Regulating EV Recharging

A feature on the New York Times website tipped me off to a debate that's brewing in California concerning whether and how the state's Public Utilities Commission (PUC) should regulate facilities and firms that will recharge the electric vehicles expected to dot California's roads within a few years. From my own experience in attempting to involve my former employer in the recharging infrastructure for the old GM EV-1 in the late 1990s, I knew this wouldn't be a simple matter, but I had little appreciation for the complexities that have emerged in the last decade. How this gets resolved will have enormous implications for automakers and incumbent utilities, as well as for start-ups such as Better Place that some would like to treat as regulated utilities.

The discussion with the PUC hinges on some very thorny questions: Is a company that buys electricity for resale to consumers for the purpose of recharging electric vehicles--which takes in both battery-electric vehicles and plug-in hybrids--more like a utility or a gasoline distributor or retailer? Who should pay for installing recharging facilities, and how--and from whom--should these parties recover their investment? Should a consumer who already uses large quantities of electricity at home and pays at the top rate tier, which can hit $0.40/kWh in some areas, qualify for discounted power to recharge an EV? How should a customer be billed when recharging outside the service area of the utility from which he normally buys power? The list of such questions is long, and looming behind them are larger questions about how best to gauge the effect of EV recharging on greenhouse gas emissions and air quality concerns, and to manage its impact on the regional generating mix, and on grid stability and reliability. Many EV advocates assume that EVs are inherently grid-stabilizing and renewable power-enabling, though it's not hard to construct scenarios in which the opposite could be equally true, if they're not implemented properly.

The emissions aspect becomes even more interesting in light of the views I saw expressed in a PUC filing by Tesla Motors, Inc., a Silicon Valley manufacturer of high-end electric sports cars that recently qualified for a half-billion dollars in low-interest expansion loans from the federal government. Tesla sees the generation of tradable credits under either cap & trade or the state's Low-Carbon Fuel Standard as a significant source of revenue for the owners of EV recharging facilities, and they might be right, though when I converted the federal estimates of emission allowance values under Waxman-Markey of around $15/ton of CO2 to cents per kilowatt-hour, using California's natural gas-dominated average generating mix, I came up with a value of less than a penny per kWh. I have to wonder how excited utilities will be to take on the cost and risk of putting in EV rechargers for such a small reward, if they can't also make a profit selling power to EV drivers.

The whole notion of regulating resellers of electricity to EVs as utilities also raises serious questions about the alternative business models now under consideration by companies such as Better Place. Would offering EV services on a cents-per-mile basis, rather than cents per kWh, be deemed sufficiently transparent, and would they have to negotiate their profit margins and investment recovery with the PUC? That sounds like a great way to make it harder for anyone new to the scene to compete with traditional utilities in this area.

Fairly soon the California PUC will resolve most of these questions and in the process largely define the environment in which EVs will emerge in the biggest early market for them in the US, potentially setting the standards for their use throughout the US and beyond. I don't have a horse in this race, but I will be watching the outcome with great interest.