EVs on the grid

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The large size of the US auto market and high GDP per capita, as well as easy access to financing options, make it a leading candidate for electric vehicle uptake. However, the lack of a strong regulatory foundation represents a substantial barrier, as does the relatively low cost of gasoline and diesel.

Depending on the region, S&P Global Platts Analytics forecasts plug-in electric vehicles to reach total cost of ownership parity with internal combustion engine vehicles over the next 10 years. Market fundamentals will begin to drive PEV sales to a greater degree as consumers become aware of the savings associated with reduced operational costs.

As PEV adoption gradually moves away from early adopters, the development of a robust and ubiquitous charging infrastructure will become even more important than it is now.

PEVs will raise power demand, but the effect on the grid will depend on the speed, time and location of the charging. In this article, we will take a look at the impact on the grid of rapid PEV adoption, focusing on passenger vehicles and taking the US state of Virginia as a case study. The electrification of commercial and other heavy duty vehicles would pose different challenges to the grid due to different utilization patterns and charging requirements.

State regulations a key driver

The operational costs of PEVs are considerably lower than those of ICEs. Despite this, the high purchase premium of a PEV compared with an ICE, driven primarily by battery costs, now makes PEV ownership less economically attractive for many consumers. Furthermore, low PEV ownership also presents challenges for profitable investment in charging infrastructure.

As a result, PEV market growth will initially rely heavily on government subsidies and incentives. The US lacks a long-term, federal PEV adoption strategy, which is likely to stymie PEV market growth relative to other PEV-focused markets such as the EU and China.

However, local air quality concerns, environmental targets, and the desire to support a nascent industry have proved powerful arguments to justify government support. States, power providers, transportation authorities, and local governments have made substantial ground in filling this void by instituting their own PEV sales targets and incentive packages.

In the short-to-medium term, different states’ regulation, support schemes, vehicle fees and infrastructure will lead to variation in the pace of PEV adoption. The US coasts are likely to have the fastest adoption during that period, but PEV adoption will also grow in other regions. Longer-term, marketfundamentals including the total cost of ownership will be the primary driver of adoption as the cost of PEVs comes down.

Platts Analytics forecasts PEVs will account for about 14% of total passenger vehicle sales in Virginia in 2030, up from less than 2% in 2019, according to our latest EV Essentials report. However, the vehicle stock turnover is relatively slow as vehicles’ lifetimes average 11-12 years in the US. This means PEVs will account for about 3.5% of Virginia’s vehicle stock by 2030.

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