The Obama administration has called for one million electric cars on the road in the U.S. by 2015. But what about when there are a million electric vehicles that have to be managed by a single independent system operator?

Better Place and PJM Interconnection released a new study that evaluates the impact of one million cars operating in the Washington-Baltimore Metropolitan area and found that a central network operator is the only solution to moderate the impact of EVs on the grid and the wholesale markets -- not to mention drivers’ pocketbooks. However, the study makes assumptions about management and pricing for both central and distributed charging that suggest there will be various ways to solve the conundrum of bringing EVs on the grid en masse.

The study found that with no smart charging, one million cars could add up to $750 million in annual wholesale energy costs -- but a central network operator, such as Better Place’s swapping technology, could cut that increase in half.

The findings are unsurprising, given the source. Better Place’s business model revolves around battery swapping versus fast-charging and individual charging at home, work and retail locations, such as Walgreens. Although the conclusions show the advantages of a system like that offered by Better Place, they also show the shortcomings that can be addressed to make individual smart charging more effective.

The study examined five weeks from each season of the year and had PJM model the market and pricing impact of different EV charging models, including no charging scheme, time-of-use and central charging.

Better Place chose a two-tier time-of-use scheme that is being piloted by Southern California Edison for the TOU pricing model. While consumers overall saw a savings of 3.7 percent on the TOU program, wholesale prices rose about 4 percent over no charging plan at all, totaling more than $800 million annually. With a central network, that figure was halved to $436 million.  

The crucial difference in this study was that the central network operator scenario used locational marginal prices, while the TOU rates were $60.17/MWh off-peak and $143.45/MWh for on-peak. But Better Place says it goes further than just real-time prices.

“Although the argument may seem to be that real-time pricing is the key to reducing grid impacts, a CNO is actually the enabling entity that allows for the price predictions and responses to those real-time prices,” the authors argue, “but the CNO is the only entity capable of aggregating the energy needs across the network to make a prediction for system-wide prices.”

However, other charging networks would argue that they too have the technology to mitigate the peaks that charging can create. Also, smart charging may not be just two tiers, but rather could be closer to the LMP, which would increase the effectiveness of TOU pricing for EVs.

Better Place argues that even with real-time prices, there could be a herd mentality that could compel the majority of drivers to set their cars to start to charge as soon as the price drops, creating another peak. But it is likely that charging networks will allow drivers to set the time by which they need a full charge, and let the network charge accordingly, rather than having the car respond to a crude price signal.

Like dynamic pricing for homes, the effectiveness is directly related to how the tariff is set up. If the prices are not reflective enough of wholesale prices, or don’t have enough of a spread to shift behavior, they will not be effective. However, various pilots are being conducted to evaluate different pricing schemes for EVs, and there has yet to be a clear winner.

In the real world, it’s not a matter of either individual charging or a central network. Fleets, which make up the bulk of early adopters of the EV market, will likely adopt advanced charging technologies that can balance the needs of fleet charging with the needs of the grid. Large fleets charging in one location could also provide some of the other ancillary services to the grid operator in the same way Better Place could.

With an EV market in its infancy worldwide, these are all issues that are being studied and there is no clear answer yet on how best to meet drivers’ needs while not overloading the grid. What is known is that there will not be just one winner, as the needs of an electric bus fleet  are different than those of a commuter using a plug-in electric hybrid vehicle.

For more on the challenges and opportunities of the mass deployment of electric vehicles, join Greentech Media on October 20 in San Francisco for The Networked EV.