The Value of The V2G Business Model For an EV Fleet Manager.
You may have heard of the Vehicle-to-Grid(V2G) business model for electric cars, but no one has convinced you of how viable and profitable it could be if done on a larger scale. Then stay-on to this blog-post, as we have the experts' answers for you.
This article explores the practical business model for V2G. Primarily for a fleet manager, and how much benefits you can harness from such a model. We are aware that there are still many people sceptical about the success and profitability of the V2G business model; a careful read of this will resolve your doubts.
An Overview of What V2G Technology Involves
Vehicle-to-Grid is a bi-directional interaction between an electric vehicle and an energy distribution grid. With V2G, an electric car can send its stored energy to the network and vice versa when the vehicle's battery pack needs to be charged.
For V2G to be possible, a connecting system that allows the bi-directional flow of energy and information must be present. One of the communication interfaces is called the ISO/IEC 15118 - "an international standard defining a vehicle to grid (V2G) communication interface for bi-directional charging/discharging of electric vehicles." CharIN, a Berlin-based company, recently began the implementation of the ISO 15118 communication interface - also called Plug and Charge.
Another protocol that's already in use is the CHAdeMO - a DC charging protocol for EVs; CHAdeMO Association, a Japanese-based company, develop it. Car manufacturers like Toyota, Mitsubishi, Nissan, Tesla, Kia, Mazda, Subaru, BD and Peugeot already have the CHAdeMO interface in place in some of their EVs.
It's sufficient to say that a couple of EVs are ready for the V2G technology application; however, what are the benefits and who are the stakeholders?
A Business Case For V2G
As energy produced from renewable sources is increasing, there's been a challenge of effectively distributing the energy we produce because renewable energy sources (RES) have their peculiarities. For instance, wind turbines and photovoltaic cells produce electricity when the wind blows, and the sun shines. Since these are not predictable, we must manage the energy produced effectively.
"Effectively" means that when the produced energy from a RES is not needed, the energy is stored; and when it's needed, you supply it back into the grid. You can easily proffer a solution for building battery bank centres, but there are consequences of capital and profitability.
Instead of constructing battery banks, there are impressive batteries with substantial capacities already present in electric vehicles that we can harness. And fortunately, EVs now have a wider spread across the world, and we've predicted the spread to increase.
An important question that may pop-up is - won't the car be in-use? Research shows that most cars are in use about 2-3 hours of the day. Most times, we park our vehicles. It's possible to exploit this situation for V2G, especially if the EV owner follows a patterned charge-and-use cycle; which is why using V2G for a company fleet proves to be the most productive business model.
Therefore, this leaves us with a large pool of mobile battery capacity that the grid can adopt for temporary energy storage. Aside from storing energy, we can use V2G to regulate the grid's frequency and also manage the energy demand response during peak and off-peak periods.
All these said, the adoption of V2G adds value to these stakeholders:
- Utilities: V2G services can help to store and manage energy produced from RES. It's also an economical solution for ancillary services in a grid.
- DSOs can adopt V2G services as a demand balancing mechanism and load control within a local grid.
- The EV owner enjoys monetary perks and favourable charging conditions.
- The EV Fleet manager is the focus of the article and thus deserves that we discuss separately. A company fleet manager also falls under this category.
Indirectly, adopting V2G saves the environment by promoting renewable energy sources and avoiding the production of new Lithium-ion batteries(whose manufacturing process can be harmful to the environment.)
How Can an EV Fleet Manager Benefit From The V2G Business Model?
For an individual user, V2G offers minimal benefit in comparison with the amount of investment that you will need for running a full V2G service. However, a fleet manager with access to a significant number of EVs can add a new source of revenue by adopting V2G services for the EVs managed by his/her company.
An EV fleet manager can provide V2G business services for frequency control or for managing peak shaving.
Frequency Control V2G business Model:
Through active communication with the grid, the EVs in a fleet supply energy or draw energy from the grid in response to its current frequency value. This model also favours the life-span of the EV's batteries as it involves a shallow charge/discharge cycle of the battery.
Managing Peak Shaving V2G business Model:
During peak periods, the EVs supply energy to the grid to meet the excessively high demand for electricity. While during the off-peak hours, you can charge up your EVs to their normal state. Unlike the frequency control model, this reduces the life-span of the vehicle's battery.
The analysis below is an excerpt from Kaufmann, A. (2017). Vehicle-to-Grid Business Model–Entering the Swiss Energy Market (Doctoral dissertation, University of St. Gallen).
"Assuming a 10kW bidirectional charger, and an EV available for V2G services 12 hours a day on average. The revenue accumulated over one month is 10kW x (12hr x 30days) x 0.029CHF/kWh = 104 CHF as a capacity price only."
According to the analysis, the revenue you can generate per month from one EV is approximately $105, which sums up to $1,260 per year. A fleet with 20 EVs can produce up to $25,200 annually. Fifty EVs will generate $63,000 annually - this' just an example as V2G services can be dynamic.
To boost revenue generation, an EV fleet manager can decide to target EV users with a more organised movement pattern and charging sequence.
Operating a V2G business service as a fleet manager will require an active management system that allows you to optimise your processes and provide your fleet services more efficiently. Our Hive Manager solution is integrated with blockchain technology to enable you to control your EV fleet system locally effectively.