Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
During several days of brutal cold in Texas, the city of Austin saw its fleet of 12 new electric buses rendered inoperative by a statewide power outage. That problem will be magnified next year, when officials plan to start purchasing electric-powered vehicles exclusively.
The city’s transit agency has budgeted $650 million over 20 years for electric buses and a charging facility for 187 such vehicles. But officials are still trying to solve the dilemma of power interruptions like the Texas freeze.
“Redundancy and resiliency when it comes to power is something we have long understood will be an issue,” said Capitol Metro spokeswoman Jenna Maxfield.
“There is definitely a chicken-and-egg situation with charging infrastructure”
Emily Fisher, general counsel of utility trade group Edison Electric Institute
Austin’s predicament highlights the challenges facing governments, utilities and auto manufacturers as they respond to climate change. More electric cars will require both charging infrastructure and much greater electric-grid capacity. Utilities and power generators will have to invest billions of dollars creating that additional capacity while also facing the challenge of replacing fossil fuels with renewable energy sources.
Extreme weather events add additional layers of difficulty.
“Reliability keeps you awake,” California Energy Commission member Siva Gunda said in an interview.
Rolling blackouts during a California heat wave last year prompted the state to direct its utilities to procure emergency generating capacity for this summer and to reform its planning for reserve power.
The state plans an aggressive phase-out of sales of gas- and diesel-powered cars and trucks by 2035 – which, if achieved, would require vast increases in electric grid capacity.
The power and transport sectors combined make up more than half of US greenhouse gas emissions. Their simultaneous greening is considered critical for the United States – the world’s second-largest emitter behind China – to meet its obligations under an international accord to address global warming.
The goal is to power electric cars with renewable energy rather than the coal and natural gas that currently dominate the US power supply. To realize that vision, electricity from intermittent sources like wind and solar will need to be stored, probably through battery technology, so that cars can charge overnight or at other times when supply outstrips demand.
A model utility with two to three million customers would need to invest between $1,700 and $5,800 in grid upgrades per EV through 2030, according to Boston Consulting Group. Assuming 40 million EVs on the road, that investment could reach $200 billion.
So far, investor-owned companies have plans approved for just $2.6 billion in charging programs and projects, according to trade group Edison Electric Institute.
“The electrification of the transportation sector will catch most utilities a little bit off guard,” said Ben Kroposki, director of the Power Systems Engineering Center at the National Renewable Energy Laboratory (NREL).
The organization estimates that, by 2050, the electrification of transportation and other sectors will require a doubling of US generation capacity.
If not managed carefully, the needed investments could saddle consumers with higher energy bills, according to a report last month by California’s utility regulator. Another challenge: lower-income customers often can’t afford to make the upfront investment in electric cars, home batteries and rooftop solar systems that could save them money in the long term.
Utilities are embracing EV sales growth as both a promising new source of revenue and an opportunity to use excess wind and solar power generated at very windy or sunny times when supply exceeds demand.
Investments in both the grid and charging infrastructure that are recovered from ratepayers could add between $3 billion and $10 billion in cumulative cash flow to the average utility through 2030, according to Boston Consulting Group. The forecast also includes potential revenues from new products outside of utilities’ regulated businesses, such as customer fleet routing or charging station maintenance.
The revenue opportunity is still nascent, however, with EVs making up less than 2% of all vehicles registered in the United States. And utilities must invest in infrastructure now for consumers to feel secure in their purchase of an EV, said Emily Fisher, general counsel of utility trade group Edison Electric Institute.
“There is definitely a chicken-and-egg situation with charging infrastructure,” she said.
Major US automakers General Motors and Ford have announced large investments in EV development to keep pace with electric-car pioneer Tesla Inc and to prepare for the prospect of tougher emissions regulations. EV share could grow to 15% by 2030, according to US Department of Energy forecasts.
The electricity to power all those cars is expected to come primarily from renewable energy sources and natural gas, according to NREL. Even if natural gas generation increases to support electrified transportation, overall emissions are projected to decline, the organization said.
Large new investments may pose difficulties for utilities already experiencing weather-related problems. In Texas, many of the companies that would be making those investments face a financial crisis stemming from last month’s cold snap. Utilities and power marketers face billions of dollars in blackout-related charges, and several have filed for bankruptcy.
Daimler Trucks, the world’s biggest maker of heavy-duty haulers, plans to sell electric vehicles in Europe, North America and Japan by next year. But the company is grappling with how to charge what will one day become hundreds of thousands of battery-powered trucks, said Daimler Trucks chairman Martin Daum.
The need for massive investments in grid infrastructure and charging stations “cannot be underestimated,” Daum said.
Ford Chief Executive Jim Farley last week called on US government leaders to support EV sales with favorable regulation and subsidies for the production of batteries and charging infrastructure.
But Robert Barrosa, senior director at Volkswagen AG’s Electrify America, which is building out fast-charging stations throughout the nation, said the gradual pace of EV adoption will allow utilities to adapt.
“We’re not in a doom-and-gloom situation,” Barrosa said. “We’re not going to 80% battery electric sales overnight…it will be a natural transition.”
Barrosa said US energy consumption decreases over the last 20 years, due to efficiency gains in appliances and the transportation sector, mean that the US power system has enough established capacity to support EV growth without the immediate need for big investments.
Utility Xcel Energy said EV adoption would likely not require capacity additions until after 2030, and that near-term investments would mainly be in distribution systems. The company is planning to accommodate 1.5 million electric vehicles in its Midwest and Western service territories by 2030, about 30 times more than its current capability.
The utility in December received approval to spend $110 million on electric vehicle charging infrastructure in Colorado, which passed a law in 2019 requiring utilities to develop plans for widespread transportation electrification. The plan is expected to add 65 cents a month to residential customer bills.
Electric vehicles – especially commercial ones with large batteries – can help stabilize the grid in the long run by feeding power back into the system during times of peak demand, using chargers that allow electricity to flow in both directions. Passenger cars that sit idle most of the day could one day earn money by feeding power back into the grid with the help of bi-directional chargers, utilities predict.
During the Texas outages, some Twitter users said they used their electric vehicles to power their homes. But wider applications of such vehicle-to-grid technology would require larger infrastructure changes and utility involvement.
“Planning is going to be more sophisticated,” said Ryan Popple, co-founder of Proterra, which produced some of Austin’s electric buses. “And as vehicle-to-grid becomes more common with our commercial fleets, it’s actually going to make the overall technology even more attractive.”
(By Nichola Groom and Tina Bellon; Editing by David Gaffen and Brian Thevenot)
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