V1G and V2G development could revamp the business case for electric vehicle ownership. By Megan Lampinen
Electric vehicles (EVs) are generally regarded as an essential element in addressing climate change, but the segment’s future is far from secure. Sales growth has fallen short of expectations in the face of range anxiety and continued higher transaction costs on the forecourt. Down the line, there are also huge uncertainties surrounding the ability of the electric grid to cope with demand.
Research from EY and Eurelectric suggests that unidirectional smart-charging (V1G) and vehicle-to-grid (V2G) technology could be the lynchpin to tackling near-term headwinds and paving the way for an electric future. “EV uptake is good but not great,” says Kristian Ruby, Secretary General of Eurelectric, the trade association of Europe’s electricity industry. “Consumers are primarily concerned with vehicle affordability and range. There is a real opportunity to tweak the business case for the electric car.”
EY and Eurelectric suggest that EVs must be integrated into the grid as flexibility assets to unlock their full value. In this case, ‘flexibility’ refers to EVs’ ability to adapt their charging times in a way that promotes grid stability and optimises the use of renewable, affordable energy. EY predicts that there will be more than 50 million EVs within Europe alone by 2030, representing 15% of the total vehicle stock. With this many cars all pulling from the grid, cost-effective, stable and efficient charging solutions could make or break the segment’s success.
“People buy a car without thinking twice that they have a battery in there that can be monetised,” observes Serge Colle, EY Global Power & Utilities Leader. “There’s a lot of value locked in this asset. If we make it available for the customer, we can come up with a very attractive value proposition and simultaneously solve upcoming grid problems.”
Some VW models in the ID. Family offer bidirectional charging with the “Vehicle to Home” function
How big an impact?
While EVs cost more upfront, the promise is that charging costs are cheaper than fuelling an internal combustion engine. EY and Eurelectric’s report—‘Plugging into potential: unleashing the untapped flexibility of EVs’—found that simply switching to electric produces annual savings of 4% in the compact segment, 9% in the family car segment, and 14% for large SUVs on average across six key markets in Europe. When optimally charged and rewarded for selling energy back to the grid, those savings accelerate. For instance, a compact EV owner in the UK could save up to 19%, while in Germany, Sweden and Spain, the TCO could be reduced by as much as 14%. In France and the Netherlands, savings of 7% and 9% respectively are possible with optimal charging. The family segment could yield 15% annual savings in France, rising to 23% in Germany. In the SUV segment, optimal charging promises annual savings of 26% in the UK and 29% in Germany.
“There’s a need to deal with demand peaks, when too many cars are charging at the same time,” says Colle. “This problem will amplify very quickly as we see more EVs coming on to the grid.” There is also the opportunity to charge at those moments when electricity is the cheapest or renewables are most available. For example, charging at midday when there’s plenty of sunlight. Under the Renewable Energy Directive, the EU is aiming for 45% of its energy consumption to come from wind and solar power by 2030, with a binding target of at least 42.5%.
“There will be many days where we need to inject more power into the system because there’s not enough wind or sunshine, or we will need to decrease consumption,” says Colle. “This is where EVs could have a massive impact.” EY predicts that EVs could store and then potentially reinject up to 4% of Europe’s annual power needs by 2030, equating to 114TWh, or enough to power 30 million homes. By 2040, if all EVs are capable of bidirectional charging, more than 10% of Europe’s power could be stored and reinjected when needed.
What next?
When it comes to accessing optimised charging today, there are a range of smart wall boxes for the home and apps that can assist with public charger insights, but transparency and accessibility remain an area for improvement. “In most markets customers have access to V1G, but we’re far from an ideal scenario,” says Colle. “More often than not, customers don’t want to know about the details. They just want to know that charging is done in the optimal way, that whenever their car is idle, it’s plugged in. Beyond that, things should happen in the background.”
smart charging and V2G can reduce TCO by up to 26%
The next step, V2G, represents a considerable advance and could require quite some time to realise. Ruby estimates there are no more than ten commercial V2G projects underway in Europe, adding: “This is really a nascent technology and something that’s going to require push from different sides. The potential is huge, and we need to get going now, but it will take time to have a massive system effect.”
The vision of an electric transport ecosystem supported by a clean grid balanced by smart technology remains just that: a vision. Achieving it will require considerable work from a number of players and buy-in from consumers. “EV owners and automakers need to trust that their equipment will not be harmed,” says Colle. At the same time, automakers will need to adjust their warranty policies around EV batteries, figuring out some means of ensuring battery performance is not impacted by too many charging/discharging cycles.
On the grid side, there needs to be a clear understanding of what’s going on at a localised level, as well as the ability to act upon it. “We need standardisation around data, visibility, and market integration,” adds Colle. “We also need to make sure there is a proper reward structure at a grid level. Grids need to figure out the true economic value of the energy injected back into them, and that feeds into the value proposition for customers.”
While developments will take time, momentum is building, and Colle believes that V2G could eventually become table stakes in the EV segment. “Automakers won’t see this as optional; if your competition offers it as an integrated proposition with the car and you don’t, then your car will be more expensive in comparison.”
By 2050, Europe’s power demand is expected to exceed 4,500 TWh. While it may seem far away, the work to embed smart charging and V2G into energy system planning needs to start now. “If we can tap into the EV, we will have an asset that is abundant, ubiquitous, and very decentralised,” concludes Colle. “From a capital deployment perspective, it’s also free. At the end of the day, EVs are much more than simply a means of getting from A to B.”
