By Syed Shazil Hussain
New Delhi: India’s transportation sector is responsible for approximately 14% of the nation’s overall CO2 emissions, with freight vehicles (HCV and LCV) accounting for 38%, and intermediate paratransit vehicles contributing 15% (ICCT, 2020). Notably, in 2022, a significant 716,566 commercial vehicles were sold in India (SIAM, 2022), underscoring the urgency for businesses to transition their fleets to zero-emission electric vehicles.
As the electric vehicle (EV) fleets continue to gain traction in a more mature market than us–United States, McKinsey & Company published a report on Vehicle-to-Everything (V2X) technology in e-fleets. The incorporation of bidirectional technology offers a unique opportunity for these fleets to not only power themselves but also contribute to the grid, homes, and buildings. This bidirectional energy flow, known as Vehicle-to-Everything (V2X) technology, presents a promising solution to the challenges posed by integrating renewable energy sources and managing peak demand on the grid.
McKinsey estimates that by 2030, around ten million fleet electric vehicles, including both battery electric and plug-in hybrid models, will be in operation. This rapid adoption poses questions about the potential impact on the grid and the energy consumption of these EV fleets. However, the batteries within these fleets also hold the key to addressing these concerns.
The primary challenges arise from the variability of energy consumption and the potential to overload the grid during peak demand hours. For instance, neighbourhoods with high EV adoption might experience sudden peak loads during evenings when EV owners typically charge their vehicles. Upgrading infrastructure to accommodate these peaks can be expensive and could result in increased electricity rates for everyone.
This is where V2X technology comes into play. EV fleet batteries can serve as valuable assets that can alleviate stress on the grid and contribute to grid stability.
Potential use cases for V2X technology
Backup capacity: EV batteries can store energy and discharge it during high-demand periods, providing a backup capacity that supports grid stability. This can be done either through demand response programs or contracted capacity fixed programs.
Rate optimization: By using stored energy to buffer energy demand during peak hours, EV fleets can reduce their utility bills. This includes energy arbitrage, where energy purchased from the grid is sold back at higher prices during peak demand hours.
Ancillary services: EV batteries can help balance energy production and consumption, providing services such as frequency regulation and reserve capacity to maintain grid stability.
The potential revenue from V2X for fleets varies depending on location, use case, and fleet archetype. For instance, as per McKinsey, heavy-duty trucks, medium-duty trucks, and school buses in Southern California Edison’s territory could earn USD 7,000 to USD 12,000 per vehicle annually through V2X applications. However, this potential varies significantly across utility and independent service operator regions.
Four key insights
V2X value variability: The revenue potential from V2X can differ greatly based on utility and regions. This variation can be as much as tenfold across different locations.
Battery capacity and charger power: The revenue potential from vehicle to grid (V2G) depends significantly on battery capacity and charger power. Increasing these factors can lead to higher revenue.
Trade-offs with charging infrastructure: Fleet operators face trade-offs between investing in more chargers versus faster chargers to access V2X revenues. The balance between these factors varies based on fleet behaviour and location.
Uncertainties in frequency regulation: While frequency regulation presents a compelling business case, uncertainties remain, including the shallow frequency regulation market and concerns about battery degradation.
According to McKinsey’s findings, enabling widespread V2X adoption requires several key enablers:-
Reliable pilots: More diverse pilot programs are needed to prove the business case and cash flow potential of V2X.
Cost-competitive hardware: The availability and cost-effectiveness of bidirectional chargers are essential to V2X adoption.
Industry standards: Universal standards for communication among OEMs, charging companies, and utilities are crucial to accelerate V2X adoption.
Predictable rate structures: Utilities should offer compensation plan guarantees to reduce uncertainty and encourage V2X adoption.
In conclusion, V2X technology holds significant promise for EV fleets and the grid by addressing energy demand challenges and providing new revenue streams. While challenges and uncertainties remain, collaboration among V2X stakeholders will be essential to creating a functional ecosystem and fostering investment in this technology. As EV adoption continues, localized V2X markets are expected to emerge, offering both fleet operators and utilities a path toward a more sustainable and resilient energy future.
