New Funds Pave the Way for Lasting Change

Utilities understand that loads are shifting away from fossil fuels towards cleaner forms of energy, and the move to electric vehicles isn’t just a trend or a key part of climate change mitigation; it’s a durable market that must be prioritized to remain relevant and competitive.

The United States is at a tipping point of EV adoption, meaning there’s a huge opportunity for utilities to be the Swiss army knife the country needs to meet the Biden Administration’s goal that half of all new U.S. vehicle sales be zero-emission by 2030. Electric vehicle and fleet charging infrastructure is imperative to achieving that goal, and with billions of dollars in available funding, utilities want their fair share.

When asked about the top three priorities for their organization if IIJA funding is granted, EV charging infrastructure received the highest marks, with 63 percent of respondents noting that it would be a top priority (Figure 22). Couple that sentiment with the fact that 39 percent of respondents intend to make investments in transportation fleet electrification and/or charging infrastructure in the next one to five years, and it’s clear this issue is top of mind for utilities, and planning is underway.

When asked how much money their organization is planning to invest in transportation and fleet electrification and/or charging infrastructure over the next one to five years, 16 percent said they expect to spend more than $10 million. Other investment amounts range from less than $500,000 (24 percent), $500,000 to $1 million (20 percent), $1 million to $5 million (16 percent), and $5 million to $10 million (4 percent). One in five respondents reported they aren’t sure how much money they’ll devote to that.

While the funds are available and money is earmarked for electrification and charging infrastructure, questions remain about how best to budget that money as well as to accurately forecast the load requirements coming down the pike.

The Need for Education, Effective Forecasting

While the survey demonstrates robust plans for investment in vehicle and fleet electrification and required charging infrastructure, the data turns murky when respondents weighed in about how much of their forecasting for future load is integrated into the expectation for vehicle electrification. More than four in 10 respondents — 44 percent — replied that at least some of their forecasting included vehicle electrification and fleets, while 22 percent said none of their forecasting involves vehicle and fleet electrification. Twenty-four percent said they don’t know (Figure 23).

This begs the question: if utilities are planning to invest in this area, as the survey results clearly illustrate, why aren’t they planning to accommodate the increased demand for electricity that these investments in EV charging buildout will inevitably require? What might explain this disconnect?

One answer is that it’s hard to predict the future. Load forecasters have a difficult job, and their predictions can drive billions of dollars in investments and real changes to electricity rates. The estimate is too high, and a utility has stranded assets and unnecessarily high rates. The estimate is too low, and the utility risks not having enough power to serve its customers. Since the 2008 financial crisis, the usual link between growth in the gross domestic product (GDP) and electricity demand has decoupled. This means that even though the economy is growing, a utility shouldn’t necessarily assume that this will result in higher electricity demand as our economy has de-industrialized and things have become more efficient. The period of flat load growth has made load forecasters more cautious when forecasting future loads.

Another answer may be that work is needed to educate the utility sector on effective planning and budgeting as the adoption of EVs continues to pick up speed. Consider this: Just 5 percent of all new car sales today in the United States are electric; in five years, that number is only expected to increase, especially considering the expanded tax credits for EVs now available through the recently passed “Inflation Reduction Act.” Similarly, the number of electric fleets also is expected to rise, as is the electrification of heavy machineries such as forklifts and other equipment. According to the survey, three-quarters of respondents reported an increase in EV charging site requests, spanning both Level 2 (38 percent increase) and Level 3 (38 percent increase) charging site requests.

Black & Veatch recently completed an important project for the strategic planning group at San Diego Gas & Electric (SDG&E). SDG&E set out to establish the most viable pathways for economy-wide decarbonization, with Black & Veatch providing technical advising, subject matter expertise, and economic and power market modeling services to the utility. This work was published in “The Path to Net-Zero: A Decarbonization Roadmap for California,” a comprehensive decarbonization blueprint to meet the state’s goal of achieving carbon neutrality by 2045. The work showed that electric consumption is expected to double as the economy decarbonizes, and the majority of that additional demand will come from electric vehicles. The industry can’t ignore the increase in demand in the very near term, which is only expected to grow. Growth in electrification also means increases of the load on the grid, making it imperative that utilities properly forecast the load requirements of those vehicles. The inescapable fact is that that the rising number of EVs and fleets expected to be on the road in coming years won’t be sustainable without proper charging infrastructure.

No Time to be Passive

With President Joe Biden having signed an executive order calling for EVs to account for half of all U.S. auto sales by the end of this decade — and automakers making EVs a bigger part of their inventories in a world increasingly embracing decarbonization — it’s incumbent on electric utilities to respond. Many are, reflected in the survey findings showing attentiveness to the need to invest in and prioritize the required infrastructure.

But more education around the need for effective planning and investment remains essential, especially considering that only half of the respondents to Black & Veatch’s survey say they’re ready to enable new EV loads over the next year. Breaking that down further, 22 percent say they’re ready now, 15 percent say they’ll be good to go in less than six months, and 14 percent say they’ll be ready in six months to a year.

When utilities meld that confidence in readiness with more education and effective, thoughtful planning, the vehicle, and fleet electrification sector will be on track to make lasting, sustainable change.