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How vehicle-to-grid technology could disrupt energy storage investment as we know it

If millions of electric vehicles are poised to connect to the grid, that changes expectations around stationary energy storage needs.

Lou Schick
Lou Schick
4 min read
How vehicle-to-grid technology could disrupt energy storage investment as we know it

Lou Schick is director of investments at Clean Energy Ventures. This contributed content represents the views of the author, not those of Canary Media.

Venture capitalists and other investors are struggling with how to identify good grid technology investments. It’s likely to be another decade before we have appropriate rules and designs to prepare our electrical grid for a clean energy future, which makes it nearly impossible to evaluate the risk of adopting new technologies. If emerging technologies get traction, they can have major effects on how the market evolves, even if they lack regulatory backing.

We at Clean Energy Ventures recently investigated how big an impact vehicle-to-grid technologies — which connect EVs bidirectionally to the electrical grid — could have on the “need” for grid storage, to hone our investment thesis in energy storage. (The storage sector is much bigger than batteries!)

The trick is to recognize that millions of EVs, each with potentially hundreds of kilowatt-hours of storage capacity, will be a very large determiner of grid needs and deployment. What happens if cars interact bidirectionally with the grid? What if a small fraction of EVs’ storage capacity can send power back to the grid when demand is high? We interviewed dozens of experts as part of our internal research and analysis to address these important questions.

Is vehicle-to-grid technology ready?

Yes. Small batches of bidirectional charging devices have been built and deployed for over a decade. The performance characteristics and requirements are very typical; the components are widely available commercially and in use for PV inverter applications everywhere. Even the plugs, safety standards and controls needed to scale vehicle-to-grid (V2G) solutions are very similar to mature technologies. Several startups such as Fermata Energy, Nuvve and Connect California have made systems with commercial intent to scale and get cheaper.

The only reason bidirectional charging devices are still somewhat costly is that they are not yet manufactured in large numbers. This could be fixed by one or two big players committing to the product and making large orders. Costs will not be bound by a new product learning curve but simply by sourcing and by supply chain players reacting to large orders. The important players in this space have already worked with automakers to access their application programming interfaces and pin down warranty requirements and safety specifications, so scaling can be near immediate.

Can we control discharge to the grid such that vehicle batteries are not degraded?

Again, yes. The car companies have engaged in partnerships and conducted public studies to show that the bidirectional charging and discharging that happen while EVs are plugged in are less demanding on batteries than driving. There’s anecdotal evidence that bidirectional charging even helps protect batteries. Today, work related to automaker warranties and application programming interfaces is entirely a commercial negotiation and no longer in technical discovery or proving grounds.

Is the available storage from V2G large compared to the projected needs?

You guessed it: yes. The number of “parked” EV batteries will be huge compared to grid storage needs. Estimates of future EV uptake vary widely, but overall they can be expected to underestimate the speed of adoption, just as most renewable energy growth predictions over the last decade came up short. Also, the mix of EVs is not dominated by Tesla or other trophy cars but by Nissan Leafs in the West and all manner of low-cost commuter vehicles in China.

The real issues will be around use cases. How much capacity will a car owner allow to be under the control of a grid operator or third-party aggregator? We assume 10 percent, but it could easily be higher depending on incentives. How visible will that capacity be to grid operators so they can dispatch it? That will depend on utility upgrades to local distribution (available with existing technology) and agreements on software standards.

What barriers exist to wider adoption of this tool?

Regulations and utilities are the main barriers. As with everything in the energy transformation, incumbents have rational risk aversion and a tendency to change slowly. Utility monopolies and captured regulators abet this. Worse, poorly thought-through, top-down mandates on utilities (often springing from frustrations with utility foot-dragging) don’t work in the marketplace. This is a political-economic problem. For investors, it’s concerning because most cannot easily influence or plan for regulatory sausage-making.

Which players are likely to win first?

V2G technology can be expected to take hold early in places with progressive regulators — like Germany and California — where other distributed energy resources are being heavily deployed, as well as in commercial fleets. While we wait for regulations to catch up, California has made moves to treat V2G as part of its Self-Generation Incentive Program, which encourages customers to generate electricity for the grid. In this setting, V2G can easily beat other technologies on a cost basis for peak-shaving and daily load-shifting. Industrial customers already negotiate bilateral electric deals outside of tariff structures, so they can move ahead of rate cases easily in these markets to set up new deals that incorporate V2G for their EV fleets. Watch for the flowering of software aggregators in California starting to use successful early V2G deployments.

The bottom line

Vehicle-to-grid will be real, big and disruptive. As you evaluate the future of energy storage, keep in mind that grid needs for standalone storage are likely to be smaller than imagined as V2G and other solutions have the potential to provide huge amounts of storage.

(Article image courtesy of Science in HD)

vehicle-to-gridV2Gelectric vehiclesEV chargingEnergy Storagebatteries

Lou Schick

Lou Schick is director of investments at Clean Energy Ventures. Trained as a physicist with 10 patents, Lou is an experienced technologist and investor in early and growth-stage energy companies.