requirements, displace ICE vehicles, the reasoning goes that dealer revenues are doomed to decline.

Of course, this wouldn’t happen overnight. In 2017, U.S. auto dealers sold 17 million cars. Of that total, only 1.2 percent of all sales (199,826) were EVs. That said, EV sales in 2017 increased about 25 percent over 2016. So while EVs still represent a small market segment, it is growing rapidly.

Whatever the rate of EV adoption, dealers do have their work cut out for them. Along with continuing to support ICE vehicle sales and service, dealers will have to emphasize new training and develop new EV-related expertise. Nate Chenenko, a Massachusetts-based transportation consultant, contends that even though EVs will go longer between service appointments than their ICE counterparts, “dealers still can persuade EV owners that the dealership is the best place for service after the factory warranty expires.” After all, this is new technology, and customers will want the support of trusted experts.

Also, let’s not forget the attractiveness of used EVs. Thousands of them are coming off leases, making used models available and affordable. Auto dealers are ideally positioned to be the go-to resource for shoppers interested in a pre-owned EV.

But dealerships could face competition from new ways of selling cars. Tesla, for example, takes a direct sales approach.  Will that catch on as a dominant model? Will auto buyers gravitate toward “Experience Centers” where they can enjoy a low-pressure environment while being educated about choices and even offered test drives? Might customers start buying cars like they buy computers today at the Apple store, or even through “car vending machines” like Carvana? Dealers will have some control over this if they become and remain trusted experts on EV sales. If they drag their feet, another sales model is likely to bypass them.

While this change looks disruptive—and it certainly may be—it brings opportunity as well. Consider one potential EV-related revenue sources that auto dealers could work with.

RAP’s series of blogs on beneficial electrification principles considers how flexible EV charging load, among other electrified end uses, has value to the grid. “We All Wish We Were More Flexible: Electrification Load as a Grid Flexibility Resource” points out how the batteries that power EVs can be charged whenever doing so is most beneficial to the grid. This improves utilization of the electric transmission and distribution systems, shifting loads that would otherwise add to the system peaks that drive grid investment and increase cost. Utilities can also schedule EV load to pair it with inexpensive renewable resources that often run when there is low demand and risk being curtailed.

Furthermore, EV charging flexibility also provides the potential for vehicle-to-grid (V2G) services, or two-way charging, which would allow for EV batteries to serve as storage devices that can discharge power back onto the grid when called upon. This would enable a utility or aggregator to provide “ancillary services” to the grid, including frequency regulation (a transmission-level service) and voltage support (a distribution-level service), to help ensure that the grid operates efficiently and reliably.

In short, EV charging has value to utilities. But they need to unlock this full value, and they might be able to do so effectively by partnering with auto dealers, who can educate and market these benefits to prospective EV owners. After all, dealers are:

• Among those best suited to help get new EV owners into the driver’s seat;
• Well positioned to sell Level 2 EV chargers (which are “smart,” or communications-enabled, and more efficient) rather than the comparatively “dumb” and inefficient Level 1 chargers that come with a new EV as standard equipment;
• Well positioned to develop, market, and aggregate charging packages that provide EV owners with lower-cost, cleaner renewable electricity.

Dealers can do all of these things—and in the process capture for themselves some of the value that EVs can provide to the grid.

“Give Me a Little Piece of the Pie if You Make it a Hit”

Consolidated Edison (Con Ed) offers a program in New York State called SmartCharge New York. It’s a partnership between the utility and a Canadian company called FleetCarma, in which FleetCarma signs up EV drivers in Con Ed’s territory and arranges for them to charge at off-peak times. Actively managing demand in this fashion saves Con Ed money—enough money, in fact, for FleetCarma to make a business of it, by aggregating EV drivers, educating them, and arranging for sharing of the resulting savings among Con Ed, FleetCarma, and the EV customers. The utility, the aggregator, and the EV customers “share the pie.”

With a front-row seat and access to new EV owners, forward-thinking auto dealers could do the same thing: turn a looming challenge into a chance to make some money. In his song “Horses,” songwriter Slaid Cleaves tells a story about meeting a guy who’s down on his luck. In Willie’s tale of woe, Cleaves sees an opportunity. And that’s just how auto dealers need to start thinking about EVs:

I met Willie by the still, he was brewin’ a batch
He had a short cigar and one last match
He was tellin’ me ’bout his latest trouble with the government
He had child support and alimony
He was looking depressed and kinda lonely
Just tryin’ to figure out where all his hard-earned money went

“Well I’ll be go to Hell,” he said,
“I got nothing but a Ford and a barn full of hay
If it weren’t for horses and divorces
I’d be a lot better off today”

Well I said, “Willie, that sounds like a song,”
He said, “Son you know you may not be all wrong
Could you give me a little piece of the pie if you make it a hit?”

Timing Is Everything: How Smart Rate Design Helps Make Electrification Beneficial

In talking about beneficial electrification, we have emphasized the benefits of various kinds of flexibility. For example, loads that can be scheduled at different times of day without too much inconvenience to the user can be beneficial, because they can help the power grid run more efficiently and use more clean renewable energy.

Owners of electric vehicles would ideally charge their new cars when surplus clean energy is available. In California, with its solar panels and sunny afternoons, that could mean charging cars in the office parking lot. In Texas, where wind power reigns, it may mean charging at home overnight instead. But to get EV owners to do this, we need to send them the right signals. That’s where smart rate design comes in.

It is no surprise that consumers respond to changes in prices—we see it all the time. Moviegoers choose matinees over Friday night screenings so they can pay less (and beat the crowds). Would-be vacationers watch for hotel and airline prices to fall during lower-demand months. And grocery shoppers take advantage of coupons for things they don’t need right away.

The principle is the same in the electricity sector: Changes in prices can lead customers to nimbly shift their energy use throughout the day. Research shows, for example, that many customers are willing to shift when they do laundry or use appliances, when exposed to prices that change over the course of the day.

The logic of smart rate design is straightforward: set the structure of electricity prices to send the signals necessary to encourage flexible behavior. This includes signals for behavior on a day-to-day basis, such shifting car charging or clothes washing toward certain hours and away from others, as well as minute-by-minute forms of flexibility that can be automated and can help with grid management. It also includes signals for long-term decisions, such as investment in appliances or chargers that can operate automatically at favorable times.

Here I’ll look briefly at some smart rate design ideas that are featured in RAP’s beneficial electrification principles report, which in turn builds on previous work RAP has done on smart rate design.

A Smart Move for Rate Design: Time-of-Use Pricing

The figure below shows a residential summer TOU example from the Sacramento Municipal Utility District. Although there’s room to debate the price levels and timing of the periods, the basic logic is clear: the fluctuation of prices throughout the day reflects both demand patterns and the availability of solar energy. In the noon-5 p.m. period of the Sacramento summer, demand for air conditioning and other uses tends to be quite high—but the output from rooftop PV is also strong, so prices are set at a moderate level. During the late afternoon and early evening period, demand from lighting and other home uses is high, business use has not yet abated for the day, and the sun is setting—underpinning the peak price period. Finally, it makes sense to keep prices low overnight when both residential and commercial demand are very low.

In places where TOU pricing is not yet in place, it is useful to think carefully about designing a TOU rate to encourage beneficial electrification. Utilities and regulators could assess local conditions, resources, and the potential contribution to the system of newly electrified loads, and shape TOU rates to encourage customers to schedule those loads to optimize and capture system benefits.

Rethinking Demand Charges

Another important step toward smart rate design is reexamining the “demand charges” that utilities often apply to larger customers, such as hotels, schools, retail stores, or factories. Demand charges are usually assessed for each large customer based on that customer’s peak demand during the month. Typically, this is simply measured as the customer’s highest hour (or highest 15 minutes) of consumption during the month, regardless of whether or not the customer’s peak occurs at a time when the overall grid is stressed by short supply. We recommend limiting these “non-coincident peak” demand charges because they encourage customers to spread out their usage to reduce their own peak demand, but they usually do not provide good incentives for customers to adjust their usage in a way that is helpful for managing system peaks. (More specifically, as we explain in this report, we recommend limiting non-coincident peak demand charges to a level adequate to cover the cost of the proximate transformer most directly affected by the usage of the customer, along with any dedicated facilities installed specifically to accommodate the customer in question.)

Putting It All Together

Smart rate design can help utilities and grid operators shape the load created by electrification—and do so in a way that creates benefits to the grid and society as a whole. This can include reducing system peaks, enabling the grid to accommodate greater amounts of cleaner resources, and allowing utilities to defer or permanently avoid generation, transmission, and distribution system upgrades.

We All Wish We Were More Flexible: Electrification Load as a Grid Flexibility Resource

Imagine you are preparing dinner for guests arriving at 6 p.m. when you learn that they’ve been delayed. And imagine that, instead of keeping the food hot, you had to throw all of it away and start cooking again for the actual time they come in the door. Wasteful and unacceptable, right? If you are an electric utility providing energy for consumption at a specific time and the demand isn’t there, that’s exactly what you have to do: throw it away.

The obvious difference between these two examples is the ability to store food in one case and the inability to store energy in the other. If guests don’t show up, the cook simply puts the dinner in the fridge for later consumption. But in the power system, if the demand for electricity, or “load,” is not there, the grid manager often has to “curtail” generation—i.e., throw it away. Lawrence Berkeley National Laboratory reports that in 2016 across the country’s seven organized wholesale markets, grid operators, on average, threw away about 2 percent (and in several cases over 4 percent) of electricity from variable renewable energy resources like wind and solar, because the demand for it wasn’t there when the energy was available. As those clean resources become cheaper and cheaper, wasting them probably makes even less economic sense.

How can we avoid wasting this low-cost energy? One good way is through beneficial electrification. Some electrified end uses—like charging electric vehicles and heating water—don’t require electricity from the grid at the moment they are used. Therefore, much of the new load added to the system by these uses is inherently flexible and can serve as energy storage. As a result, the power system can reduce curtailment and serve that flexible load at cleaner and less expensive times of the day. Let’s look at these end uses and consider how they can give grid managers greater flexibility in optimizing their systems.

Electric Vehicles (EVs): Potential to Cut Costs for Everyone

EVs constitute a significant source of flexible load because the batteries that power them can be charged whenever is most beneficial to the grid. This flexibility means that EVs can actually improve the utilization of the transmission and distribution system, shifting loads that would otherwise add to system peaks, which ultimately drive grid investment and increase cost. The need for system upgrades can be minimized if EVs are charged during off-peak periods, either through smart charging, time-of-use pricing, or some combination of both. EV charging flexibility also provides the potential for vehicle-to-grid (V2G) services or two-way charging, which essentially allows for an EV’s battery to serve as a storage device available to discharge power back onto the grid when called upon.

Adding EV load can also contribute to lowering the average cost to serve all customers, not just EV owners. Analysis of EV adoption scenarios in California by Energy and Environmental Economics (E3) found that there can be significant utility system benefits from adding EV charging load to the grid. E3 found that utilities’ cost to serve the load added by substantial EV adoption was less than the amount of revenue they would bring in from customers charging EVs, thereby reducing the cost of providing electricity for all ratepayers.

Utility System Costs and Benefits from EV Charging in California

Source: RAP

Water Heating: Load-Shifting and Ancillary Services

Uncontrolled residential water heating usage usually peaks in the morning and evening hours, when consumers start and end their days. The figure below characterizes typical residential hot water heater electricity usage for an upper Midwest state, by hour of the day and month of the year. From a grid management point of view, this demand trend occurs at different times of the day from typical solar production (mid-day) and the most common wind production (overnight). This means that flexible water heater load can be moved off-peak to “charge” water heaters during cheaper and lower-emitting hours.

 Water Heater Usage from the Upper Midwest

Source: Steffes Corp.

Electric resistance water heaters (ERWHs) and heat pump water heaters (HPWHs) are examples of this flexibility. Because the water tank of an ERWH can typically store a full day’s supply of hot water, it doesn’t matter when it is charged. Its energy use can be curtailed during peak, daytime hours and that load can be concentrated into low-cost (and low-emission) hours of the day. Heat pump water heaters can also be controlled to provide load-shaping and capacity benefits to the system.

In addition to load shifting, flexible electrification load can help in providing “ancillary services,” another category of tools used by grid managers to ensure power system reliability and meet operational requirements. Smart electronics and improved communications are creating a new category of responsive appliance resources that enable grid managers to control the heating elements of ERWHs in very short increments for various uses.

This flexibility allows a utility or aggregator to provide valuable ancillary services to the grid, such as frequency regulation (a transmission-level service) or voltage support (a distribution-level service), to help ensure that the grid operates efficiently and reliably. Because HPWH compressors are mechanical devices that could suffer unacceptable wear if controlled down to the sub-minute periods required for fast-response services, they are not currently suited to provide fast-response benefits.

Space Heating: Tapping the Smart Thermostat

The electrification of space heating—where technologies have previously relied on fossil fuels—also holds great promise. When connected with smart thermostats, for example, air source heat pumps can help manage system demand by preheating a space during the afternoon hours and running less during the early evening peak. Smart thermostats can enable demand response programs whereby a utility can reduce the electric load of a group of heat pumps by an individually small amount. Taken as a whole, these reductions can provide a measurable peak load reduction benefit to the grid and also reduce air emissions.

Waste Not, Want Not

As we have noted in our publications, for electrification to be considered beneficial, it should meet one or more of the following conditions without adversely affecting the other two:

1. Saves consumers money over the long run;
2. Enables better grid management; and
3. Reduces negative environmental impacts.

The flexibility enabled by electrifying end uses constitutes a new tool and source of value for managing electricity grids. For consumers, smart charging programs featuring time-of-use rates can provide the exact same service but at less expense and often with cleaner electricity. For system operators, flexible loads represent the opportunity to have greater control of the power system by shaping demand, and to optimize system efficiency by enabling greater use of existing resources.

The chart below shows the penetration of wind resources in ISOs around the United States, and also their curtailment between 2008 and 2016.

Wind Curtailment and Penetration Rates by ISO  

Source: U.S. Department of Energy

By moving flexible electrification load to times when these resources are being curtailed, grid managers could charge EVs and operate space and water heating heat pumps using the thousands of GWhs currently being wasted. By moving load to times when it can be served by cleaner, cheaper resources and avoid system peaks, grid operators can save money and emissions over time—both for themselves and ultimately for ratepayers.

In short, by fully engaging the flexibility of newly electrified loads on the power system, grid operators can “toss out dinner” a little less often and reduce the waste of valuable energy resources.

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This is the second in a series of RAP blogs exploring aspects of beneficial electrification.

Fuel-Switching: We Just Did This in 1990, So Why Are We Doing It Again?

RAP senior advisor Jim Lazar tells a story about doing a cost and environmental analysis on behalf of the Association of Northwest Gas Utilities in 1990, in which he compared space and water heating run on natural-gas-generated electricity to those same end uses fueled directly by gas. Jim’s analysis at that time found that the electric options were not only twice as expensive to run as direct-gas-fueled space and water heat, but the direct-gas options used 20 percent less gas and produced 20 percent less carbon emissions.

But things have changed in three decades. Jim now admits that “the same analysis that showed natural gas was the right choice in 1990 would conclude that electricity is probably the right choice today.”

What Has Changed Exactly?

A lot. Gas appliances have become more efficient since Jim did his study—but those gains have been far outpaced by innovation in electrical devices. In 1990, for example, gas combustion turbines were about 40 percent efficient; today’s best models are about 60 percent efficient.  Back then the best heat pumps had coefficients of performance, or “COPs,” of around 2.0, and heat pump water heaters were an emerging technology. Today both are available with COPs of 3.0, and can deliver one-and-a-half to three times more heat energy to a home than the electrical energy they consume.

And today, wind and solar generation can be expected to meet much of new electrical load, further reducing both costs and emissions. As Michael Liebreich of Bloomberg New Energy Finance noted in describing the “world record prices” (i.e., the best projects with the lowest risk) for unsubsidized renewable energy occurring around the world: “If you are not planning for two-cent solar, you are not on the money.”

Even with the production tax credit for renewables beginning to phase out, last summer American Electric Power filed a $4.5 billion proposal in Oklahoma, the heart of gas and oil country, for the Wind Catcher Energy Connection project, which the utility says can deliver energy at a levelized cost of 1.09 cents per kilowatt-hour (with no risk of fuel-cost escalation) over the life of the project. Further, the cost of battery electric storage—a key technology supporting electric vehicles (EVs), solar, and grid services—has declined by about 80 percent since 2010.

What’s the Right Analysis?

The shorthand term for the options Jim analyzed in 1990 is “fuel switching.” At the same time that Jim was doing this in the West, Steve Nadel and the American Council for an Energy-Efficient Economy (ACEEE) were investigating gas demand-side management and fuel-switching potential in New York State, and Vermont’s utility commission was directing utilities to develop programs to capture all cost-effective demand-side resources, including fuel-switching.

A fuel-switching analysis asks a deceptively simple question: What are the most efficient investments irrespective of fuel? In other words, what are the least-cost and highest-value investments for consumers that utilities ought to be planning for and making, and regulators ought to be approving?

In 1990, replacing electric resistance space-heating equipment with onsite fossil fuel space-heating and water heating technology offered efficiency savings and reduced emissions. Today, the exact opposite is true; fuel-switching from fossil-powered end uses to electrified ones now produces those results.

Jim’s story reminds us that the answer to that question has changed not only because generation and other technologies have changed, but also because gas prices are not expected to go down. In 1990, replacing electric resistance space-heating equipment with onsite fossil fuel space-heating and water heating technology offered efficiency savings and reduced emissions. Today, the exact opposite is true; fuel-switching from fossil-powered end uses to electrified ones now produces those results.

So while the inputs may have changed since the 1990s, the purpose of fuel-switching, and the basic rule about reducing net energy costs, have not: Efficiency is cost-effective when the net cost of installing and maintaining measures that improve the efficiency of overall energy usage is less than the total cost of alternatives to achieve the same end use over the same lifetime.

State programs are beginning to recognize this and to see that electrification, as the efficient fuel-switching option available today, opens up opportunities for consumers to better control their overall energy costs (even if their electricity consumption increases).  Connecticut’s 2018 Comprehensive Energy Strategy supports this transition and encourages investment in air source heat pumps that can “cost-effectively displace heating supplied by oil, propane, or electric resistance units.” Vermont has also adopted an electrification policy designed to result in a net reduction in fossil fuel consumption by a utility’s customers.

Grid Flexibility is the Key

This new era of fuel-switching offers an advantage that the earlier transition couldn’t: flexibility. Unlike virtually all other electric end uses, water heaters and EVs don’t have to immediately use the power they draw from the grid. When you take a shower, it doesn’t matter whether the water was heated five minutes or five hours earlier. The same goes for your EV. This flexibility produces an array of benefits for consumers, utilities, and our economy.

The big news for utilities and consumers is that the flexible load associated with these end uses can serve as grid resources and be managed through appropriate rate designs and smart-charging programs. These electrified loads can be shifted:

• Away from more expensive peak times, often served by dirtier fossil-generated electricity,
• To times when there is less demand for electricity and it is cheaper and frequently cleaner, and
• When variable renewable energy resources are being curtailed, ensuring that less clean generation investment is wasted and that the grid can get even cleaner as it accommodates even more variable resources.

Flexible loads can also help utilities to defer or avoid costly distribution system upgrades that could be required if this demand were left uncontrolled.

Despite consuming additional kilowatt-hours of electricity, this flexible load enables consumers to be more “emissions efficient” by using less energy overall per vehicle mile traveled or gallon of hot water produced, producing fewer pounds of pollution.

So, What Makes Electrification Beneficial?

Some may think that electrification is simply about increasing load and sustaining utility revenues. We don’t agree, but nor will beneficial electrification happen automatically.

From RAP’s perspective, for electrification to be considered beneficial, it needs to meet one or more of the following conditions, without adversely affecting the other two:

1. Saves consumers money over the long run;
2. Enables better grid management; and
3. Reduces negative environmental impacts.

These three conditions guide our discussion of beneficial electrification and inform the articulation of principles for regulators to consider in developing and evaluating electrification strategies. This is the first of a series of blog posts exploring these ideas, and as future posts will explore, observing such principles will help ensure that electrification develops in a manner that serves the public good.

Fuel-switching worked in 1990, but a lot has changed since then. It’s time to do it again.

Utilities Can Get a “LEG” Up with Beneficial Electrification—But Regulators Also Have to be Ready

In a series of blog posts over the last several weeks, RAP has spotlighted the opportunities associated with beneficial electrification—the practice of electrifying appliances and machines that are currently powered by fossil fuels. Embracing beneficial electrification provides a significant opportunity for utilities, making them more competitive by giving them a “LEG up”—where “L” stands for emerging revenue streams associated with new load, “E” for potential environmental benefits, and “G” for better grid management.

Utilities that embrace beneficial electrification opportunities, such as electric vehicles, space heating, and water heating, will set themselves up to sell electricity that is cleaner, manage their systems more cost-effectively, and offer services that customers increasingly want. Beneficial electrification promises significant environmental and public health benefits from both drawing upon a power sector with an improving emissions profile and replacing fossil-fueled energy end uses with electricity where the grid is comparatively clean (e.g., through miles driven in an electric vehicle instead of a gasoline vehicle). Finally, keeping in mind what Teaching the Duck to Fly teaches us about the changing power sector and customer loads—especially net loads—beneficial electrification offers a key to intelligently managing the grid and integrating distributed resources.

The opportunities that beneficial electrification can provide for utilities seem clear. But in today’s regulatory paradigm, utilities are regulated monopolies with respect to some or all of the “LEG up” benefits. Accordingly, some of these opportunities should also redound to the benefit of ratepayers. When, if, and how that happens, however, hinges on regulators’ understanding of beneficial electrification and its outcomes. This includes consideration of the extent to which any beneficial electrification services may be competitive and how revenue from such services should be treated. It could also include an examination of policy reasons why potentially competitive activities might be allowed for utilities and under what circumstances, how cost recovery for beneficial electrification investments occurs, and other issues.

What does beneficial electrification (or strategic electrification, or smart electrification, or other equally apt terms) mean for utility regulators?

First, this issue doesn’t rise above the noise of the routine regulatory agenda unless commissioners prioritize it. Why would they do that? They would, if they thought that beneficial electrification would position their states for a future with a higher share of renewable power on the grid (a priority that may be set by the executive or legislative branches, and may fall to the public utility commission (PUC) to implement). They also might prioritize it if customers clamor for cleaner choices. If beneficial electrification does become a priority in a state, a number of regulatory issues emerge.

Among the questions that might arise are:

• Does rate design motivate customers to buy and use an electric vehicle in a way that more fully uses utility assets?
• Does rate design motivate customers to control load in ways that more effectively use customers as a resource without reducing customer satisfaction?
• Does rate design meet tests of fairness to customers who choose to electrify end uses as well as other customers, while staying sufficiently simple?
• Should energy efficiency and demand response programs be overhauled, with an eye toward addressing market barriers to beneficial electrification?
• Does benefit/cost screening consider the benefits associated with beneficial electrification?
• How do distribution and resource planning and electric system operations change, and how does the role of the regulator overseeing them change?
• Should the role of the utility in deploying—and even owning—resources at customer premises, either through an affiliate or by the utility itself, be re-examined?
• Should utilities be motivated in some performance-oriented way to exceed electrification deployment goals?
• Are PUCs staffed to accept these challenges, given that these ideas, systems, and technologies may be unfamiliar?

We, at RAP, routinely talk with government officials about these sorts of questions. Because these issues are complicated, our discussions sometimes default to addressing the challenges. Answering tough questions also requires decision-makers to reconsider priorities, important cornerstones in and of themselves. Beneficial electrification provides a good reminder—for RAP as well as policymakers—that the flip side of challenge is opportunity. The real focus of our efforts together lies in creating greater value, helping to build the society that citizens want, and making it work better and cost less.