The Business of Plugging In: Building the Full Ecosystem for a Successful Plug-in Vehicle Industry in the US
The Business of Plugging In conference in Detroit this week marked a serious effort by utilities; automakers and suppliers; academia; government agencies; and financiers to instigate the necessary granular discussions required to lay an integrated foundation to develop a full ecosystem—products, services, policies, supply chain and consumer demand—for the successful deployment and growth of plug-in vehicles in the US.
Viewed another way, the conference was seeking to connect the different contributors or stakeholders that will be required to deliver and to support—on a large scale, to mainstream consumers—plug-in, electric drive vehicles that can compete in terms of cost, convenience, performance, and lifestyle appeal with combustion-engined cars that have had the benefit of more than 100 years of an ever-evolving value chain.
The overarching question was not whether the light-duty transportation sector would electrify to a significant degree, but when. As one of the speakers put it to the attendees, the bulk of which came from Southeast Michigan, plug-in vehicles will a major career path for most of the people in the room.
The conference was sold out; it was also essentially a PowerPoint-free zone; the basic format relied heavily on brief introductory remarks from sets of speakers representing the diverse stakeholders, followed by questions from attendees.
|“I’m very encouraged that carmakers now see as allies the utilities, plug-in advocates, community and regional efforts like ProjectGetReady.”|
—Felix Kramer, founder, CalCars
While there were certainly differences in the technology approaches different companies represented on the podium are taking, the focus and point of the discussion was less on the individual technology differentiators, and more on what would be required to establish a successful market for plug-ins (PEVs), in which the individual technology approaches could then succeed (or fail).
Topics covered the expected gamut of policy (especially carbon policy), infrastructure, batteries and consumers.
Infrastructure, recharging and business models. While OEMs and utilities continue to define and refine hardware standards and communication protocols for smart charging, a tremendous amount of work needs to be done in preparing both the grid and the process to accommodate the expected influx of plug-ins, and to make the process as easy as possible for consumers.
As one example in the opening plenary panel session, Peter Darbee, Chairman and CEO of Pacific Gas & Electric Corporation described the opportunity and challenges from his utility’s point of view.
The messages that I have with you are pretty simple...plug-in electric vehicles, PEVs, are coming, and based on my experience in the cellular arena 20 years ago what we see is that there may be a backtail on the estimated demand for plug-in vehicles. That means that there is more likelihood that the actual demand that we see from customers will be substantially higher than the estimates rather than right on target or below estimates.
The impact from plug-in electric vehicles on the grid could be very substantial. Therefore it is important that auto manufacturers, policy makers and electric utilities work together very closely. If they do not, then there could be very significant consequences as a result.—Peter Darbee
PG&E services the San Francisco area and Northern California. Darbee noted that although California has about 12% of the population, it has about 25% of the demand for plug-in hybrids. He said that they thought it very likely that California and Northern California would be the epicenter for the PEV market.
One the issues for PG&E is the impact of peak demand on the grid. The average peak electric demand for a house in San Francisco is 1.8 kW; in inland areas, where it gets much hotter, the average draw per house rises to about 6.6 kW—about three times the load.
An electric vehicle charging at 110V takes about 6-7 hours; moving up to 220V brings charge times down to 2 and 3 hours, Darbee said. “We think there will be a substantial preference on the part of the customer to head to 220.”
The issue is the draw. At 110, the draw is about the same as in SF, about 1.8 to 2.0 kW. But we see a 6.6 kW draw at 220. In other words, adding an electric vehicle at 220 is like adding another home to the network or to the system, and that would be a home in the San Ramon area. It would be the equivalent of adding three homes in San Francisco.—Peter Darbee
The nightmare scenario Darbee has is that on a very hot day, after businesses have been running operations, lights and air conditioning all day, people go home, turn the AC on or up, and plug their car in. The plug-ins would create a peak on top of the current peak, Darbee said. “The results would be pretty dramatic and pretty negative.”
Furthermore, given that the distribution of PEVs will not be homogeneous—e.g., Berkeley will have a higher percentage than Fresno—it will not be unlikely for 3-5 PEVs to show up on one neighborhood circuit in Berkeley, overwhelming the local circuit, and leading to blackouts, he said.
To get around this, PG&E would like to install a 220 interface in garages with timers and also implement dynamic pricing to encourage customers to charge between 11 at night and 4-5 in the morning.
The point to be made is that the automotive industry, policy makers and also utilities need to go to work as early as possible to deal with this great opportunity. We see it as an opportunity but it could also be a challenge of significant proportion.—Peter Darbee
During the question and answer session, Darbee said that utilities have to “walk before we run” with the smart grid. PG&E will start with timers and dynamic pricing. The next step will be the ability to communicate with individual cars—that could address the 3 cars on the same neighborhood circuit issue. Vehicle to grid is further out, he said.
GM’s Jon Lauckner, Vice President, Global Program Management, highlighted one of the mundane challenges facing automakers and customers: who will wire up the home 220V charging system, and how quickly?
Every [Volt] will come equipped so you have some type of charger. For those who interested in 220V, we have a charger, but it has to be wired, by electrical code, into a work box. That’s not our choice, that’s the electrical code. And so here comes challenge number one. We have, what, 3,000 public and private utilities out there? Who is going to install that 240 volt charging system in the garage if that’s what somebody chooses to do? Who is going to pull the wires, who is going to wire it up to the work box? Utilities, some of them will do more of that than others. Frankly, we need to find a way to make that a seamless part of the whole customer experience.—Jon Lauckner
Reports from various efforts at the conference suggested that the current process for that type of installation can be time-consuming and less than seamless.
The charging infrastructure area will be a difficult one for businesses, noted Mark Duvall, Director Electric Transportation, Electric Power Research Institute (EPRI), in his session.
There are a lot of very important decisions coming up in this space. You now have hundreds, thousands of different entities, whether it is a municipal government, a retail shop owner, or someone who manages parking garages or a utility or someone else who has to make decision about well, what are we going to do, how are we going to build this infrastructure?
Electricity is a cheap entity—not a commodity, but is its fundamentally very cheap. You really have to package together something that allows you...to maintain a system as well as maintain and recover and investment on it that is fundamentally very cheap. That’s going to be a major challenge for almost anyone in this area.
Duvall looks at recharging infrastructure in two pieces: privately-owned (recharging companies, workplace and home charging); and publicly-owned. It is the latter where a lot of the uncertainty is, Duvall said, and:
it is coincidentally where the biggest bets are being talked about being made. People get up without batting an eye—they won’t even take a sip of water—and say a billion dollars [for infrastructure] for Northern California, and you have to have it in place before the first vehicles hit the road. Well, I don’t know if you have been to California recently, but that’s an insane amount of money to talk about in this space.
I think in the end with many of these business models you have to prove that it works. Don’t ask anyone in here, myself or anyone else, to assume that a business model will work for infrastructure because they are very very challenging.
The few who have done it successfully, Duvall said, should be congratulated.
Daniel Ford, Managing Director and the head of US Utilities Equity Research for Barclays Capital noted that utilities are mature, capital-intensive, highly-regulated groups of companies that are local monopolies. They are not risk-takers. “To get the infrastructure necessary, we need to talk about a deal, a deal between policy makers and regulators and the companies.
...In the scale of things, electric vehicle infrastructure probably starts for utilities about five years out and then ramps from there if it is successful... The question more pressing for utilities right now is the renewable portfolio standard; emerging issues around the environment including carbon, but also NOx, SOx, PM; aging infrastructure, things are falling apart, and that’s also true in the electric grid system; and then transmissions upgrades.
As a result, the best way to approach it [EV infrastructure] is to approach it right now. Cooperate with the local regulators to put in place tracking mechanisms for EV infrastructures. While it is small dollars, if you get the statutes right, it will survive. If you try to put the statutes in when you’re talking big dollars, good luck. I think this will be big dollars, but if successful, now is the time to really get mechanisms in place, to track actual expenditures, and pre-determine recovery, timeline and return on capital.—Dan Ford
Batteries. While batteries were an omnipresent topic at the conference, due to their critical role in enabling range and cost, there was a specific panel session on battery futures moderated by Denise Gray, GM’s Global Battery Systems Engineering Director. (GM captured the entire session on video, and has posted it for viewing on the Chevrolet Voltage site, here.)
Participants on this panel included:
- Yet Ming Chiang, Ph.D., Kyocera Professor of Ceramics, Massachusetts Institute of Technology and Co-founder, A123Systems, Inc.
- Dania Ghantous, Vice President, Technology and Battery Development, Imara Corporation
- John Patten, Ph.D., Director, Manufacturing Research Center, Western Michigan University
- Jeffrey Sakamoto, Ph.D., Assistant Professor, Michigan State University
- Ann Marie Sastry, Ph.D., Chief Executive Officer, Sakti3
One of the questions posed by Gray to the panel was what the enablers are for advancing battery technology to Generation 2 or Generation 3 (an exercise GM is currently undertaking with the Volt) to bring the cost down.
Drs. Chiang and Sastry both suggested that solutions will come from a focus on advances in materials made by an extremely knowledgeable workforce—many members of which haven’t been trained yet. Education thus was one of the recurring themes in this panel.
Effort will be applied to all components of the battery. However, Dr. Sastry noted:
We will have people innovating on all axes...the thinking on which component is king has changed as we understand more about failure mechanisms...I think you’ll have different arguments being made based on different chemistries. I would add though, that… regularized simulation and understanding of better controls architecture…all the way down to optimization of designs is absolutely essential.
Customers. Customers and customer reaction were also a recurrent theme at the conference. In one of the sessions, Richard Curtin, director of the Reuters/University of Michigan Survey of Consumers, released the recent survey data showing that while there is widespread consumer interest in buying plug-in hybrid electric vehicles, the cost of the cars is much more influential than environmental and other non-economic factors as a predictor of purchase probabilities. (Earlier post.)
Given the currently unavoidable price hit resulting primarily from the cost of batteries, there were numerous mentions during the conference of mechanisms to establish a market environment that could better support plug-in adoption—carbon tax, fuel price mechanisms, or increased subsidies.
In his prepared remarks prior to his panel’s discussion, Felix Kramer, founder of CalCars, said that he was confident that real production PHEVs and EVs are coming&mash;not new prototypes or conversions.
Vehicles will come into a twilight zone at an unusual intersection. The public has understanding and misconceptions, expectations and hopes. They will bring them all to their encounters with multiple flavors of plug-ins from both big and small companies. They will see what plug-ins can deliver. And we hope they’ll recalibrate their expectations in healthy an enthusiastic ways.—Felix Kramer
Kramer predicted that:
First vehicles will be gobbled up by early adopters.
For a long time, carmakers will sell as many as they can build.
Early buyers will self-select based on drive cycle and access to home or business charging. Up to 50% of the population with access to a plug is not a niche.
Millions will pay more for features (green/smart/cool/advanced/prestigious) communicated by positioning, design and advertising.
Automakers and the broad community can take many steps to influence this unpredictable journey. Actions and communications strategies we choose can significantly improve chance of successful commercialization.
It’s now possible for carmakers, the media and advocates to use new communications tools to give voices to future drivers who will become the first owners. These customers can describe what they hope for, what they get, what they like, what they want to see in version 2.0 of automotive software and hardware. Think of them as a giant fan club and focus group.
For rollout, the guiding principles for all of us are those GM embraced when it announced the Volt: transparency and two-way communications at every stage. This year the cars will do us a big favor and give us the biggest boost yet: They give us the chance to personalize the experience and enlist every new driver as a advocate—starting with their families, friends and neighbors, and coworkers. I expect many will jump in and become amateur evangelists to audiences who want to hear all about it. I can't wait.—Felix Kramer
However, he said, CalCars has analyzed how long it takes new vehicles to penetrate markets.
Hybrids took 10 years to get to 1% of all and 2% of new cars. Plug-ins will amount to a tiny percentage of the 250 million vehicles in the US and 900 million worldwide for much longer than a decade. This leads us to a new goal: We’re pointing to a global business opportunity to fix [i.e., convert] millions of cars on the road.—Felix Kramer
[GM hosted Green Car Congress at the Business of Plugging In Conference.]