The IMET initiative spoke with Javier Navamuel Calderón, MSc in Industrial Management, about his research in the past 9 months on Vehicle to Grid (V2G) and the possible sustainable business model innovation that may appear within the Spanish energy industry.
Which competitive advantage does V2G present?
Common Electric Vehicles (EVs) usage is based on mobility, where EV users make use of their EVs for mobility purposes, needing to recharge their EVs to keep moving. However, the V2G technology brings added value to EV users and Distribution System Operators (DSOs), creating the opportunity of providing certain services to the power grid, while the EVs are plugged-in, allowing a bidirectional exchange of power, from the power grid to the EV, and the other way around, from the EV to the power grid. Considering numerous EV networks, these services could help the energy industry to better manage power generation, its management, and finally its consumption.
Which are the services that can be provided via V2G?
As I mentioned before, the key factor around the V2G technology is that it brings the opportunity for EV users to provide services to DSOs by making use of their EVs as bidirectional chargers.
If we consider a certain EV network as a huge battery connected to the power grid, it might be understood that the power grid can make use of that power storage system when needed. Having access to that EV network, the energy industry would benefit from some key services.
The first one could be shifting and adapting power demand to live power generation. If we take into account the current power generation system and power demand patterns (Figure 1), there is a profound demand valley at night, two demand peaks at noon and when people usually come back home in the evening. These three specific demand points lead to high variability in power generation. Thanks to the V2G technology, EVs could be charged at night to a higher state of charge than actually needed for mobility purposes, and then injecting that extra power into the grid when demand goes up over the day.
"Thanks to the V2G technology, EVs could be charged at night to a higher state of charge than actually needed for mobility purposes, and then injecting that extra power into the grid when demand goes up over the day."
The second main service to be provided via V2G is the frequency regulation of the power grid. On the one hand, when power demand is higher than power generation, then frequency goes down. V2G can help the power grid rise the frequency through diminishing the number of cars charging their batteries and/or increasing the number of cars which are being discharged. On the other hand, when power demand is lower than power generation, the frequency goes up. Then V2G may act to increase the number of EV being charged and/or decrease the number of cars discharging.
Which benefits are achieved while providing these services via V2G?
There are many benefits for the two stakeholders considered in my study. The current power consumption patterns are quite variable over the day, as I have explained before. Moreover, current renewable energy sources have a high dependence on weather conditions to generate power. This is difficult (and with some of them, actually impossible) to define when to produce and not to produce power, so this characteristic adds extra variability to DSOs operating system.
However, thanks to the V2G technology, EV users can make use of their EVs to provide, for example, the services mentioned before to the DSOs, and then, bringing some extra benefits for the system itself:
• V2G can bring flexibility to power generation, allowing DSOs not to generate extra power in peak demand moments, which would result in power generation savings
• Matching power generation with power demand at peak moments is currently achieved throughout the most expensive and polluted non-renewable energy sources. Then, DSOs can cut cost and emissions thanks to V2G while achieving less dependence in non-renewable energy sources
• V2G brings the possibility of creating a huge storage system to make use of its power when needed
• If we talk about the specific cases of local microgrids, individuals can generate their own energy and make use of their EVs via V2G to store that energy and make use of it when needed
• Finally, there are some moments of the day where the energy generated by renewable sources is not entirely utilized because there is not enough demand, so that that energy is disposed of. Thanks to V2G, we could store that clean energy and being injected into the power grid when demand is higher, so that the renewable energy exploitation rate is improved.
"Thanks to the V2G technology, EV users can make use of their EVs to provide services (...) to the DSOs, and then, bringing some extra benefits for the system itself."
How can a Sustainable Business Model flourish within this environment?
Let’s start defining what a Sustainable Business Model Innovation is: A Sustainable Business Model Innovation is just a business model innovation that accounts not only for good economic performance, but also societal and environmental viability around the business model, considering every stakeholder benefit, and making a more equitable distribution of benefits and costs for the three pillars economy, society and environment.
We can implement sustainable business model innovation in different ways, and one of them is throughout Product-Service System (PSS) that combines tangible products and intangible services, working together to fulfil certain customer demands. This system is mainly focused on the usage phase.
Thanks to PSSs, new sources of value and competitiveness can be achieved by companies through integrated and customized value proposition, loyalty and innovation. PSS focuses on quality and product longevity rather than production volume, unlike most common business models, causing a reduction in total product lifecycle impact, focusing on the product functionality and not the product itself.
"A Sustainable Business Model Innovation is just a business model innovation that accounts not only for good economic performance, but also societal and environmental viability around the business model, considering every stakeholder benefit. (...) To implement a V2G Sustainable Business Model Innovation throughout a Product-Service-System (...) the best way seems to be based on a product sharing system in which V2G bidirectional chargers are owned and managed by DSOs, who seem to be the most benefited stakeholders around the V2G."
Talking about possibilities to implement a V2G Sustainable Business Model Innovation throughout a PSS, after analyzing all the current possibilities and combinations, the best way seems to be based on a product sharing system in which V2G bidirectional chargers are owned and managed by DSOs, who seem to be the most benefited stakeholders around the V2G. Hence, they would put those V2G bidirectional chargers as accessible as possible on the mass EV market to guarantee as much utilization as possible in order to receive services from EV users. Then, those bidirectional chargers, implemented either in private or public places, will be used by EV users to provide services, and then, they would receive a fee for doing so on a pay per use basis. Summarizing, the Sustainable Business Model Innovation around the V2G technology is based on both a product-related (product sharing) and results-oriented (pay per use) policy.
Besides receiving those services mentioned before, DSOs can create a better and differentiated value proposition to end power customers, creating strategic positioning and bringing more sustainable ways to generate, to manage and to consume power.
What makes a sustainable business model innovation?
Considering the three pillars of the Sustainable Business Model Innovation (economic, social and environmental sustainability), the V2G Sustainable Business Model Innovation definitely accomplishes the three of them, and I can explain why.
Social sustainability is accomplished because of the empowerment of EV users. They become key stakeholders for the success of the V2G Sustainable Business Model Innovation, making it also more accessible to buy an EV for everyone. Then, power consumers have changed from simply end-customers to even taking part in the DSOs’ supply chain, so that they can play a very important role in this regard.
Regarding the environmental sustainability, EV are themselves a much cleaner solution than internal combustion vehicles (if the power consumed comes from renewable energy sources). Moreover, thanks to the V2G services, DSOs can optimize their processes, reducing their dependence in non-renewable energy sources, and then, reducing their greenhouse gases emissions.
Finally, the economic sustainability depends on both the fee paid by DSOs to EV users to provide their services, and the cost savings and strategic positioning DSOs can achieve throughout the V2G Sustainable Business Model Innovation.