It’s widely accepted that electric vehicles will become increasingly popular and affordable in coming years, and utilities are trying to make sure their grids can handle an influx of vehicles plugged in.

But a recent study by the global consulting firm Deloitte argues that utilities should embrace electric vehicles even more aggressively, treating them almost like power plants and “batteries on wheels,” incorporating them into the fabric of their electricity delivery and generation systems and ideally into their rate-bases.

“We’re really seeing this as a convergence of forces,” said study author Scott Smith, U.S. power & utilities leader for Deloitte LLP. “The technology, government policies, the auto manufacturers, and — we believe — the utilities, have a central role to play in this.”

The study says embracing electric vehicles and their charging infrastructure would help utilities with “three of today’s biggest challenges: stagnant demand, the requirement to integrate renewable and distributed energy resources seamlessly, and the need to engage customers and interest them in new services.”

Helping utilities

Fleets of commercial, public and personal electric vehicles on the road mean a new source of demand at a time other factors are curbing customers’ need for electricity.

And electric vehicles’ ability to interact with the grid and potentially charge and/or release energy upon request could help make the grid more flexible and responsive.

A situation known as V1G, where the utility can — with the owner’s permission — tell the car when to charge or stop charging, is already viable. Research and pilot programs are ongoing into the potential of V2G, where electric vehicles act as battery banks that can send energy back to the grid when needed. The Deloitte study notes that “EV fleet owners in Denmark are already collecting €1,300 (about $1,530) per vehicle per year for feeding power back to the grid through a pilot program managed by Nissan Motor Co. and the Rome-based multinational power company Enel SpA.”

And Deloitte argues that EVs will finally engage customers in managing and manipulating their energy use via smart technology, solving the puzzle that has thus far eluded utilities of making electricity “cool” and developing a “killer app.” Deloitte predicts customers will become engaged with their electricity management as a whole when they can gain credit on their bills for helping the grid by plugging in their EVs.

“Cars are a very emotional purchase,” said Dan Bowermaster, electric transportation manager for the Electric Power Research Institute, a non-profit research and development entity whose members include major investor-owned utilities. “Customers are more likely to interact with an app for their car’s energy use than their hot water heater. But at the end of the day you’re kind of competing with everyone’s ESPN time or CNN time … so the question in my mind is still what would it take for people to be incentivized to do that?”

Charging customers for charging stations?

Utilities are generally only supposed to charge things to their customers, and earn a rate of return on it, if the investment is essentially for the good of all customers. Since relatively few people have electric vehicles, it can be challenging to make that case for charging infrastructure.

But the Deloitte study argues that significant, proactive investments in electric vehicle infrastructure would potentially be so beneficial for the grid and all ratepayers that utilities should be able to rate-base these investments — to recoup the costs plus a rate of return from customers.

Both V1G and V2G arrangements could make the grid more nimble and efficient, and help avoid firing up peaker plants or otherwise reduce the need for new generation — benefiting the environment and everyone who uses the grid. Meanwhile Deloitte argues that if utilities aren’t able to rate-base their investments and take a leading role in building charging infrastructure, the needed infrastructure might not get built quickly or effectively enough to meet potentially exploding EV demand.

Utility regulators, however, have been reluctant to allow rate-basing of EV infrastructure. For example last spring, the Missouri public service commission turned down Ameren’s request to rate-base EV infrastructure, and last fall the commission denied Kansas City Power & Light’s request to rate-base more than a thousand charging stations. Among other things the commission found the environmental benefits weren’t clear enough, nor was the demonstrated demand for charging stations.

“Everyone has concluded we’re going to see a big ramp-up in electric vehicles,” Smith said. “If it’s not the utilities building it and public utility commissions encouraging it, it’s not going to get built. The utilities have the balance sheets, they have the financing, they’re used to building a lot of infrastructure with returns over time.”

“[Utilities are] used to this model of investing big dollars in long term infrastructure assets,” he continued. “Gas pipelines for distribution, power plants, substations — it’s a different kind of asset but the same model.”

A map compiled by EPRI shows $1.4 billion in EV charging projects proposed by utilities nationwide, including utility-owned ones in Washington, Oregon and California. The California Public Utilities Commission banned the state’s investor-owned utilities from investing in EV charging infrastructure in 2011.

But as the Deloitte report explains, “In 2014, the commission reversed the ban, and, in 2016, it approved $197 million of investment in light-duty vehicle charging infrastructure by the state’s three largest investor-owned utilities—and it is currently considering utility plans for more than $1 billion in infrastructure buildout.”

Renewables and autonomous vehicles

While electric vehicles are only as clean as the generation of the electricity they use, clean energy experts generally see them as dovetailing with the rise of renewable energy, both symbolically and pragmatically.

Deloitte notes that “studies show that 28–40 percent of EV owners in the United States and Europe also have home solar, compared with about 1 percent solar penetration among the general population.”

Great River Energy in Minnesota offers a plan called Revolt where customers can charge their EVs entirely with wind power at no extra cost. The Deloitte study notes that special billing plans could encourage EV owners to charge not only off-peak but at times when excess renewables flood the grid, for example in the middle of sunny days or windy nights.

“Think about it like telecom – you offer free nights and weekends, free lunch time charging,” said Bowermaster. “Places like Phoenix and Hawaii there is a lot of solar and not much demand [during peak sun hours.] Air conditioning demand usually peaks at 6 or 7 p.m. and solar has already dropped off. If you can increase demand to match supply [of renewables], everybody wins.”

Meanwhile clean electric vehicles are also seen as integrated with the rise of autonomous vehicles and the sharing economy.

Deloitte’s forecasting predicts that by 2040, half of miles driven in the U.S. will be by autonomous cars in ride-sharing services.

The paper notes that the onset of self-driving cars should accelerate the adoption of EVs since “electric cars are easier for computers to drive.” And ride-sharing services including by fleets of continuously-circulating self-driving cars should also boost the EV market, proponents say. That’s because the economic advantage of EVs increases the more miles a car drives, thanks to avoided refueling costs and cheaper maintenance. Autonomous cars can also recharge on their own more easily than they could fill up with gas.

“The rise of bulk autonomous vehicles and car-sharing arrangements is potentially game-changing,” said Howard Learner, executive director of the Environmental Law & Policy Center. “This is the first set of game-changing technological innovations in the transportation sector over the last 100 years.”

And with coal plants closing and renewable energy proliferating, Learner said clean energy advocates should focus their attention more on transportation.

“We need to concentrate more attention on the opportunities [created by] policy advances and technological innovation in the transportation sector,” Learner said, “to reduce carbon pollution in the same way solar, wind and energy efficiency have begun to create a quiet revolution in the electricity sector.”