If you throw a rock here in Silicon Valley, you’ll probably hit an electric car, or at least a hybrid. Californians started the national paradigm change in low or zero emissions vehicle purchases and continue to lead the way.
Walk into any car dealership and you will see that “electric cars” are increasingly just called “cars”, offering increasing ranges, declining costs, and lower fuel and repair bills. A recent EY study projects at least 70 million EVs will travel on US and Canadian roads by 2035. As large as that sounds, it would still only be 18% of all vehicles. An unprecedented transformation but imagine (as I do) if those same factors mean that EVs proliferate much, much faster than that.
At the same time, unprecedented heat, drought, and wildfire drive an undeniable imperative to transform our atmosphere, greenhouse gases most of all. Combine the 25% of US greenhouse gases that electricity still emits and transportation’s 29%: that’s over half of US greenhouse gas emissions. In this 21st century context, the EV is “one small step for humankind” in these twin transformations.
As a result, two centenarian industries, automakers and electric utilities, suddenly see new growth opportunities. It’s a great prospect, especially when combined with a greening grid. But fasten your seatbelts: the ride will be bumpy and, absent intervention, we risk economically and environmentally damaging collusions.
Consider that the electricity and automotive industries have barely interacted over the last century but, through rapid transportation electrification, will increasingly define each other’s businesses. That’s a bigger challenge than it appears.
Distributed, mobile loads like EVs — sudden “fuel-up fast” power draws that show up where they want, when they want — are foreign to utility systems. Utility customers used to sit on concrete foundations; now more and more of them are on wheels. In response, legacy utility systems will have to change, often profoundly. Wires and substations will need to reflect not just the built environment but newly relevant factors like traffic and parking patterns. In turn, automakers will for the first time deal with regulators (and not the free market) determining where and when their customers can fuel their products (or not) and at what cost. Smash.
Further, the rate of change in EVs — battery, charging, and even ownership behavior innovation — is far quicker and more risk-tolerant than the “think in decades” tempo and “boldly go where everyone has gone before” risk tolerance of utilities and their regulators. This mismatch implies that inadequate electric service will ride the brakes on EV sales. Crash. Further, who bears the stranded EV charging infrastructure costs when tomorrow’s batteries have the same range as today’s gas tanks? Crunch.
It’s not the fault of the utilities, of course: their cultures, business models and processes, organizational and governance structures, power system scale and complexity, financial and accounting practices, legal and regulatory constructs, and even personnel policies are designed to provide safe, reliable, affordable, and now sustainable electric service to their customers. And that must continue: unreliable and/or expensive electricity stunts climate-saving electrification as well as acting as a regressive tax on those least able to afford it. That electrification, in turn, puts a premium on system resilience: emergency vehicles, for example, cannot run out of “fuel” when either Mother Nature or a malicious human tries to turn off the lights.
Thus, we will ask even more of our infrastructure and, for the foreseeable future, need more of it. $25 billion more to meet both sustainability and transportation electrification goals, according to that same EY study. From power generation to towers and poles to transformers and switchgear, those long-lived, capital-intensive investments have only been cost-effective if financed under low-risk operating assumptions over long periods, often decades. Thus, it is reasonable to assume that “thinking in decades” and “boldly going where everyone has gone before” will continue to define the utility industry into the future. And put it on a collision course with automakers’ upside-seeking proliferation and innovation, even as they rely on utilities to fuel their products. Another smash.
Inevitable? Hardly. Today our hypothetical rock hits a Tesla, at least here in California. And these risks are still just that: risks. In 2030, 2040, or 2050, who knows? It is certain, however, that recognition of and innovation around these risks today can lower the risks of collision tomorrow. The crashes, crunches, and smashes can be avoided. For both the economy’s and environment’s sake, it’s high time to take the wheel.
