1. RETRANS2 – Final Report Executive Summary Univ.-Prof. Dr.-Ing. Armin Schnettler, Thomas Dederichs Ann-Kathrin Meinerzhagen, Eva Szczechowicz RWTH Aachen University, Germany 26. July 2011

2. www.iea-retd.org Introduction  IN 2009/ 2010 the project IEA-RETD „Renewable Energy in Road Transport (RETRANS)“ examined different options of using renewable electricity in electric vehicles.  Using renewable electricity in electric vehicles would result in a „Co-Evolution“ of the energy and the transport sector.  Based on the findings of RETRANS, the follow-up project RETRANS2 Regions aims at identifying challenges and opportunities for the Co-Evolution of electric vehicles and renewable electricity in three world regions: North America, Europe and China  An analysis of the characteristics of each region concerning the political, economical and infrastructural framework gives stakeholders an opportunity to understand the different roads the Co-Evolution can take.  The assessment of different policy options which were suggested in RETRANS highlights the regionally differing developments. 2

3. www.iea-retd.org Identify Challenges and Opportunities for the Co- Evolution of Electric Vehicles and Renewable Electricity  Comparison of three world regions (North America, Europe, China)  Assist stakeholders of this Co-Evolution in better understanding the characteristics of each region  Examine whether the policy recommendations from the RETRANS project can be applied  Identification of those policy options that have to be adjusted to better fit the situation in one region  Approach:  Assessment of studies that are relevant to the field, of pilot projects, of statistical data on the three regions and of policies that concern either electric vehicles or renewable electricity  Expert interviews for additional insights 3 Scope of RETRANS2 Regions

4. www.iea-retd.org Table of Contents  Regional Context  Socio-Economic Background of the regions  Passenger Vehicle markets  Pilot Projects deploying Electric Vehicles  Share and expected development of electricity from renewable sources  Policies for the integration of electricity from renewable sources  Situation of Grids  Policy Assessment  Recommendations from RETRANS  Policies on Renewable Electricity and Electric Vehicles until today  Regional Assessment of policy options from RETRANS  Conclusions 4

5. www.iea-retd.org EVs meet with diverse circumstances globally 5 North America Personal mobility relies almost totally on cars Biofuels are available regionally Europe Personal mobility relies on cars and on public transport Biofuels are widely available China Personal mobility relies strongly on public transport (except around cities) Biofuels are not widely available Efficiency gains in conventional vehicles challenge emission benefits of electric vehicles Customer acceptance of vehicle design, performance and new mobility solutions is unclear Increases in personal mobility can be expected in all regions Context – Economic influences on Electric Vehicles

6. www.iea-retd.org Factors influencing the price gap between electric and conventional vehicles North America Very low gas price No taxation of GHG emissions from vehicles Vehicles have to fulfill set criteria for receiving tax reductions No electricity consumption tax Europe Elevated gas price Taxation of GHG emissions from vehicles Vehicles have to fulfill set criteria for being subsidized Elevated electricity consumption tax (esp. in Nordic Countries) China Low gas price Taxation of GHG emissions from vehicles Only vehicles recommended by the government are subsidized 6 Context – Economic influences on Electric Vehicles

7. www.iea-retd.org The Chinese vehicle market has the highest potential for a transition towards electric vehicles North AmericaEuropeChina Vehicles on Road 277 million 1% EVs (mostly HEVs) 210 million 1% EVs ~55 million 0,5% EVs Passenger Vehicle Sales 12 million (2009)16 million (2009)10,3 million (2009) 13,7 million (2010) Vehicles per 1000 people 830Europe: 473 Nordic: 500 China: 54 Beijing: 228 Overall Market situation Stagnating, expected to increase as of 2012 StagnatingStrongly growing (doubling of sales within 3 years) 7 Context – Vehicles Market The strong growth in the Chinese vehicle market could facilitate market entry for Electric Vehicles for first-time owners. In the other markets, EVs may have more difficulties securing their share.

8. www.iea-retd.org Pilot Projects – The first phase of EV deployment North America Pilot projects are public-private- partnerships Electricity companies are coordinators Small vehicle deployment Only The EV Project (US) targets a fleet of several thousand vehicles across cities Europe Diverse nationally/ regionally funded projects Mostly coopera- tion of vehicle manufacturer(s), authorities, utilities and DSOs. Focus on infra- structure and usage experience in cities and on important routes China National „Ten Cities Thousand Vehicles“ Pilot Program Federal and local subsidies mostly for public vehicles Cooperation with local vehicle manufacturers Mostly deployment of EVs as buses, taxis and other public vehicles. 8 Context – Regional Pilot Projects – Comparison Pilot projects lead to first infrastructure and learning effects (thus also cost reductions) in the production and maintenance of electric vehicles.

9. www.iea-retd.org 9 Comparison of regions Outcome of pilot projects  EVs alone cannot solve traffic problems – an integrated approach and a new concept of transport are necessary  User acceptance:  EVs for a set purpose are well accepted  Business cases:  Car-sharing/ Mobility Partnerships for commuting  Usage patterns:  Local solutions for traffic problems and personal mobility are needed Context – Pilot Projects’ Learnings

10. www.iea-retd.org Incentives are similar on first glance – differences lie in the amounts 10 North America SubsidiesTax exemptions Europe Subsidies (6 national policies) Tax exemptions (22 national policies) Traffic privileges (3 national policies) China Subsidies (partly for private EV acquisition) Tax exemption in Beijing Traffic privileges (municipal policies) Context – Incentives for Electric Vehicles Vehicle emission standards are in place on national levels.

11. www.iea-retd.org Current regulatory framework for new Renewable Electricity North America Policies for RES-E only on state/ province level Vertically integrated electricity markets: new producers can not join in Feed-In tariffs lead to higher electricity prices – difficult in regulated markets Infrastructure gaps hinder new RES-E production Europe Policies for RES-E integration widely implemented across Europe Successfully increased RES-E share Deregulated common internal electricity market China Vertically integrated electricity market: new producers can not join in Grid companies are obliged to integrate as much RES-E as the government requires 11 Context – Electricity from Renewable Sources

12. www.iea-retd.org EVs mostly affect distribution grids 12 Context – Needed System Expansion North America Assets of local distribution networks may overload RES-E expansion far from demand Thus local grid development (EVs, Feed-In, Smart Grids) Expanding distribution grids locally Europe Overloads are only expected for high penetrations (>50%) RES-E expansion on distribution grid level (unless off-shore wind) Thus preparing grid for more feed-in China Assets of local distribution networks may overload RES-E expansion will concentrate on large production sites (far from demand centers) Thus enhancing transportation capacity Expanding distribution grids locally Electric Vehicles will first be deployed in cities and urban areas

13. www.iea-retd.org Comparison of regions Characteristics North America Low population density: Grid expansion costly Few instruments for furthering RES-E expansion EV deployment may stay marginal for longer: Focus on cities! Europe Increasingly distrib- uted generation (RES-E) and load (EVs) challenge grid Communication technology needed for higher penetra- tion of EVs and RES-E Nordic Countries may achieve Co- Evolution more easily (most RES-E and EVs) China Distributed genera- tion not encouraged New RES-E in large facilities require transmission! EV deployment concentrated on public institutions and load centers Market for low- performance EVs in rural areas Experience with electric scooters has shown that passenger vehicles remain important status symbols in rural areas 13 Context – Comparison of backgrounds

14. www.iea-retd.org Urban EV deployment Further RES-E integration Transmission grid expansion Controlled charging Ancillary services Unregulated charging Controlled charging Further RES-E integration Active load management Ancillary services Charging with RES-E Storage of RES-E Ancillary services (bidirectional) Local integration of EVs and RES-E First Smart Grids Local grid expansion Controlled charging Ancillary services (bidirec- tional)? Different situation and cultures need diverse policies 14 Context – Roadmap for Co-Evolution

15. www.iea-retd.org Table of Contents  Regional Context  Socio-Economic Background of the regions  Passenger Vehicle markets  Pilot Projects deploying Electric Vehicles  Share and expected development of electricity from renewable sources  Policies for the integration of electricity from renewable sources  Situation of Grids  Policy Assessment  Recommendations from RETRANS  Policies on Renewable Electricity and Electric Vehicles until today  Regional Assessment of policy options from RETRANS  Conclusions 15

16. www.iea-retd.org Increase deployment of EV to reach mass markets Increase system integration to enable higher use of EV and RES-E Prepare for EV’s Infrastructure and standardization Pilot fleets in niche markets for learning effects and cost reductions Provide long term perspective to industry Increase RES-E production Priority access for renewables Promotion via Feed-in tariffs or premiums Renewable Portfolio Shares or obligations Cap and trade Ensure balanced grid development Coordinate technical and institutional efforts Smart grids and active load management/ regulated charging Phase 2 Deployment Co-Evolution – Policy options from RETRANS A two-phase long-term policy approach for large scale introduction of Evs and Co-Evolution with RES-E 16 Phase 1 Preparation

17. www.iea-retd.org Phase 1 options are almost always feasible For Phase 2 options the feasibility is insecure North AmericaEuropeChina Tax exemptions for RES-E charging Re-Investing electricity tax ~ Hard Coupling ~ ~ EV manufacturer investments into RE capacity Cap and Trade ~ ~ Grid Stabilization Bonus ~~~ 17 Co-Evolution – Feasibility of policy options

18. www.iea-retd.org Consistent long term policy is required for stimulating large scale introduction of EVs and Co-Evolution with RES-E  Provide security of investment for car industry and infrastructure providers (Security of the existing tax exemptions )  Mandatory targets for EV-numbers and RES-E share  Demonstration of system integration of EVs and RES-E  Standards development  Investments in infrastructure  Involve a variety of actors  Coordinate network development and system integration to allow high penetrations of EV and RES-E  This is already taking place in the national Nordic TSO's and in the context of ENTSO-E  Grid reinforcement and upgrade  RET integration  Coordinate system integration among grids and vehicle/battery manufacturers 18 Conclusions

19. www.iea-retd.org Policy Recommendations by Region 19 Conclusions North America Incentives and Policies on State/ Province level most likely Fiscal (indirect) incentives likely to be publicly accepted Facilitating market entrance of EVs and RES-E is key to Co- Evolution Profitability is the most important acceptance factor Targets are a premise Europe European policies have to build a stable framework for nationally adapted policies Standardization is an important issue for providing security for manufacturers All discussed policy options are feasible on European or National level China Centralized state – can more easily implement regulatory policy options Premise for many options is the development of emission reduction and RES-E targets

20. www.iea-retd.org Actions for Co-Evolution‘s stakeholders  Government and regulators  Regional infrastructure strategies  Funding research and information campaigns  International governmental organizations  Co-ordinate international standardization issues for cross-national compatibility  Support the RD&D of EV system solutions for developing countries  Support dissemination of RD&D on EVs and infrastructure  TSOs/ DSOs  Help develop business models  Promote adoption of real-time energy-usage information and pricing  Co-operate with OEMs for interoperability standards and post-installation support  Utilities  Co-operation with regulators to facilitate implementation of RES-E and EV connection  OEMs  International strategy and standards for interoperability of system components  Address concerns with long-term post-installation support and reliability  Marketing and information campaigns for EVs 20 Conclusions OEMs = Vehicle and charging stations manufacturers

21. www.iea-retd.org 21 Comparison of regions Lessons learned so far  Policy options & public acceptance  Skepticism regarding Co-Evolution  Low RES-E shares reduce benefits  Technological and regulatory hindrances in foreground  An uninformed public does not accept EV promotion “from above”  Information campaigns on the benefits of EVs needed  Including financial, fiscal and non-monetary benefits for users  Policies furthering EVs and RES-E have to be adapted to regional characteristics  Important regional differences in Phase 1, Possible synergies in Phase 2  Influence of RES-E deployment and potential  Potential for RES-E not fully exhausted yet  Sustainability of RES-E for EVs absolutely vital for ecological benefits  Electricity tariffs that guarantee RES-E for charging EVs are needed Conclusions

22. www.iea-retd.org Conclusions  For a true Co-Evolution of transport and renewable electricity local pilot projects should gain experience with EV and RES-E integration and, accordingly, grid reinforcements  System integration can be achieved by involving the system operators in pilot projects and by upgrading the grid and its regulation for allowing for bi-directionality and integration of renewable energy  Electricity tariffs that guarantee RES-E for charging EVs are vital for sustainable EV integration  In China the integration of renewable energy focuses on large RES-E plants. Distributed generation is not encouraged and the current small numbers of EVs are not of interest for grid services yet. Synergies and Co-Evolution are thus complicated.  Pilot projects show that electric vehicles can be successfully integrated in combination with a framework of mobility solutions that address users’ concerns 22 Conclusion

23. www.iea-retd.org Summary  Regional electricity system characteristics and policy frameworks differ and have to be taken into consideration for short-term EV and RE deployment  The coupling of EV and RE is needed for full benefits but has to overcome regulatory and acceptance or policy barriers.  The Co-Evolution of EV and RE has to include a variety of stakeholders who have considerable influence  RETD recommends …  … to enable pure RE charging for EV worldwide  … to choose holistic mobility policies for best integrating EV into the transport landscape  … to devise national short-term policy solutions in order to account for regional differences  … to adapt mandatory emissions and/ or RE targets for providing a stable incentive for further action  … to introduce EV in cities first. 23

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