Will Tesla Sales Cause Electrical Blackouts?

Will greater adoption of electric vehicles lead to electricity blackouts? A new report explores the effect that electric vehicles may have on utilities.

Jan 21, 2014 at 1:59PM

In a new report from Navigant Research, the myth that electric utilities may not be able to handle meaningful adoption of electric vehicles is explored. The title of the report, "Plug-In Vehicles: For Utilities, More Opportunities than Challenges," says it all. If Tesla (NASDAQ:TSLA) does, indeed, bring to market an affordable electric vehicle with about 200 miles of range that goes on to sell hundreds of thousands of units, don't worry: Tesla will not be causing blackouts.

Tesla Charging

A Model S charging. Source: Tesla Motors.

Utilities do not fear EVs
To the contrary, electric utilities may look forward to adoption of electric vehicles, or EVs. EVs are an opportunity for higher revenues with very little grid modifications needed. The average household with a battery-electric vehicle or a plug-in hybrid results in around $450-$520 per year in incremental revenue for electric utilities, according to the report. "To reap such revenues, some modifications to the existing utility grid infrastructure are necessary, but not many," said Navigant Research's Scott Shepard.

Even more, many utilities have already been required to upgrade their grid supply infrastructure to handle increased demand for air conditioning during summer afternoons. EVs, which are usually charged at night as opposed to being used at peak times like air-conditioning units, can take advantage of this larger load capacity without adding to peak time demands.

Utilities will actually see a number of benefits from increased adoption of electric vehicles. "[U]sing PEVs [plug-in electric vehicles] for demand response programs, for grid balancing, renewables integration, and demand charge reduction, will help utilities supply electricity and may actually reduce peak demand loads," said Shepard.

Even in the state of California where Tesla sales and sales of other EVs are far greater than an any other state, electric utilities only need upgrades to local grids to handle the increased demand in energy consumption due to EV adoption less than 1% of the time -- and the required upgrades are just at the local distribution transformer.

Should investors worry about blackouts?
No. If anything, utilities are hoping Tesla and other EVs will succeed in gaining greater adoption.

At the end of the day, potential blackouts from electric-vehicle charging is a myth. What critics often fail to acknowledge is that electric vehicles are far more efficient than gasoline vehicles. While the average gasoline vehicle drives about 12,000 miles per year and consumes the equivalent of 16,000 kilowatt-hours, the average fully electric vehicle driving those same 12,000 miles consumes just about 3,900 kWh (the average plug-in hybrid consumes the equivalent of about 4,300 kWh on 12,000 miles), Shepard explains.

Utilities have no reason to fear consumers charging their vehicles at home. Green Car Reports added useful context to the Navigant Research's story: "Real-world data from utilities has already shown that existing levels of electric cars have made virtually no impact on local grids. Last year, PG&E in California said it had upgraded only 12 neighborhood grids out of 10,000 service checks."

Shepard sums it up well in the report: "The net effect to utilities should be new revenue streams with few costs." That said, utilities are likely more than willing to make the necessary upgrades to handle greater adoption of electric vehicles.

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Fool contributor Daniel Sparks owns shares of Tesla Motors. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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