VARNUM. September 10, 2018

Transcription

1 201 North Washington Square Suite 910 Lansing, Michigan Telephone 517 / Fax 517 / Timothy J. Lundgren tjlundgren@varnumlaw.com September 10, 2018 Ms. Kavita Kale Executive Secretary Michigan Public Service Commission 7109 W. Saginaw Highway P.O. Box Lansing, Michigan Re: MPSC Case No. U Dear Ms. Kale: Attached for electronic filing in the above-referenced matter, please find the Direct Testimony and Exhibits of James Ellis on behalf of ChargePoint, Inc and Proof of Service. Thank you for your assistance in this matter. Sincerely yours, VARNUM TJL/kc Enclosures c. ALJ All parties of record. Timothy J. Lundgren Ann Arbor Detroit Grand Haven Grand Rapids Hastings Kalamazoo Lansing Novi

2 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION ***** In the matter of the application of ) CONSUMERS ENERGY COMPANY ) for authority to increase its rates for ) Case No. U the generation and distribution of ) electricity and for other relief ) ) DIRECT TESTIMONY OF JAMES ELLIS ON BEHALF OF CHARGEPOINT, INC.

3 JAMES ELLIS DIRECT TESTIMONY I. Introduction & Background Q. Please state your name and business address. A. My name is James Ellis. My business address is 254 E Hacienda Avenue, Campbell, CA Q. By whom and in what capacity are you employed? A. I am employed by ChargePoint, Inc. ("ChargePoint"), and currently serve as Senior Director of Utility Solutions Q. Please describe your educational background and relevant business experience and expertise. A. Prior to joining ChargePoint, I served as the Director of Electrification and Electric Vehicles for Pacific Gas and Electric Company ("PG&E") with a focus on developing products and programs to support customer needs in the fastest growing electric vehicle ("EV") market in the United States. During this time, I also served as a board member for the California Electric Transportation Coalition supporting advocacy for low carbon fuel standards, vehicle and infrastructure incentives and supported policies for an increased utility role in transportation electrification. I also served as board member for the California Plug-In Vehicle Collaborative, working with government and industry stakeholders to identify and advocate for accelerated transportation electrification through education and outreach initiatives. Before PG&E, I was the EV Regional Manager for Nissan North America in the Corporate Planning and Sales and Marketing organizations. At Nissan, I was responsible for market acceptance activities including 1

4 JAMES ELLIS DIRECT TESTIMONY strategy development and implementation for EV infrastructure in key markets to support the 100% battery electric LEAF. During this time, I developed financial tools and strategies that enabled the deployment of hundreds of DC fast chargers in the US. I also served as Senior Manager for Transportation and Infrastructure at the Tennessee Valley Authority ("TVA"), leading research and development activities related to clean transportation technologies, utility plug-in readiness activities across the 80,000 square mile service territory, and worked on carbon reduction strategies to enhance economic, environmental and societal benefits. I hold a Master of Business Administration degree from the Massey School of Business at Belmont University and a BS degree from Appalachian State University Q. Please describe your job responsibilities. A. In my role at ChargePoint, I manage a team that advises electric utilities and other key stakeholders in North America on EV market engagement and investment, and support the development of policies and programs to accelerate the adoption of EVs and EV charging equipment and services Q. Have you previously testified before the Michigan Public Service Commission? A. Yes. I previously provided testimony on behalf of ChargePoint in U-17990, In the matter of the application of Consumers Energy Company for authority to increase its rates, for the generation and distribution of electricity and for other relief

5 JAMES ELLIS DIRECT TESTIMONY 1 2 Q. On whose behalf are you submitting your testimony in this proceeding? A. I am submitting testimony on behalf of ChargePoint, Inc Q. What is the purpose of your testimony? A. The purpose of my testimony is to provide support for the goals, general program design and proposed outcomes of PowerMIDrive and to make recommendations regarding (i) rebate structure, (ii) future-proofing investments, and (iii) maintaining site host flexibility in setting pricing for EV charging services Q. Are you sponsoring any exhibits? A. Yes, I am sponsoring the following Exhibits: Exhibit CP-1 (JE-1): INL: Lessons Learned About Workplace Charging Exhibit CP-2 (JE-2): E3 Paper on Transportation Electrification Exhibit CP-3 (JE-3): Discovery Response ELPC-CE Q: Please describe ChargePoint s expertise in the electric vehicle ( EV ) charging market. A: ChargePoint is a leading manufacturer of electric vehicle charging equipment and provider of network, maintenance and associated services. Using ChargePoint products and services, our customers operate more than 54,000 Level 2 and DC fast charging spots, including more than 1,000 publicly-available, workplace, commercial, and private residential charging spots in Michigan. By delivering more than 42 million EV charging 3

6 JAMES ELLIS DIRECT TESTIMONY sessions since inception, ChargePoint drivers have driven over 975 million electric miles and avoided over 40 million gallons of gasoline. ChargePoint designs, develops, and deploys residential and commercial AC Level 2 ( L2 ) and DC fast charging ( DCFC ) electric vehicle charging stations, software applications, data analytics, and related customer and driver services aimed at creating a robust, scalable, and grid-friendly EV charging ecosystem Q: What is ChargePoint s business model? A: The ChargePoint business model is to engineer, manufacture, and sell the hardware, cloud-based network and associated services necessary for EV charging station owners to effectively provide charging services to drivers that patronize their properties. In almost every case, ChargePoint does not own or operate the equipment, but provides a portfolio of products and services to individuals and site hosts ChargePoint sells residential charging solutions direct to individuals and EV drivers, and commercial charging solutions to a site host, such as an employer, business, city, fleet operator, or multi-unit dwelling. In addition, ChargePoint sells network services to commercial site hosts to manage their charging infrastructure using cloud-based software tools, as well as preventative maintenance and related customer services. The commercial site host operates the station, including granting access to EV drivers and setting the price that EV drivers pay to use the charging station on their property. ChargePoint does not set the pricing to drivers at stations that are owned and operated by site hosts and conveys 4

7 JAMES ELLIS DIRECT TESTIMONY 1 2 all revenue collected from drivers as a service, other than a small transaction fee, to the site host Q: What are the products and services that ChargePoint offers to the market? A: ChargePoint offers a complete line of L2 and DCFC products and services, including the CT4000 family of Level 2 charging stations for public and workplace charging, ChargePoint Home for single-family residential use, ChargePoint Multi-Family for commercial multi-unit dwellings, ChargePoint Fleet, and both 24 kw and 50 kw DC Fast Charging stations for rapid-charging needs. ChargePoint s next generation DCFC platform solutions, ChargePoint Express 250 and Express Plus, are capable of charging from 62.5 kw to 500 kw For drivers, ChargePoint provides a unified mobile and web application for all aspects of their public, workplace, and home EV charging. ChargePoint drivers have access to real time information, payment, and support services through the information available on the screen of the charging station, in their mobile app, via and text notifications, or on the ChargePoint website. ChargePoint also provides services to drivers, free of charge, which allow them to easily find and access the EV charging infrastructure provided by station owners through a mobile app, in-vehicle navigation, and our website For site hosts, ChargePoint provides subscriptions to our cloud-based platform. This toolset provides the station host with everything needed to manage EV charging operations, including online management tools for data analysis, billing and payment 5

8 JAMES ELLIS DIRECT TESTIMONY processing, load management, and access control. Charging stations connect to the ChargePoint network over a secure, payment card industry ( PCI ) compliant, cellular data network, enabling site hosts the flexibility they need to be the provider of electric vehicle charging services Maintenance and customer service are priorities for our company. ChargePoint offers a comprehensive set of support services for both EV drivers and station hosts, including: a 24/7/365 hotline for drivers, the industry s first parts and on-site labor warranty, site qualification, installation and validation services and help line for site host specific questions Q: Who are ChargePoint s customers? A: ChargePoint supports EV drivers across North America and Europe. Our customers are workplaces, governments, hotels, colleges and universities, hospitals, electric utilities and other energy companies, parking garages, fueling stations, airports, multifamily housing, auto dealerships, retail stores, property management and commercial land ownership firms, and other businesses, as well as residential customers that purchase our charging products Q: Where does EV charging typically take place? A: There have been a variety of studies into electric vehicle charging behavior to determine the extent to which drivers charge their vehicles at home, work, or in other public locations. While each driver has unique needs, it is possible to identify general trends 6

9 JAMES ELLIS DIRECT TESTIMONY and patterns in EV charging behavior. One analysis conducted through the Idaho National Labs found that, on average, EV drivers charged their vehicles at home 64% of the time, with 33% of charging taking place at work, and the remaining 3% at charging stations in other locations. These values represent an average of overall charging frequency by location of the Nissan LEAFs and Chevrolet Volts included in the study. See Exhibit CP-1 (JE-1) Q: Why do charging station site hosts invest in EV charging? A: The EV charging market is growing and dynamic, and there is no one static business case for the electric vehicle supply equipment ( EVSE ) industry or for EV charging site hosts. The business case, or value proposition, for various entities to install and operate charging stations incorporates many different value streams and varies across use cases Our customers find that the provision of EV charging services can align with and augment their existing operations and core business goals. Site hosts balance costs against the value created by hosting a station, which are often beyond direct revenue that may be generated. Non-financial benefits include providing EV charging as an amenity to attract and retain employees, attract new customers and have them stay for longer periods of time for businesses, and appeal to new tenants. In addition, EV charging helps to meet sustainability goals for local governments and businesses. Residential customers acquire L2 EVSEs for home use for convenience and to meet individual vehicle charging requirements within an overnight time frame. And across the US, many utilities now offer EV time of use ( TOU ) rates which incent drivers to charge off-peak at significant 7

10 JAMES ELLIS DIRECT TESTIMONY 1 2 cost savings, which increases system utilization, creating grid benefits for utilities and all ratepayers Q: What are the capabilities of smart, connected EVSE? A: Smart EV charging stations is a broad term, but generally refers to the EVSE having connectivity and the ability to measure electricity passing through the unit, providing data and load management capabilities and scheduled charging features, providing for point of use payment and access control, and incorporating two-way communication from the EVSE to the driver through an app as well as with the station operator via a screen or other means. These capabilities can be of significant importance to a site-host to enable charging services at their facilities, and to their utility, as the smart station provides a wealth of information related to charging behaviors and load profiles that can enable various demand side management programs. Those programs could include demand response, or even enabling a TOU rate specific to EV charging in the home through utilization of the embedded meter. The associated communication and cloud-based technology platform can also be leveraged to provide enhanced station management features like reservations or notifications for charge completion for an improved driver experience through greater visibility and interaction II. Summary of PowerMIDrive Q. Please describe the PowerMIDrive program. 8

11 JAMES ELLIS DIRECT TESTIMONY A. The PowerMIDrive program proposed by Consumers Energy ("Consumers" or "the Company") is made up of five related Components: 1) Residential, which seeks to incentivize EV drivers to charge at home during off-peak hours; 2) Public Charging, which would support the deployment of AC Level 2 charging stations in public, workplace, and multiple-dwelling units ( MDUs ); 3) DC Fast Charging Component, which would support the deployment of DC fast charging stations along highway corridors; 4) Education & Outreach, which would seek to increase awareness of EVs and EV charging, educate customers about the Company s rates and smart charging, and recruit participants for the PowerMIDrive program; and 5) Technical Development, which would allow the Company to explore the costavoiding and value-creating opportunities of networked EV charging stations and ensure that the Company is prepared to integrate the new load from EVs in a manner that benefits its customers and the grid Q. Please describe the Nighttime Savers Rate. A. The Nighttime Savers Rate is a year-round TOU rate made of up three periods with differing price signals. All existing customers on the Company s REV-1 and REV-2 rates would be transitioned to this rate. The three periods are On Peak (2PM - 7PM), Off Peak (7PM-11PM and 6AM-2PM) and Super Off Peak (11PM-6AM)

12 JAMES ELLIS DIRECT TESTIMONY Q. Please describe how program costs will be recovered. A. The Company proposes to amortize annual deferred amounts of the proposed PowerMIDrive costs over 10 years beginning with the year after costs are incurred. Amortized expenses would be included in rates, and deferred cost recovery would be subject to Commission review. Following such review, and assuming approval by the Commission, the unamortized balance that had been deferred would be included in rate base and receive a rate of return. 8 9 III. Evaluating PowerMIDrive Q. What is your overall impression of PowerMIDrive? A. The PowerMIDrive Program is in almost all respects consistent with emerging best practices for utility EV charging programs that encourage increased adoption and continued innovation, while ensuring the growth of the competitive market. Through supporting the deployment of make ready infrastructure, the Company s proposal will appropriately lower market barriers, reduce costs and increase benefits to ratepayers. The program will also maintain customer choice in charging equipment and network service, and catalyze sustainable and scalable growth in the EV and EV charging markets. The current program design underscores the need to holistically support EV charging with efforts that encourage charging at home, at work, and in public while also providing education and raising consumer awareness on electricity as a transportation fuel

13 JAMES ELLIS DIRECT TESTIMONY Q: How will the Program contribute to overcoming barriers to deploying EV charging stations? A: The Program will primarily help to overcome barriers to deploying EV charging stations by reducing total cost of stations and installation. Typically, the cost to install a charging station in an existing parking space is equal to or more than the cost of the hardware itself. Installation costs downstream from the customer of record s utility meter necessary to complete make ready construction include trenching or boring, conduit, wiring, labor, mounting, site reconditioning and landscaping along with signage. These costs are unlikely to experience significant reductions over time. Furthermore, site hosts will likely need to add additional charging stations as EV adoption increases, and a well-designed make ready program should support a future-proofed infrastructure deployment for continued growth and innovation in the market Q: Will the Program only create value for the utility, site hosts, and EV drivers? A: No. The Program has the potential to create value for all ratepayers, including those who do not directly participate in the Program. Several studies highlight that the expected long-term energy revenues from incremental EV load generally exceeds the costs for the grid to support that load. See, for example, Exhibit CE-2 (JE-2),. In effect, prudent investments in EVSE with increases in energy use exert a downward pressure on unit energy costs that can benefit all utility customers regardless of EV ownership. However, this is predicated on the EV load not resulting in excessive new investments in distribution infrastructure costs and avoiding high cost peak generation and/or 11

14 JAMES ELLIS DIRECT TESTIMONY distribution time periods. The associated benefits of additional EV load to all utility customers could be significantly increased and grid infrastructure risks lowered by offering a make-ready incentive and setting functional requirements to qualify networked equipment to participate in the Program and provide additional opportunity to create longer term grid benefits and aid in development of smart charging programs that encourage wise charging behaviors as early as possible Q: Is it in the public interest to require site hosts to participate financially in the deployment of EV charging stations deployed on their property? A: Yes, with certain exceptions Q: Please explain. A: From ChargePoint s experience in deploying over 54,000 charging spots, site hosts that make a financial contribution to the charging station are far more likely to actively support the successful installation and ongoing preventive maintenance of the charging station because they have skin in the game. Utility programs can help their customers deploy charging infrastructure to accelerate beneficial energy use without fully covering project costs in base rates. Leveraging site host contribution to equipment and installation costs stretches the value of ratepayer dollars by increasing the net funds available for equipment and services and ensures that choice of qualified equipment and services are responsive to customer needs. Historic and projected growth in the EV charging market show that private dollars are increasingly flowing into the market, which indicates a growing competitive market. Utility support can serve as a catalyst for accelerating 12

15 JAMES ELLIS DIRECT TESTIMONY growth in the EV and EV charging markets with appropriate program designs that support competition, leverage private capital, and balance the costs and benefits to ratepayers Q. What is your impression of the specific program details of the Public Charging and DC Fast Charging Components of PowerMIDrive? A. The specific program details of the Public Charging and DC Fast Charging Components of PowerMIDrive are consistent with the Program s stated goal to support the growing Electric Vehicle ( EV ) market in the Company s electric service territory. Direct Testimony of Delaney at 2. I would respectfully recommend enhancements to the proposed Program design to more closely align the Components with the stated Program goals and to ensure sustainable and scalable growth in Michigan s EV charging market. These recommendations address (i) rebate structure, (ii) future-proofing investments, and (iii) maintaining site host flexibility in setting pricing for EV charging services Q. What are your recommendations with regard to rebate structure? A. The Company s proposal to utilize a rebate to incent consumer behavior will promote innovation, competition, and customer choice in the EV charging market. It is important to set rebate structures in a manner that returns the most value to ratepayers and supports sustainable and scalable growth in Michigan s EV and EV charging market The Company proposes to set rebates on a dollar-per-station basis and to test different rebate levels. ChargePoint supports the Company s proposal to test different rebate levels 13

16 JAMES ELLIS DIRECT TESTIMONY in order to optimally leverage third-party capital to expand the value of every ratepayer dollar invested. However, for the AC Level 2 stations, we recommend that rebates be calculated on a dollar-per-port basis and not on a station basis due to variability in the number of ports per station EVSE can feature one or two plugs ( ports ), which determines whether the station can charge one or two EVs simultaneously. Therefore, I recommend that Program rebates be tied to the number of ports that would be deployed, rather than the number of stations for the Level 2 incentives. This will more reliably ensure that ratepayer dollars are not artificially constrained from increasing access to charging to the greatest extent possible Q. What are your recommendations with regard to future-proofing EVSE deployed in conjunction with the Program? A. I recommend that EV charging sites in the Public Charging Component be future proofed, where feasible and provided that additional funding be made available for this purpose. This would entail constructing additional make ready stub outs beyond the number of initially deployed ports to streamline future installation of additional EVSE and avoid significant, and unnecessary, future retrofit costs. The ability to scale up deployments over time as EV adoption increases without having to break ground again will avoid significant costs, mitigate the need for future utility investment, and ensure flexibility to allow for technological changes over time

17 JAMES ELLIS DIRECT TESTIMONY Future-proofing sites should not come at the expense of decreasing the number of ports that would be deployed through PowerMIDrive to meet near-term charging needs. Given the program budget, I support the Company s intent of limiting [t]he number of chargers allowed per public site [ ] to 2, in order to provide greater allocation across Company territory. Direct Testimony of Michael Delaney at 17. I also support that the Company recognizes the need to increase the number of chargers at workplaces and MDUs on a sliding scale [ ] commensurate with the number of employees or residents. Id. at Q. What are your recommendations with regard to maintaining site host flexibility in setting pricing for EV charging services? A. I recommend that the Program be clarified to ensure that all site hosts participating in PowerMIDrive have the same flexibility to determine the appropriate pricing for EV charging services on their premises The issue of who determines pricing for EV charging services provided by site hosts that will participate in PowerMIDrive is critical to the success of the Program and mitigates risk or confusion of the utility unintentionally competing with its customers. Advancing the sustainable and scalable growth of transportation electrification in Michigan hinges on supporting an EV and EV charging ecosystem that works for drivers, riders, site hosts, and the grid

18 JAMES ELLIS DIRECT TESTIMONY The Company proposes two conflicting pricing policies. The policy for stations deployed in the Public Charging Component clearly ensures and maintains site host flexibility to determine pricing for EV charging services provided on their premises: The default charging option [for the Public Charging Component] will be for site hosts to pass through the Company TOU rate to customers. In addition, site hosts will have the option of providing charging for free to EV drivers, charging drivers directly, or using a third-party vendor to manage the charging sites. Delaney at In contrast, the Company proposed in its DC Fast Charging Component to work closely with site hosts to ensure prices charged to EV drivers are within market rates. Delaney at 19. The Company further clarified this to mean that [a] condition of receiving the rebate will require site hosts to agree to keep rates at or below the comparable cost of fueling an internal combustion engine with gasoline. See Exhibit CP-3 (JE-3) In most markets, it is common that the equivalent cost to refuel an electric vehicle with electricity is already at or below the comparable cost of fueling an internal combustion engine with gas. It is important for EV charging programs to strike a balance between catalyzing growth and negatively impacting or even stifling the competitive market. A utility, by providing services offered by customers at a lower price runs the risk of pricing out private investment and preventing growth Restricting or limiting flexibility for site hosts to set pricing for EV charging services is neither consistent with Commission precedent nor in the public interest. I recommend 16

19 JAMES ELLIS DIRECT TESTIMONY 1 2 addressing this critical issue by amending the pricing policy in the DC Fast Charging Component to be consistent with the policy in the Public Charging Component Q. Please explain your concerns with the revised guideline to peg the price of EV charging services to that of gasoline. A. It would not be appropriate to peg the price of EV charging services to the price of gasoline. Gasoline prices are determined by market prices, not by the Commission. In contrast, a site host s electricity costs are based in part on the Company s distribution and transmission costs, both of which have no relation whatsoever to the price of gasoline Q. Is the provision of EV charging services merely the resale of electricity? A. No. The provision of EV charging services is not at all akin to the generation, transmission, distribution, or sale of electricity to end users. Rather, EV charging station site hosts purchase electricity to provide a discrete EV charging service to their customers. The use of electricity is just one component of the provision of EV charging service through a privately-owned charging station. The charging service provided by the charging station owner or operator is not delivered by that owner or operator over distribution system wires or circuits, but rather by a cord and a connector in the sole purpose of fueling an electric vehicle The transaction between an EV service provider and an EV driver has nothing in common with a traditional sale of electricity by a utility to a consumer. Indeed, non- utility companies selling charging services are themselves retail customers that purchase 17

20 JAMES ELLIS DIRECT TESTIMONY electricity from a regulated utility in order to provide charging services, which will in most cases include providing the user access to the charging station, use of related metering and communications software, participation in a network, billing, and various other options. In this respect, a provider of EV charging services has more in common with a coffee shop that allows users to plug in to charge their computer batteries or a cell phone battery-charging kiosk at the airport than with a regulated public utility operating a grid and selling electricity to local businesses and households Q. Why is it in the public interest for site hosts to have the ability to control pricing for the EV charging stations installed on their premises? A. EV charging station site hosts must be allowed to control pricing for, and access to, charging services to ensure that charging stations meet the needs of drivers and the local property offering the charging services. Empowering businesses with the flexibility to provide access to charging using a range of pricing structures helps the site host best utilize its property and incentivize drivers to use what they need and then move on to allow other EV drivers to plug-in Empowering site hosts to effectively influence pricing for charging and parking services ensures that drivers can be incentivized to return to the vehicle when it is fully charged, which allows other drivers to use that charging resource. Pricing policies may also encourage drivers to visit the site and spend time shopping or otherwise provide value to the site host, which in turn will encourage the site host to set pricing policies that lead to the greatest possible utilization of that charging station. 18

21 JAMES ELLIS DIRECT TESTIMONY It is critical that a site host have the ability to incentivize turnover at the EV charging station. Providing the capability and flexibility to adjust EV driver pricing and to align with the local site host use case will ensure station utilization, EV driver satisfaction, and support achieving widespread grid benefits Q. Is the model for refueling an EV the same as for internal combustion vehicles? A. No. The model for refueling an EV at an AC Level 2 station is inherently different than refueling an ICE vehicle, and the business models for site hosts of both types of technologies are similarly different. Whereas refueling an ICE vehicle with liquid fuel takes a matter of minutes and does not result in longer-term parking with the driver absent from the vehicle, charging an EV at an AC Level 2 station has a longer timeframe and often results in a parked, unattended vehicle. The combination of charging and parking services associated with EV charging infrastructure is unique The model for providing DC fast charging services is also quite different from the model for refueling ICE vehicles. DC fast charging involves a driver plugging in for typically minutes, where they may also park and leave their vehicle Q: Are there any examples of utility EV charging programs that empower site hosts to set pricing and access controls? A: Yes. Two prominent examples include Eversource Energy s EV Charging Infrastructure program in Massachusetts and AEP Ohio s EV Commercial Electric Vehicle Charging Station Incentive program in Ohio. In both cases, program 19

22 JAMES ELLIS DIRECT TESTIMONY participants hosting utility-supported EVSE on their premises may still set pricing and access controls. Program participants maintain the right to influence the charging and parking behavior of drivers on their premises Q: Can you provide examples of how site hosts might set a price for charging services? A: Some examples of how a site host might set a price for charging services include: A free charging session; for which a driver gets free charging services as an amenity provided by the site-host; A fixed rate for the session, for which the driver pays a set fee for the entire session; An energy rate, for which the driver pays for the energy consumed on a per kilowatt-hour (kwh) basis; An hourly rate, for which the driver pays per hour, similar to how a parking meter operates; Length-of-Stay pricing, for which one price is charged during the first x hours and another price is charged for every hour afterwards; Time-of-Day pricing, for which one price is charged during peak hours and another during off-peak hours; A minimum and/or a maximum fee per session; A combination of the above, (e.g., a flat session fee followed by an hourly rate, an hourly rate followed by per kwh pricing, a minimum session fee followed by an hourly rate, or a free period of time followed by per kwh pricing); and Driver groups, for which station owners may set unique policies for different classifications of drivers (e.g. employees vs. visitors) using the options above

23 JAMES ELLIS DIRECT TESTIMONY Q. Has the Commission previously issued guidance on the topic of pricing for EV charging services? A. Yes. As I discussed previously, electricity is only one component of the provision of EV charging services. However, even if electricity was the only component involved in the provision of EV charging services, it would not be appropriate to limit site host flexibility for setting pricing at DC fast charging stations. As the Commission noted in response to Staff s request to clarify in the Company s tariff language in schedule C4.4 that sale-for-resale at an EV charging station is not regulated by the Commission as a sale of electricity by a public utility: The proposal indeed appears to be non-controversial, and the Commission agrees with the Staff that the sale of electricity by charging station owners should not be treated as a resale of electricity under the tariff, or as a sale by regulated utilities. This is a necessary change to the tariff language which the Commission approves. [U Final Order at 160.] IV. Evaluating Cost Recovery, Nighttime Saver s Rate, and Technical Component Q. What is your impression of the Program s proposed cost recovery mechanism? A. Rebates for EV charging hardware, services, and installation, when recovered as a regulatory asset, would be the best model to encourage customer investment in competitive charging technologies and expand these needed technologies throughout Michigan. This approach to cost recovery has a track record of success in demand side 21

24 JAMES ELLIS DIRECT TESTIMONY management incentive programs. Given the widespread grid benefits that can be enabled through transportation electrification, it would be appropriate and in the public interest for the Commission to approve regulatory asset accounting, recover identified program costs through rates, and, pending future review, permit the utility to earn a return at the authorized rate of return Q. What is your impression of the Nighttime Saver s Rate? A. The Nighttime Saver s Rate will help to ensure that the new load from increased EV adoption in the Company s service territory leads to widespread grid benefits. There are many examples the demonstrate how price signals can be used to influence EV charging behavior Q. What is your impression of the Technical Development Component? A. The Technical Development Component is central to the success of the Company s proposal. This Component will ensure that the Company is prepared to take advantage of advances in EV charging and load management technology. I concur with Witness Delaney that this Component will help the Company to ensure that the integration of EVs provides a benefit, rather than a burden, to the grid. Direct Testimony of Delaney at p I am in strong support of the Company s stated effort to explore how to avoid the need for a second meter in residential applications when incorporating the load associated with EVs. Customers are often disincentivized to subscribing in EV-Only TOU rates due to 22

25 JAMES ELLIS DIRECT TESTIMONY 1 2 the additional costs associated with installing a second utility meter and may be wary of moving to a whole-home TOU rate. This Component will help to address these barriers Technology such as connected charging stations represent an opportunity for the Commission to update regulatory metering requirements for embedded meter devices. Utility metering requirements are often misaligned with how end-use metering actually functions, which is a missed opportunity for generating grid benefits and lowering costs. Accurate and reliable charging data can be transmitted to a utility through embedded metering in EV charging stations for multiple program designs, such as subtractive billing and pay-for-performance. These features may also be used by a resident to manage their own home energy use on a whole-home TOU rate or other EV tariff Other jurisdictions are already exploring these opportunities. ChargePoint is currently providing the networked charging solution for Green Mountain Power s managed home charging program including both demand response and using embedded meter data to facilitate an unlimited off-peak charging plan. Additionally, the Minnesota Public Utilities Commission ("MNPUC") recently approved a pilot proposal by Xcel Energy to reduce the upfront cost burden for customers looking to opt into EV tariffs by implementing the tariff directly with a smart EVSE. The MNPUC has ordered Minnesota Power to follow suit and develop its own program to pilot feasible alternatives to using traditional utility meters. See Minnesota Docket No : Petition for Approval of a Residential EV Service Pilot Program and Minnesota Docket Nos. 23

26 JAMES ELLIS DIRECT TESTIMONY 1 2 E002/M , 112, 120: Order Accepting 2017 Annual Reports and Establishing Requirements for Next Annual Reports Q. Does this conclude your testimony? A. Yes it does _4.docx 24

27 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the application of ) CONSUMERS ENERGY COMPANY ) for authority to increase its rates for ) Case No. U the generation and distribution of ) electricity and for other relief ) ) EXHIBITS OF JAMES ELLIS ON BEHALF OF CHARGEPOINT, INC.

28 MPSC Case No. U Exhibit CP-1 (JE-1) Page 1 of 29 Lessons Learned about Workplace Charging in The EV Project John Smart Principal Investigator Idaho National Laboratory Annual Merit Review Washington, DC June 9, 2015 VSS170 1

29 MPSC Case No. U Exhibit CP-1 (JE-1) Page 2 of 29 Overview Timeline Start: Oct 1, 2013 End: Jun 30, % complete Budget FY14: $50k FY15: $10k (project highly leverages DOE funding to INL for EV Project and ChargePoint America data analysis) Barriers Addressed Infrastructure For consumers to accept, purchase, and use plug-in electric vehicles, the proper infrastructure must be in place to enable the full utilization of the technology with minimal impact to the usage habits of the consumer. Partners Nissan North America General Motors/OnStar Blink Network ChargePoint

30 MPSC Case No. U Exhibit CP-1 (JE-1) Page 3 of 29 Relevance Proponents of plug-in electric vehicles are constantly challenged that public charging infrastructure is needed to support wide-spread PEV market adoption Workplace charging has been proposed as a promising option to meet this presumed need The purpose of this project is to demonstrate the usefulness and benefits of workplace charging to plug-in electric vehicles (PEV) owners by studying the charging and driving behavior of PEV drivers with access to workplace charging The study focused on the following questions: Where do PEV drivers charge when they have the opportunity to charge at work? How is workplace charging equipment used? Does workplace charging affect electric vehicle miles traveled? What guidelines for effective implementation can be crafted based on case studies of organizations with workplace charging? 3

31 MPSC Case No. U Exhibit CP-1 (JE-1) Page 4 of 29 Milestones Task Target completion Status date 1. Identify worksites to study, based on vehicle and EVSE data 11/9/2013 Complete availability 2. Gather easily obtainable background information about worksites 11/29/2013 Suspended for entire data set; on-going a. Number of EVSE, usage fee (fee vs. free), charge power level, time period of EVSE installation, etc. for selected sites (see Phase II) 3. Choose time period that study will examine 11/29/2013 Complete 4. Publish white paper on how much Leaf and Volt drivers 3/28/3014 Complete charge at work, home, and other locations 5. Publish white paper on how workplace charging is being used 8/21/2014 Complete a. Utilization from EVSE data b. Driving and charging behavior of Leafs and Volts with access to workplace charging 6. Publish white paper on electricity demand at work site(s) with many EVSE, impact on demand charges, and potential ways to mitigate demand charges 8/29/2014 Delayed in order to complete phase II 4

32 Milestones MPSC Case No. U Exhibit CP-1 (JE-1) Page 5 of 29 Phase II Develop rules of thumb as inputs to tool to guide employers infrastructure deployment decisions Task 1. Characterize worksites studied above into scenario groups based on factors that heavily influence observed behavior: a. Free vs. fee b. Other policy distinctions (public access vs. employee-only access, etc.) 1. May require communication with employers (???) c. Utilization d. Vehicle mix e. Those with/without drivers who charge at home Go/no go decision is there enough empirical data (EV Project) in a broad enough range of scenarios to compare to survey results? 2. Determine if/how we can fit survey responses to worksite data a. Ex: if the survey response to question 1 is a and question 2 is b, then we can use behavior observed at worksites A and D as a guide to what they might expect. b. Update employee survey if necessary c. Create employer survey to understand employer objectives and desired outcomes 3. Decide how to address scenarios that exist (per survey results) but are not represented in empirical data 4. Deliver report with rules of thumb and recommendations on methodology for interpreting survey results to inform infrastructure deployment decisions Target completion Status date 3/28/2014 Complete 3/28/2014 No go insufficient data 6/30/2014 Canceled 7/31/2014 Canceled 8/29/2014 Canceled 5

33 MPSC Case No. U Exhibit CP-1 (JE-1) Page 6 of 29 Milestones Phase II (revised) Develop a lessons-learned document to guide employers infrastructure deployment decisions Task Gather information to characterize selected worksites into groups based on factors that heavily influence behavior, including: a. Free vs. fee b. Public access vs. employee-only access c. Vehicle mix d. Those with/without drivers who charge at home Target completion Status date 6/30/2014 Complete Perform case studies on selected groups with reliable information about work site Deliver lessons-learned report on considerations guiding the management and use of workplace charging infrastructure 7/31/2014 Complete 8/29/2014 Complete 6

34 MPSC Case No. U Exhibit CP-1 (JE-1) Page 7 of 29 Milestones Phase III produce easily digestible summary report of key take-aways Completion date: June 30, 2015 Status: in progress 7

35 MPSC Case No. U Exhibit CP-1 (JE-1) Page 8 of 29 Approach 250 work sites identified with workplace charging available across the US Data collected from 600+ Nissan Leafs and ~100 Chevrolet Volts in The EV Project who parked at these sites in Case study of large work site with AC Level 1, AC Level 2, and DC Fast Charging Units (Facebook) Data collected from charging units at 6 worksites highlighted in case study by CA PEV Collaborative 1 1 Amping up California Workplaces: 20 Case Studies on Plug-in Electric Vehicle Charging at Work, California Plug-in Electric Vehicle Collaborative, November

36 Technical Accomplishments Where did PEV drivers with access to workplace charging choose to charge? Nissan Leafs On work days, 98% of charging events was either at home or work and only 2% at other locations Percent of Charging Events by Location and Day MPSC Case No. U Exhibit CP-1 (JE-1) Page 9 of 29 Workdays Non-workdays 707 vehicles, Jan 2012 Dec 2013 Charging at work was free for many of these drivers, which may have been one reason why they frequently charged there. 9

37 Technical Accomplishments Where did PEV drivers with access to workplace charging choose to charge? Chevrolet Volts On work days, 98% of charging events was either at home or work and only 2% at other locations Percent of Charging Events. by Location and Day MPSC Case No. U Exhibit CP-1 (JE-1) Page 10 of 29 Workdays Non-workdays 96 vehicles, Jan 2013 Dec 2013 Charging at work was free for many of these drivers, which may have been one reason why they frequently charged there. 10

38 MPSC Case No. U Exhibit CP-1 (JE-1) Page 11 of 29 How much did PEV drivers charge at work vs. home? 14% of Leafs studied needed to charge at work in order to complete their daily commute on most days On these days, they charged at home and topped off at work as expected 11

39 Technical Accomplishments MPSC Case No. U Exhibit CP-1 (JE-1) Page 12 of 29 Leaf drivers who did not need workplace charging on most days had varying behavior Mixed Only charged at work on most days Fully charged at home and topped off at work on most days Partially charged at home and topped off at work on most days 12

40 Technical Accomplishments How many drivers needed to charge at work to complete their commutes? Assumption: if you need it, you need it; if you don t, you don t 14% of vehicles needed workplace charging to complete their daily driving on most days, but 43% of vehicles needed workplace charging to complete their daily driving on some days Percent of vehicles needing to charge at work on at least 5% of days MPSC Case No. U Exhibit CP-1 (JE-1) Page 13 of 29 13

41 MPSC Case No. U Exhibit CP-1 (JE-1) Page 14 of 29 Does workplace charging increase electric vehicle miles traveled? Yes! On days when Leaf drivers needed to charge at work, workplace charging extended their range by an average of 15 miles (21%) Round-trip commutes on these days averaged 73 miles On days when drivers did not need workplace charging but charged anyway, they averaged 12% more miles than on days when they did not charge at work. 14

42 MPSC Case No. U Exhibit CP-1 (JE-1) Page 15 of 29 How often did drivers charge at work? Assumption: if they can charge at work, they will A study of Leaf and Volt parking and charging at 6 work sites showed dramatic differences from site to site 15

43 Technical Accomplishments MPSC Case No. U Exhibit CP-1 (JE-1) Page 16 of 29 How often did drivers charge at work? and from vehicle to vehicle at the same site Worksite with Free Charging 16

44 Technical Accomplishments MPSC Case No. U Exhibit CP-1 (JE-1) Page 17 of 29 What determines whether drivers will charge at work? Some correlation to free/cost Ratio of vehicles to charging units, policy for use, and other factors also matter also From 47 Leafs, 5 Volts at 6 worksites 17

45 MPSC Case No. U Exhibit CP-1 (JE-1) Page 18 of 29 What determines whether drivers will charge at work? 18

46 MPSC Case No. U Exhibit CP-1 (JE-1) Page 19 of 29 Responses to Previous Year Reviewers Comments This project started in FY14 19

47 MPSC Case No. U Exhibit CP-1 (JE-1) Page 20 of 29 Collaboration and Coordination with Other Institutions Data collection partner providing data from Blink residential and commercial AC Level 2 charging units and DC fast chargers Data collection partners providing data from Chevrolet Volts enrolled in The EV Project Data collection partner providing data from Nissan Leafs enrolled in The EV Project Participant in The EV Project and ChargePoint America; provided qualitative information about use of charging equipment at its offices * Vehicle and charging unit owners gave written permission for data to be collected and provided to researchers 20

48 MPSC Case No. U Exhibit CP-1 (JE-1) Page 21 of 29 Remaining Challenges and Barriers All data necessary to complete the remaining reports in this project have been collected and analyzed There are no anticipated barriers to completing these works by the end of the project One challenge is to distill the conclusions of this project s studies into easily digestible points that provide useful guidelines to organizations considering installing workplace charging. Care must be taken not to overstate the applicability of the results, in light of the limitations of the studies with respect to the following: Samples were not representative of the overall PEV market Only two PEV makes/models were studied included Only early adopters studied 21

49 MPSC Case No. U Exhibit CP-1 (JE-1) Page 22 of 29 Proposed Future Work From Phase I, one additional paper on electricity demand from workplace charging will be completed The summary report of key take-aways for Phase III will be completed for use by DOE Workplace Charging Challenge staff The author recommends that DOE fund additional workplace charging studies to understand how the use and value of workplace charging changes as the PEV market evolves 22

50 Summary MPSC Case No. U Exhibit CP-1 (JE-1) Page 23 of 29 Workplace charging has been proposed as an important part of the charging infrastructure necessary to support PEV adoption Using data collected from large PEV infrastructure demonstrations, the charging and driving behavior of >700 PEV drivers with access to workplace charging was analyzed to understand how they used workplace charging. Case studies on the use of charging stations at individual work sites were also performed. Workplace charging infrastructure was highly used Leaf and Volt drivers performed nearly all charging at home and work on work days and only slightly less on non-workdays Workplace charging enabled range extension for Leaf drivers 14% of Leaf drivers needed to charge at work to complete their daily commutes on most days. 43% of vehicles needed workplace charging to complete their daily driving on some days On days when Leaf drivers needed to charge at work, workplace charging extended their range by an average of 15 miles (21%) Use of workplace charging varied based on many factors, including commuting distance, the cost to charge at work, the ratio of vehicles to charging units, and policies for use 23

51 MPSC Case No. U Exhibit CP-1 (JE-1) Page 24 of 29 TECHNICAL BACK-UP SLIDES 24

52 MPSC Case No. U Exhibit CP-1 (JE-1) Page 25 of 29 The EV Project Purpose is to build mature EV charging infrastructure in 17 US regions and study: Infrastructure deployment process Customer driving and charging behavior Impact on electric grid 12,000+ AC level 2 charging units, 100+ DC fast chargers 8,000+ Electric drive vehicles INL data collection Jan 2011 Dec 2013 Project partners: ChargePoint America Deploy 4,700+ residential and public AC level 2 charging units in 11 US regions Study customer usage of residential and public infrastructure INL data collection May 2011 Dec

53 Infrastructure Deployment in The EV Project through December 2013 MPSC Case No. U Exhibit CP-1 (JE-1) Page 26 of 29 26

54 Infrastructure Deployment in ChargePoint America through December 2013 MPSC Case No. U Exhibit CP-1 (JE-1) Page 27 of 29 * All units are AC Level 2 Dual-port units count as 2 units 27

55 MPSC Case No. U Exhibit CP-1 (JE-1) Page 28 of 29 Geographic Distribution of Vehicles Number of EV Project Nissan Leafs with access to workplace charging by area 28

56 MPSC Case No. U Exhibit CP-1 (JE-1) Page 29 of 29 Percent of Charging Events by Location, Power Level, and Time of Day 84% 4,038 Leafs 16% 87% 1,867 Volts 13% 29

57 MPSC Case No. U Exhibit CP-2 (JE-2) Page 1 of 18 ENGAGING UTILITIES AND REGULATORS ON TRANSPORTATION ELECTRIFICATION Nancy E. Ryan, Director of Policy and Strategy Luke Lavin, Associate Energy and Environmental Economics This paper presents analysis demonstrating that electrification of passenger vehicles could benefit utility customers, shareholders, and vehicle drivers. Realizing these benefits will require innovation in utility practice and regulatory policy. Across the U.S., there is an increasingly clear public policy case for electrifying passenger transportation. Plug-in electric vehicles (PEVs) 1 can be a near-term option for improving local and regional air quality. 2 A growing chorus of studies finds that electrifying passenger transportation is essential to strategies to reduce greenhouse gas (GHG) emissions to very low levels by mid-century. 3 Although PEV sales are growing rapidly, their adoption will likely need to increase by an order of magnitude over the coming decade to reach levels consistent with public policy goals. Electric utilities are critical actors in shaping the speed, cost, and environmental impacts of transportation electrification. Through outreach, education, and direct incentives, utilities can accelerate PEV adoption. Through rate designs and programs, utilities can encourage charging behavior 1 Throughout this paper, PEV refers to both plug-in hybrid electric vehicles (PHEVs) and full battery electric vehicles (BEVs). 2 As has been argued in a number of studies, whether and the extent to which PEVs reduce criteria pollutants (SO 2, NO 2, O 3, PM, CO) depends primarily on generation mix. In coal-dominant regions, higher penetrations of PEVs are generally thought to increase SO 2 but reduce CO and, depending on controls, NO x and PM. For the case of Texas, see Brice G. Nichols, Kara M. Kockelman, Matthew Reiter, Air quality impacts of electric vehicle adoption in Texas, Transportation Research Part D: Transport and Environment 34 (2015): From a forward-looking perspective, the environmental ambiguity of PEVs in coal-dominant grids is less a case against PEVs and more a rationale for reducing the environmental impacts of coal. 3 See, for example, James H. Williams et al., The Technology Path to Deep Greenhouse Gas Emissions Cuts by 2050: The Pivotal Role of Electricity, Science 335 (2012): 53-59; Max Wei et. al., Deep Carbon Reduction in California Require Electrification and Integration Across Economic Sectors, Environmental Research Letters 8 (2013); Jane Long et. al., California s Energy Future: A View to 2050 (Sacramento: California Council on Science and Technology, 2011); Christopher Yang et al., Meeting an 80% reduction in greenhouse gas emissions from transportation by 2050: a case study in California, Transportation Research Part D: Transport and Environment 14 (2009): ; M. Melaina and K. Webster, Role of fuel carbon intensity in achieving 2050 greenhouse gas reductions within the light-duty vehicle sector, Environmental Science and Technology 45 (2011): ; International Energy Agency, Transport, Energy, and CO 2: Moving Towards Sustainability (Paris: OECD/IEA, 2009); National Research Council, Transitions to Alternative Vehicles and Fuels (Washington, DC: The National Academies Press, 2013). 1

58 MPSC Case No. U Exhibit CP-2 (JE-2) Page 2 of 18 that reduces rates for other customers, provides value to shareholders, minimizes costs to vehicle owners, and reduces criteria pollutant and GHG emissions. To date, many utilities have taken a cautious, reactive approach to vehicle electrification. This paper argues for engaging utilities to develop a more proactive approach, based on the potential nearer- and longer-term benefits that PEVs provide to utility customers and shareholders, PEV owners and society at large. To explore the utility and societal case for transportation electrification, this paper draws from the results of recent studies conducted by Energy and Environmental Economics (E3). Section 1 establishes the public policy case for longer-term electrification of passenger vehicles in the U.S. Section 2 describes the potential economic benefits of PEVs to utility customers, shareholders, and vehicle owners. Section 3 examines how changes in rate design and utility programs can help utilities achieve these benefits. Section 4 distills key issue areas for engaging utilities and regulators on PEVs going forward. 1 The Public Policy Case for PEVs The public policy case for PEVs is mainly grounded in their environmental benefits zero or near-zero tailpipe emissions and, with a shift to non-fossil fuel sources of electricity generation, low overall emissions. In regions of the U.S. that have difficulty attaining compliance with federal air quality standards, such as southern California, accelerating PEV adoption is a near-term strategy for moving toward compliance. 4 Over the longer term, electrifying passenger transportation is likely to be a critical element of efforts to minimize the risks of climate change. This section focuses on the latter, drawing on a study E3 conducted as part of the UN-sponsored Deep Decarbonization Pathways Project (DDPP). 5 The premise of the DDPP, a collaborative effort of research teams from the 15 largest GHG emitting countries, was to ask each country team to develop technologically feasible pathways for reducing energy-related CO 2 emissions to levels consistent with a 2 degree Celsius (2 C) increase in global average surface temperatures. E3 led the U.S. DDPP study, in collaboration with Lawrence Berkeley National Laboratory and the Pacific Northwest National Laboratory. Electrifying passenger transportation was necessary to meet a 2 C 2050 target in all of the scenarios E3 examined as part of this study. The logic is straightforward. Passenger vehicles account for just under 20% of U.S. CO 2 emissions, and their emissions currently exceed the total, economy-wide 2050 target. [3] CO 2 emissions from mobile sources like passenger vehicles cannot be controlled, which means that passenger transportation will need to shift to other, lower carbon energy sources. Biofuels are likely to have higher value as a low carbon fuel in other sectors. The remaining low-to-zero carbon primary energy sources renewable energy, nuclear, and fossil fuels with CO 2 capture all must be converted 4 For example, the California Air Resources Board has determined that, to attain ozone standards by 2032, Nitrogen Oxide (NOx) emission reductions in the South Coast Air Basin and San Joaquin Valley Air Pollution Control Districts will require virtually all light, medium, and heavyduty vehicles to be zero or near-zero emission.. 5 Sustainable Development Solutions Network (SDSN) and Institute for Sustainable Development and International Relations (IDDRI), Pathways to Deep Decarbonization (New York and Paris: SDSN and IDDRI, 2014), [3] The U.S. Energy Information Administration (EIA) estimates that light-duty vehicles accounted for 1,026 MtCO 2 (19%) out of a total of 5,426 MtCO 2 in Data are from the Annual Energy Outlook 2014, E3 used a 2050 target of 750 MtCO 2 for energy-related CO 2 emissions in the DDPP study. 2

59 MPSC Case No. U Exhibit CP-2 (JE-2) Page 3 of 18 to electricity before they can be consumed by end users. Although, in principle, this low carbon electricity can be further converted into hydrogen to power fuel cell vehicles, in most of the cases E3 examined PEVs were the dominant passenger vehicle technology. 6 Electrification of the passenger vehicle fleet, as well as electrification of other traditional uses of oil and gas, drives a significant increase in electricity demand in the U.S. between 2030 and 2050, shown in Figure 1 for a high renewables case. Because of dramatic improvements in residential and commercial end use efficiency, most of the growth in electricity demand results from new kinds of loads (e.g., for industrial customers) or new kinds of customers (e.g., PEVs). By the mid- to late-2030s, passenger transportation is an important electricity consumer. In this case, the freight transportation sector also becomes a significant source of electricity demand by 2050, though this is primarily through production of electric fuels (e.g., hydrogen, synthetic natural gas). Figure 1. Electricity Demand by End Use Sector, E3 U.S. DDPP Report s High Renewables Case 10,000 9,000 8,000 Electricity Demand (TWh) 7,000 6,000 5,000 4,000 3,000 2,000 1, Residential Commercial Industrial Passenger Transportation Freight Transportation 6 For more on these cases, see the U.S. DDPP report, 3

60 MPSC Case No. U Exhibit CP-2 (JE-2) Page 4 of 18 Figure 2. Light Duty Vehicle Sales and Vehicle Fleet, E3 U.S. DDPP Report s High Renewables Case The necessary timing of PEV adoption to meet a 2 C CO 2 target by 2050 is governed by stock-turnover dynamics for passenger vehicles. Because passenger vehicles have year lifetimes, annual sales the number of new vehicles purchased and old vehicles replaced are a small share of the total fleet. Even rapid growth in sales requires many years to have a significant impact on the composition of the vehicle fleet. In all of E3 s cases, a nearly full turnover of the U.S. passenger vehicle fleet is necessary to achieve the target by 2050 (Figure 2). With this constraint, more rapid growth in PEV adoption could wait until the early 2020s. However, by the end of the decade PEVs would need to account for almost all new vehicle sales. Such a dramatic scale-up of PEV adoption suggests the need for more proactive nearer-term policy and regulatory innovations and engagement with utilities, in key leading states, to support longer-term electrification of passenger transportation. As described in the next section, these efforts can be oriented around the potential benefits that PEVs provide to utility customers, shareholders, and vehicle owners in the near to medium term. 2 Potential PEV Benefits to Utility Customers, Shareholders, and Vehicle Owners PEVs offer different kinds of potential benefits to utility customers, shareholders, and vehicle owners in the near to medium term. For utility customers, PEVs can lower rates by improving asset utilization and decreasing costs. For shareholders, they can increase returns and present a new source of growth and investment. PEV owners realize fuel cost savings, through improvements in vehicle efficiency, and may 4

61 MPSC Case No. U Exhibit CP-2 (JE-2) Page 5 of 18 also benefit from utility and other incentives. This section provides an overview of potential nearer-term PEV benefits from each of these different perspectives. 2.1 Benefits to Utility Customers Electricity demand varies significantly across seasons, kinds of days (weekdays, weekends, holidays), and over the course of a day. The example in Figure 3, for the California Independent System Operator (CAISO) region, illustrates the large differences in demand that occur between the highest and lowest load days, and between nighttime and daytime demand on high load days. Because electricity infrastructure power plants, transmission lines, distribution systems is built to meet peak demand, large differences in the timing of consumption mean that this infrastructure is frequently not used at its full capacity, resulting in higher costs per kilowatt-hour (kwh) of electricity sales. 7 PEVs often have considerable flexibility in when they are charged, providing an opportunity to incentivize charging at offpeak times when capacity utilization is low. 8 If they are charged off-peak and improve capacity utilization, PEVs lower costs, which translates to lower rates for customers. If PEVs are charged during local or total system peaks, they trigger investments in transmission and distribution infrastructure and procurement of new generating capacity, raising costs for customers. For utilities, a goal should be to ensure that the net benefits (incremental benefits minus incremental costs) to customers are positive. Figure 3. CAISO Control Area Highest and Lowest Load Days, 2011 Demand (MW) 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, Hour 30-May 7-Sep 7 Capacity utilization in electricity sectors is frequently measured in terms of load factor, the ratio of average to peak demand. For the average American utility, load factor has hovered around 60%, a relatively low level of utilization, since the late 20 th century. See Edison Electric Institute, Statistical Yearbook of the Electric Power Industry. 8 For more information on the possibilities for and benefits of encouraging off-peak charging, see Jeff Berkheimer et al., "Electric Grid Integration Costs for Plug-In Electric Vehicles," SAE International Journal of Alternative Powertrains 3 (2014):

62 MPSC Case No. U Exhibit CP-2 (JE-2) Page 6 of 18 Figure 4. Utility Net Revenues from PEV Adoption, E3/ICF CalETC Study 9 PEVs are a new source of revenue for utilities, but charging them increases generation (capacity and energy) and infrastructure (transmission and distribution) costs. For PEVs to provide benefits to all utility customers the revenues collected from PEV owners for charging must exceed the cost of serving the new load. In a recent study for the California Electric Transportation Coalition (CalETC), E3 assessed the net benefits of PEV adoption under California s Zero Emission Vehicle Program (the ZEV Program) 10 using standard regulatory cost benefit tests. Typically used to assess the cost-effectiveness of energy efficiency programs relative to investments in new power plants, these tests provide a window into the impact of new PEV load from a variety of perspectives. Figure 4 addresses the question of whether a representative California utility s customers are better or worse off as a result of growing PEV charging load. Simply put, this comparison shows whether PEV customers contribute more revenue to utilities than the cost of serving them. The figure shows estimated utility revenues, costs, and net revenues associated with PEVs under two typical residential tariffs tiered and time-of-use (TOU) rates 11 with net revenues ranging from $2,788 to $9,799 over the life of the vehicle, depending on rate structure. Revenues and net revenues are higher under tiered rates, but lower under TOU rates as PEV owners are allocated a larger share of cost savings through 9 The comparison in Figure 4 is more formally known as a Ratepayer Impact Measure (RIM) Test. It is meant to answer the question of whether customers who adopt a technology or measure (e.g. PEVs, rooftop solar PV) are increasing or decreasing rates for customers of the same utility service provider who do not adopt the technology or measure. It does not directly measure broader system-wide or societal impacts, which would be appropriately accounted for using the Total Resource Cost (TRC) or Societal Cost (SC) Tests. Figure 5 displays results from a SC Test. 10 See 11 Most residential customers of California IOUs are served on steeply inclining block tiered rate schedules. PEV owners have the option to take service on TOU rates. Despite the fact that many California PEV owners would realize significant monthly bill savings from opting into TOU rates, most remain on standard tiered rates. See Application of Southern California Edison Company (U 338-E) for Approval of its Charge Ready and Market Education Programs, 6

63 MPSC Case No. U Exhibit CP-2 (JE-2) Page 7 of 18 lower off-peak rates. In both cases, there are positive net revenues to the utility, part or most of which can then be shared with customers as reductions in rates. Utilities and their regulators can shape both the size of net benefits and how they are allocated. 2.2 Benefits to Utility Shareholders In an era of declining utility sales, where growth in energy efficiency and behind-the-meter generation are posing a threat to the traditional utility business model, PEVs represent a new opportunity for growth and innovation. Growth in electricity demand from PEVs can benefit utility shareholders in multiple ways. Part of the potential cost savings from improved capacity utilization, described in the previous section, can be shared with shareholders. For instance, an earnings sharing mechanism, commonly used in performance-based ratemaking, would allow a portion of utility cost savings to translate into higher return on equity. Shareholders also benefit from the need for nearer- and longer-term investment associated with PEVs. In the near-term, utilities may see significant opportunities to invest in charging infrastructure, depending on regulatory rules. In the longer-term, sustained growth in PEVs will require upgrading and modernizing distribution systems. Greater use of information and communications equipment in distribution operations will allow for more optimal use of PEVs as a flexible load, providing cost savings to customers over the longer term. These longer-term savings, combined with nearer-term savings from improved capacity utilization, provide a source of downward pressure on rates that can offset the costs of increased investment. Potential shareholder benefits have, by and large, not yet spurred sufficient interest for utilities to develop proactive strategies around PEVs. Many utilities remain focused on short-term, traditional areas of business that have greater revenue and regulatory certainty. In a number of states, utilities do not have clear incentives for PEVs, and the value proposition to shareholders thus lacks a more solid grounding. Many of the capital investment opportunities associated with PEVs are predicated on sustained growth in PEVs, creating a chicken-and-egg problem. Overcoming these obstacles requires changes in regulation. These changes should not focus narrowly on providing incentives for growth, but rather on the quality of growth and value to customers. 2.3 Benefits to Vehicle Owners For PEV owners, benefits are largely from fuel cost savings and utility incentives. Savings on gasoline are a significant benefit to PEV vehicle owners, which must be balanced against the higher upfront cost of the vehicle. These fuel savings result primarily from the higher energy efficiency of PEVs. For travel in electric mode, PEV owners generally have to purchase around 60% to 70% less energy per mile than would be required for a conventional gasoline vehicle. 12 Although electricity is often slightly more 12 For instance, a conventional car with a fuel economy of 30 miles per gallon uses around 4 megajoules (MJ) of purchased energy per mile. By contrast, a comparable electric vehicle that uses 0.35 kwh per mile and has a charging efficiency of 85% will use 1.5 MJ of purchased energy per mile while in electric mode. 7

64 MPSC Case No. U Exhibit CP-2 (JE-2) Page 8 of 18 expensive than gasoline per unit of energy, 13 this significant improvement in efficiency leads to operating cost savings. The fuel cost savings to vehicle owners comprise a large share of the net societal benefits from PEVs. Figure 5, also from the CalETC study, illustrates this for residents of a representative California utility s service territory, again using tiered and TOU rates. While PEVs do provide environmental and energy security benefits for a state s residents generally, the vast majority of benefits are from gasoline savings and federal incentives that accrue to vehicle owners. Net societal benefits are higher when PEVs are served on TOU rates because of the cost savings (productivity improvements) from improved capacity utilization. Figure 5. Illustrative Societal Net Benefits from PEV Adoption, E3/ICF CalETC Study Vehicle owners can also benefit from utility outreach programs and direct incentives. Even in cases where PEV adoption would save customers money, they may choose a conventional car or light truck because of the uncertainty surrounding costs and charging options. Because of the complexity of retail rate structures, many customers are not likely to be able to calculate their annual cost savings from a 13 The average residential rate in the U.S. was $0.1188/kWh, or $0.0330/MJ, in 2012; the average price for gasoline (all grades) was $3.68/gallon, or $0.0307/MJ, in Data are from the EIA website, 8

65 MPSC Case No. U Exhibit CP-2 (JE-2) Page 9 of 18 PEV; nor are many customers aware that they could, in principle, charge a PEV with a level 1 charger without any changes in their electrical wiring. 14 Utilities may also provide direct incentives to PEV owners, either for charging equipment or for the vehicle itself. Georgia Power, for instance, currently provides rebates on residential, workplace, and community charging equipment. 15 Revenues to support both customer awareness and direct incentive programs can be justified through potential cost savings to customers. The regulatory principle for this the net benefits test is based on the notion that existing customers should be willing to share some of the cost savings that result from new customers to attract those customers. 3 Achieving Consumer and Shareholder Benefits of PEVs The financial benefits of PEVs either in the nearer or longer term will not necessarily materialize as a matter of course. Achieving them will, in many cases, require regulatory changes that better align the interests of utility customers, utility shareholders, and vehicle owners. In particular, it will require efforts to encourage vehicle owners to charge in a way that maximizes the net benefits of PEVs to the electricity system ( smart charging ). This section describes how smart charging can limit cost increases associated with PEVs in the near term, and improve utilization of renewable energy generators in the longer term. 3.1 Nearer Term: Limiting Cost Increases through TOU Rates Much of the initial concern with PEV cost impacts has focused on distribution systems. For instance, as California prepared for the new generation of PEVs to begin arriving in 2010, a major uncertainty was whether the distribution system, especially in older residential neighborhoods, would be able to support charging. Utilities worried about adverse effects on safety and reliability, as well as the potential expense of spreading the costs of any necessary upgrades across their entire customer base. The California Public Utilities Commission (CPUC) ordered the utilities to track PEV-related upgrade expenses in order to provide an empirical basis for setting policy on upgrade costs. Reports subsequently submitted to the agency show that so far these costs have been negligible. 16 Going forward, however, PEV charging will eventually strain the distribution system and drive higher costs if not properly managed. E3 and ICF s analysis in the CalETC study examined the distribution system impacts of PEV charging under a range of assumptions for PEV adoption in California through To determine when residential distribution circuits would start to become overloaded due to PEV charging, E3 and ICF used 14 Other studies have shown that public awareness of the availability and benefits of PEVs is a significant barrier to PEV adoption. See Committee on Overcoming Barriers to Electric-Vehicle Deployment, Overcoming Barriers to Electric Vehicle Deployment (Washington, DC: The National Academies Press, 2013). 15 See 16 The most recent of these reports concludes that, of the approximately 100,000 PEVs in investor-owned utility territory, only 126, or 0.1% have required a service line and/or distribution system upgrades. See For the original decision, see For reports filed by utilities, see and 9

66 MPSC Case No. U Exhibit CP-2 (JE-2) Page 10 of 18 actual data on the topology of participating utilities distribution systems, projected load growth from PEV charging and simulated PEV deployment based on the geographic pattern of hybrid vehicle ownership. Even under rapid PEV adoption (7 million PEVs in 2030), few major residential distribution system upgrades were needed until the 2030 timeframe. As shown in Figure 6, projected upgrade costs were more than 60% lower when PEV owners were assumed to be mostly served on TOU rates than if they took service on flat or tiered rates. Figure 6. Present Value of Estimated Distribution System Upgrade Costs, E3/ICF CalETC Study 17 $0.40 Distribution Upgrade Costs (PV $Billion) $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $0.00 Tiered Flat Mixed TOU Improvements in charging technology are enabling more price-responsive charging among PEV owners. For instance, most PEVs have on-board chargers that allow charging times to be programmed either within the vehicle or remotely via an internet-connected device. In other words, to take advantage of off-peak TOU rates vehicle owners do not need to plug in their vehicle at the beginning of an off-peak period; instead they can keep their vehicle plugged in and program it to only charge during the off-peak period. With these kinds of enabling charging technologies, some of the available evidence thus far suggests that PEV customers can respond to TOU rates This figure is based on the CARB Most Likely Adoption Case, or 2.2 million PEVs in For instance, in the DOE-funded EV Project offered subsidies for home charging equipment to purchasers of Nissan Leaf and Chevy Volt vehicles in exchange for allowing metering of their PEV charging consumption. Variations in the tariffs available for PEV charging across the participating regions created a natural experiment to assess the impact of TOU rates on charging behavior. In Washington, D.C., which did not offer TOU rates, customers charged PEVs during the early evening peak. In San Diego Gas & Electric s service territory, which had a super offpeak rate that was aggressively marketed to PEV owners, customers charged in the early morning off-peak hours. See 10

67 MPSC Case No. U Exhibit CP-2 (JE-2) Page 11 of Longer term: Improving Renewable Energy Utilization Wind and solar energy are becoming an increasingly important part of the U.S. generation mix, and their shares are expected to continue to grow. Wind and solar output is both variable and uncertain, requiring changes in power system operations to accommodate them. Adding progressively more wind and solar energy to a region s generation mix changes net load the difference between total generation output (gross load) and the output of non-dispatchable generators, such as wind, solar, and nuclear. As the penetration of non-dispatchable resources grows, these changes can become significant. The system operator s challenge is to meet net load with dispatchable resources and price responsive demand. As a flexible, potentially price responsive, and potentially dispatchable load, PEVs may be part of the solution to this challenge. In a recent study for California s five largest utilities ( RPS study ), E3 examined the integration challenges of a higher renewable portfolio standard (RPS) for California in Solar, as the state s most abundant renewable resource, is key to this challenge. As Figure 7 illustrates, while adding solar generation reduces the need to run gas-fired peaker plants to meet the gross system peak on hot summer days (left-hand panel, highest load day ), it also creates the potential for over-generation and steep ramps on days with abundant sun and relatively low consumption (right-hand panel, highest ramp day ). Over-generation, also referred to as negative net load, occurs when non-dispatchable generators are producing more energy than the electricity system can absorb. Figure 7. Gross and Net Load for Highest Load and Ramp Days in CAISO System in 2030, E3 RPS Study Faced with over-generation conditions, and absent other solutions, system operators would need to curtail renewable generators to maintain reliability. Significant levels of curtailment increase the costs of renewable energy and introduce contractual risks for renewable energy developers and utilities that 19 See E3, Investigating a Higher Renewables Portfolio Standard in California, 11

68 MPSC Case No. U Exhibit CP-2 (JE-2) Page 12 of 18 could hamper the growth of renewable industry. E3 s RPS study identified several solutions to mitigate over-generation. One such solution is to exploit the flexibility of loads such as PEVs. The challenge of balancing power systems with high penetrations of solar energy turns the conventional system planning problem upside down. Instead of reducing flexible loads during daytime hours to respond to supply shortages, system operators need flexible loads that can ramp up during the middle of the day in order to mitigate solar over-generation. One way to accomplish this is through smart charging of PEVs at workplaces and other locations where they are parked for many hours during the day. Because they do not vary from day to day, or within pre-defined periods, TOU rates are an overly blunt instrument to incentivize charging during periods of over-generation. Dynamic rates, which vary by hour to reflect changes in marginal costs, could be a more appropriate tool. Figure 10 shows a hypothetical example that illustrates how dynamic rates can be used to enlist PEV owners in reducing over-generation. The figure is based on analysis E3 prepared in support of San Diego Gas & Electric Company s (SDG&E s) application to the CPUC for approval of a pilot program to test the effectiveness of dynamic rates for PEV charging; using a custom smartphone application, participating customers may actively manage charging or set parameters to respond passively to price signals. 20 With dynamic rates, customers are incentivized to charge during periods when the marginal cost of energy is lowest, which coincide with periods in which the share of output from non-dispatchable generators is highest. The figure shows a day with significant solar over-generation, indicated by the negative marginal cost of energy during midday hours. In the left-hand panel, the PEV customer faces a TOU rate schedule and charges mostly late at night. In the right-hand panel, the customer is enrolled on a dynamic rate that tracks the marginal cost of energy. 20 See Application of San Diego Gas & Electric Company (U 902 E) for Approval of its Electric Vehicle-Grid Integration Pilot Program, 12

69 MPSC Case No. U Exhibit CP-2 (JE-2) Page 13 of 18 Figure 8. Hypothetical PEV Charging under TOU and Dynamic Rates, E3 Support to SDG&E Dynamic Rates Pilot Application The above example assumes that PEV customers will, in fact, respond to price incentives by shifting charging to over-generation hours where the marginal cost of energy is low. SDG&E s proposed pilot program is designed to test this responsiveness. If PEV owners prove to be price responsive, improved utilization of solar energy effectively, more solar output (kwh) per unit of investment costs ($) will benefit all utility customers. If PEV owners are relatively price unresponsive individually, other strategies, such as creating the market and regulatory space for load aggregators to manage PEV loads, may be a better solution. Pilot programs like SDG&E s are an important testing ground for these questions. 13

70 MPSC Case No. U Exhibit CP-2 (JE-2) Page 14 of Future Study: Understanding Regional Renewable Integration Challenges More generally, the challenges of wind and solar over-generation vary across climate regions in the U.S. Figure 11 shows simulated weekly gross and net load shapes for four different regions in the Western U.S. under a scenario in which renewable energy accounts for 27% of the region s generation mix in The figures are drawn from E3 and DNV GL s study for the Western Interstate Energy Board (WIEB) on the adequacy of natural gas infrastructure to meet changing electric sector needs in the western U.S.21 The solar-dominant Desert Southwest (bottom left) shows a pattern of over-generation (green shaded area) similar to California (top left). This regular, diurnal pattern can potentially be mitigated by shifting daily charging schedules for PEVs via smart charging. Renewable generation and net load are very different in the Rocky Mountain (top right) and Pacific Northwest (bottom right) regions, where onshore wind is the dominant renewable resource. In those regions the system operator must be able to respond to occasional large ramps as the wind dies or picks up speed. Stationary storage, perhaps using recycled batteries from PEVs, may be a more suitable integration solution in these areas. This spatial variability in renewable energy integration challenges suggests the need for nearer-term, state-specific research and pilots to better understand the potential effectiveness of solutions like PEVs. Figure 9. Gross and Net Load Shapes from Four WECC Regions under High Renewables (27% WECC RPS) case in 2022, E3 and DNV GL WIEB Study 21 This study included two phases. For more on the study, and for the reports from each phase, see 14