Response to CER Consultation CER/16/286 ESBN Electric Vehicle Pilot & Associated Assets Submission date: 25/11/2016 Submitted by: SEAI
SEAI Response to CER Consultation CER/16/286 ESBN Electric Vehicle Pilot & Associated Assets Summary Response Ireland is uniquely placed in Europe s emerging EV markets in so far that it has a single distribution system operator who, with the backing of our regulator, via ESB Ecars has shown leadership and determination to develop the infrastructure upon which a sustainable market for electric vehicles could be developed in Ireland. This group has progressed as far as it can on existing arrangements and it is now time to resolve uncertainty around ownership and operation of the charging network, and hence secure an appropriate funding regime necessary to enable Ireland to realise its EV ambitions. When Electric Vehicles (EVs) reach price parity with conventional Internal Combustion Engine Vehicles (ICEs) then it is reasonable to expect that an EV driver would be willing to pay similar costs for accessing chargers which provide equivalent driving range to traditional fuels. However at present, an EV requires up to 10,000 in subsidies to encourage consumers to purchase them. Given current manufacturing costs and trends, purchase price parity is not expected to occur for another 10 years so it may be the case that some form of subsidy may be required until then. At present, an EV driver using home charging exclusively at night rate electricity prices could save 70% or more on their annual transport fuel bill with respect to a modern diesel ICE vehicle. SEAI s own market survey indicates that running cost savings are by far the main reason why Irish consumers decide to purchase an EV. It is considered reasonable that at some point in the future these customers collectively would partially or fully pay for the necessary charging infrastructure. However, if it was attempted to put the entire cost of running and maintaining this infrastructure on the existing 2,000 EV customers today (new sales + second hand imports), then it is expected that the cost per customer would be so prohibitive that customers would avoid using the system or worse, incrementally return to using an ICE vehicle. SEAI consider that it would therefore most likely be counter-productive to the Government s overall EV ambitions should the CER decide to sell on or hand over the charging assets to a commercial entity at this stage of market development in Ireland. SEAI therefore proposes that, during the next phase of growth and operation, the assets should be put in the possession of ESB Networks and treated as a regulated asset. This will provide the ability to precisely determine how much of the cost should be shared with all electricity customers and how much should be placed on the EV drivers. This position should then be reviewed in 10 years time when it is expected that EVs could be closer to price parity and the number of EVs will be great enough to support full commercial operations. At that future point, the number of users will have grown and the vehicle costs will have reduced, therefore some locations will become commercially viable (e.g. Fast Charging stations) and some may still remain uncommercial (e.g. street charging). 1
Therefore even after 10 years time, some areas may still require public ownership or support to stay in operation. Currently the cost of accessing the charging infrastructure is free. It has been reported that this has led to cases of drivers excessively using chargers to avail of this. SEAI would therefore support the introduction of some form of low level minimum pricing such that it offers no advantage for a consumer to do this. Similarly there may be a case to consider time based pricing to prevent over use of critical Fast Chargers in order to give motorists fair access while reducing the threat of queuing. As this is such a rapidly changing sector, funds collected from DUOS charges should also be made available to perform studies and technology trials to ensure Ireland continues to invest in the correct mix of charging technologies. For instance will induction charging supersede simple conduction charging in the home and work environments? Will 350kW extreme fast chargers become the standard upper limit for EV manufacturer s post 2020? Additionally, a cooperative Steering Group should be established to recommend and propose areas where research funds should be used. This group should oversee the development of the regulated charging infrastructure, its costs, user chargers, reliability, identification of bottlenecks for investment etc. Given that Ireland is very much a technology taker with regard to EVs, it is essential that this activity has due regard to international activity and trends. ESB Ecars should be encouraged to use the intellectual property and expertise gained from the Pilot project and market these skills to other countries wishing to develop their own EV charging infrastructure. Key Points SEAI would strongly oppose a fully commercial Private Ownership model at this time. Given the nascent status of EV ownership, we firmly believe that this would not facilitate the Government s objective of accelerated deployment of EVs (i.e. BEV and PHEV of passenger car and light commercial van category) and would in fact set efforts back significantly. 1,770 EVs have been bought in Ireland since 2011 (see Fig. 1). Including imported vehicles, the total ownership figure is above 2,000. It is estimated that the operating cost alone for the current EV charging system is 1.5-2million per annum. Sharing this cost evenly amongst all drivers would imply a minimum fee per driver of 750 to 1,000 per annum just to support the network. This cost does not include the development costs required to build up the network further or investigate issues and solutions arising along the way. SEAI s market survey of EV drivers indicates that the promise of low running costs is by far the primary reason for their decision to purchase an EV. 2
A fully commercial infrastructure model would require both the operating and development costs to be recovered from the EV drivers alone. With so few drivers this burden will be too high for users to support. SEAI therefore recommends a regulated Public Ownership model similar to that used for the existing electricity distribution network and that all assets should be placed with ESB Networks. This Public model should lead the role out of infrastructure and continue until such time that EV price parity with conventional ICE vehicles is reached. A more detailed note is provided on this further within this document. This Public system should be operated in an open manner and allow Private Infrastructure developments to take place in parallel with it. As the technology is evolving in particular with respect to Fast Charging, Induction Charging and Vehicle to Grid, support for R&D activities including field trials should be made available via the regulated model in order to ensure that the electricity network is sufficiently prepared to accommodate their impacts and to avoid making wrong investments early on. Low level charging fees should be applied to the users of this public system in order to prevent nuisance charging or wasteful use of the infrastructure. These fees should be minimised such that they promote fair use of the charging assets but do not diminish the benefit of low running costs to drivers. For an example of minimum pricing, all chargers should include a price such that an individual choosing to use a public charger for a whole year would be expected to pay at least the equivalent price of a domestic user charging exclusively at home for the year. Further consideration such as parking times at critical places (street locations, fast chargers) could also be considered again with an appropriate stepping up of cost once a fair amount of time has been given to each user. Only the implementation of a Public Ownership model can ensure that the controlled development of user payment models can evolve in step with EV costs while protecting such a small nascent market. If prices are controlled for 10 years, then this will give the early adopter EV purchasers greater confidence that they will not suddenly be faced with prohibitively high running costs from a Private Operator. Given the importance of this small but growing market to Government ambition with regard to decarbonisation, we feel it is important that it is protected from the inevitable pressures associated with fully commercial ownership and operation at least in the short to medium term. The Public system should primarily include the Fast Charger, Street Chargers and Public Car Park networks. Subsidies should also be considered for Domestic, Commercial, Private Cars Parks and Shared Parking locations. A Steering Committee should be established to review all details associated with the Public Charger network. Specifically the deployment rate, delay/queuing rates, operation/maintenance costs, investment costs and the regulated customer user fees should be considered and approved by the committee each year and published in full. The fees should be minimised on the driver to encourage uptake and optimise infrastructure use with the remainder paid via DUOS fees. Any technology trials or research activities or studies should be 3
reviewed and approved by the committee to ensure that the appropriate investments are made to prevent technology obsolescence and poor infrastructure investments. The committee should ensure that Private investment can happen in parallel and is not impeded by the Public Charger network. Information from the charging network (including delay times if possible) should be actively made available to vehicle manufacturers IT navigation systems and users. Membership should include ESBN, CER, SEAI, Leading Car Manufacturers, SIMI and the EV Association Ireland. SEAI supports the request to recover 6.1m via DUOS charges for the ESB Group to cover its unexpected expenses incurred during the delivery of the Pilot programme. This recovery should be spread appropriately over a period of years so as not to cause an undue rise in DUOS charges in any single year once the costs for the proposed regulated activities are considered. Approval for this payment however should have due regard to the performance of the ESB Group in the upkeep of the network already in place. 700 600 500 PHEV BEV 400 300 200 100 0 2011 2012 2013 2014 2015 2016 Fig. 1 New EV sales in Ireland for BEV and PHEV types. BEV sales in Ireland have declined significantly in 2016. Based on market surveys and discussions, this can be attributed to a lack of BEV models to choose from, infrastructure concerns and also the impact of exchange rates. 4
Choosing the Appropriate Time to Move from Public Ownership to a Full Commercial Ownership Model Electric Vehicles comprise Plugin Hybrid Electric Vehicles (PHEVs - Petrol/Diesel engines with battery storage to provide electric driving range of 50km typically) and Battery Electric Vehicles (BEVs Full electric vehicles with electric driving ranges of 170km to 600km). EVs receive capital supports because their unsubsidised market prices remain significantly higher than conventional ICE vehicles at present. EVs currently receive up to 10,000 in subsidy from VRT relief and capital grant from SEAI. The VRT subsidy for BEVs is set to continue until at least December 2021 as announced in Budget 2017. Based on feedback SEAI has received from its partner member countries in the International Energy Agency Hybrid Electric Vehicle (IEA HEV) group and recent studies on battery cost development rates, it is considered that an EV may reach the same capital cost as an equivalent conventional petrol or diesel car around the year 2025. BEVs offer clearer energy and environmental benefits than PHEVs as the PHEV driver has the choice of using electricity or fossil fuel. Out of the 1,770 EVs bought as new in Ireland, 80% of these are BEVs (see Fig. 1) which is a favourable position to be in with respect to the greater benefits of the BEV. Consequently however, BEV users are more heavily dependent on the need for reliable and widely available charging infrastructure. For long journeys in particular, they require chargers available at safe locations when they get to their destinations and they require access to Fast Chargers along the way without long delays. This will remain a particular sensitivity for drivers until such a point in time as battery ranges grow to a point where, due to Ireland s scale, the need for additional charging points will likely taper over time. SEAI s own recent spot check on 14 th October 2016 indicated that only 80% of the Fast Chargers were available to drivers which may be a contributing factor in the reduction in BEV sales in Ireland this year (see Fig. 1). This level of reliability must improve if we are to encourage greater BEV (in particular) use in Ireland. It is recognised that settling this current ownership question in a timely fashion will of course help to deliver a quicker solution to these reliability concerns. Drivers purchasing EVs have indicated that the single greatest reason why they decided to purchase an EV was because of the very low running costs. This primarily includes the low energy costs which are typically 70% less than the price spent on equivalent diesel fuel each year at current oil prices and assuming that only night rate electricity is used for the electric car. Any threat to this saving in the context of the high capital premium already paid will jeopardise the role out of EVs in Ireland. With so few EVs on the road at present, then under a full commercial model, the cost shared per driver must be high in order to pay for the operation, maintenance and future development of the network. However, as the number of users grows, then the utilisation of the assets increase and the cost per user will fall as shown conceptually in Fig. 2. At the same time, the purchase price of the EV will be reducing and the EV drivers will be eventually be willing to pay fees proportionate to those currently paid by ICE drivers in particular those costs for longer journeys. So before this tipping point is reached we would have an Uncommercial Market for EV infrastructure and after it we would see a Commercial Market emerge. 5
Therefore at this moment in time, a Fully Commercial model is unlikely to succeed until the number of cars greatly increases. Additionally there would be no profit to invest in any new infrastructure and growth in EV numbers would stagnate or worse still fall. It is worth mentioning that again via SEAI s participation in the IEA HEV, it is recognised that there is no leading mechanism to finance the development of infrastructure. The vast majority of countries foresee the requirement to subvent the cost of infrastructure during these early stages at least. Some states in the USA for instance have given permission to their network operators to include charging infrastructure in their regulated asset base. The Netherlands and UK offer grant support to local authorities or regional projects. However, this runs the risk of producing regional islands with poor interoperability and a lack of a uniform approach. Establishing the infrastructure via the DSO avoids this problem and results in a well-integrated robust common infrastructure. Sweden has established the Climate Step group which is a cooperative body to oversee the deployment and placement of charging infrastructure across the country. Therefore SEAI strongly recommends that at this time, a Public Ownership model is applied (similar to Option 1 in the Consultation). Some pricing should be applied to the users in order to promote sensible and fair usage only of the infrastructure. The remaining costs to operate and develop the system (which will be the majority of the costs initially) should be recovered from the DUOS fees as charged by ESB Networks. A Steering Committee should be established to determine what this minimum user fee for the infrastructure should be each year. Support for R&D activities should also be included in the costs recoverable by ESB Networks each year. The Committee should review and approve study topics and propose topics/activities for further investigation by the operator (ESB Networks/Ecars). 6
Cost per Vehicle for Infrastructure Increasing --> Uncommercial Market Commercial Market Acceptable Cost per Annum Number of EVs Increasing --> Fig. 2 Illustrative cost per driver for Charging Infrastructure As more drivers emerge, a tipping point must be reached when infrastructure utilisation becomes optimum and cost shared by each driver falls. In parallel, EVs eventually reach price parity with ICEs, and in this case the EV driver should be capable of paying prices comparable to that spent on fossil fuels for equivalent long distance journeys (i.e. requirements not met by domestic charging) each year. 7