At the end of September, General Motors joined a growing group of global automakers aiming for an emissions-free future for automobiles by committing to selling 20 different models of all-electric vehicles by 2023.
Clearly, the growth of electric cars both here in the United States and globally continued at a strong pace in the last year. It has been reported by Electric Vehicle Insider that from July 2016 thru June 2017, electric vehicle sales in the United States increased by 45%. Adding to the enthusiasm was a Bloomberg New Energy Report that projects that 54% of new car sales will be electric vehicles by 2040. There is also the non-binding commitment on the part of ten countries (including the USA, UK, Germany, France, and Japan) to a target of 30% market penetration of all new vehicles being 30% electric by 2030.
These developments make it important to try and discern what impact this will have on the electricity markets and prices, and over what time frame. The initial reaction is to think that over time it will really increase demand and cause a shift to much more demand in the off-peak hours as people charge their cars during the night. There is also the question of whether increased demand could impact overall prices and system reliability. The price questions are important to all our clients as a both a possible increase in pricing and the relative changes in the peak and off-peak curve will impact them.
This is by no means an exhaustive study since we are only analyzing Peak and Off-Peak Forward Curves out until 2022, and we are only looking at one pricing point (PJM/ComEd) in the entire Eastern InterConnect. In what is a good related exercise in Electricity Price Risk Management, we will examine the spot results for Peak and Off-Peak for 2014, 2015, 2016, and 2017 YTD against the forward curves just prior to each year. The premise we are reviewing is whether increased demand for off-peak power because of the growth of electric cars could change the relationship between peak and offpeak power and demand could push overall prices higher.
For wholesale pricing in the Eastern Interconnect, Peak Prices are defined as the 16 hours between 6:00 am -10:00 pm every calendar workday. Off-Peak prices are from 11:00 pm – 6:00 am every workday and 24 hours on Saturday and Sunday and for the six North American Electric Reliability Council (NERC) holidays of New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.