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In the driving seat

"Companies must engage widely with other interested parties to anticipate future patterns of EV demand."



Utility WeekMark Fitch16 November 2011


Mark Fitch urges distribution network operators to take the lead on decarbonising transport.

To help achieve 80 per cent cuts in greenhouse gas emissions by 2050, the Committee on Climate Change has defined individual sector "pathways" for each of the emitting sectors. At present, the two largest emitting sectors are transport (22 per cent) excluding international aviation and shipping, and power (35 per cent).

The pathways of these two sectors are strongly linked. The decarbonisation of the electricity sector would provide an ultra-low-carbon fuel source to power our surface transport. Electricity already has the advantage of an established infrastructure, owned and operated by the distribution network operators.

The alternative option of biofuels raises concerns about sustainability and competition for resources between fuel and food. Likewise, hydrogen presents challenges by requiring a transport and delivery infrastructure as well as significant energy to produce it. The Committee on Climate Change therefore concludes that the most economic option for carbon abatement is to use electric vehicles (EVs). Indeed, the committee claims that the life cycle cost of an EV will converge with the internal combustion engine by 2020, enabling a potential 60 per cent penetration of new vehicles to be reached by the 2030s. Hydrogen and biofuels will play their part, but mostly as lower carbon fuels for heavier goods vehicles, with light vehicles (cars and vans) and rail moving over to electricity. 

This clearly has huge implications for the power sector, which must analyse the impact of EVs on existing business models, as well as anticipate the wider effect of the decarbonisation of transport. At the same time, the government believes the industry needs to invest £110 billion in the current decade to achieve a largely decarbonised power sector by 2030. 

The Committee on Climate Change analysis suggests that the power sector can cope with the demands associated with the switch to EVs. This assumes that the peak power requirements to support the charging of EVs overnight do not exceed that needed to meet the winter peak demand. However, this analysis fails to recognise the impact on the distribution networks. These networks must be able to cope not only with peak daytime flows of energy but also with peak evening flows to homes as people plug in their EVs.  

The networks will need to invest in and overhaul their infrastructure to meet these new demands. Specifically, they will need to overcome uncertainty around EV clustering. At the moment, they cannot be sure if, when or where clusters of EVs will appear on their networks. Individual EVs connecting at home within a street will generally be accommodated, but clusters can quickly lead to network congestion. To further complicate the situation, independent installers can add charge points without collaborating or consulting with the network companies.

To help manage the uncertainty, operators need to take three key steps. First, they must take a leadership role in the debate surrounding the transition to EVs. The low-carbon transition places distribution network operators at the centre of the decarbonisation of transport and they can lead developments across the EV value chain, supporting Ofgem and government transition plans. By linking new entrant providers of EVs, charge points and other energy services, they can help to ensure the system provides the right incentives. 

The volume of capacity that will be required will depend on the ability of the networks to lead the industry in encouraging and incentivising the uptake of integrated and controlled smart charging. This will allow them to moderate EV charging when the network is congested because EV charging may need to slow down or even stop during periods of high demand or shortages of low-carbon or low-cost energy supplies - for example, when it is not windy. Second, they must take advantage of the evolving economic regulatory framework. Ofgem is implementing changes to the process of setting the tariffs that network companies can charge customers. The new approach - RIIO - focuses on what network businesses deliver for the money they are allowed to charge customers. RIIO aims to facilitate the transition to the low-carbon economy and to deliver long-term value for money. The framework aims to improve the alignment between what the network companies do with what their customers want. These changes provide network operators with a once-in-a-lifetime opportunity to address the emerging challenges and create better ways to manage uncertainty.

The way companies engage with the new framework is critical to the success of the decarbonisation of transport. RIIO allows the networks to define what they will deliver and at what cost for the period to 2023. It also allows them to commit to strategies that have benefits beyond that period, reflecting the long-term view that is needed in evaluating the benefits of the low-carbon transition. Distribution network operators need to lead the way in defining the output measures they will be judged upon. These should reflect the need to prepare for decarbonisation of transport, and be linked to metrics that can be used to incentivise and create flexibility in revenues to reflect consumers' responses to policy changes. 

Third, companies must engage widely with other interested parties to anticipate future patterns of EV demand. They have traditionally based their investment on trends in long-term housing growth, economic growth and similar factors. All of these are typically slow-moving, allowing time to add capacity to their networks. 

The decarbonisation of transport could happen much more quickly and with less obvious leading indicators. There is no need for planning permission, no prior notification of purchases of EVs or installation of home charging points. Suppliers of these technologies may resist additional regulation, arguing that it would stifle growth. This means network companies will need to become more sophisticated in seeking alternative indicators of uptake, as simply being reactive may provide insufficient lead times to develop capacity. 

They must be able to draw on strong understanding of local issues and engage more with customers to understand and measure the attitudes towards the uptake of EV or alternatives. This understanding is crucial to allow the deployment of investment and resources to manage clusters as they emerge. 

Building a compelling case for investment will also require dialogue along the supply chain so that network operators can establish consensus for the need for network capacity. This will mean justifying both the volume of additional capacity and why it needs to be added now.

So, the challenge facing distribution network operators is clear and the imperative to build closer links with consumers, businesses and key industries across the decarbonised transport sector could not be more urgent. 

Mark Fitch is an energy expert at PA Consulting Group.

Contact the energy and utilities team

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