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EV trucks and buses need costly grid updates. Should utilities pay?

A new study says ratepayers will come out ahead if utilities take on the upfront costs to build much-needed charging infrastructure for electric fleets.
By Jeff St. John

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A row of white semitrucks connected to EV chargers
(Volvo North America)

If U.S. truck and bus fleets are going to go electric, they’ll need utilities to help them build the infrastructure to charge all of their vehicles. But should utility customers pay for the power-grid upgrades and on-site improvements necessary to make that happen?

The answer is yes, according to a new report from the Environmental Defense Fund that suggests utilities and their regulators may not have to choose between fleet electrification and ratepayers’ wallets. Its analysis of two New York state utilities found that ongoing electricity sales to medium- and heavy-duty electric vehicle fleets can more than make up for the upfront investment required to make that charging possible.

Utilities can invest in charging infrastructure without having a negative impact on ratepayers,” said Pamela MacDougall, director of grid modernization at EDF. It’s beneficial for the fleets, beneficial for the utilities and beneficial for the ratepayers — if it’s done well.”

Electric trucks, buses and vans are increasingly cost-competitive with diesel-fueled vehicles, particularly when their lower lifetime fueling and maintenance costs are taken into account. But the upfront cost of charging infrastructure can erase those advantages for fleet owners. Findings like EDF’s could help regulators in states with aggressive truck and bus electrification goals feel more comfortable giving utilities permission to expand and accelerate their EV charging site make-ready” spending plans, MacDougall said, thus alleviating a major barrier for fleet owners looking to go electric.

Although medium- and heavy-duty trucks and other larger vehicles make up less than 5 percent of vehicles on the road in the U.S., they account for nearly 30 percent of the country’s total transportation-sector greenhouse gas emissions. They also spew air pollution that disproportionately harms people living and working near highways, ports, distribution hubs and other heavily trafficked areas.

Fast-moving states such as California, Massachusetts, New Jersey, New York, Oregon, Vermont and Washington have all adopted Advanced Clean Truck” rules, which set deadlines to shift from fossil-fueled to zero-emissions vehicles over the next two decades, and a dozen other states are exploring similar mandates. If the U.S. Environmental Protection Agency’s newly proposed rules for vehicle emissions are put into effect, the demand for fleet charging could become even more pressing across the country.

But building out the utility capacity to support large-scale fleet charging can take years of advance planning and millions of dollars of investment. It also involves upfront site preparation and upgrades to accommodate an influx of EVs, including everything from installing new transformers to extending power lines.

These make-ready” costs, many of which are determined by utilities and thus out of fleet operators’ control, can add up to 30 percent or more of the total cost of charging installations at depots, warehouses, truck stops and other high-intensity charging sites, according to an EDF study of fleet electrification costs in New Jersey. Those expenses pushed otherwise favorable electrification economics out of reach for all but one of five fleet operators EDF surveyed for the New Jersey report.

So far, most fleet electrification projects have targeted sites that happen to have enough utility capacity to serve them, MacDougall noted. But a growing body of evidence, ranging from studies of infrastructure costs for charging along highways in the U.S. Northeast to the direct experience of projects in and around California’s busy coastal ports, indicate that meeting aggressive electrification targets will require much more grid capacity.

That’s where utilities need to play a more active role, she said. 

Rightsizing the grid needed for electric fleets

EDF’s analysis, conducted by Synapse Energy Economics, examines the economics of utility make-ready” investments for both private-sector and government-owned medium- and heavy-duty fleets. It uses data from New York utilities Con Edison, which serves New York City and environs, and National Grid, which serves swaths of the state’s more rural upstate regions, providing insight into both dense urban environments and more sparsely populated rural areas.

Across a range of cases, the results show that make-ready investment would yield a neutral-to-beneficial impact on rates” for utility customers through 2045, the date set for economywide decarbonization under New York state law. The precise balance between upfront make-ready costs and long-term payback via electricity sales depended on a number of factors, including the density of customers served compared to available grid capacity and assumptions on how often parked EVs charged simultaneously.

One major factor that Synapse modeled was the impact of managed charging,” or controlling when vehicles draw power to reduce the total grid load at charging sites.

Limiting those combined loads can allow utilities to reduce the scale and upfront cost of the upgrades needed at certain sites. The practice can also mitigate the grid impact of EV charging during high-demand periods, like hot summer days when air conditioning use spikes, and slash site hosts’ electric bills by reducing the sky-high demand fees utilities charge for peak electricity use — a major cost for EV charging sites.

Synapse Energy Economics simulated the impact of managed charging by reducing each vehicles’ peak electricity demand and extending total charging time by two hours per day. The result was a significant reduction in total upfront costs compared to unmanaged charging. Managed charging also reduces electricity sales revenue due to lower demand charges, but the end result is an overall increase in value to utility customers over time, as the two charts below show.

Chart of costs and revenue for utility investments in medium- and heavy-duty EV charging with unmanaged charging
(Environmental Defense Fund, Synapse Energy Economics)
Chart of costs and revenue for utility investments in medium- and heavy-duty EV charging with managed charging
(Environmental Defense Fund, Synapse Energy Economics)

In the near term, managing power demand at specific sites will be important for containing the scope of work needed to get them up and running. In the longer run, managed charging will be vital to preventing the growing number of EVs on highways and depots from overwhelming the grid.

That last point — grid reliability — is a major concern when it comes to electrifying medium- and heavy-duty vehicles.

The growing demand for charging power could eventually leave fleet operators stranded on overloaded grid circuits, according to 2021 study by National Grid and Hitachi ABB Power Grids of an unnamed U.S. Northeast metropolitan area. The analysis found that if the more than 50 medium- and heavy-duty commercial fleets in the area sought to switch to electric vehicles on the existing grid, a majority of feeders would be overloaded or at risk of overloading.

We can certainly meet the charging needs of electric trucks and buses,” said Brian Wilkie, National Grid’s director of transport electrification for New York. But to do it, we need to make smart, proactive investments to deliver power to where it’s needed.”

Aligning grid investments with clean transport goals

Some states have begun to authorize utility investments on this front.

California regulators have directed 70 percent of $1 billion in utility EV charging spending toward medium- and heavy-duty charging. Illinois has authorized utilities Commonwealth Edison and Ameren to conduct make-ready pilot projects for heavy-duty electric vehicles. New Jersey regulators released a revised proposal for similar utility charging investments in December. And New York state regulators opened a proceeding this month to address barriers” to medium- and heavy-duty charging.

Wilkie highlighted a bill now being considered in the New York state legislature that would order state transportation agencies and utility regulators to develop a joint highway and depot charging access plan” to assess the grid infrastructure needed to meet the state’s decarbonization goals.

The new EDF report shows that states may be able to go even faster on such efforts, because one of the key challenges with doing so — the impact on utility customers — has been shown to be a smaller issue than expected. In fact, these programs can be a benefit to ratepayers rather than a cost, if implemented correctly.

But creating structures that allow utilities to preemptively build out their grids in anticipation of growing demand for EV charging remains a complicated matter, said Daniel Bowermaster, head of electric vehicle research for the Electric Power Research Institute, a utility-funded nonprofit group.

How do you get the fleets to communicate with utilities on where they’re planning to go? How do you get the data required for utility interconnection to the fleet operators as smoothly as you can? Some of the steps aren’t yet finalized to the extent that a utility might wish they were in a perfect world,” he said.

Still, a more forward-thinking approach is likely to work better than today’s common method of allowing customers to add chargers until available grid capacity is used up, then sticking the next customer that has plans to electrify their fleet with the bill for a major grid expansion.

Is that the best way to do it or the fair way to do it?” he said. As a research group that doesn’t get involved in policy decisions, EPRI’s not going to say one way or the other. But at the end of the day, it’s about how you give the confidence to utilities, and those regulating them, to go ahead and build.”

Jeff St. John is director of news and special projects at Canary Media. He covers innovative grid technologies, rooftop solar and batteries, clean hydrogen, EV charging and more.