A new state law requires utilities to propose alternatives to help customers avoid large demand charges that can come with installing electric vehicle fast-chargers.
Massachusetts is asking utilities to come up with new ways to tally the bill for customers with electric vehicle fast-charging stations that won’t punish them for drawing electricity in sporadic bursts.
“I don’t think I can stress enough how much of a game-changer this legislation is for electric transportation,” said Kevin Miller, director of public policy at charging station company ChargePoint. “This is going to make it easier for everyone in Massachusetts to drive and ride in electric cars and buses.”
The new policy is part of the comprehensive transportation bill signed into law by Gov. Charlie Baker earlier this month. The goal is to smooth the way for the growth of fast-charging infrastructure, which has been slowed in part by the potential to trigger big increases in monthly utility bills.
As Massachusetts works toward the goal of going carbon-neutral by 2050, transportation, which is responsible for around 40% of the state’s carbon emissions, is a major target for action. Electrifying private cars and trucks, fleet vehicles, and public transportation is a central element of the state’s strategy.
The state has set a goal of putting 300,000 electric vehicles in service by 2025, but is still well short of that number. While it is difficult to determine the exact number of electric vehicles on the road right now, it is likely somewhere between 20,000 and 25,000 of the more than 5 million vehicles registered in the state.
Many drivers are hesitant to make the leap to an electric car because they worry it won’t be able to drive far enough between charges, a concern known as “range anxiety.”
A possible solution to this barrier is the installation of more direct current (DC) fast chargers, which can power up an electric vehicle to 80% full in 20 minutes. They are generally located in public spots like malls, supermarkets, and interstate service areas, where drivers can power up while they buy their groceries or grab a coffee.
“These stations are vital components of the successful electric vehicle adoption strategy,” Miller said.
At the moment, however, there are just 90 publically available fast-charging stations in the state, offering a total of 345 outlets.
The economics of demand charges partially explain the lag. Demand charges are a component of commercial and industrial electric bills that assesses a fee based on the highest amount of energy used in any 15-minute period throughout the month. They are designed to make sure customers are paying their fair share to keep the grid ready to deliver even in times of high demand.
“The cost of delivering electricity is based on the cost of building systems to meet customers’ maximum demand,” said Kevin Boughan, manager of clean energy strategy and business development for utility Eversource. “That’s why demand charges exist.”
There is widespread agreement, however, that traditional demand charges don’t make sense for fast-charging stations, at least not yet. These stations just aren’t used that often, so demand charges can constitute a disproportionate portion of owners’ bills — as high as 80% to 90% — often making it financially unfeasible to offer fast charging.
“The utilities are operating on an old model that wasn’t designed to fit this use,” said Sarah Krame, associate attorney for the Sierra Club. “Demand charges are a really significant burden on direct-current fast charging site operators.”
The problem would be less acute if there were more electric vehicles drivers using each station — the peaks would stay roughly the same, but the overall use would be great, making demand charges a small percentage of the total bill. The demand charge could also then be spread out across more users, Miller said. But at the same time, the relative lack of fast charging stations is helping slow the adoption of electric vehicles.
“We need more DC [fast charging] to make people more comfortable driving electric vehicles,” Krame said. “But these stations need more people driving electric vehicles to have higher utilization rates.”
The new state measures aim to disrupt this cycle. Utilities will be asked to look for alternatives to conventional demand charges that meet their needs while solving the problems associated with fast charging. Both Eversource and National Grid, the state’s two major utilities, have expressed support for this new approach.
Neither utility has developed any firm proposals yet, but other states offer some ideas for how it might be done. In Virginia, fast-charger customers of Dominion Energy that have low demand can qualify for a general service rate without a demand charge. In Connecticut, Eversource converts the demand charge into an equivalent per-kilowatt-hour rate. Southern California Edison offers time-of-use rates, which charge different rates at different times of the day, for five years, with demand charges phasing back in over the following five years.
“There is additional digging that needs to be done in terms of what would be the best fit in Massachusetts,” said Megan Aki, clean energy analyst for the Metropolitan Area Planning Commission.
Utilities now have 180 days from the signing of the bill to file their rate proposals, which will then be open to public comment before the Department of Public Utilities decides whether to approve the plans.
Massachusetts’ strategy of letting utilities formulate their own plans, rather than dictating the state’s preferred solution is promising, and could be a model for other states, Miller said.
“It’s a collaborative approach that ensures this problem is addressed,” he said. “And it leaves room for significant innovation.”