Ancillary Service Revenue Opportunities from Electric Vehicles via Demand Response

Abstract

Driven by a variety of factors including falling costs, environmental impacts, and state mandates, the integration of renewable energy on the U. S. electrical grid is increasing. While studies have shown that the existing electric grid system can absorb this load with the addition of considerable transmission and distribution infrastructure over the next few decades, the effect that intermittent solar and wind resources may have on the operational flexibility of the grid are less known. This poses a unique challenge for the Regional Transmission Organizations (RTO), Independent System Operators (ISO), and other grid operators that are responsible for procuring and coordinating ancillary services that support and maintain the reliable operation of the interconnected transmission system. As additional renewables are added to the system, they must secure enough services to account for small disparities between the quantity and quality of the energy output of these variable sources and those of the dispatchable resources responsible for the majority of electricity generation. In certain regions, these organizations not only determine the existence, definition, and pricing of these ancillary services, but also enable a range of generation, transmission, system control, and distribution system stakeholders to trade these products on open markets. Perhaps the most promising, but least proven, providers of ancillary services are electric energy storage (EES) technologies such as flywheels and advanced batteries. These devices store and release electric energy on demand and are prized for their fidelity and rapid response functionality. However, high costs associated with the operation of EES assets have prevented their deployment at a meaningful scale. The large-scale adoption of electric vehicles (EVs) presents an opportunity to overcome this barrier. Recent advancements in demand response, vehicle-to-grid (V2G), and battery technologies suggest that networks of aggregated battery EVs may soon be a reality. Research suggests these networks could provide EES-based ancillary services at a competitive price. The purpose of this project is to provide a technical and economic analysis of the ability of EV networks to deliver ancillary services associated with the integration of renewables within the California Independent System Operator (CAISO) market area, and identify which ancillary services are best suited for EES. The California ISO region was selected for three reasons. Firstly, California is predicted to contain the highest concentration of early EV adopters in the US. Secondly, state regulators generally maintain a progressive stance towards renewable energy and EES. Finally, research suggests a causal relationship between increased renewable energy penetration and increased demand for two primary types of ancillary services within the CAISO region: frequency regulation and operating reserves. This report examines the potential impact of renewables on the ancillary service market under the CAISO, and focuses on the ability of EVs to provide such services via demand response and V2G. The document also presents a revenue model that incorporates potential scenarios regarding EV adoption, electricity prices, and driver behavior. The output of the model determines the overall revenue opportunity for aggregators who plan to provide DR-EV. While EVs and renewable energy technologies are often mentioned in the same breath as cornerstones of a low-carbon future, the relationship between the two technologies remain nebulous. Our hope is that the conclusions herein will facilitate the transition to a sustainable transportation system by highlighting important synergies and related potential business opportunities. In order to color our analysis and inform our assumptions, we relied on a number of private and public sector organizations. When considering the integration of renewables, we turned primarily to the California Public Utility Commission and the CAISO. To understand ancillary services and their markets, we relied on ORNL and EPRI reports and personnel. Similarly, we used published reports to model EV adoption rates and patterns. We also interviewed EV, EES, and renewable energy experts from the DR-EV Ancillary Services Study 7 University of Michigan to determine the capabilities and limitations of these technologies. Finally, the team met with experts from numerous advanced battery, utilities, and other industry stakeholders to collect supplementary information.