EVs are REALLY Challenging for Utilities

We all face interesting questions at family gatherings because of our work and interests. An attorney cousin can't escape questions about wills and contracts. Realtor siblings get requests about where the next best deals will be. And we all badger broker and banker in-laws for hot stock tips. As a car enthusiast and utility vendor, I try to stay up to date on electric vehicle matters so that I take my share of questions about what EV to buy, where to charge them, and why they are so expensive.

The funny thing is I don't get a lot of questions. Like most people, my family doesn't seem to care about EVs, and three articles this week exemplified the point for me on this incredibly complex issue.

The first came from CBS News local affiliates reporting on Xcel Energy's canceling the $200M charging station project in Minnesota. In and of itself, not an important story, but the background explains the matter better. Minnesota's PUC slashed Xcel's rate request by more than half and recommended they reassess their plans to support fleet electrification after failing to reach critical mass in other charging station projects.

https://www.cbsnews.com/minnesota/news/xcel-energy-cancels-200m-ev-charging-station-project-in-minnesota/

The PUC feared that the Minnesota project may not be completed as planned, but the issue brings up other challenges. Xcel planned for roughly 700 direct current fast chargers (DCFC) for consumer use. With only 23,000 EVs registered in MN, the Xcel project would add capacity for charging disproportional to the petrol fleet.

Minnesota has 5.7M registered vehicles on its roads and about 2060 gas stations. At 6-12 pumps per station (no other stats available), that means Minnesota has 1 pump for every 230-460 cars on the road.

But, the Xcel charging station project offers 1 charger for every 32 EVs on the road, and that infrastructure doesn't include the public chargers in condos, office buildings, and apartment complexes, or the chargers in EV owners homes. Turns out Minnesota is a pretty good state for EV charging, as this article highlights:

https://www.cbsnews.com/minnesota/news/push-for-more-charging-stations-as-minnesota-ev-sales-soar/

Soaring sales indicated in the article mean that Minnesota could expect double or triple the electric vehicles on their roads soon, but that rate still brings the total to less than 100K total electric vehicles, or just 1.8% of registered EVs in the state. I'm not sure that those figures quite fit the normal definition of "soaring" but I certainly applaud those buyers for their environmental and energy efficiency sensitivities.

Certainly Xcel Energy faces pressure to get prepare for fleet electrification across its service region from grid and capacity issues to charging infrastructure, the immense scale of the challenge requires long term investments in the Millions and Billions. Investors want at least some predictability to get comfort on a bet of that scale. No one wants to have a lot underutilized infrastructure sitting idle consuming capital better used for other projects. So, timing seems to be everything.

And, therein lies the problem for utilities. No one can predict when fleet electrification will actually happen. A delay of even a few years costs billions of dollars of wasted capital, not to mention opportunity costs. Energy companies are being asked to thread the needle, being told to be ready for the inevitable transition of gas engines to EVs that's been described as imminent for far too long.

Which brings me to third article that caught my interest on a quirky, perhaps even snarky site, Jalopnik, that speaks to consumer interest in electric vehicles.

https://jalopnik.com/no-one-in-the-us-really-wants-to-buy-electric-vehicles-1850622254

It seems now that supply chain recovery has opened the delivery of more gas engines to dealers and used car prices are falling along with gas prices at the pump, no one cares much for EVs (except maybe in California). A survey by Cox Automotive shows that consumers report interest in EVs and may consider a future purchase, but they aren't buying them at anywhere near the rates that support an imminent transition of the consumer fleet. Dealers report a 92 day supply of EVs on their lots, but only a 54 day supply of ICE vehicles. Customers may say they will consider buying EVs, but the numbers really don't show them making the actual purchase.

So, utilities face pressure to prepare for fleet electrification as if it's

happening on the schedule that manufacturers predict. GM wants to sell only zero emission vehicles by 2035. Ford promises the same by 2030, which means utilities have only a short time to upgrade their infrastructure accordingly. But, consumers don't really seem to have that same commitment to an accelerated transition to electric vehicles, and their opinions matter most because unless customers want to buy EVs en masse, the manufacturers will adjust their plans accordingly. No auto manufacturer can afford to build things their customers won't buy, after all.

I have a lot of sympathy for utility executives related to fleet electrification, as it's an impossible challenge. The industry has historically had an arm's length relationship with their customer in the commodity business, but has adapted to try to put the customer at the center of their business. But we're asking them to predict consumer behavior and invest accordingly in areas as fickle as consumer demand for their cars. If consumers demand EVs at an accelerated pace, then projects like Xcel's make sense. But, if consumer demand lags even for a few years or don't buy EVs at the current pace, then Xcel's customers will be hit with a very large bill for idle infrastructure. Electric Utilities are in a tough spot with EV planning. How would you make that decision?