March 2, 2018
When it comes to electric vehicles, while there is no question sales will continue to rise, there are real questions about whether the electric power industry can keep up with new demand. However, past experience suggests it is a question that can be answered with a resounding yes for two reasons. First, the timing of the increase will allow the electric power industry to make the necessary capital investment. Second, the industry has experienced great growth in electric demand from new technologies in the past, and succeeded in meeting those challenges.

Timing of New Electric Investment

Some estimates suggest the number of electric vehicles on the road, currently around one million globally, could approach 24.4 million by 2030. To produce the high volume of electric vehicles that is projected, existing automobile manufacturing plants will have to be converted to produce electric vehicles or new production factories will need to be built.

In 2017, nearly 200,000 electric vehicles made by seventeen different manufacturers were sold in the US, compared to seventeen million automobiles sold with internal combustion (IC) engines. Reaching the estimated twenty-four million electric vehicles by 2030 means that, on average, two million new electric vehicles need to be sold each year between now and 2030. Many of these electric vehicles will be assembled and sold in the US, yet, as of today, US manufacturers have neither ordered the construction of new factories nor indicated plans to convert existing IC factories to reach a portion of the remaining 1.8 million cars per year production output required.

However, while these changes are still in the early stages, as new factories are constructed or announcements of factory conversations are made, there will be ample warning for the US electric industry to ramp up. But what is needed to “ramp up”?

Continued Electrification of the Economy

To assess the power industry’s ability to meet growth in electric demand related to the proliferation of electric vehicles, it is useful to consider previous eras of electric power expansion. Consider that in the US, average annual electricity usage per capita increased tenfold between 1950 and 2010, which is around 4 percent annual growth. While this past growth rate has significantly declined as more efficient devices have entered the market, it does demonstrate the industry’s historic ability to invest in adequate facilities.

Demand (in terms of power expressed in kilowatts) also grew during this period from a combination of increase in home size, ownership of more kinds of electric appliances (the Lawrence Berkeley National Laboratory says the average home has more than 40 different kinds), and the proliferation of air conditioners.

Thus, one can calculate that the electric demand, or peak power requirement, grew to 20-25 kilowatts (kW) at a family residence (over 26 horsepower (hp)).

Consequently, the electric industry invested in new facilities over the past half a century by adding new generation, transmission, and more power capacity at the distribution level.

What does this mean for the ability to meet any new demand and energy required by electric vehicles? The Department of Energy’s Pacific Northwest Laboratory (PNL) estimates that today’s grid could support 150 million new electric vehicles in the United States with current generation and transmission assets.

However, local distribution grids across the country may not be adequately sized if electric vehicle ownership is clustered in neighborhoods that feed off the same pole top transformers. While slow charging should not be a problem, the widespread adoption of fast charging systems in private homes could be a major one.

In that case, the local electric utility would need to upgrade the local distribution circuit, increasing its power capacity. This raises a policy question, namely who pays for the upgrade—the ratepayer or the individual electric vehicle owner. Unbeknownst to most residential electric rate payers, many electric tariffs (the rates and the rules for getting electric service) require a homeowner to advise the utility in advance of adding large electric loads, frequently at the 20 hp (15 kW) level, and individual customers were asked to pay for the service upgrades.

Thus, the electric industry is anticipating this new expansion of electricity into transportation by reviewing capital investment plans and policies and introducing new rate schedules which incentivize electric vehicle owners to charge when it is advantageous to the entire electric system—resulting in reduced capital investment. This includes tools to encourage consumers to charge their vehicles during off-peak times, offering discounts, and lowering nightly charging rates.

The introduction of a large fleet of electric vehicles may also provide opportunities for increased efficiency and revenue sharing between the electric utilities and electric vehicle owners. In the future, electric vehicle battery charging and discharging could be coordinated to provide a “service” to the grid. The massive battery storage potential of PNL’s hypothetical 150 million electric vehicles could alter the operation and economics of both the distribution and transmission grids as a complex system of “smart grid” sensors, meters, and switches dispatch electricity in ways heretofore not even considered possible. While this remains to be seen, there is doubt that the introduction of electric vehicles will have an impact that reverberates far beyond the transportation system.  

Branko Terzic formerly served as a commissioner of the Federal Energy Regulatory Commission and Wisconsin Public Service Commission. He is a nonresident senior fellow with Atlantic Council’s Global Energy Center.