Efforts to electrify the US transportation sector are strong—and growing. In 2022, more than 800,000 fully electric vehicles (EVs) were sold in the United States, making up nearly 6% of all vehicles sold. The 2022 EV share of the US market approximately doubled from 3.2% of sales in 2021, and is a marked increase above the approximately 327,000 EVs sold in 2019. This growth over prior years affirms that policy efforts to encourage EV deployment are taking root and that consumer appetite for electrified transportation is growing.
Analysts, policymakers, and market participants are projecting continued EV penetration into US markets. The growth in EVs will naturally create greater opportunities for battery storage. For example, battery storage systems at charging stations could be used to reduce peak demand, thereby reducing grid congestion and, importantly for charging station developers, reducing demand fees. Storage could also be paired with solar energy to enhance the reliability of renewable charging resources, as most EV charging (especially in the commercial and transportation sector) will occur at night. Such storage projects would qualify for funding available under the Infrastructure Investment and Jobs Act (Infrastructure Act) for EV charging station development.
The following analyzes the existing US market for EVs and identifies some of the key ways in which EV operations and battery storage are natural and, in some instances, co-dependent allies.
Commercially Successful Siting of EV Charging Infrastructure
As anyone in the EV sector is aware, network charging infrastructure is a threshold issue that must be addressed in order to get more EVs on the roads in US markets. Range anxiety, exacerbated by what many potential consumers view as inadequate EV charging opportunities across the United States, is considered to be an obstacle to the Biden administration’s stated goal of achieving 50% zero-emission vehicles by 2030.
A continued emphasis on and aggressive pursuit of public EV charging station development was a key issue in 2022 and will remain so in 2023 and beyond. Absent a robust network of fast public charging opportunities, consumer range anxiety will persist, which will necessarily hamper EV sales to certain market segments (namely, those that need transport for long distances and/or in underserved areas).
Progress continues on this front and various policy incentives are slowly facilitating increased public charging station development. State zero-emission requirements, such as those adopted in California in summer 2022, will help encourage increased charging station development by providing certainty to developers and potential developers that a robust charging market will exist. More importantly, the US Department of Transportation’s approval of the National Electric Vehicle Infrastructure (NEVI) Formula Program implementation plans for state development was a key trigger for public charging station development (discussed below).
Continued focus on commercial successful development will also be front of mind for charge point operators (CPOs) in 2023. A commercially successful development opportunity requires a circumstance whereby the CPO can have an advantageous revenue stream as well as minimize risk exposure arising from the siting and operation of the station itself. This raises two issues: (1) the best way in which to monetize charging infrastructure; and (2) the best type of contractual protections in infrastructure licensing or site host agreements.
Demand charge management is often one of the biggest challenges that owners of EV charging stations confront. In short, demand charges are fees that a utility assesses to customers as part of its rate design that are based on the highest amount of power drawn, or demanded, by the customer during a defined period of time in a billing cycle.
Demand charges are not tied to the total load requirement of a customer that visits a charging station or the total amount of power consumed by the charger. As a result, demand charges can be challenging for the financial viability of a charging station owner’s proposal to develop a network of charging stations.
Although some US utilities are exploring alternatives to demand charges, station owners must currently consider how to grapple with the impact of those charges on the projected economics of a project. One possibility for consideration: siting a battery storage project adjacent to a network of chargers, in order to mitigate the impact of demand charges through a leveling of the charging station’s demands.
Wide-scale siting of storage batteries plus chargers—similar to a solar-plus-storage model—could produce better economics for a proposed project than those realized by a network that is routinely subject to demand charges.
Policy Support for Charging Plus Storage
The Infrastructure Act’s authorization of $7.5 billion in EV-related funding is intended to help establish a national network of 500,000 EV chargers. However, the funding authorization is allocated largely across the NEVI EV charging program.
Under the NEVI, the Infrastructure Act allocates $5 billion over the course of five years to a formula-based funding program, through which states can access a predetermined portion of funding to create EV charging stations in designated areas. Each state’s portion of funding is determined and distributed via the predetermined formula, and is based on various factors, such as the population of the state. As envisioned in the Infrastructure Act, states are permitted to use the funds through the award of grants to further the acquisition, installation, operation, maintenance, and data sharing related to EV infrastructure. For each project that receives grant funding, the funding can equate to 80% of the project’s costs; the private sector funding recipient must pay at least 20% of the project’s costs.
Eligible projects are not limited to new charging station installations, although those are certainly within the funding’s purview. Eligible projects also include upgrades to existing charging stations and onsite distributed energy resources, such as self-supply solar and adjacent-sited battery storage.
Both Congress and the Biden administration recognize the natural alliance between EV charging and battery storage, which is precisely why adjacent-sited storage projects are eligible for federal funding. In short, under NEVI, adjacent-sited storage would qualify for funding if it would lead to lower construction and operating costs for the EV infrastructure.
Given the effect of demand charge application on the financial viability of a network of charging stations, it is easy to see how adjacent-sited storage could be a natural solution to a vexing issue.
Energy Storage in Practice
For the purposes of brevity, this article has not examined or otherwise discussed how home storage assets could help facilitate EV deployment or impact the budding vehicle-to-grid efforts. However, it is worth noting that the ideas discussed above are not at all conceptual or theoretical—as some trade press or market participants would have the public believe.
Earlier this year, one of the largest CPOs in the United States (ChargePoint) announced a partnership with Stem, a battery storage and software developer for adjacent-sited storage and charging projects. Both companies, in their public press releases, echoed many of the sentiments discussed above. Further, they explicitly recognized the role of NEVI funding in this effort, thereby affirming the administration’s idea that storage eligibility for EV development funding simply makes sense.
Read our full report, Energy Storage: A Global Opportunity and Regulatory Roadmap for 2023 >>