Will Tesla Sales Cause Electrical Blackouts?

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.

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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Read/Post Comments (7) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 21, 2014, at 3:03 PM, jeffhre wrote:

    Debunks one more myth one more time on basically what is old news. PG&E studies showed the very same results - last year.

    Yet the myth persisted. Though Enron made 2000 miserable for them and weather events (plus tree branches) can stretch their M&O capabilities, utility companies have managed to continue operations through the challenge of demand growth - for the past 131 years.

  • Report this Comment On January 21, 2014, at 3:33 PM, membender wrote:

    What an asinine title.

  • Report this Comment On January 21, 2014, at 9:58 PM, dnhines wrote:

    Who pays you to write this tripe. Have you shorted a bunch of Tesla stock causing you to write negative article after negative article hoping that one of this gains traction and cause the stock to retreat.

    Don't hold your breath. Americans aren't as dumb and you think.

  • Report this Comment On January 21, 2014, at 11:12 PM, TMFDanielSparks wrote:

    @dnhines,

    Not sure how this is negative?

    Also: "Fool contributor Daniel Sparks owns shares of Tesla Motors."

  • Report this Comment On January 21, 2014, at 11:20 PM, Ustauber wrote:

    @dnhimes,

    The author is actually talking positive about Tesla.

    His articles are very positive for the company and I believe that he is long on Tesla.

  • Report this Comment On January 21, 2014, at 11:22 PM, Cornan wrote:

    Most likely utility companies will welcome electric cars. It happens that as Solar City and others deploy more and more solar and take business way from providers, electric cars will help bring new revenue.

  • Report this Comment On January 22, 2014, at 10:54 AM, 48ozhalfgallons wrote:

    Amazing that we haven't seen the development of a light electric pickup such as Ford experimentally prototyped in the '90's and took back from users who loved them. A light utility pickup does not require great range nor accessories. One could be manufactured to sell profitably for less than 15 grand. Sales volume potential would be enormous. Modern auto execs and common working people do not inhabit the same world.

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