Panelists, representing a variety of different perspectives within the industry, included Mark Dudzinski (Chief Marketing Officer for GE Energy), Steve Eichenlaub (Managing Director, Cleantech Sector, Intel Capital), Larry Gelbien (VP, Engineering, NSTAR Electric), and Philip Giudice (Commissioner, Massachusetts Department of Energy Resources).  HBS Professor Richard Vietor  moderated the event.  During the discussion, the topic of electric vehicles came up several times.  I also noted as I was writing this article, that GE and Nissan announced that they’re teaming up in a three-year Memorandum of Understanding to research new technologies that will be needed in electric cars, on the grid and at home or work to make smart charging a reality. These cars are being so widely discussed these days since they represent a viable way to reduce CO2 emissions.  The Obama administration, through its stimulus program, committed more than $2 billion in Federal funding to develop electric vehicle technology.  The goal of this funding is to encourage up to one million new electric vehicles to be on the road by 2015.  With the release of the Nissan Leaf, the first mass market all electric vehicle, scheduled to become available later this year at an expected price point of around $30,000, and the increasing affordability of hybrid cars, the President’s vision could soon become a reality.  So this then begs the question - what do these cars have to do with the Smart Grid?

The answer is, plenty!  Charging an electric car’s battery can almost double an average home’s energy consumption.  As a result, an increase in the number of electric vehicles will significantly raise demand for electricity and put pressure on the power grid’s existing generation capacity.   The current US power system can only support a small percentage of the vehicle fleet being power by electricity before the grid’s stability starts to be compromised.  However, if power is managed more efficiently and if the demand for electricity could be shifted away from high use periods to periods of lower demand, this amount could increase significantly without needing to add more power plants.  This is where the Smart Grid comes into play.

There are several ways in which the Smart Grid will increase the number of electric vehicles that the current power generation base can support.  Demand response programs, enabled by the Smart Grid, help insure that the increased demand for electricity created by electric vehicles does not overtax the Grid’s existing capacity.  During extreme peak periods, demand response systems selectively reduce demand to preserve the integrity of the grid.  For example, an air-conditioning unit might be turned down slightly.  Most of this automatic shifting in demand takes place for a brief amount of time, without the consumer even being aware of the modification.  In exchange, the grid would better utilize its existing generation assets and would not require as many new power sources to be built, which can be both costly as well as detrimental to the environment.

Real time pricing of electricity, made possible through a smarter Grid, will also play a large role in facilitating the more widespread adoption of electric vehicles.  Dynamic pricing provides a monetary incentive for people to charge their cars during times of lower demand when electricity is cheaper.  Changing consumer behavior in this manner allows the current power base to support a much larger electric vehicle fleet.  Realizing this trend, Microsoft and Ford recently teamed up to develop a software application that helps users monitor their energy consumption and optimize the time when they recharge their vehicles.  This software and other similar products will rely heavily upon a Smart Grid to provide usage and pricing information.

As technology develops, one can also envision a time when electric vehicles will not only be charged through the system, but can also sell electricity back into the grid.  Car batteries could become storage units that increase the grid’s capacity during peak periods when existing generation sources alone cannot meet demand.  This too will require the Smart Grid to be in place to communicate demand trends and to effectively vary electricity prices throughout the day.

When seen in this light, putting a Smart Grid in place is an important step that should be taken to pave the way for more electric vehicles.  Not only will a Smart Grid improve the power system’s efficiency and therefore increase the number of electric vehicles that the grid can support, but it will also allow consumers to make more informed decisions about when they want to charge their cars.  This is why I believe that the Smart Grid will play an integral part in helping create a cleaner, greener future for our transportation system.

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