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Why Electric Cars Require Us to Get Electric Rates Right Now

Posted in Clean Energy, Electric Vehicles, Renewable Energy

I got gas a couple of weeks ago.  Ok – mostly that wouldn’t be worth reporting.  But it was the first time for my new Ford C-Max Energi plug-in hybrid.

Kathleen Petrich reported on January 9 that I had bought a new car.  I had been nursing my 13-year old VW Beetle, hoping that before it died someone would make a car that I could drive back and forth to work without using any gasoline, but still could drive to Olympia or Tacoma or Edmonds whenever I wanted without worrying about whether I had enough battery to get home.  And Ford did it!  Just in time.  The Ford C-Max Energi is a plug-in hybrid, which gets somewhere between 12 and 21 miles based on a full charge of its plug-in battery, then switches to a hybrid motor, using what we have all come to think of as “Prius technology.”  [Ford would be offended by that statement.  It turns out that Ford and Toyota were independently developing the technology at the same time.  After some suits and countersuits, they settled by giving each other a cross-license.  So they both have essentially the same hybrid technology, and each claim bragging rights to it.]

My new car is an amazing piece of engineering.  It is a joy to drive, with lots of pickup, great handling, an array of gadgets, and far more space than I was used to.  Ford claims I can expect better as the car gets broken in, but on that first tank of gas I went 642 miles on 10.9 gallons of gasoline, for an average gasoline use of 58.8 miles per gallon.  Yes, there were trips to Olympia, Edmonds, Kirkland and Tacoma, but mostly commuting to work has been gasoline-free.  Living in Seattle, where our electricity comes from water falling over dams, not coal- or gas-fired generators, that makes my commute about as climate neutral as it gets.  And when I get home at night, I plug it into a normal 110-volt plug in our garage – no fancy charging station for this car.  I love it!

But the experience has also focused my attention on the issue of “what happens if this move to plug-in hybrid cars succeeds like I think it will?”  Because it is hard to miss the fact that it takes energy to move this car, all 3,400 pounds of it, up and down the hills of Seattle.  Just because it is gasoline-free doesn’t mean it is energy free.  It can’t be.

Right now Seattle City Light gets about 13% of its revenues from selling surplus power on the wholesale market.  In the middle of the night, it can produce way more energy than it can sell, and mostly spills water over the dams rather than running it through the generators.  Charging a car at night has essentially no environmental consequences.  But what if 5 years from now 50% of the new cars in Seattle are plug in cars.  What then?

About 28% of all energy used in the United States is used by transportation.  That includes planes, trains, trucks boats and cars, not just the personal automobile.  But the personal automobile and fleets of vehicles that could be electric-powered are a significant share of the total.

Electric companies are required to build generation, transmission and distribution capacity to meet their peak demands.  That is typically the middle of the hottest day, when the most people are running their air conditioning systems at full bore.  Different electrical utilities have somewhat different peaking periods, but for all of them, by 10 or 11 o’clock at night, they don’t begin to need all the generation capacity they have.  Across the United States, during the off-peak periods there is enough unused electrical capacity to take maybe half the power demands of our automobiles if they were electric.  But, if all those cars were being charged during the middle of a hot summer day – the nation would need to build a lot more generation plants and distribution facilities and would need to upgrade its distribution systems downstream of thousands of substations.

And what would that mean?  Power companies are entitled to earn a return on the capital investments they are required to make in order to supply the power we need.  Those investments get repaid, and a return on the investment gets earned, through the electrical rates we pay.  That is a fundamental rule of utility rates.  So if power companies have to build new generation capacity, or new transmission lines or upgrade their substations, they are entitled to increase their rates to pay for that and earn a return on the investment.  The bottom line is that if some years from now, the conversion to electric cars forces construction of new generation, transmission or distribution capacity, the rates for electricity must rise.

What does that mean for today?  The power companies are saying, “don’t worry about it.  We’ve got plenty of power.”  And indeed many electric power companies have seen their loads fall as consumers have invested in energy saving devices and strategies.  When their load falls, the power companies need to cover their return on investment from the sale of fewer kilowatt hours of electricity.  Power companies don’t necessarily like too much conservation.  And they would not necessarily mind having a new source of load on their system – that is more kilowatt hours to sell.

But the rest of us, and particularly the automobile companies that have invested in developing this amazing new technology, need to worry now.  People who would love to see a major switch to electric cars should be insisting that electric rates get set now to encourage electric cars to be charged at night.  Some Northwest utilities already have time-of-use pricing.  Smart metering makes that possible.  On the other hand, when time-of-use pricing just moves the existing load around, there can be real disadvantages as well, because while some customers’ rates go down, customers who use electricity during peak periods see their rates go up.

But electric cars are not existing load – they are potentially a huge new load.  That load needs to be met, to the greatest degree possible, by the unused capacity of the off-peak hours.  And now is the time to develop the rate structures and the technologies to encourage electric car owners to charge during off-peak periods.

That can still make electric cars a new source of revenue for power companies.  They need not worry about too much efficiency with electric cars – every kilowatt sold to power a car is a new kilowatt.  But if we just assume that electric cars can be charged “whenever” – if we wait until the power companies have to build more capacity or we start to experience brown outs as a result of that new load – the odds that we can get this right go down.  At that point electric cars will be demonized, and we will have one more example of the law of unintended consequences.  What could and should have been a major tool in reducing carbon emissions and our dependence on foreign oil will instead sour, as all electric consumers pay the price.  There is no excuse for that to happen.  We should be smart enough, and able to see over the horizon well enough, to address the problem now.