NANCY RYAN: What I'm going to
do today is, I think, perhaps a change of pace for
you all, I understand, in that this is really
going to be pure policy, the talk I'm going
to give you today. And although I'm not a partner
at Energy and Environmental Economics anymore, but I'm
still affiliated with the firm. And I continue to
work with them, but I launched a new firm
with a professional colleague, eMobility Advisors,
which is really, our goal is to work
full-time on policy to promote transportation
and electrification across the board.
So hence the E3 PowerPoint
format, but the new title. And I think the other reason
this is in E3 PowerPoint format, I'll mention
is just a lot of what I'm going to
present to you today is distilled from recent
reports that I've worked on with E3 to share with utility
clients who are always eager to understand what's
going on in other parts of the country. So what I want to do
in the 30 to 40 minutes that I'm going to
aim to talk to you, is to after this quick
introduction, then give a little background on
the electric utility industry, quick primer on market
and regulatory context. Then I want to talk about
some of the major themes across states and utilities,
some of the things that really, the biggest
questions that they're all thinking about.
And then I want
to go into three– pardon me, five specific
areas which are very salient. And I'll talk a
little bit about where states are coming
together and where they're converging on those things. The next question–
oh, OK, all right. So electric utilities
and automakers have historically existed in
completely different worlds. But the electrification
of transportation is really bringing
them together. And I think they're
something of an odd couple. So let me lay some groundwork
to get to the point where you can, I
think, see that. First thing to understand
about electric utilities in the United States is that
there are a lot of them. There are something like
close to 3,000 of them. In fact, on other
things I think I've seen numbers as big as 4,000.
They fall into three categories. Investor-owned, so
their stock, they're traded on publicly
traded companies. Publicly owned, which are
typically owned and run by a city or a county, so like
Austin, Texas, Seattle, LA, Sacramento, are examples of
big publicly owned utilities, but there's a lot
of little ones. And then there's also
a lot of cooperatives. However, a relatively
small number of investor-owned utilities,
168 versus nearly 3,000 public ones. That small part of– small portion that's
investor-owned really accounts for most
of the customers served. You can see that
in the two charts in the bottom left-hand corner. The other thing is just to give
you a sense of the size of them and where our utilities fit in. The bottom right
corner gives you some of the major utility
companies in the US. And this is kind of old. I see it's from 2012. There's been some more
mergers since then. But the main thing to note
is that two of the California utilities, Pacific Gas and
Electric, PG&E, and Edison International, which is the
holding company for Southern California Edison, they're
among the top two utilities in the country.
And if you actually look
at, sort of separate away the holding companies or
some of the other enterprises that are sometimes
wrapped up in them, PG&E and Edison are probably
still the largest utilities in the US. So that's important
to think about when we think about California. So very balkanized industry,
but a lot of the money is in the big IOUs. They mainly serve the
big populous areas. So automakers. Really different
kind of industry. Highly competitive
consumer product. Enormous. These are all–
the big automakers are all global enterprises.
2019, total revenue
for the industry was over a trillion dollars. If you look at the market
cap for the top 10 companies led by Toyota and VW, it's huge. 200 billion for Toyota,
80 billion for VW. And if you look at a
utility, their market cap is typically quite
a bit smaller. Particularly a lot of the ones
on this chart on the right are, again, they're
holding companies, so there are multiple
utilities in there. But if you go, like I think
the first one that's actually just a single utility is
Consolidated Edison, which serves in New York City area. And then PG&E. As of April last year, about
a year ago, their market cap was $27 million for
Con Ed, 22 million for PG&E.
If you
follow the news, you know that lots of things
have happened that have cost PG&E's stock value to go down. So I note below that
their highest market cap since 2006 was 35 million. So one utility, one big utility
has about the same market cap as a good-sized
automaker, and is dwarfed by the biggest one. And the revenue is also, if
you look at like Toyota's 2019 [INAUDIBLE] of $172 billion.
Compare that to PG&E,
so about $17 billion. Again, order of
magnitude difference. So just to put them
in perspective. So the other thing that's– now, I'll come back to what
the significance of some of those things are. But just bear that in mind. So IOUs, Investor
Owned Utilities, are regulated at
the state level. That is like the nature of
the federalism for the energy industry is that really most
of the regulation on all the important things
occurs at the state level. The principal exception
is interstate commerce, which primarily means
regional electricity markets like PJM in the
mid-Atlantic region, and interstate transmission. But really, most other aspects
of IOUs, operation, pricing, et cetera are regulated
at the state level by entities with various
names, but commonly called public utility commissions or
public service commissions. In most states but
not all of them, PUC commissioners are
nominated by the governor and typically have some sort
of legislative confirmation process. That's how it works
in California. There are a number of states,
for example our next door neighbor Arizona,
where they're elected.
And that can lead to some
very bizarre things happening. And if anybody remembers, I'll
tell you about one in the Q&A after the seminar in
the student discussion. So EPA regulates smokestacks,
but PUCs regulate pretty much everything else. So it's really these
investor-owned utilities are local monopolies. What they have a monopoly
over depends on whether or not they're in what's known as
a restructured state where they're still fully
vertically integrated and they handle all aspects
of generation, transmission, and distribution of electricity. But in any event,
they're local monopolies and they're regulated by
these state authorities. OEMs, automakers, originally
equipment manufacturers or OEMs, are regulated
mainly at the federal level, with some delegation
to the states. That can seem confusing
in California. And I'll explain why. So the Federal Clean Air
Act is the main authority for tailpipe emissions
from vehicles. And traditionally that's
been the mileage standards set by the US EPA and the
National Highway Safety Traffic Administration. And then I think the enforcement
is largely up to the states. However, the Clean Air Act
granted California unique power to set its own stricter
tailpipe standards when it was passed back in the early '70s.
And the reason for that is that
due to decades of air quality issues in Southern California,
our state was already regulating emissions
from vehicles, and generally trying to
address pollution problems. And so California had an
exemption carved out for it that allowed it to continue to
have its own stricter standards in order to try to meet– stricter standards for vehicles
and other things in order to meet the federal standards
for various pollutants like dioxin particulate
matter and so on and so forth. The other interesting thing
about the Clean Air Act is that, I think
it's section 177, allows other states to adopt
California's regulations. And that has happened
for a long time with its just conventional
tailpipe emissions standards for, again, things like NOx. But since California started up
with its Zero-Emission Vehicle program 20 plus years
ago, that has really been pushing for
automakers to make and sell both battery electric
and fuel cell vehicles.
To date– actually, I
think this is incorrect. I think 10 other states have
adopted the Zero-Emission Vehicle program, because
Colorado just joined last year. And both Minnesota and
New Mexico are on the way. So the ZEV states
amount to something like a third of the US
market for automakers. And I think it's safe to say
that they, well they really don't like that. They don't like the idea
that they're selling cars. Here they are, they're
global corporations, and they're selling cars in
the US, one of their biggest markets, not their
biggest market anymore.
For most of them it's China. But they're selling
cars in the US. And there's two standards,
one at the state level, and one at the federal level. And when the Trump
administration came in, and California and the
feds had achieved– had converged at the
time that, during when President Obama was in office. But they had converged on
some pretty stringent mileage slash CO2 standards,
tailpipe standards. And when President Trump was
elected, some of the automakers went to him and said,
you know, we really wish that you would not– that you could sort of
slow this whole thing down. And he basically said,
oh boy will I ever.
And he has really tried
to completely reverse what happened under the
Obama administration, and indeed has tried to revoke
California's authority to set its own standards altogether. So they're all off
to the courts now. This will grind on for years. And I think that the
automakers, some of them are probably really sorry that
they ever had that conversation or wrote that letter
to President Trump. Because now they
have two standards and they have a
lot of litigation before it gets sorted out. So two different industries,
one local monopoly is under state
supervision, primarily kind of economic regulation. The other federally regulated
with this interesting carve out for California
and global enterprises.
So now they're coming together. So the California Zero
Emissions Vehicle program, which is to date mainly
been enforced in California, it is now really being
picked up in other states and enforced actively
in other states. Again, that's something if
you want to know about it I can tell you later. But now we have this
convergence of these two historically different and
very distinct industries.
And so we have
guys and women who work for automakers sitting
in rooms like the one in the top left, which is
the auditorium at the CPUC, because suddenly the CPUC
and other public service commissions, especially
in the ZEV states, are really important
venues for them. Because those– the
utilities at a minimum have to reinforce their
distribution systems in order to serve what will over time
be a pretty substantial load. And many utilities and a lot
of environmental advocates are eagerly banging
on the door saying, we would like to build not
just the infrastructure, the distribution infrastructure,
but we would also like to, in many instances we would
like to own and operate charging stations.
Because utilities, the
other thing that's important about them is while
automakers make money by selling cars, and even
more importantly lending money people to buy cars, lending
money to people to buy cars, utilities make money by
deploying infrastructure. And then they get paid a
return on their infrastructure. So they like building
more infrastructure. And moreover, what
they also like is to be close to
their customers and to be seen as doing
things that are green, particularly in states
like the ZEV states. And so for all of
those reasons, we've had a number of utilities come
forward to their commissions and say, we it like to own
and operate charging stations, or we want to be involved
in this in some way. And I don't mean to make
this sound nefarious. I mean, these are just
what their incentives are. And there's a lot of good
people who work on this. And plenty of people
who just appreciate, this is a new electric load,
and it's our job to serve it, and we need to work out
how we're going to do it.
So now this is being worked out. And to some extent in
almost every state now. With three states I'm
going to talk about, going to zero in on, really
being in the vanguard. And this is just a colossal
headache for, oh yeah. Because again, here they are. They're huge global enterprises. And it was bad
enough that they had to deal with like the
feds versus the ZEV states in the US. And now they've got 50 states
that are each sort of deciding, well, we're going to
decide for ourselves how we should use our electric
utilities to support transportation and
electrification. So that is– so that's
the stage, stage is set.
So the states I'm going to talk
about, I'm going to zero in on, are our home state of
California, and then New York State, which
is historically also a real bellwether
state for regulation. And then Hawaii,
which has really emerged in the
last several years as a very interesting
laboratory for energy policy, and has kind of been a
leader in some regards. So just very quickly,
the approach– we got started on this
in 2009 in California when the first Leafs and
Volts and Tesla Model Ses were heading our way. And the commission
and the utilities understood that we had to
start doing some things to accommodate that load. And sort of the prevailing
view that really kind of, I would say, governed
what happened at the CPUC to the extent
that you could even say it was sort of a
philosophy, was essentially let a thousand flowers bloom. Utilities are going to
come to us with ideas. We should let them
try stuff out.
We had pilots that– I call them pilots because some
of them were like $100 million, which is not a pilot in really,
I think, anybody's book. And as a result, we had San
Diego Gas & Electric wanting to own and operate, charging
infrastructure, you know, the whole nine yards. We had a different model
from Southern California Edison in the Los Angeles area. There was a lot of litigation. And now, 10 years
on, the commission has launched a big
docket that they're calling the DRIVE
OIR, where they're trying to work out kind of
a comprehensive framework that they're calling the
transportation electrification framework. And that would culminate in a
direction then to the utilities to bring them plans. I'll just say briefly, there
was a stakeholder mutiny when this 200-page draft,
TEF as it's called, came out. And they said, this
is way too much work.
By the time this all
gets done and litigated it's going to be out of date. So they're kind of
back to the drawing board of how to do that. New York, that
building that looks like it should be in
Moscow or maybe Stalingrad, is actually the headquarters of
the New York Public Utilities. Or it's anyway, it's on
the Capitol Mall in Albany. It's really a scary
looking place. And they've only come at it
from a much more top down view, where it's like– you know, they've sort
of told the utilities to try some stuff.
But then they said,
we're going to tell you what we want you to do. We're going to tell you what
role we're going to have. So they had to be very
kind of what I would call a lean stakeholder process. They had a few workshops. They got some written papers. They [INAUDIBLE] work on a study
for their companion research agency, NYSERDA, on
cost and benefits. And then they put
out a white paper in which they said, OK, this
is how we think it should be. Here's our model. And then the third
one is Hawaii, where for several years now, the
Hawaiian commission have really been saying to
the utility, HECO, like basically they've put out
a decision, maybe like 7, 10 years ago when solar was
first becoming a big thing. And just said,
listen, you guys, you are just from the last century. Things are going to
be different now. This is how we're
going to do stuff. You're going to be
more customer oriented. You're going to be more
receptive to distributed energy resources including solar.
And then they hammered on
them several more times. And they let HECO do
a little bit around EV charging stations. They actually did a really cool
pilot with Nissan at one point. But when they came
back for more, and this was what I would call a
real pilot, very small. When they came back for more,
the commission said, no. That's enough. We want to see your plan. We want you to go do
stakeholder outreach, and we want you
to come back with a comprehensive electrification
strategic roadmap that lays out your priorities for the
near-term, the mid-term, and the long-term,
then up to 10 years, across all the potentially
electrifiable technologies.
And so I had the privilege to
work on that when I was at E3, and the document is available
if you go to E3's website or HECO's. And I think it still
really sort of set the standard for what would
these plans look like. So anyway, so three of
the states, and so we'll just sort of follow
them through. As you think about an energy
regulator, really fundamentally they're mainly about the money.
I mean, a lot of other things
have come in the picture. But the PUC, again,
like it sets the rates. It allows the utility to collect
money from its customers, to give a return to
its shareholders, and to make certain investments. That's at its core, that's
really what they do. But in places like California
and a lot of the other ZEV states, regulators
and utilities have been pressed into
service to support social and environmental goals.
And none more– and
many of these sort of come under the heading of what
we call market transformation. So the idea of taking a
relatively new and not yet commercial technology, like
in the last decade renewable energy, and in the
current and coming decade, electric vehicles. You know, transforming
the market for those to make them fully
commercial, and pump priming. So that's become a core part
of the mission, certainly of the California
commission, and I think it's fair to say
that the Hawaii commission, and to a large extent the New
York commission understand– see themselves the same way.
So they want market
transformation. They want to support
their states, EV adoption and greenhouse gas
mitigation goals. For sure they care about rates. But the other thing
they really care about when they're kind of
setting the rules for who gets to do what and how much
the rate payers pay for, is they also want
competition and innovation. And they're mindful
that the utility is a regulated monopoly,
that it has essentially guaranteed capital recovery. And they have to
somehow play this, like do this delicate
balancing act to create a playing field in
which new entrants providing, for example, charging
services can come in and carve out business
models in an industry that really has no natural
monopoly characteristics.
You can't really say that EV
charging is a natural monopoly like the way that you know the
buyers portion of the utility is. So what they're trying
to balance is like, well, if we have the utility do
it, they could go really fast, and we could really deploy a
lot of charging infrastructure, and helps sell a lot of cars. But then maybe we
would snuff out these new entrants
who are probably more innovative than the utilities.
Really a lot of my work,
and just sort of thought that I've done over
the last 10 years, has really been around
this core question. And so we're going
to see how that's played out in various states. So the last thing I want to
say is if you sort of think about the market
transformation challenge of EVs from the perspective
of the auto industry, of the environmental advocates,
of generally the broader community who want
to see EVs adopted, we kind of came
to the conclusion, again, in the work that we did
with utilities and regulators at E3, is that it
really makes sense to frame that conversation
around what are the adoption barriers to EVs. And there have been study after
study, a lot of good work out of ICCT in San Francisco.
But certainly not
limited to them. So surveys and
studies on factors that stand in the way
of people buying cars. And typically, they
zero in on people just don't know that much
about EVs, and they're worried that they can't
charge, that there's not enough charging infrastructure. So range anxiety. And today, they still cost
more than other vehicles. And there are some other things. And then from the
utility perspective, there's also this
question of how do we integrate this big
new load into our grid, in particular our
distribution grid, where a charging EV can
use as much electricity under certain circumstances
as a house does today.
And so there's that
question for them. And then there's
the other question. Most cars aren't driving
most of the time. So can we somehow incentivize
people to drive and charge their cars in a way that's
advantageous to the grid, and particularly helps
us absorb solar energy? We did a lot of work at
E3 on this, I'll mention. So when you think about what
the utility's role will be, there are really three
models, although there are four are shown here.
So model number one
is just basically, this is a load like
any other load. It's just like a
new subdivision. The utility's job
is to just provide the service connections. So all the stuff
on its own system. The wires, the service drop, the
transformer, up to the meter. That's their job, and that
gets recovered through rates. And everything else,
that's up to the customer. So that's, like I said,
that's business as usual. On the opposite
end of the spectrum is what some
utilities have asked their commissioners to let them
do, which is full ownership. So they basically want to be– they want to both
do the upgrade, and then they want to offer some
sort of turnkey or concierge service and do everything on
the customer side of the meter too, including
owning and operating the charging infrastructure. And then case
number two is really the in-between case, which
is what's referred to as a make ready, where the
utility does the upgrade on its side of the meter.
And then it takes care of kind
of the wiring and everything else on the customer side of
the meter up to the charging station. Then the customer owns
the charging station and has a separate relationship
with some kind of third party company, like
ChargePoint, or EVgo. So those are the models. And a lot of the fight about
what the utility's role should be and how much ratepayer money
should be spent on EV charging really kind of circles
around this question of which of these roles does
the utility play. So how has it worked
out in our three states? So again, in California, we've
let a thousand flowers bloom, so we've tried all the models.
So Southern California, which
is pictured on the right, that's a San Diego gas and
electric facility, they persuaded the commission
to let them do this, to own and operate a lot
of charging infrastructure, primarily in workplaces
and multi-family housing in exchange for piloting
a very interesting time-dependent tariff
design, which is actually designed to use EVs to
integrate solar power, because they have more
solar on their system than any of the other utilities. So at the other end
of the spectrum, Southern California Edison
came into the commission right from the beginning
and said, you know, we just really mainly
wanted to do [INAUDIBLE].. And we think that will–
we think that will work.
PG&E came to the
commission and said, we will want to do everything. And the commission said, no. You can't. And in the end, they ended
up getting a primarily make readies approved, with some
exceptions for disadvantaged communities– that's a DAC– and multi-unit dwellings,
which have proved to be very difficult to serve. And then there's some pilots. And there has not been a
lot of utility money yet– I think PG&E is the exception,
but it's really primarily a make-ready that
has gone into DC fast charging, because there's
cap and trade revenue and VW under the
settlement agreement, has been spending all
the money on that. So kind of a mishmash
in California. But I think in this, you know,
this docket I mentioned before, the policy docket
that's happening now, they're really kind of realizing
that nobody thinks that it's wrong to do make-readies. Or everybody thinks it's
fine to do make-readies. So then it's really
more about what are the circumstances in which
it's acceptable for utilities to do more. New York, very different
kettle of fish than California.
Fully restructured state. So the utilities are
really principally distribution companies. New York, it's the home
of the stock market. It's just, it's a very
market-oriented state. And the commission staff,
under the supervision of the chair of the New York
Public Service Commission wrote this white paper I
mentioned, and issued it in January. And they basically
say, look, there's no reason for utilities to be
in the charging infrastructure business or charging
service business at all. And we don't want them in it. And we think the
make-ready model is fine. And we understand that in
rural upstate areas of New York it's going to be difficult
to deploy the network of DC fast chargers that's needed
to give people the range confidence to, say,
drive to Montreal.
But we think there should
be some sort of franchise arrangement for that. It's also the case that New York
has this other pot of money. The New York Power
Authority gets a lot of revenue from the big
hydro plants like at Niagara falls. And they've been spending some
money on DC fast charging too. So that's kind of another
reason that the utilities don't necessarily need
to be tapped for that. Hawaii, when we wrote
our plan for when we helped HECO write their
transportation strategic plan, they really wanted to
include it, and so they did– I mean, it's their
plan, –what they called a critical backbone of
chargers that they would own.
And the way we
described it is we want to have all this creative
destruction in the charging industry, and you know lots
of innovation and competition. But we don't want people
to ever feel like they're going to be stranded. So HECO should own
a critical backbone. So when the commission
looked at this, they said, well, we don't
really know what that means. So we told HECO to
go hire a consultant to come up with a bottle and put
it as a navigate road report, and you can read it. I did not find it
all that compelling. And I'm not sure the
commission did either, because they then issued
yet another decision, and they said,
look, let's just not talk about that critical
backbone thing for now. Just go just to make-readies
and work on the buses, because the major cities,
particularly Oahu, want to start
electrifying buses.
So that's kind of what's
gone on in Hawaii. So I would say in
general the trend is towards that
the make-ready is becoming the principal model. It really gets the utility
largely out of the business of being a charging
service provider. And the exceptions are going
to be around inclusiveness for disadvantaged communities
and getting into places like multifamily
housing, where it's just a lot harder to jack
hammer things up, and so on and so forth. Where we do see
different outcomes is for those publicly owned
utilities, where they don't have a commission to answer to. And they are more
kind of a tool, and I mean that in the
best sense of the word, of typically the
local city government.
So you see Los Angeles
Department of Water and Power being a lot more proactive. And also see this to some
extent in the southeast, where commissions tend to be more
indulgent of what utilities want to do. Let me talk about,
kind of quickly go through a few of the
other key considerations for commissioners. California politics are
such that it's really, really important to decision
makers in Sacramento, to the legislature
in particular, and very much on CARB's
radar, the Air Quality Board, that the rollout of electric
vehicles cannot just benefit the wealthy people who
actually buy new cars. So we see, particularly
in California and these big
100-plus– you know, multi-million-dollar decisions
authorizing municipality investment and charging
infrastructure. There are going to be
percentages in there, that you have to put this much
in disadvantaged communities, and that much in– like at least this much
in multi-family housing.
And PG&E has a
program that they're– a new program where they're
going to actually do sort of like a turnkey service for low
to moderate income customers. Now, there's a
different point of view that we see more on the
east coast, which is– it's like, look,
the number of EVs that's going to find its way
into low and moderate income communities, it's going to
be really small for a while, because it's really a very small
segment of the US population that even buys new cars. And many people in low and
moderate income communities, particularly in
disadvantaged communities, are buying maybe not
even a second-hand car, but a third or fourth-hand car. And so it's really not a wise
use of the rate payers' money to be building
charging infrastructure in these communities
to serve, what– even if the charges were
there, it would probably still be a relatively
small number of cars.
So the other point of
view is like, look, let's just focus on cleaning up the
emissions of the vehicles that go through those communities
and are located close to them. So the ports, big
commercial fleets, freeways. And so that's– the New
York whitepaper says that explicitly, like we're
not going to designate. We're not going to tell them
to go get these things built in low-income communities. We're going to focus on cleaning
up trucking and transit. And I mean, I will say,
California is doing both. I mean, we lead the
country in terms of what we do with ports and transit. So we have a kind
of I'm going to have one of everything on
the menu, or maybe even several of everything
on the menu approach.
But I think the key
thing is that some of these more
market-oriented states, again, don't see it as
making that much sense to put infrastructure in
low-income communities. I'm going to skip past
this because I've mainly covered it already. But I think the
key thing to note is that most of the discussion
about transportation electrification to
date has really mainly been about light duty vehicles. I mean, when you look
at the carbon emissions, they are where almost
all the action is. But if you look at the
local air quality impacts, then that's all transit
and goods movement. So you get a double whammy. And that's why CARB has actually
moved away, for example, from zero emission bus
program, and they now call it the Advanced
Clean Transit Rule. And everything is an
Advanced Clean Car, Advanced Clean Truck rule.
So we will see a lot more action
on that in all the states. The thinking is by far the
most advanced in California. So I want to talk about two
final things really quickly, in the last five
minutes, because I want to have some room for Q&A. So cost benefit analysis. This is something
that has been honed to a very fine
point over decades at commissions like the ones
in California and New York. And new investments,
for example, in energy efficiency or the
decision about should we build this power plant,
or do the storage thing, they go through the cost
benefit analysis wringer.
There's been a big
discussion about should we be applying cost
benefit analysis to transportational
electrification investments that utilities are making
with their customers' money. And San Diego Gas and
Electric commissioned E3 to do a cost benefit
analysis for them of the program that I told you about
a few minutes ago. And I don't think throw
it in the circular file, but nobody looked
at the commission. They just sort of steamed ahead. They haven't really worried
about cost effectiveness at all, because
their view is, look, this is market transformation. We're at the early
stage of this market. Why would we expect
these investments to be cost effective? We're trying to accomplish
something that is not really readily priced. On the other hand, John Rhodes,
the chair of the New York Commission, when I met with him
to discuss some cost benefit analysis that we
did for NYSERDA, he expressed a
concern that he wants to use the rate payer dollars,
rate payers' dollars wisely.
And I do think most
commissioners, including all the ones in California
feel that way as well. But they leaven that
wisdom with their concern about market transformation. And so he wants to be
discriminating about which programs yield more benefits. The Hawaii plan includes
some cost benefit analysis. But again, it wasn't
really something that was determinative
for their commission. But again, the dollars
have not really been big in any state yet,
except for California. And some states have
started to say, OK, when you come back to us utility
with $100 million program or something like that,
then you're really going to have to prove that
it's going to generate benefits not just for people who own
EVs, but for the general body of rate payers as well. And the reason that it
would generate benefits for the general
body of rate payers as well is that if the
charging EVs doesn't require much or any new
distribution infrastructure, then you're basically
recovering those fixed costs over more kilowatt hours sales.
And if you do some
sort of smart charging to shift the charging, for
example, to overnight, the wee hours, then you're
going to use it even– you're going to use your
fixed infrastructure even more efficiently. And you can look at these later. These are two
charts I pulled out of the Hawaiian electric plan. But what they show is that from
kind of a regional perspective, if you compare the cost of
serving the EV load to all the benefits that are reaped
minus the environmental benefits, the big dominant thing
is this light lavender bar, which is the gasoline savings. And when you compare those to
the cost of making electricity, it's cheaper. I'm sorry, the lavender–
yeah, the lavender is avoided gasoline consumption. So it's cheaper. But who's getting
those benefits? Well, the people who
own the cars, the EVs. So the other question
is, if we compare the cost of serving the
load to the revenue paid in, the rates paid in by the
people who own the cars, is the cost of serving them more
or less than what they pay in? And what we found in
Hawaii was that it was more than what they
pay in, especially again, if they're primarily
charging off peak.
So this is the kind of thing
that commissioners care about. But this is– the level at
which this has been done so far is purely like, you know, what
are the effects of EV adoption, per se? The question that's
not being asked is– although we did a
little bit in New York. The question that's not
really being asked so much is like, but how
does that compare to how much the utility wants to
spend to help make this happen? Last thing I want
to talk about is, so I just talked about how the
benefits to the general body of rate payers are greater
when we have smart charging, so we shift charging
to off peak hours, or we push it into
hours when there's a surplus of solar power.
There's a lot of
different ways that you can do that with rates. There have been a lot of
creative rates experimented with around the US. I mentioned the
one that San Diego tried that's a time varying rate
that specifically encourages charging at times of day
when there's surplus solar. New York had a pilot with a
really interesting company called FleetCarma, teamed up
with Con Ed, and they did– they piloted an approach that
basically just paid people a reward if they went the whole
month without ever charging during the on peak hours. Hawaii is, again, at the
direction of their commission, and even as we speak,
developing EV rates that are going to have the same,
I think the same goals that particularly the
SDG&E rates to use their surplus solar energy.
When asked by clients when
at E3, what rate did we like the best, we
always pointed them to this San Diego Gas
and Electric rate. And the thing that
we liked about it was that it's a three-part rate. So there is a customer
charged, just like basically what you charge, pay every
month to be connected and have a bill printed and sent to you. Then there's kind
of a charge that's associated with kind of the
total size of your footprint on the grid and that
can go down if you use– if you spread your load
out, even it out some. And then the really
interesting thing on there was the marginal cost
value-based charge which varies by hour. So they took the California
ISO day ahead prices. And they said, OK, tomorrow is
going to be a high solar day, so the price is going to be
really low in the afternoon, and we're going to show that
to the customer in the hopes that they will choose
to charge then.
So really interesting example. Again, happy to provide
info on all of these. So I will just say
the main punchline from this slide is
that when we actually looked at dynamic rates, like
the one I just described, versus standard
time of use rates, the dynamic rates really
provide a lot more value. And that's because
they pick out the days where it's most useful
to have somebody move their charging around. So they provide a lot
more value to the grid. And so that's why we always
supported those rates. So that is all I have to
say that I have time to say.
And I'm happy to
take your questions. JOHN WEYANT: Great. Thanks very much, Nancy. That was a terrific
tour de force covering a huge amount of territory. So I'm going to try to summarize
a long list of questions. There are several
questions that kind of get at just probably viewing
you as one of the world's expert on all this. Of the states you've
looked at, which ones do you think are
doing the best job managing this transition, and are any
of them moving as fast as you think they have to, to achieve
the objectives that we all have in mind? You can define
whose objectives you would like to use as a
reference point for that. NANCY RYAN: Yeah, I mean
that's a great question. That's a really hard
question to answer, because again, you have to
think about why do PUCs have the process that they have? I mean, it's all about
collecting money from the many to pay for services that
everybody uses in various ways to varying degrees. I think to me a couple of
things stand out, is I mean, I like how they did it
in New York, because– and Hawaii, because both
of them were, you know, the commission I think provided
some direction to begin with.
And Hawaii kind of
like, this is what– these are the questions
we want you to answer and how we want you to do it. And it was a pretty
compact assignment. Hawaii is a relatively small
and uncomplicated place. In New York, they really had
a pretty lean stakeholder process, and came
out with a paper and said, OK, just file this
stuff in your rate cases. And it took them, I
think, a year and a half to write the paper, because
they were busy with other stuff. And this a problem
with regulation, is that legislatures and
regulators' ambitions often exceed their means. Even when I worked at the
California Commission, I was just blown away by the
amount of paperwork and process it takes to do anything there.
And I continue to
believe that that's– it doesn't, like the
people can get due process without that much process. And so I guess I
would look at those. I like how it's worked
out in those other states. JOHN WEYANT: So one more. It's kind of a collection
of many issues. It seems like a lot of
the action here has to do, and you [INAUDIBLE] this
way, with charging capacity. So who should own what types
of charging capacity, and who should have access to that? You've already talked a
little bit about who benefits and who pays. But is there a general– you see different
business models coming out where in some places
util– and you actually gave one example of utilities
either could do it or not do it. OEMs could do it or not do it. Municipalities could do it.
Third parties could own it. Any general wisdom from
your perspective on that? Say you were– you may be
doing this for all I know. Suppose you were
a VC, and you were getting a bunch of
new business proposals from different
people who were going to buy and sell essentially
electricity from charging capacity. So the investment would
be in charging capacity. Which ones do you think
would make the most sense? Or do you just need a wide
range of possibilities to fit the different
circumstances one finds in the different
states and sectors? NANCY RYAN: Well, boy, there's
a lot of questions wrapped up in that question. I mean, I'm a big fan
of creative destruction. This is why I really have pushed
hard in every jurisdiction where I got to talk
to a regulator. I have always pushed hard
for the make ready model, because I think
essentially that provides a sufficient financial
foundation to enable various charging
companies to try out different kinds of models for
interfacing with customers, and for pricing
charging services, or packaging up subscriptions.
And I think that– they've all, I mean, I guess
the other thing I'll say is that I also think that that
free money from the EVSP's point of view, from the charging
company's point of view, that free money has to be
conditioned to some extent. And that is part of what
results in so much litigation, is how much it's going
to be conditioned. But one of the things that
I think California has done and some other commissions
are thinking about, is that there has to be some
kind of interoperability. Like if the ratepayers, the
general body of ratepayers are going to subsidize
your EV charging business, then everybody has to be
able to use your station. It doesn't have to be free. But they have to have a
way that they can use it. And they don't have to
have a key chain with 27 different RFID cards on it.
They should be able to call
a number or swipe a credit card or whatever. And I think that's important. If there's a part
of that question I didn't answer that you
would like me to answer, feel free to re-ask it. JOHN WEYANT: I may, yeah,
in way I may do that, because I'm going to
parse things a little bit. Are there a host of questions on
what I would call related grid integration issues? NANCY RYAN: Yeah.
JOHN WEYANT: And I know you
touched on it a little bit. But everything
from is this system going to be able to take the
increment and total load? Is it going to be able to
manage the various loads between having
more renewables on, having charging perhaps
doing vehicle to grid trades and so on. How do you see that working? I see people either say it's
totally impossible to go very fast or we'll work it out.
The whole thing will work. We don't have to worry about,
those are just details. If we get everything
set up, if we build it, they will come effectively. How do you see
that set of issue? NANCY RYAN: Yeah. I mean, this is
something that we really looked at a lot from a lot
of different angles at E3. At some point, some of you
have probably seen someone from E3 present on
the PATHWAYS model, which is a energy system
model of the entire economy. And I'd like to start there
on some forums when I talk. And you what that
shows is that really the new– even with super
aggressive adoption of EVs in California, and this
would be true anywhere, super aggressive
adoption of EVs, and sort of meeting the
kind of energy efficiency targets we have,
that we pretty much have flat load at the system
level all through the 2020s.
And that was before the
COVID economic crisis hit. And then it ramps
up kind of gradually after 2030, because
at that point, the new cars are
very, very efficient. The light weighting has been
very successful, and so on. So we have never regarded it as
a problem for the generation. So the issue is really primarily
at the distribution level. And if you have a lot of
cars really concentrated in a relatively small
distribution area, how do you serve them? And I think that's the
most immediate question. The utilities were all
wringing their hands 10 years ago that
they were going to have exploding transformers. And no such thing has
happened since then. And what they've
spent to accommodate the cars that have been
sold today is pretty modest. But that will become
an issue going forward. But it's something
that they should be able to plan full forward.
I think there's some– there's a lot of
different technologies to solve that problem. JOHN WEYANT: Two
more quick ones. If you were advising
a utility, which it sounds like you do
a lot, how would you advise them to prioritize–
you actually did touch on this explicitly, but
didn't say too much about it. Would you go for the
light duty vehicles for the commercial market
for municipal EV fleets? Is there anything, any
general guidance in that area? NANCY RYAN: I think it really
depends on where you are. I mean, if you're– I mean, first of
all, everybody, it's foundational to do something for
light duty vehicles, I think, unless you exclusively serve
an area where people just don't have– you know, if you're
like a rural co-op in Montana, that should probably
not be your priority.
But if there's like
a meat packing plant that trucks go in and out of all
the time, [INAUDIBLE] school, then maybe you should be
thinking about the trucks. The way they've looked at it for
clients is, beyond light duty, then what are the major
commercial and industrial transportation related
loads in your community? Has your transit agency
decided that they want to electrify their fleet? Or do you have big multi-modal
depots or a port, or– so I think there, it's all
very location specific, and you really need
a custom assessment.
JOHN WEYANT: One
last question that's come up in many of the seminars
this quarter from totally different angles is, once
you start down the EV road, how long before
surprise, surprise, it turns out that fuel cell
electric vehicles are actually an even better idea? I guess for you, do you feel the
system has been set up in a way that kind of compromises,
it's kind of a lock-in pathway problem. Do you think the
current initiatives could kind of fit hydrogen
fuel cell vehicles? Or would it be something else? Or are we making
investments that we'll regret because we should have
known that the hydrogen fuel cell vehicles would
ultimately beat out the EVs? How do you come out
on that set of issues? NANCY RYAN: Yeah, it's a
really interesting question. I mean, the air board has really
gone out of their way for years to call it a zero emission
vehicle program, to have a fuel cell path to compliance. They really wanted to figure out
a way to finance the charging, or the hydrogen refueling
network for cars. They thought they were going
to use the Low Carbon Fuel Standard to get the
refiners to pay for it, but that didn't happen.
And there's a modest number
of stations in California and really no place else. And that, I think, has
led all of the major OEMs to just think, well,
we've got to have an electric player in the game. My understanding, though,
is that the bigger factor is actually China, where they've
really gone heavily electric. And that's really the
tail that's wagging– or it's the dog
that's– we're the tail. They're the dogs.
JOHN WEYANT: Great. Well, thanks for
a terrific seminar and for answering all these
questions so skillfully. I think you just
proved my hypothesis that you're one of
the few people alive who actually can play three
dimensional chess while roller skating. So thanks again– NANCY RYAN: [INAUDIBLE], John. JOHN WEYANT: We'll
look for you on campus here with– particularly
with the [INAUDIBLE] program down the road as soon as
we're all cleared to travel. NANCY RYAN: Great, thank you. JOHN WEYANT: Great,
thanks a lot..