There is quite a bit of talk about Vehicle to Grid (V2G) charging where the vehicle battery can return energy to the grid – but how important will it really be? The feature will probably be available on most chargers but may not deliver as much profit as hoped – here’s why.

V2G, should, and will happen, and will be deployed on most vehicles and chargers. It will provide valuable flexibility to the electric grid. However in most cases, today it is more important for most drivers and fleets to focus on the transition to EVs in general.

There are three flavors of V2G to consider, we will focus on the last one, full V2G:

- Backup Vehicle-to-Home (Backup V2H) – In this case the EV is used to provide backup power when the utility grid is down. There could either be powering a few devices from an inverter and AC plug on the vehicle, or connecting to a home which has a transfer switch separating it from the grid in case the grid is down. The business case for this is around how much you value backup power. In markets where blackouts are frequent, this is an important feature.

- Behind-the-Meter Vehicle-2-Home (Grid-tied V2H) – In this case the vehicle and charger can return power while the grid is running but are only providing power to the end customer. It means the customer uses less grid power but isn’t actively returning power to the grid for money.  This can be interesting if you have excess solar power production and want to store it for later use. The business case for this is largely driven by consuming the energy you produce yourself, thus avoiding fees, transactional costs, and taxes from returning energy to the grid and later buying it back.

- Full V2G - This is where the EV can be commanded to return energy to the grid by the grid operator directly or via a utility price incentive to return energy. This is the focus of the rest of this article.

Who will drive the market?

V2G will likely become a standard feature on chargers because is complex to implement in software and in control but is relatively cheap to add to a charger in terms of bill of materials cost; it requires few additional hardware components. This means that as the market matures, and the manufacturers develop the software and designs to support it, the additional cost will be low. Chargers are becoming a commodity product, they all do the same thing, convert AC power to DC, or connect AC power, to a vehicle to charge according to standardized connector and protocol. There are few secondary features to justify a higher price for one vendor, such as styling, delivery times, reliability and service, so manufacturers will seek features like V2G to stand out. The low marginal cost, and the drive of charger manufacturers to offer competitive features will likely drive it to become a standard feature on chargers; much like air conditioning used to be a luxury option in a car but is now standard.

Stakeholder management challenges, but easy in some cases.

Financially motivating V2G is challenging because it requires many stakeholders to participate - the utility, the utility connection user such as an office building, the owner of the charger, the owner of the vehicle and the driver of the vehicle (which in a lease or fleet vehicle is separate from the owner) All of those players need to have an incentive, beyond their costs, to participate.

This makes some markets like school bus fleets where many of those roles are the same stakeholder easier. Then it could be between just the utility and a school bus operator who owns the buses, the site, the chargers, and the buses. Long run these issues will get resolved and the right motivations will get each player to participate in many cases.

V2G is likely won’t generate substantial extra profits in the long run, since most of the value can be delivered by simply controlling other loads, especially by reducing EV charging demand with smart charging, without returning any energy.

The ultimate value of V2G is flexibility to the utility to help balance the grid. The amount of power going into the grid always has to be kept in balance with the amount of power being consumed from it. As you turn on your stove, the load goes up, as a cloud shades a solar array, the production goes down; so the utility needs flexibility. (there are some distribution complications) Power however is fungible, and a reduced load has the same impact as an increased generation. For the energy the results are equivalent, whether your vehicle returns energy to the grid with V2G or your neighbours car reduces charging power with smart charging. The demand for flexibility is increasing as the share of renewables increases on the grid, wind and solar are far more variable than traditional fossil power generation. Both V2G and single directional smart charging can provide the same flexibility to the grid.

There are several other options to provide grid flexibility outside of EV Charging, such as regulating HVAC, cooling and other loads. One utility implemented a demand response program using smart thermostats. On hot summer days they could slightly reduce the temperature for participating customers during the early afternoon. Then later in the afternoon when the overall power demand is highest, the temperature would be allowed to rise slightly, reducing the power demand, all while keeping the customers within a comfortable temperature range. This provided them the flexibility to shift their power demand with little extra hardware cost beyond the control signal to the thermostats which people had anyway. The customers were paid an incentive to participate, and rarely noticed the temperature change. Similar techniques can be used for commercial freezers, buildings and other electricity users which need some amount of energy over a long period, but they are flexible exactly when it is delivered, within a time window. There is a time range to this flexibility - few will notice a building air conditioner shutting down for5 minutes, but 12 hours would be unacceptable. These can also provide low-cost flexibility to the grid as they are developed.

Smart charging will always be a lower cost option than V2G. Reducing the charge power of a vehicle which is charging doesn’t add any losses, the vehicle just gets charged later, with the same amount of energy, through the same converter with similar losses (often lower losses since charger efficiency drops as they get hotter)as if it was charged more quickly. V2G requires first charging, then storing, then returning the energy to the grid; resulting in two trips through the power converter, and additional cycles on the battery. There may be times when the added losses and battery life costs of V2G can still be profitable because the flexibility it delivers is so valuable, but it is fundamentally more expensive to provide than simply reducing charge power with smart charging.

The grid flexibility market is like any other commodity market, the price is set by the highest cost producer which is delivering into the market. This is illustrated in a merit order graph below. There are a variety of sources which can deliver the same thing, but at different costs to their producers. To satisfy the demand (redline) the cheapest sources will be used first, and then proceeding to more expensive sources until the demand is fully met. The price of the commodity(green line) is set by the price which is needed to pay for the most expensive marginal producer to participate. All the cheaper producers will earn extra profits from the higher price. The more expensive sources won’t be used. The demand for grid flexibility is always fluctuating, as are the costs and quantities of the potential supplies, so this graph is always changing, resulting in continuously changing prices.

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The key question for the value of V2G is how often the demand for flexibility will exceed what can be supplied with lower cost options such as single directional smart charging and likely many other flexibility sources like controlled heating / cooling. This will vary over the long run as the markets and technologies evolve, it will vary with location, and it will vary hourly as the as the demands shift. On the flexibility supply side if we assume all 278M vehicles in the US are converted to electric and continue to drive an average of 13,500 miles per year at about200Wh/km that will require 1.2PWh (Peta = 10^15th or Trillion kWh) of energy which could be smart charged to become flexibility, compared to the 4.05PWh of current annual production, or about 30%. Looking at the demand for flexibility we also need to keep in mind the time cycles. At a daily level, during a typical summer day US energy use varies from about 400GW to 650GW, or about a 40% variation over a day. If all the energy used to charge EVs were used to level out the load curve, it would roughly flatten it. In practice this isn’t possible since EVs can’t charge at completely arbitrary times; and isn’t desirable since some generation such as solar occurs at specific times of the day, and some loads like air conditioning is correlated with it. Shifting residential water and space heating to heat pumps could add an extra 10%demand, but much of it could also be flexible. Keep in mind this variation is once a day, so if you store energy in your EV during the day and sell it at night you can usually do one cycle a day, and earn the difference between the peak and minimal daily price per kWh. There are also faster markets, such asFCR and aFRR, where the grid operator pays for fast responses to changing conditions. In the Netherlands where this market is mature, the typical volumes are about 300MW of flexible generation on an overall system of 10GW-15GW or about 3% of total capacity. If all vehicles were smart charging and connected could easily be met by smart charging alone, or potentially other flexibility sources. Predicting how the supply and demand for flexibility will evolve in future will be very difficult and market specific as different supplies are developed. The opportunity will also drive more development and increased supply of solutions like smart charging and flexible heating controls. The potential EV charging smart charging flexibility is comparable magnitude to the likely flexibility needs, so it isn’t obvious that V2G will be necessary often.V2G will be used occasionally, on the most extreme days, but how often is difficult to predict. 

What todo about V2G in the near term as the market is evolving? For charger manufacturers, they should develop it and include it in their offerings, since it will be useful in some markets and will become a standard feature. For utilities, smart charging should be the priority, then V2G if more flexibility is needed. For fleets and drivers; they should focus on standard, single directional, smart charging where most of the savings are for now unless their utility offers a specific incentives.

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