DNOs and the EV transition

The mass take-up of EVs is coming, and with it a profound change for network companies, but questions remain about standardisation and the regulatory support, says Maria Bengtsson, a director in EY's energy team

The number of electric vehicles (EVs) in the UK is rising rapidly. In September 2017 there were 122,000 EVs (both pure electric and plug-in hybrid); by December 2018, that number had increased to more than 200,000. National Grid’s Future Energy Scenarios say there could be as many as 11 million EVs by 2030 and 36 million by 2040. This growth, coupled with the long-term UK government targets for all new cars and vans to be zero emission by 2040, will lead to increased pressure on our electricity networks and significant increase in electricity demand.

The rate of increase will be partly (if not fully) driven by price and performance of EVs versus internal combustion engine (ICE) vehicles and the speed of investment in infrastructure. According to an EY survey of network companies carried out in 2018, 92 per cent of respondents believed that EVs and EV-charging infrastructure would be economically viable by 2030.

Implications for electricity networks

This rapid increase in the adoption of EVs will have broad impacts across the value chain and some of these will call for changes in the way network operators work.

There are two key challenges affecting the infrastructure segment of the value chain.

First, a key barrier to the mass market adoption of EVs is the low penetration of charging infrastructure, with pre-emptive public installations on low voltage networks crucial to enabling the electrification of transport. According to analysis conducted for EY by a team at the University of Melbourne, to provide an adequate ratio of charging points per EV would require around 1.5 million public charging points to be installed in the UK, costing almost £7 billion.

Second, this acceleration of charge point availability and utilisation will increase pressure on network load and constrain legacy connection points, built to withstand only modest demand, for example at refuelling stations, public carparks, and home consumption of electricity.

Therefore, to enable an efficient switch to EVs, network constraints will need to be alleviated through network upgrades as well as innovative approaches such as on-site storage and generation.

The complexity of the overall market has so far led to a fragmented approach where market participants are approaching the EV rollout in different ways. Examples include the different types of plug arrangements and a lack of interoperability between public charge point operators, as well as a lack of consistency in approaches from local authorities.

In a lot of cases, development of, or planning for, local infrastructure is not very progressed. There is a view among many that the private sector has taken the lead in relation to charging infrastructure. Without central or regional guidance as to how the build-out should be structured, and clear requirements on the infrastructure, private investors (and local authorities) have followed different routes, which may prove to stall progress overall.

There is also a risk that private investment will lose momentum if there is a fear of stranded assets, either as a result of technology changes or that the infrastructure will not match the EV take-up in certain regions (such that some assets are left idle).

Market initiatives

From governments and regulators to vehicle manufacturers, we are seeing varying levels of engagement with these challenges so far.

Currently, in most cases suppliers and network owners are not able to influence the charging at private or public charge points. Managing when EVs are charged will be a key issue. Several initiatives could assist in driving this, for example a requirement for all charge points to be “smart”, which in turn would enable energy suppliers to charge customers on a time-of-use basis.

Alternative ways of solving the energy supply issue are also emerging. Some investors, sometimes partnering with vehicle manufacturers and system operators, are looking at providing generation assets behind the connection point. One example of this is the implementation of an energy storage system on-site to store at time of low load, and release at times of vehicle charging.

Vehicle-to-grid (V2G) technology is another promising development. These services would help network operators manage network constraints, capacity and renewables integration by providing flexibility. However, while there is consensus on the concept in principle, the scale of the impact on V2G technology on the overall balancing of supply and demand is under debate. Whereas some observers consider the impact will be material, others are more cautious, citing uncertainties around battery warranties, necessary technological upgrades and payment structures.

A range of issues need to be addressed to ensure V2G services are able to maximise value add to networks. First, the method by which EV users are charged for electricity by suppliers requires an update, with legacy tariffs providing no incentive or benefit for managing consumption.

Second, regulatory approaches to network charging and V2G need to be concluded. With the recent suspension of the capacity market, regulatory concern about advanced technologies has been heightened, filtering down to investment proposals. Government and regulators must provide long-term clarity on network charging methodologies and access to markets for EV charging.

In summary, while there is still a high degree of uncertainty around the pace of EV adoption and charging patterns, appropriate preparation will increase the chances of successful adaptation. For distribution network operators, this can include looking at scenarios for EV uptake from the point of view of constraints on the networks, opportunities for actively managing the balance between supply and demand, and exploring ways of enabling more flexibility.

On a larger scale, it is clear that all relevant stakeholders need to work together in a more co-ordinated way to ensure a speedier transition to EVs.