Silent movers: electric cars are coming, but is energy regulation ready?
Electric vehicles are moving rapidly towards common use with a number of manufacturers making commitments to convert to electric power.
Widespread adoption of electric vehicles will have a significant impact on the economy and on society as a whole. It will create new challenges and opportunities for the future, not least for the energy markets.
In our opinion, the regulatory arrangements are not ready to deal with the rising uptake of electric vehicles.
A recent report by KPMG, Electric Vehicles, is the energy market ready, analyses the readiness of the energy sector as more electric vehicles hit the road. Seamless integration requires the right energy resources to be available in the right places to match demand and the right regulation to facilitate this.
However there is substantial uncertainty on the amount and location of electricity needed for vehicle charging that could limit the ability of commercial businesses and regulated networks to provide sufficient capacity in advance of the increasing demand.
Many factors will influence the ‘when’, ‘where’ and ‘how’ of electric vehicle charging. Some factors are personal, like how you use your car. For example, do you drive back and forth to work or school during typical commuter hours, or only use your car for the occasional trip to the shops?
Some factors are market driven, like the availability and type (e.g. fast versus slow) of charging infrastructure along main roads, work places and shopping centres. The range and interaction of these factors can make it difficult to forecast with any certainty how much electricity will be required when, at what locations and from what type of infrastructure.
To encourage charging when demand is low, vehicle owners should face incentives to encourage off-peak charging to minimise impact and costs. However the current regulatory rules prevent specific network tariffs for electric vehicles and could discourage fast charging stations.
What is certain is growth in numbers of electric vehicles will introduce new businesses into the energy sector. Managing the impacts of electric vehicles will require co-ordination and co-optimisation of decisions across a range of diverse businesses who will each have their own objectives and aims. A level of government guidance and over-sight will certainly be needed.
The energy markets in Australia are in a state of transition, and a multitude of factors will impact energy markets in the future, including the pace of technological change, changing customer behaviour, the ageing of existing infrastructure and government policy on emissions. Widespread adoption of electric vehicles will bring further disruption to the sector.
A clear regulatory and policy framework needs to be put in place to ensure that electric vehicles are efficiently integrated into the evolving energy markets. Without this, it could cause significant additional disruption through the potential impacts on the electricity system from charging and potentially discharging. Effective integration means that there are no barriers to customers’ uptake, the cost impact is managed and the benefits from electric vehicles to the energy market are fully captured.