Electric vehicles revolution is coming
Electric vehicles (EVs) are on a roll. Battery costs are dropping and consumer interest continues to climb. Even without subsidies, the total cost of EVs is fast reaching parity with internal combustion engine vehicles. As the market takes shape, utilities are actively exploring their potential roles. Winners will charge ahead by investing smartly, tapping their trusted customer relationships, and partnering with others to provide bundled, differentiated and meaningful eMobility experiences.
There is tremendous value potential in eMobility. In Europe and North America alone, the eMobility market is expected to top US$2 trillion by 2040.
EV battery costs—US$750 per kilowatt-hour (kWh) in 2010—dropped more than 80 percent in six years. This helped make the purchase price of certain EVs comparable to that of internal combustion engine (ICE) vehicles. But the real economic benefit of EV ownership materializes over time, as the costs per mile driven are lower than for conventional vehicles. Two-thirds of future EV owners we surveyed indicated “saving money over the longer term” is one of their top reasons for making the switch.
Further spurring consumer interest is the speed with which auto manufacturers are shifting their investments toward EVs. Currently, US and European consumers can choose from between 30 and 50 EV models, respectively. It is estimated there will be 400 EV models available globally by 2025. At that time, Europe and the United States will have 10 million EVs on the roads, compared to 2.5 million today.
While EV sales are taking off faster than imagined, obstacles still exist. Owning an EV is a complex undertaking. Many EVs still have a shorter mileage range than conventional cars, and charging takes time. Owners charging from their home will need to ensure their domestic energy systems are up to the task, schedule the installation of the home charging infrastructure, and determine maintenance requirements. Owners who opt for public charging need to check public charging options and their availability, choose the right tariff/payment options, and schedule their charging routines according to their travel needs. Consequently, 39 percent of conventional car owners say they would never buy an electric car.9 Companies that can help owners make EV ownership as easy as owning any other type of vehicle will bend the adoption curve upward—further accelerating the transition to eMobility.
Over 80 percent of future EV owners plan to charge their vehicles primarily from their homes. Yet, only 55 percent have their own garage.
- Commodity sales: Selling kilowatt-hours in the EV market is a natural extension for utilities. Some are already strengthening their core commodity business by introducing innovative time-of-use tariffs for EV owners. While EV-directed commodity sales may reach US$1.7 trillion in Europe and North America by 204010, such sales generate margins in the three to five percent range. For this reason, utilities should think of electricity sales as just one component of a bundled set of services.
- Charging stations: Another opportunity for utilities focuses on deploying the many charging stations needed. Utilities are best equipped to address at-home charging requirements, but margins may be limited—especially once interoperability standards are in place and drivers can use any charging infrastructure to power their EV. Public charging requires substantial investments, with infrastructure costs estimated to total approximately US$150 billion.11 Beyond the investment cost, a number of oil and gas players are exploiting the public-charging opportunity. BP, Total and others made significant investments in the past year.12 Their retail networks and business models make them natural providers of new fuel for public consumption. A recent Accenture survey of fuel retailers showed they expect eMobility to have the greatest impact on their retail business over the next three to five years.13 In such a heavily contended space, data will be key in determining the highest value charging point locations.
- eMobility-related services: Utilities are well positioned to orchestrate a host of services across the customer journey. To pursue this US$250 billion opportunity, utilities could, for example, facilitate charging station installation and maintenance services, or provide apps that enable remote charging. Platforms that enable other services designed to create a seamless, more satisfying customer experience—such as integrated home-EV energy management, charge point navigation, charging reservations, battery management or payment processing—would also be valuable to customers. Similarly, financing services would help facilitate EV ownership as the high initial purchase costs is consumers’ biggest barrier toward buying an EV.
Consumers have an appetite for such services. For example, 53 percent of current EV owners financed or leased their batteries, and half of future EV buyers expect to purchase their home charging station as part of a packaged deal.
- Grid flexibility: Consumers plan to do most (53 percent) of their charging in the early evening, between 5 and 10 pm, placing an extra load on the grid at peak times. There is an opportunity for utilities to actively use EV charging to balance supply and demand—and optimize grid and portfolio performance— much as they do to accommodate wind or solar energy sources. Alternatively, focusing on creating a more flexible grid for eMobility would enable utilities to better manage network congestion, reduce grid stabilization costs, and optimize wholesale/retail portfolio spend.
(From the print edition)