The Promise of Industry-wide Electrification Moves Forward

by Matthew Rose, Enerdynamics Facilitator and Director at EMI Consulting

As evidenced by an estimated 1,800 attendees at the recent Electric Power Research Institute (EPRI) electrification conference held in California, electrification is quickly becoming a key focus for the electric industry[1]. The first-ever conference brought together the “electrification community" including electric utilities, regulators, technology companies, automakers, and relevant trade groups to offer their perspectives, advocate for continued investment, and amplify the promise of a cleaner energy economy. As noted by Mike Howard, president and CEO of EPRI, the shift toward electrification is “going to be profound” with some of the additional keynote speakers declaring the movement to be “transformative” with wide-ranging beneficial impacts on society. The conference discussion acknowledged that the shift to electrification offers many benefits and much promise but also requires a lot of discussion surrounding issues that must be worked out.

The status of the electrification shift

The reality is that, with the exception of states like California pushing hard to decarbonize[2], the shift to electrification has been gradual and fragmented across the U.S. The focus has been in the transportation sector with added attention needed in building technologies plus codes and standards. Many utilities represented at the conference indicated they are in the early stages of implementing programs or are engaged in pilot projects[3].

Different views on the long-term impacts

The focus on an electrification future, while enthusiastically embraced by most electric utility executives, causes concern for other entities in the energy industry. There is some consensus that a path to full electrification would require shifts beyond the transportation sector and must include a shift from fossil fuel to electricity for space heating and water heating. One of the more entertaining and contentious conference sessions presented the two divergent views from the American Gas Association (AGA) and EPRI.

The AGA study concluded that policy-driven electrification (in contrast to leaving the decision up to consumer choice) would be “burdensome to consumers and to the economy.” The presentation noted that, under an aggressive electrification policy, total U.S. greenhouse gas emissions would be reduced by 1 to 1.5 percent with total energy system costs as high as $1.2 trillion. The AGA study also noted that electrifying all residential natural gas space heating could nearly double peak hourly demand and dramatically increase winter peak requirements in some states.

The EPRI study applied a different approach, relying on customer choice (without a mandatory shift away from natural gas space and water heating). The EPRI report relied on forecasting impacts of electrification technologies under a series of scenarios that included economic growth indices, rate of technology change, and varied carbon pricing levels.

The EPRI study found that under each scenario economy-wide electrification and technology advances led to reductions in energy consumption and emissions while natural gas use increased across all four scenarios. Even in the modeled aggressive, transformative scenario, natural gas usage is expected to increase slightly. Carbon capture and storage becomes an essential technology for natural gas use to continue growth in the scenarios that assume a future carbon price.

A summary of the EPRI study results is shown below:

SUMMARY OF EPRI’S ELECTRIFICATION ASSESSMENT MODELING RESULTS

Source: EPRI, National Electrification Assessment, April 2018. The same graphic was used in the presentation from Tom Wilson, EPRI at the EPRI Electrification Conference, August 23, 2018.

The competitive impact of natural gas and electric use in the context of an electrification future remains a critical concern with a recognition that reliance on policy solutions around fuel types will be contentious.

The need to focus on the customer

The conference sessions amplified the importance of working backward from understanding and educating the customer. The shift to electrification technologies is complex and requires greater knowledge on the part of the customer who must be educated on how to participate. This was mentioned extensively around promoting electric vehicles, recognition of customer charging requirements, and the customer relationship and value from the electrification investment. Some utility presentations included specific customer-engagement strategies and education efforts to allow customers to make more informed choices and remove the challenges affecting adoption decisions.

Some of the customer discussions also addressed issues working to a future of greater access and opportunity for all customers. A key question is how utilities and regulators can include customers of all income levels and home ownership (renters) and ensure all ratepayers benefit from a shift to electrification. Some of the California-specific presentations talked about regulator-approved efforts to deploy charging stations to low-income communities and EV ride-sharing projects for specific community targets.

The role of the utility

One of the conference topics discussed across many of the presentations was defining the role of the utility in the shift to electrification. Most utility executives who presented at the conference noted that utilities are open to “being part of the process” while mentioning that even if the utilities were not involved, the shift to electrification would still occur and evolve. However, there were follow-up concerns about investment, financial impacts, ownership status, and system planning. In states like California, the decision as to how to best use the state utilities and deploy electric vehicles is already unfolding[4]. In other jurisdictions, the role of the utility is being debated. In states like Michigan and Maryland, the state’s energy agency is leading the efforts to conduct assessment research and determine deployment strategies for charging stations. The presentations seemed to suggest that every state will have a different set of circumstances and strategies, and the resulting role of the utility will be different.

A few questions posed that must be addressed include:

• What's the role of the utility versus that of competitive providers in accelerating deployment of EV infrastructure?
• What types of utility infrastructure will be needed to serve EV users, who should pay for it, and how will utilities recover their fixed costs?
• What incentives should EV customers face to encourage right-time charging and discharging?
• What involvement should utilities assume in the EV-to-grid relationship?

Unanswered questions

In addition to the above themes, there were several issues that were not fully detailed and require greater attention moving ahead. Key unanswered questions from the conference include:

• What are the costs to design and deliver relevant programs in deploying various electrification strategies?
• How can utilities and regulators establish some common ground in advancing electrification investments?
• What is the relationship and impact of electrification on utility objectives of energy efficiency? Can electrification and energy efficiency co-exist as utility objectives?
• How do customers derive value from electrification opportunities?
• How can states best leverage funds from the VW Diesel Settlement to advance the electrification opportunities?

A final question that presented itself was “who pays”? It remains an underlying concern to everyone as utilities look to recover costs and make a return on their investments, regulators want customer access and low rates, transmission organizations want to ensure reliability, and customers want to know what their investment will cost and what they'll get in return.

The next EPRI Electrification Conference is scheduled for two years out. Hopefully, many of the current uncertainties can be addressed and the next series of challenges posed for resolution.