Plugged-in electric vehicles could overload neighborhood transformers and drive up peak demand on already-stressed grids. Or, they could wield their influence in ways that brings the grid into better balance than it is today.

So say a host of companies trying to develop technology and business models around EV charging as an aggregated grid resource. By subtly shifting and tweaking when and how much electricity plug-in vehicles draw from the grid, they say, EVs could help ease congestion on distribution grid circuits, absorb excess solar and wind power, or provide sub-second response for high-priced ancillary services markets.

Figuring out the value of this still-theoretical grid resource is a tricky matter, however, given the small number of EVs on the road today, and the even smaller number of “smart” chargers being tested in pilot projects. So it's going to be hard to prove out the following business proposition: give chargers away for free, and pay off that cost through grid services revenue over their lifetimes.

But this is the task that EMotorWerks has set for itself. Founded in 2010 as an electric vehicle conversion company, the San Carlos, Calif.-based startup shifted in 2013 with a Kickstarter campaign to selling “open-source” EV charger kits for the low, low price of $99. Those kits received mixed reviews, but provided customer feedback that fed into the launch of the company's new JuiceBox residential EV charger, built by contract manufacturer Telirite, at a retail price of $299, about half the cost of a typical Level 2 home charger. 

That low price has helped EMotorWerks sell more than 3,000 JuiceBox units to date, CEO Val Miftakhov said in an interview last week. But a special offer launched last summer put the price of a JuiceBox even lower -- in fact, it became completely free. The only catch was that participants needed to have a working home Wi-Fi connection, live in California, and agree to sign up for a pilot project that’s gathering data on how in-state EV owners charge during different times of the day and night.

From that, EMotorWerks and partner Ohmconnect are seeking to show that EV chargers could pay their own way through grid services like fast-acting demand response, frequency regulation, or other aggregated functions -- if the regulations and markets to earn that money can be built to support those models.

“Today we’re profitable on hardware sales already, but that’s not our business model,” Miftakhov said. Instead,our plan is to get there with the third-party finance strategy, not unlike SolarCity.”

Of course, other EV charging players such as ChargePoint are financing low-cost commercial EV chargers. But “those are financing deals for the equipment,” he said. “The specific difference here is that the revenue stream does not come from the hardware -- it comes from the energy market.”

Turning driver behavior and multiple grid markets into predictable revenue

Here’s how it works: First, every new owner of a free JuiceBox charger has to agree to sign up for the California Public Utilities Commission’s plug-in electric vehicle (PEV) submetering pilot. Then, EMotorWerks will use the home’s Wi-Fi connection to send that charger-generated data to its partner, Ohmconnect, a San Francisco-based startup with a software platform to allow home energy savings to be aggregated for direct participation in grid markets.

“We’re trying to qualify all the revenue streams that would be open to a player like us,” Miftakhov said. “Once someone buys an EV, it becomes the largest load in their household by far -- and it’s purely time-shiftable, with a few exceptions.”

JuiceBox owners don’t have to do much besides agree to let EMotorWerks alter their charge rates within a certain multi-hour timeframe, he said. A simple slider bar on their iPhone or Android app allows them to say by what hour they need their car battery to be fully charged. Within that window, “on a statistical basis, you can be pretty sure, 95 to 99 percent sure, what your capacity is going to be,” he said. “That’s what you commit to the market.”

 “Predictive analytics around driver behavior is part of the secret sauce we have,” he said. Ongoing observations of how often individuals unplug before their stated end time, for example, or learning how much charge they need to do their typical weekday versus weekend driving, all inform the data model. “After a couple of weeks, we know a lot -- and the more we observe, the more we know.”

On the other side of the equation is “what we call the market engine,” he said. “It takes the data from the energy markets -- for example, wholesale pricing on the day-ahead market and real-time pricing on the ancillary services markets -- and assigns the value to an action that we can perform on these aggregated assets."

This is a lot more complex than participating in demand response programs, which have limited rules for when chargers should turn off and turn on under direct control from utilities or aggregators. But it could yield far more frequent and lucrative opportunities to alter energy consumption for profit, he said.

For example, at night, when wholesale power prices are low, there’s still a lot of wind power being generated, which calls for greater need for frequency regulation, he said. During the late afternoon or early evenings, by contrast, wholesale prices can sometimes spike to as high as $1,000 per megawatt-hour, or 30 times the average price, as air conditioning energy use peaks, or Californians come home from work and turn on all their household appliances and electronics.

EMotorWerks and Ohmconnect are seeking to participate in several California pilot projects testing the ability for distributed, aggregated assets like these to compete against big power plants, mass-market demand response and other traditional grid market players. Those include PG&E’s Supply Side Pilot and Excess Supply Pilot, set to launch later this year, as well as the proposed Demand Response Auction Mechanism. (Read this article for more information on California’s new demand response models.)

EV charger fleets as securitized assets?

“Knowing the value does not mean that we can extract it,” Miftakhov conceded. “That’s the point of all these pilots we are doing. The market mechanisms aren’t there yet.” But as California and other markets like New York or Hawaii increase the range of roles that grid edge devices like EV chargers can play, there will be a need to measure their value in terms that translate to the world that wholesale energy traders and power plant operators understand, he said.

As a former physics researcher at the DOE’s Stanford Linear Accelerator Center, with executive experience at McKinsey & Co., Nielsen and most recently, Google, “my background is in big data, analytics, and the heavy terabyte-type industries,” Miftakhov said, and the company has other executives and advisors with deep data experience in the realm of energy market finance. That helps lend some credence to the next, even more ambitious phase of EMotorWerks’ business plan: “to capitalize or securitize this future revenue stream."

"Yes, it’s a statistical game. But there is a significant predictability in statistics, once you aggregate large numbers," he said. “The beauty here is that all of the revenue streams we’re talking about are free-market revenue streams. We do not depend on government subsidies for revenues in any way. They’re based on fundamental needs to balance the grid.”

The challenges in proving this out will be immense, of course. Energy markets are open to companies that can successfully aggregate larger commercial and industrial customer loads and energy assets, with big-league demand response players like EnerNOC and startups like Enbala, Viridity Energy, Blue Pillar, Powerit Solutions, Innovari, Demansys and Tangent Energy staking their claims in the field.

But thousands of EV chargers located at homes or small businesses are a far more complicated set of assets to turn into energy market players. Even if they're eventually allowed to participate, it’s much harder to get enough of them connected, controlled and verifiably performing at the scale needed to gain entry. While companies like SolarCity and Nest are talking about the potential for mass-market residential energy aggregation to serve these kinds of grid needs, they’ve not publicly announced any plans to finance installations on that hypothetical value.

There are also definite challenges in tapping the EV charger as a go-to grid services asset, Miftakhov noted. For example, most public EV chargers aren't good candidates, because the customers who plug into them want to charge as much as possible, as quickly as possible, leaving no wiggle room for the fine-tuned charging alterations that EMotorWerks relies on. Even with residential customers, "one of the big variables is how accepting drivers will be of these manipulations of the charging rate," he said. 

Even so, “I feel we can extract the value and we can bank on it,” Miftakhov said. “Once we have statistically significant proof of the revenues generated through these models, there will be financing players willing to capitalize” the equipment.

EMotorWerks has raised an undisclosed amount of seed funding and institutional investment, and “we are preparing for raising a Series A soon,” he said. “We have the system built out; we have the pilots already that are utilizing all these capabilities. We need to bring it to the next level. We need thousands of devices to be under control for a certain period of time to gather significant data.”