How mature is the market for EV charging flexibility?
When discussing flexibility markets in the context of the energy transition, we often think of large industrial batteries as the main source of flexibility. However, what if this flexibility could be provided not only by these large batteries but also by the cumulative flexibility of electric vehicle (EV) batteries? With the growing number of EVs on our streets, they might offer even more flexibility than industrial batteries in the future, and importantly, with much less initial investment.
Recently, I had many discussions on this topic with various companies, for example, at the Smarter E conference in Munich. Many companies are looking to develop hardware and software for bidirectional charging of EV batteries. There are three typical applications of this charging: V2H (vehicle to home), V2B (vehicle to building), and V2G (vehicle to grid).
V2H means that power stored in car batteries can be used for home power supply. This is a behind-the-meter application and is technically feasible today if the EV battery supports bidirectional charging. The business case does not require a complex approval process and, according to calculations made for Germany, can save a household a few hundred to a thousand Euros a year, assuming smart metering and dynamic household tariffs.
V2B supports so-called peak shaving processes for a building’s demand, allowing the building to use the batteries of the EVs to reduce load at peak times. The application remains behind the meter for the charging points, while the building (or group of buildings) is expected to have its own meter points.
V2G is a more complex application that requires integrating the charging point into the front-of-the-meter infrastructure. Usually, the charging point is not directly connected to a meter; it needs to be connected to an aggregator that provides aggregated flexibility of multiple charging points to the grid operator. This technology is very promising because it helps to avoid the expense of building dedicated standalone batteries. However, the difference between standalone batteries and aggregated charging points is that vehicles are primarily used for driving and need to have power whenever the driver wants to use them. This imposes some restrictions on vehicle battery usage. The risk of limited vehicle availability for travel can be mitigated by imposing a constraint that ensures the battery always has enough power for a short trip. Additionally, drivers can be given the option to exclude themselves from participation during certain periods, such as when they anticipate unusually long trips.
But even with these restrictions, given the growing number of EVs, the cumulative capacity of their batteries is substantial and still increasing.
One interesting example of a company pushing the V2G approach is ev.energy. It provides a smart, cloud-based platform to automatically aggregate and optimize EV charging. The company operates both as a software provider and an aggregator, partnering with EV manufacturers and Community Choice Aggregators in the US. They participate in flexibility platforms like Piclo Flex in the UK, where they can bid for ancillary services to several UK local System Operators. Additionally, they provide direct flexibility to retailers, utilities, and the TSO.
The business model of such aggregators is usually flexible, ranging from profit sharing (e.g., with EV manufacturers) to optimizing the charging times of vehicles, enabling them to benefit from cheaper time slots. However, there are many challenges to this approach, with regulatory challenges being the most difficult in Europe. There are complex procedures for allowing DSF (demand side flexibility) to deliver ancillary services, and it is difficult for EV charging aggregators to meet the strict conditions of European TSOs. Another challenge is the lack of standardization. Companies providing charging point hardware are trying to develop software for data management, optimization, and other related functions, but they are less efficient in this area than aggregators. Moreover, the interfaces for data reading vary significantly depending on the manufacturer. Increased competition in the EV market might lead hardware companies to focus on their core business and partner with software platform vendors for aggregation, optimization, and bidding solutions.
Last but not least is the challenge related to drivers’ concerns about the lifetime of their car batteries. Batteries are the most expensive component of an EV, and more frequent charging and discharging can increase the risk of needing a replacement sooner. It is important to quantify this risk and compare the potential loss to the expected benefits from participating in demand response programs.
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