Utilities, oil companies and startups are preparing for a significant shift.
The coming wave of battery-powered vehicles is good news–a step toward addressing concerns about climate change and oil dependence. But electric vehicles also present new challenges for electricity providers, utility companies, smart grid and charging startups and traditional oil companies.
Converging factors, such as radical cost reductions in lithium-ion batteries, are pushing us toward an “electrification tipping point” when electric vehicles will become economically viable for the masses. By 2020 electric vehicles and plug-in hybrids could account for nearly 10% of new vehicle sales globally. By 2030 this figure could accelerate to about 30%, with an additional 20% of hybrid vehicles using batteries.
The market is still young, but automakers are committing to electric vehicle technology. Several electric vehicles will be introduced in the coming year, including Nissan’s ( NSANY – news – people ) Leaf and the Chevy Volt.
Electric-powered vehicles will create significant growth across the entire transportation value chain, expected to reach nearly $300 billion by 2020, according to global management consultant firm PRTM (my employer). This rapidly growing market will drive a shift in revenue pools from natural resources like oil toward high-tech components like the battery.
For utility companies this trend offers new revenue opportunities, since each electric vehicle consumes the same amount of electricity as an average household. The proliferation of battery-powered vehicles will require the upgrade of the electric grid. Many utilities are preparing for this shift and working to avoid expensive capital upgrades by adopting new smart grid technologies. Utilities are also employing new customer strategies, like offering discounts to encourage charging during off-peak hours. As we look ahead, electric vehicles will likely become the smartest “appliances” to connect to the grid; as such, they will be a catalyst for many smart grid solutions.
While utilities can embrace these market changes in exciting new ways, they still face substantial challenges in the move toward electrification. For example, installation of the vehicle charging infrastructure, including the IT backbone to provide services and address cross-state roaming, will require an investment of about $2,000 per vehicle, or more than $30 billion in the U.S. and Europe by 2020.
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Photo: Nissan Motors Corporation Inc.