Balance of power: how EVs will help regulate tomorrow’s energy system

On 11 March 2011, 45 miles off the north-east coast of Honshu island, Japan, a massive release of seismic energy thrust the Pacific Ocean floor toward the surface, sending a devastating wall of water hurtling towards the region of Tōhoku. The earthquake and resulting tsunami was one of the most ruinous natural disasters in the history of Japan. But as communities and emergency services struggled to manage with whatever electricity they could get from the crippled power grid, an unexpected hero emerged.

Aid workers soon realised that the batteries in electric vehicles (EVs), like the Nissan Leaf, could provide crucial backup power amidst the rubble, where over 4.8 million homes had been left without electricity. Nissan even sent 66 Leafs to support the worst-hit areas, whose batteries provided power to light rescue operations through the night and keep communications equipment charged.¹

In the aftermath of the disaster, using EVs as a backup power source was an improvised, relatively small-scale solution borne of necessity. But it made enough of a difference to catalyse development of the technology that would turn this makeshift solution into a user-friendly feature built-in by design. The following year, Nissan released its “LEAF-to-Home” power supply system,² and, in 2014, CHAdeMO – the Japanese EV charging standard – published its protocol for vehicle-to-grid (V2G) integration, enabling EVs with CHAdeMO chargers to power buildings or even return energy to the grid.³

Now, V2G technology is being developed at scale, and is set to play an essential role in the energy transition.

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From emergency aid to essential amenity

The amount of energy we can extract from renewable sources – like wind and solar – is often weather-dependent, and favourable weather may not always align with periods of high energy demand. As the energy transition electrifies our economy and increases our use of renewables, batteries will be increasingly essential to maintaining grid resilience by storing excess renewable energy produced during low-demand periods, so it can be released into the grid to cover any shortfalls at times of high-demand.

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Bloomberg New Energy Finance expects global grid battery storage capacity to hit around 2,086 GWh in 2030 – enough to cover the annual electricity needs of nearly 700,000 average European homes.⁴ However, that number will be dwarfed by the amount available in EVs. We estimate that EVs will account for over half of new vehicles sold in 2030, which would collectively offer over 1,878 GWh of battery capacity.⁵ V2G technology, therefore, represents an opportunity to significantly augment the grid’s power storage capacity, supporting the rollout of renewable energy and maintaining grid resilience.

In 2021, utility company National Grid successfully used an electric school bus to deliver power back to the Massachusetts grid for over 50 hours during peak periods

In the United States, electric school buses are demonstrating how this could work. Usually operating at fixed times before sitting idle during peak energy demand periods, school buses are a particularly good test bed for V2G technology. In 2021, utility company National Grid successfully used an electric school bus to deliver power back to the Massachusetts grid for over 50 hours during peak periods. And last year, a pilot project in the White Plains School District successfully returned energy from five school buses to the New York State grid, where it was distributed directly to customers. At least another 15 energy providers in 14 states have committed to testing V2G technology in electric school buses, with the technology backed by the World Resources Institute’s (WRI) Electric School Bus Initiative, which aims to build momentum towards electrifying every school bus in America by 2030 – setting the stage for the technology’s wider adoption.⁶

Closing the V-G gap

Today, there are three main forms of V2G:

1. Unidirectional V2G (or V1G) only allows electricity flow from the grid to the EV, but smart technologies automatically favour charging during off-peak periods or times of lower demand, while ensuring the vehicle always has enough power when required.
2. Bidirectional local V2G enables EVs to discharge electricity into buildings and other local energy systems during outages or when electricity from the grid is more expensive.
3. Bidirectional V2G allows EVs to both charge from and discharge energy into the grid, enabling smart technologies to automatically sell their stored power back to the energy provider when needed.

If these interfaces are to play a crucial role in tomorrow’s clean energy system, we must start work today to overcome the challenges involved. These include the integration of V2G into existing grid infrastructure, much of which will require substantial investment in hardware and software upgrades to enable bidirectional V2G – the most powerful V2G interface – at scale. The rate at which EV batteries become available to support a clean energy system will be directly tied to the pace of these upgrades.

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Another significant challenge is the batteries themselves – in particular, battery longevity. Lithium-ion batteries degrade with every charging cycle, and adding V2G into the mix would require EVs to charge and discharge their batteries much more often. Advances in battery technology will be vital to ensuring that longevity concerns don’t deter EV owners from V2G.

The rate of V2G adoption will also be determined by EV owners, who will need to be convinced that battery longevity and other technical issues have been addressed, that V2G is easy to use, that their car will be sufficiently charged when needed, and that the financial benefits – such as charging at off-peak rates or being paid to return electricity to the grid – are real. Securing the buy-in of EV owners will require education, good quality product design and clear incentives.

To ensure a timely rollout of V2G, policymakers must work towards technology standardisation and targeted incentives that encourage consumers and businesses to invest in V2G infrastructure

More broadly, overcoming these and other challenges will require regulatory support to encourage industry stakeholders across the vehicle manufacturing, public infrastructure and energy sectors to commit to the technology. In places this is already in place. In the US, for instance, Maryland recently became the first state to pass comprehensive legislation to both enable bidirectional vehicle charging and lay the groundwork for the creation of ‘virtual power plants’ that can aggregate energy from various sources – including V2G – to stabilise the grid.⁷ However, the global V2G regulatory landscape remains immature, with a lack of harmonised standards and clear policy incentives. To ensure a timely rollout of V2G, policymakers must work towards technology standardisation and targeted incentives that encourage consumers and businesses to invest in V2G infrastructure.

Unlocking the V2G opportunity

V2G technology has the potential to make a significant contribution to reducing emissions, by helping energy providers avoid the need to activate fossil fuel plants at times when the sun isn’t shining or the wind has stopped blowing. And while the financial returns for EV owners will vary depending on local energy prices and grid demand, V2G technology could help offset the cost of EV ownership, driving further adoption.

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However, as with any early-stage technology, V2G’s development and implementation will depend on investor support. By funding companies pioneering V2G technologies across the automotive, infrastructure and energy sectors, investors can accelerate the deployment of the V2G solutions we need to build a sustainable energy system. And with the energy transition already well underway, V2G represents both an attractive investment opportunity and a chance to make a crucial contribution to solving the climate crisis.

V2G is a simple idea with transformational potential. As the world grapples with the urgent need to electrify our economy, its promise is too great to ignore.