8 Sep 23

Fleets could earn $12,000 annually per EV from V2X

Revenue from vehicle-to-grid could offset TCO of electric vehicles, says McKinsey.

Fleets in the United States could offset the total cost of ownership of electric vehicles (EV) by as much as $12,000 per vehicle annually by exploiting the electricity storage capacity of their batteries, according to a new study by consultants McKinsey & Co.

Its analysis suggests that the ‘vehicle to everything’ (V2X) capabilities of EVs, which enable a bidirectional flow of electricity in and out of batteries to power grids (vehicle-to-grid, V2G), workplaces (vehicle-to-building, V2B) and homes (vehicle-to-home, V2H), could provide significant revenue-raising opportunities for fleets.

V2X will allow fleets to sell electricity stored in vehicle batteries back to the grid, or use the energy themselves to power corporate buildings, thereby avoiding peak energy tariffs.

Charging infrastructure decisions

Preparing for this potential, however, requires fleets to make some early decisions, particularly with regard to charging infrastructure hardware, with no long-term guarantees of future V2X revenues.

So, whereas fleets transitioning to EVs today are typically looking to install as few low-speed chargers as possible, maximising the ratio of chargers to vehicles, V2X will require every vehicle to be plugged in to capitalise on its V2X potential.

Moreover, fleets will need faster, more expensive DC chargers to supply the urgent peak demands for energy from the grid. Plus, not many bidirectional chargers are currently available, and they, too, are significantly more expensive than standard, unidirectional chargers.

“Earnings from vehicle to grid (V2G) depend greatly on how much (battery size) and how quickly (charger power) energy can be sent from an EV to the grid,” said McKinsey. “Fleet operators must evaluate how much they might earn with V2X and decide whether the price premium for bidirectional or faster DC chargers is worth the potential revenue.”

Regional revenue variations

The consultants also caution that different states will pay different tariffs to utilise the electricity stored in EV batteries, with values varying by as much as tenfold across utility and independent service operator (ISO) regions, depending on regional requirements to balance local load curves and meet surges in power demand.  McKinsey calculates that V2X values for the same vehicle could range from as little as $1,000 to $2,000 annually in Georgia to between $15,000 and $16,000 in Virginia, and there is no guarantee that rates or compensation for V2X will remain at today’s levels.

“V2X potential cannot be quoted as a uniform value for all EVs. Depending on their location, some fleets may realise significant gains in total cost of ownership from V2X and build their EV infrastructure around it. For other fleets, the benefits of V2X may be limited,” it said.

EV batteries can be used for:

  • Backup capacity – power discharged back to the grid at high-value times when electricity is most expensive. This can be either on an ad hoc basis (called demand response), or a planned, contracted basis to deliver extra capacity during times of known supply–demand mismatches (called a capacity fixed program).
  • Rate optimisation – EV battery electricity is used to power a workplace, especially during periods of high time-of-use pricing, thereby reducing corporate utility bills. In an ideal world, batteries are recharged at times of day when tariffs are lowest, and the electricity is returned to the building when tariffs are at their highest.
  • Frequency regulation – batteries store excess energy production (particularly from renewable sources) and then return it to the grid, helping to maintain the grid balance between energy production and consumption.

Modelling by McKinsey forecasts that a heavy duty electric truck in California could generate up to $13,000 annually through V2X; a medium duty truck up to $9,000; a light commercial vehicle $4,000; and $2,000 for a car. The greatest potential arguably lies with electric school bus fleets, due to their ability to recharge overnight and their fixed hours of operation.

The consultants also warn that fixed battery storage solutions are being installed across the US, which would offer greater certainty to utilities than vehicles.

However, they conclude that: “Vehicle-to-grid will likely play an important role in the future of EVs in the United States as a new revenue stream for fleets and an opportunity to strengthen the utility sector and reduce its capital burden. Given the complexities and multiplicity of variables surrounding implementing V2X in the United States, it is reasonable to anticipate that V2X markets will be localised rather than national.”

Image: Shutterstock_2320661155

Authored by: Jonathan Manning