Creating Opportunities

Positive impact of EVs on discoms and grid efficiency

The growing adoption of electric vehicles (EVs) in the country is anticipated to increase volatility in the grid to a certain extent and change the business model of utilities. Therefore, in order to plan ahead, it is important for utilities to understand the implications of the technology so as to remain competitive in the country’s continuously evolving energy landscape. Moreover, it is imperative to address the challenges associated with these EVs and tap the opportunities presented by them as an energy storage solution.

 

Impact of EVs on the grid

The growing fleet of EVs will require an increasing number of  EV battery chargers to be integrated into the existing power distribution system. Charging is bound to cause harmonic effects on the electrical distribution system. However, as per a report by the Forum of Regulators (FOR), the penetration of 5-6 million EVs is likely to require a maximum of 5,000 MW of additional capacity which would be equivalent to nearly 1.5 per cent of the total current installed capacity. Therefore, in terms of energy consumption, the impact of EVs on the grid at the national level is expected to be negligible.

While there are concerns with regard to its impact on load, the simulations performed by FOR indicate that a transformer can function safely if residential consumers and EVs share 60 per cent and 40 per cent load respectively. However, there could be harmonic distortions owing to peak EV usage during certain hours of the day.

That said, EVs are expected to complement the integration of renewable energy capacity into the grid, as there are strong inter-linkages between the two. The source of charging plays a crucial role in this case since, if thermal power were utilised for the purpose, it would offset the environmental benefits arising from EV usage. Therefore, renewables can be used for meeting the charging requirements of EVs. Further, these vehicles can be used as an energy storage solution and for providing ancillary services to the grid for instance, frequency regulation, and shaving peak demand power support to enhance operations and store capacity to secure the grid.

However, in order to avoid voltage imbalance, it is crucial that the battery charging of EVs is distributed throughout the day so that it can balance renewable energy generation. Therefore, EVs can play an important role in flattening the duck curve by drawing energy from the grid through a multitude of batteries, which can store the excess power during lean-demand hours and inject it back into the grid during critical peak hours, thereby enabling demand management. This “vehicle-to-grid” concept can help provide flexibility to the system and lead to better integration of intermittent power into the grid.

Implication for discoms

Power distribution is a regulated business and as per the provisions of the Electricity Act, 2003 and its amendment thereof, the charging of EVs entails supply of electricity. The discoms in the country have been struggling to reduce their aggregate technical and commercial (AT&C) losses and maintaining their financial health. To this end, the EVs are expected to open up extra revenue streams for the discoms in the country. Higher electricity consumption due to demand from EVs, can allow utilities to compensate for the loss in conventional revenues, which has been weighing down the power sector.

There has been a constant debate among the stakeholders in the sector whether the supply of electricity for EV charging should be treated as a sale or service. However, the Ministry of Power has recently clarified that a separate licence will not be required under the Electricity Act, 2003 for setting up a charging infrastructure. In fact, charging will be treated as a service and not as sale of electricity.

The FOR talks about business models that can be undertaken by utilities for setting up a charging infrastructure. These are as follows:

  • Distribution licensee-owned EV charging infrastructure: Under this model, the supply of electricity to vehicle owners would be a part of the activities of the distribution licensee.
  • Distribution licensee franchised EV charging infrastructure: The utility can also authorise a third party (franchise) to install and/or operate charging stations on its behalf in its area of supply. Further, the franchise can be a public-private partnership. Under this, the franchise will receive electricity at a single point as bulk supply.
  • Privately owned battery swapping stations: A battery swapping (or switching) station allows immediate swapping of a discharged battery with a fully charged one, eliminating the waiting period for charging the vehicle’s battery. A utility, distribution franchise or any other third party can aggregate the demand for batteries and set up battery swapping stations.

While the three business models will co-exist, utilities will have to decide which model to opt for depending on their requirements. Further, utilities will have to use a dynamic pricing model and smart grid tools to encourage charging stations to charge during non-peak hours, hence supporting peak load management. In this context, the regulatory bodies will have to create new tariff category for EVs by allowing the recovery of incremental cost of infrastructure through wheeling charges over and above the average cost of service. While the Delhi Electricity Regulatory Commission has introduced a special tariff for EVs, even at a central level, the Central Electricity Authority is in the process of coming up with a separate tariff category for EVs which will introduce “time-of-day” metering for charging of such vehicles.

Challenges and the way forward

The increasing adoption of EVs is expected to facilitate the integration of renewables into the grid through the creation of additional demand, which will be flexible in nature. Further, it will provide alternative revenue diversification opportunities for the discoms. However, the increased proliferation of EVs entails several risks pertaining to the transmission and distribution system. The electric grid must be made resilient enough to absorb variable loads from both renewables as well as EVs. Going forward, a dynamic pricing model, a smart grid network, and an appropriate regulatory framework and market design will help in the efficient management of these vehicles, which are expected to have a positive impact on the sector.

Abha Nirula

 

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