The Impact of Electric Vehicles on Energy Markets and Infrastructure

The surge of Electric Vehicles will soon push the limit of the current Electricity grid

Electric Vehicles (EVs) are expected to surge dramatically over the next decade. According to Bloomberg New Energy Finance, EVs will jump from 1% of sales currently to 54% by 2040, representing 33% of the global car fleet. This growth is meant to accelerate from 2025 onwards, as battery costs are forecast to drop to 100$/kW, making EVs cheaper than ICE (internal Combustion Engines) petrol or diesel counterparts. Countries like France, UK and China have already put drastic targets to their own markets with a ban of all Internal Combustion Engine by 2040.

This surge means the Electricity markets need to provide much more energy than in the past to charge all these Electric Vehicles. Car batteries are very strong energy consumers (a car battery could light a house for 3 days). By 2040, EVs will displace 8 million barrels of transport fuel per day, and add 5% to global electricity consumption, with 20% increase in cities and surging up to 50% at peak times.

This is without taking into account that batteries are getting bigger, charging capability faster and that  Electric Commercial transport increases. Tesla has recently unveiled its new Electric truck, planned for 2019 with 500 miles range, whilst all major OEMs plan to launch their electric commercial transport models. For example, many bus companies are considering retrofitting their buses to hybrid-electric, or moving to a full electric fleet. These large commercial EV fleets will add a significant additional load to the electric grid. The Low Emission Zones (LEZ) will also accelerate the transition in major European cities like London, Paris, Amsterdam.

Are Autonomous Vehicles (AV) and sharing models deemed to solve the problem? Not really. The number of cars on the road will drastically drop with the decrease of ownership model, but reduction of cars doesn’t mean reduction of usage and miles covered: shared autonomous cars would be much more used (40% time usage in autonomous shared cars vs 4% time usage per owner car). The EV energy demand is likely to remain the same with the surge of Autonomous Vehicles, or could even grow as the ease of use brought by AV might drive up individual car usage versus public transport.

Such surge of electricity demand creates two main problems. Firstly, the peak surge will create disruption as the local grid is not designed for it. As an example, many local grids are unable to cope with more than 6 cars charging concomitantly in the same street. Secondly, the grid network will need to be adapted to cope for additional energy being produced, transported, and distributed.

It is likely the current grid will be able to accommodate the surge until 2020, but risks of shortages and disruptions beyond 2020 will become acute unless action is taken now.

Solutions exist to avoid hindered EV growth or Grid meltdown…

The first focus should be on “shaving the peak” daily usage to avoid outages and damages to the grid. There are different ways to go at it.

The first way is differentiated ‘time of use’ tariffs, to incentivise EV owners to start charging their cars outside these high tariffs period. For instance, encouraging people to start charging before they go to bed (or asleep – i.e. charging in the early hours), as opposed to when they come back from work, most likely to be a peak demand period.

The second way is to leverage smart grid digital solutions, to spread the charge that would otherwise be concentrated on peak time between 4.30 and 7.30pm. It would mean that if you plug your car in at 6pm, it would only be charged based upon availability on the local grid. Most of today’s chargers are not “smart” nor connected. The technology is not yet commercially fully ready and it will require a new generation of “smart” charging points and clear communication protocols with energy suppliers and AI enabled energy aggregation platforms, to load balance EV chargers remotely.

A third way is the development of local energy storage, to be able to release energy at peak time and relieve grid constraints. This local energy storage can be behind the meter (battery in the cellar), or deployed in the local grid by the energy supplier. The battery prices are forecast to fall dramatically over the next 3 to 5 years, with the price reducing from 230$/KW today to 100$/KW by 2025, and reducing even further afterwards. It means batteries will play an increasing role in balancing the grid from 2020 onwards.

EVs could actually even be part of the solution. The car batteries could also be used as storage in what is called Vehicle to Grid (V2G), where batteries of parked cars can be used to provide electricity to the grid at peak times, and be recharged when demand is lower. Whilst concern exists about reducing battery life cycle through additional charging cycles, but some recent research suggest it might actually increase it by keeping the battery in an optimal state and avoding surcharge. However, not all car manufacturers have V2G compatible batteries like Nissan does, and whilst some V2G charging models exist and the technology is tested, it is a bit early to tell whether V2G will be scalable solution.

A fourth way will be to leverage further Solar Panels (PV for Photovoltaic) to generate additional energy which would be used/stored in resident/local batteries to accommodate the surplus of energy needed. These solar panels would need to be digitally connected to the smart home energy/smart grid to optimise the local energy management. The PV growth is a trend that will continue to grow, but will be limited in urban environment, where roof spaces are limited. This will be a growing limiting factor as the urban part of the population is growing from 52% of the population today to an estimated 80% by 2050.

All in all, it is likely that the combination of these four factors will help shave part of the peak challenge for the local grid. However, the overall need for more energy means more electricity generated and transported where it is needed. It will need significant new investments to create new low-carbon energy production capabilities (primarily wind and solar) as well as to upgrade the grid to ensure it is sufficiently flexible and robust. This grid upgrade is estimated to cost billions, and should be carefully considered once local solutions through tariffs, smart charging, energy storage, and PV have been exhausted.

…But these solutions need better focus and integrated action plans to be effective

Whilst we still have a few years to adjust before Energy grid limitations hinders EV surge, the clock is ticking and there is no guarantee the ecosystem will be ready on time, and this for several reasons.

Firstly, the various digital solutions and their integration will take time to mature. Smart charger technology will at least take a couple of years to be commercially rolled out at scale, and their higher prices might slow down their penetration – unless legislation pushes them with higher subsidies.

The smart grid communication protocols and AI enabled aggregation platforms will also take time to come to maturity and ensure effective leverage of smart chargers. Different solution providers are proposing a range of AI approaches and communication protocols. This will need storming, forming and norming phases to stabilise common protocols and practices. This is without considering Blockchain technology, seen as promising in the EV charging space, which might bring an additional level of complexity and slow down convergence.

Battery prices are expected to decrease, which could mean a slower improvement in battery optimisation solutions, until battery prices reach an inflection point.  V2G will take a few years, at least, to become viable and more widely adopted by EV OEMs.

Secondly, the legislators are observing this transformation and are yet to take decisive action. As an example, in the UK, the recent “Automated and Electric Vehicles” Bill sets an ambition, but no clear timeline has been set to give clear handrails to the market players. Legislators need to take a much more active role in accelerating change and driving convergence.

Finally, car/bus/truck OEMs, energy companies, software companies and start-ups are all building different pieces of the jigsaw, which will make the integration trickier. As an example, different charging solutions and networks are driven today by OEMs, energy companies, and independent players, all with different agendas in mind, but converging towards the same purpose: building an integrated mobility and energy offering to their customers.

At the cross roads of Mobility, Energy and Digital, the right solution for customers requires to build as an integrated end to end solution with clever collaboration models between Energy, Mobility and Digital players.

But even more importantly, it means putting customers at the heart of the integrated solution design. This means a 180-degree perspective shift: rather than starting from trying to solve the supply challenges, it means designing a differentiated customer experience, and then building accordingly the right solution building blocks to achieve this vision. In the world of tomorrow, customers will want increased easy to use, fair priced and integrated solutions, which cover EV charging at home and on the go into one single offering, and even mobility and energy bundled into one invoice.

Whether you are an Energy, Mobility and Digital player, you will need to have a clear strategy to take advantage of the EV surge and grow your market share…and put it in actions before your competitors beat you to the mark.

If you would like to discuss with us the best approach to leverage the EV growth in your business strategy and operations, please reach out to us at and we will be delighted to help.

Jean-Jacques Jouanna – Managing Director of NovAzure Consulting

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