Introduction
Revisiting part 1 of the Medium-Heavy Duty Electric Vehicles (MHD EV) discussion highlights a critical issue: the substantial electricity demand resulting from the adoption of MHD EVs. This increase in demand will undoubtedly strain the current grid system, necessitating higher loads and, if inadequately managed, could lead to grid instability, elevated electricity prices, and potential outages.
Several solutions have been proposed to address these challenges. However, as mentioned in the previous article, the adoption rate of MHD EVs remains low, making investments risky. This is particularly true given the uncertainties in forecasting future demand peaks, fleet sizes, adoption rates, and other key variables, underscoring the need for government support.
It is also important to note that MHDV electrification is a societal objective promoted by many governments. Currently, there is minimal private sector incentive for fleet and transport companies to fully electrify their vehicles. This reluctance is partly due to the significant investments required by utility companies to upgrade electric distribution systems. Additionally, utilities will eventually need to recover their costs, potentially through higher rates targeted at MHD EV owners in commercial or EV customer segments, rather than distributing the rate increases across the entire customer base. This targeted approach could lead to more pronounced rate hikes for specific segments, rather than smoothing out the increase across all electricity ratepayers.
Solutions proposed by experts such as Lowala & Spiller (2023) involve structural changes to current electric tariff systems and require the coordination of multiple stakeholders, including utility companies, state and federal governments, and consumer representatives. Managing and forecasting electric load—encompassing the demand and supply of electricity—depends not only on generators, transmission investments, large businesses, and aggregate household consumption but also on a new factor: EV charging behavior.
For instance, assuming a 70% EV adoption rate for passenger cars and MHD vehicles with peak demand between 11 a.m. and 3 p.m. in a large city, a scenario where everyone simultaneously charges their vehicles at those hours could lead to significant issues. Potential consequences include spikes in electric prices, larger-than-usual loads causing system instability, infrastructure damage, and increased long-term maintenance and operational costs.
Therefore, investing in more resilient grids is essential. Additionally, involving electricity consumers and influencing their behavior through a common-interest approach is a crucial strategy. This is particularly important when considering vehicle-to-grid technologies and managed charging.
Managed Charging
This is one of the most intricate business challenges: As policy makers and energy managers, how can we promote the adoption of passenger and commercial EVs while simultaneously encouraging consumers to charge their vehicles under optimal conditions? Specifically, these conditions include: i) periods of low electricity demand; ii) times when the electricity generation mix is predominantly renewable, ensuring that recharging is carbon-neutral; and iii) instances when electricity prices are low, enabling cost-effective charging.
This concept is central to managed charging. As electric system engineers, our goal is to incentivize grid users (i.e., EV charging customers) to reduce their energy consumption during peak demand periods, thereby helping to maintain grid stability as EV adoption grows. By participating in a managed charging program, EV consumers permit a utility or third-party company to control the charging process of their vehicles in exchange for various forms of compensation, which may include financial rewards, social incentives, or tax benefits.
Examples of managed charging programs include incentives such as earning USD 120 per year for EV consumers who comply with specific guidelines. These guidelines may require that 80% of charging happens during off-peak hours and that charging is avoided on specific dates with significant events, such as major football games or anticipated heatwaves, when energy demand is expected to be very high.
Managed charging is effective because demand and electricity rates fluctuate throughout the day. Advanced technologies make managed charging a viable option, though it is complex to implement. Accurate load forecasting is critical for utility companies to determine optimal charging times for electric vehicles. Incorrect load forecasts can lead to high electricity prices, but this can be mitigated by allowing utilities to control charging devices. For instance, managed charging programs may request participants to charge during off-peak hours when demand increases. However, this requires significant software investments across all devices included in these programs. Additionally, there may be negative consequences such as consumers feeling a loss of control and ownership over their fleets, as utilities decide when to charge medium- and heavy-duty fleets under these programs. Therefore, it is important to allow consumers to opt out of these programs and treat them as energy partners, co-responsible for maintaining grid stability. The effectiveness of these programs remains to be seen and quantified as the adoption of electric vehicles increases worldwide and across various countries and societies.
Lowala and Spiller (2023) assert that managed charging can yield substantial cost savings, exemplified by research showing up to a 61% reduction in distribution system upgrade costs for electrifying all New York City vehicles. Similarly, a report from Lawrence Berkeley National Laboratory indicates that “managed charging strategies could reduce the incremental cost of integrating EVs by up to 62 percent” (Satchwell et al., 2023). However, these projected savings require careful consideration. Realizing these benefits necessitates the alignment of advanced analytics, forecasting, stakeholder management, and optimized strategies within the EV customer base, including medium- and heavy-duty vehicles.
Vehicle-to-Grid Technology
Vehicle-to-Grid (V2G) technology enables electric vehicles to return energy to the power grid from their batteries. This goes a step further than managed charging since EV owners are now co-participating in the energy grid stabilization by giving back electricity or recharging based on energy or consumption needs. V2G may include bidirectional charging which goes either to the EV battery or from the EV battery directly or more sophisticated technology known as V2X which essentially means that EV battery can not only provide load to the grid but to “everything”, including smart buildings, homes and other loads that are compatible. As EV adoption increases with estimates up 250 million by 2030, EV batteries could contribute significantly to short-term energy storage needs if properly managed.
Vehicle-to-Grid (V2G) technology envisions EV batteries as versatile storage units capable of stabilizing the grid under specific conditions. During times of fluctuating renewable energy generation or peak demand, connected vehicles can serve as a “backup” power source. This functionality is pivotal in creating smarter grids and aligns with Germany’s clean electricity goals of sourcing 80% of its power from renewables by 2030. Research by the Fraunhofer Institute and others indicates that V2G could provide up to 28 GW of power by 2035, minimizing the need for stationary and centralized storage solutions and enhancing renewable energy efficiency.
Similar to managed charging, financial incentives exist for returning electricity to the grid. Real-world examples include collaborative initiatives between car manufacturers, utility companies, and government entities to study consumer behavior across various scenarios. However, regulatory uncertainties surround this emerging technology, including decisions about charging types.
For instance, EV batteries store energy as Direct Current (DC), while grid electricity is Alternating Current (AC). Therefore, a critical decision is whether the conversion from AC to DC should occur in the car’s onboard charger or in the wallbox (charging station) itself. Generally, DC wallboxes are favored as they simplify regulatory compliance and utilize advanced power electronics from photovoltaic (PV) systems. Since PV systems generate DC electricity, they are directly compatible with DC wallboxes, eliminating the need for AC to DC conversion and resulting in more efficient energy transfer with less energy loss.
Both the EU and the US are moving towards greater compatibility and standardization. The Combined Charging System (CCS) has been developed to integrate AC and DC charging in a single plug. This allows for slow AC charging at home or fast DC charging at specialized wallbox stations. While full compatibility across all components remains a goal, this represents a significant milestone for V2G technology.
Co-located storage and solar
The concept of co-located storage builds on the idea of placing photovoltaic panels near charging stations. For large fleet companies with warehouses or parking facilities equipped with charging stations, installing rooftop solar panels paired with battery storage can theoretically reduce reliance on grid-sourced electricity, especially during peak demand hours. This strategy can also lower the total cost of ownership (TCO) for medium- and heavy-duty (MHD) electric trucks. However, there are notable challenges to this approach.
Firstly, the initial investment and ongoing maintenance of rooftop solar installations can be considerable. Additionally, the energy produced by solar panels is often limited and may not be sufficient to meet the full energy demands of an electric vehicle fleet. For instance, research indicates that a 25,000 square foot warehouse rooftop can support a solar capacity of approximately 250 kW, generating around 2.2 MWh of energy annually. In comparison, a highly efficient Volvo FH Electric truck, which recently demonstrated its energy efficiency in Germany, requires 550 kWh to cover a daily distance of 500 km. This means the rooftop solar installation would only produce enough energy to fully charge the truck only about four times per year.
Consequently, the energy generated by solar panels would only meet a small portion of a truck’s daily operational needs, let alone the requirements of a large fleet. Therefore, more efficient sources of electricity must be pursued to effectively power an entire fleet of trucks without compromising grid stability.
Battery Swapping
Imagine you are an EV driver with only 20 km of range left. Instead of worrying about finding a charging station, you could simply visit an EV battery swapping station. In less than three minutes, your depleted battery would be replaced with a fully charged one, without you even having to step out of the car. Payment is automatically processed from your bank account. This is exactly what Nio’s EV company is offering in China. By installing battery swapping stations, drivers can quickly get a fully recharged battery and continue their journey, greatly reducing the range anxiety that new EV users or potential adopters often experience.
This approach is highly practical compared to traditional charging methods. Instead of waiting an hour at a Level 3 charging station or 15 minutes at a Tesla Supercharger to add just 100 miles, you can have your entire battery replaced in just a few minutes. This innovative business model, known as Batteries-as-a-Service (BaaS), allows users to subscribe to different plans based on their battery usage, significantly reducing the initial cost of EV ownership. Since EV batteries can account for up to a third of the cost of a new vehicle, this model makes EVs more accessible.
Moreover, this model transfers the responsibility of battery maintenance and upgrades to the company, ensuring that drivers always have the latest and most efficient batteries. This not only lowers the psychological barriers to EV adoption but also addresses practical challenges, making it much easier and more appealing for drivers to switch to electric vehicles.
Entering the battery swapping market is a challenging endeavor, but the benefits can be substantial if managed correctly. Nio’s consumer base includes taxi fleets, independent drivers working for companies like Uber, and private transportation companies. The cost of battery swapping offered by Nio is comparable to 15 minutes of Tesla supercharging, making it a competitive option for many users. To illustrate the scale, Nio had achieved over 15 million swaps by December 2022, with about 40,000 daily swaps on average. This efficiency makes battery swapping an attractive choice for corporate or individual subscriptions, saving time and reducing the need to plan routes around charging breaks, ultimately leading to higher profit margins for these companies.
However, there are ongoing challenges that companies like Nio must address. As the EV market expands, closer collaboration with utility and energy producers is necessary to maintain grid balance. Nio has partnered with Anhui Province Energy and China Southern Power Grid, which has accelerated the adoption of smart grid features. These partnerships allow for charging spare batteries during off-peak periods and times when the electricity mix is cleaner and more renewable-based, ensuring a more sustainable and efficient energy management system.
The lack of common industry standards for battery design restricts swapping stations from accommodating multiple brands and vehicle types. EV companies often compete on proprietary technologies, complicating knowledge sharing and standardization efforts needed for a universal battery type. Notably, Nio has achieved greater compatibility through agreements with manufacturers such as Chang’an, Geely, JAC, and Chery; however, international collaboration is still required to establish a single standard. Furthermore, rapid technological advancements can render older battery models obsolete, or conversely, older batteries may remain compatible but become undesirable to new EV users. To address these challenges, robust recycling and remanufacturing programs are essential, enabling the redesign and upgrading of batteries to align with the latest technologies and ensuring that critical mineral components like lithium can be reused in new batteries.
Lin (2024) raises a crucial question: How many batteries should be maintained at each swapping station to meet peak demand? Both excessive inventories and stockouts incur significant costs. Excess charged batteries risk obsolescence if not stored under ideal conditions, reduce cash flow, and waste storage and financial resources. Conversely, if a customer cannot be served due to insufficient inventory, dissatisfaction may arise, potentially undermining the perceived effectiveness of the business model and leading to increased customer churn and lower EV adoption. Striking the right balance in inventory management is critical yet challenging, necessitating real-time logistical analysis and effective data analytics to ensure optimal customer service.
Consider the challenges associated with batteries for MHD EVs. These batteries are substantial in size, leading to higher operational costs and ongoing maintenance requirements. Ensuring battery compatibility is crucial to justify investments in battery swapping stations. For heavy-duty vehicles, the weight of the battery can be an added challenge; for instance, a Class 8 tractor’s 1200 kWh battery pack could weigh nearly 17,000 lbs. Partnerships with gas stations may be necessary, but potential conflicts of interest could arise. Traditional oil and gas (O&G) companies might require government incentives to support the integration of battery swapping at their fuel stations. This approach can help avoid redundant investments from O&G and enable revenue diversification into the MHD EV sector.
Conclusion
In conclusion, reforming the electric grid to accommodate the increased demand from Medium-Heavy Duty Electric Vehicles (MHD EVs) is essential to ensure grid stability, affordable electricity rates, and the broad adoption of electric vehicles. While the adoption of MHD EVs is currently low, strategic investments and reforms today can mitigate future challenges. Managed charging and Vehicle-to-Grid (V2G) technologies present promising solutions that not only alleviate peak load pressures but also contribute to a more resilient and flexible grid. However, these solutions require substantial cooperation among utility companies, policymakers, and consumers.
Battery swapping stations, as seen with Nio’s success in China, also offer a viable alternative by reducing downtime related to charging and enhancing the overall user experience. For wider adoption, industry standardization, sustainable battery lifecycle management, and effective inventory strategies are crucial. Ultimately, a combination of advanced technologies, strategic investments, and collaborative efforts can drive the necessary reforms to create an efficient, sustainable, and consumer-friendly electric grid system capable of supporting the rising demand for EVs.
Bibliography
- Eversource. “EV Charger Managed Charging.” Eversource, accessed July 17, 2024. https://www.eversource.com/content/residential/save-money-energy/clean-energy-options/electric-vehicles/ev-charger-managed-charging/ct.
- Virtual Peaker. “What Is Managed Charging?” Virtual Peaker, accessed July 17, 2024. https://virtual-peaker.com/blog/what-is-managed-charging/.
- Virtual Peaker. “Gamification: Distributed Energy Resource Management System.” Virtual Peaker, accessed July 17, 2024. https://virtual-peaker.com/blog/gamification-distributed-energy-resource-management-system/.
- Virta. “Vehicle-to-Grid (V2G).” Virta, accessed July 17, 2024. https://www.virta.global/vehicle-to-grid-v2g#:~=Vehicle%2Dto%2Dgrid%2C%20or,energy%20production%20or%20consumption%20nearby.
- The Mobility House. “Implementing V2G.” The Mobility House, accessed July 17, 2024. https://www.mobilityhouse.com/int_en/knowledge-center/article/implementing-v2g.
- Lin, Chengyi. “How One Chinese EV Company Made Battery Swapping Work.” Harvard Business Review, May 28, 2024. https://hbr.org/2024/05/how-one-chinese-ev-company-made-battery-swapping-work.
- Lohawala, N., & Spiller, E. (2023). “From Diesel to Electric: Overcoming Grid Integration Challenges in the Medium- and Heavy-Duty Vehicle Sector.” Economics of Energy & Environmental Policy, 12(2). Copyright 2023 by the IAEE. All rights reserved.
- Unleashed Software. “Why Too Much Inventory Is Bad.” Unleashed Software, accessed July 17, 2024. https://www.unleashedsoftware.com/blog/why-too-much-inventory-is-bad.
