The world’s electricity grids are facing a dramatic makeover in coming decades as the rapid expansion of renewable energy, distributed generation, battery storage and smart technology takes hold. It’s going to be a challenge to the energy industry’s operations and to their business models – as big as the challenge that hit the world’s telecom networks more than a decade ago with the success of the mobile phone.

It may be, however, that the introduction of the electric vehicle in great quantities could be a saviour to much of the established infrastructure, protecting assets that could otherwise be stranded and leading to an overall reduction in electricity costs.

The Australian Energy Markets Commission, which is responsible for setting the electricity market rules, released an issues paper this month to help prepare for the sort of changes that might need to be implemented if the uptake of EVs takes off.

It came to two initial conclusions: Badly managed, the rollout of EVs could have a severe impact on electricity costs if battery charging times were not controlled and this resulted in large addition to peak demand.

However, if managed properly, the rollout of EVS could lead to a noticeable reduction in energy costs because it would increase load factors at night time and spread the fixed cost of the network over a larger consumer base. And its storage capacity has the potential to put energy back into the grid at times of peak demand and help reduce wild fluctuations in pricing.

The paper includes work done by the consultancy group AECOM, which finds that the difference in costs to the grid between controlled and uncontrolled charging could be as much as $12 billion if the take up of EVs is high, described as 47 per cent of new vehicles sales by 2020 and 54 per cent by 2030.

In the central scenario, where EVs account for 20 per cent of sales by 2020 and 45 per cent by 2030, AECOM says the additional cost to the grid to meet peak demand on uncontrolled charging out to 2030 is $8.9 billion. But if time of use charging is introduced, this cost is reduced to just $550 million. With smart meter charging, it is reduced to $270 million, and with controlled charging, the cost is reduced to zero (although some rural areas may need upgrades).

It should be noted that even in the high scenario, the additional load on the National Electricity Market will be 14.2 million megawatt hours, or just 3.7 per cent of the market. If this is required in the early evening when commuters return home and plug in their car, that will cause problems for peak demand, and for prices. But if the load can be distributed, it should be easily absorbed – and help reduce the occasions when excess capacity and weak demand causes “negative prices” during the night, a situation sometimes exacerbated by the rollout of wind energy.

The AECOM research estimates a wide range of consumption depending on the size of the vehicle and its use, just like with petrol cars. On average, a small car will consume 19kWh per 100kms, a little over $4 in energy costs. Those same vehicles may pay between $8 and $10 for fuel. A large car will consume 21.kWh.

On average it is expected that a small car on average kms (15,000) will consume around 2.7 MWh of electricity a year. A large car on high kilometers (45,000kms) will consumer nearly 10MWh. A taxi might consume 25MWh.

The AECOM research notes EVs may in fact help manage transmission and distribution networks, because their storage capacity can reduce system stress at times of peak demand, as well as during planned outages and in the event of asset failures.

EVs may be used to manage wholesale price risk faced by retailers. This could occur under smart charging where EV users may respond to the current retail price, thus lowering average prices for EV users and reducing price risk for retailers. And EVs may also be used to manage price risk through the controlled charging option.

Another aspect is that the rollout of the EV is likely to stimulate the introduction of smart meters and associated infrastructure to other appliances in the house. Indeed, the paper canvasses the possibility that EVs will be used to provide power to household appliances rather than relying on the grid. It says some utilities believe VsH, as it is called, will have all of the benefits of and none of the problems on distribution networks that can be anticipated with supplying EV storage to the grid(V2G) on distribution networks.

EVs may be used to recharge at times that coincide with the availability of renewable generation, meaning that EV charging could benefit from lower prices at that time.

One of the big questions, however, is how all this is managed. Which is the purpose of the AEMC issue paper. It will likely lead to a range of regulatory reform, some of which has been pushed for by utilities and some of it not. This includes the potential of time of use pricing, managing smart meters and increasing demand side participation (where energy users such as EVs put energy back into the grid, or in the case of large contracted users, sell back excess capacity).

The AECOM is broadly consistent with other studies on the rollout of EVs, including those by AGL Energy, and the Australian Energy Market Operator, although these analyses do inevitably differ on predicting the extent of the uptake of the EV – and in the case of AEMO, the impact on peak demand. The study by AGL, which has a commitment to provide renewable energy to support the rollout of the Better Place network due to begin in Canberra this year, also found that a broad uptake of EVs would have a relatively minimal impact on the nation’s electricity market.

It did conclude, however, that “the correct mix of pricing, policy and regulatory settings should ensure a smooth transition to the decarbonisation of the transport fleet.” And key amongst this is the issue of time of use pricing, among others, which the utility says is essential if the country is to take advantage of smart meters, EVs and distributed generation.

AGL agreed with AECOM in concluding that there should be more than sufficient existing generation, transmission and distribution network capacity to manage the demands of the EV, “provided that the combination of smart meters and critical peak pricing form part of the energy market policy fabric for EV owners.”

It also says that the combination of EVs and time of use pricing could maximize the use of network and generation infrastructure, and this in turn could lower unit costs for all consumers.