Why the electric vehicle boom could put a major strain on the U.S. power grid

Published

11 months ago

July 1, 2023

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Over half of all new cars sold in the U.S. by 2030 are expected to be electric vehicles. That could put a major strain on our nation’s electric grid, an aging system built for a world that runs on fossil fuels.

Domestic electricity demand in 2022 is expected to increase up to 18% by 2030 and 38% by 2035, according to an analysis by the Rapid Energy Policy Evaluation and Analysis Toolkit, or REPEAT, an energy policy project out of Princeton University. That’s a big change over the roughly 5% increase we saw in the past decade.

“So we’ve got a lot of power demand coming to this country when we really didn’t have any for the last, like, 25 years,” said Rob Gramlich, founder and president of Grid Strategies, a transmission policy group.

While many parts of the economy are moving away from fossil fuels toward electrification — think household appliances such as stoves, and space heating for homes and offices — the transportation sector is driving the increase. Light-duty vehicles, a segment that excludes large trucks and aviation, are projected to use up to 3,360% more electricity by 2035 than they do today, according to Princeton’s data.

But electrification is only an effective decarbonization solution if it’s paired with a major buildout of renewable energy. “So we have both supply-side and demand-side drivers of big grid needs,” Gramlich said.

That means we need major changes to the grid: more high-voltage transmission lines to transport electricity from rural wind and solar power plants to demand centers; smaller distribution lines and transformers for last-mile electricity delivery; and hardware such as inverters that allow customers with home batteries, EVs and solar panels to feed excess energy back into the grid.

It’s not going to be cheap. In a study commissioned by the California Public Utilities Commission, grid analytics company Kevala forecasts that California alone will have to spend $50 billion by 2035 in distribution grid upgrades to meet its ambitious EV targets.

Major grid infrastructure needs

Charging electric vehicles is quite electricity intensive. While a direct comparison with appliances depends on many variables, an owner of a new Tesla Model 3 who drives the national average of around 14,000 miles per year would use about the same amount of electricity charging their vehicle at home as they would on their electric water heater over the course of a year, and about 10 times more electricity than it would take to power a new, energy-efficient refrigerator. Larger electric vehicles such as the Ford F-150 Lightning would generally use more electricity than a central AC unit in a large home.

Lydia Krefta, director of clean energy transportation at PG&E, said the utility currently has about 470,000 electric vehicles connected to the grid in its service territory of Northern and Central California and is aiming for 3 million by 2030.

Given that PG&E’s territory covers about 1 in 7 electric vehicles in the U.S., how it handles the EV transition could serve as a model for the nation. It’s no easy task. The utility is tied to a four-year funding cycle for grid infrastructure upgrades, and its last funding request was in 2021. Now that funding will definitely fall short of what’s needed, Krefta said.

Workers for Source Power Services, contracted by Pacific Gas & Electric (PG&E), repair a power transformer in Healdsburg, California, on Thursday, Oct. 31, 2019.

David Paul Morris | Bloomberg | Getty Images

“A lot of the analysis that went into that request came from, like, 2019 or 2020 forecasts, in particular some of those older EV forecasts that didn’t anticipate some of the growth that we believe we’re more likely to see now,” Krefta said. This situation has PG&E applying for numerous state and federal grants that could help it meet its electrification targets.

“I think right now people have an overly simplistic view of what electrification of transportation means,” said Kevala CEO Aram Shumavon. “If done right, it will be phenomenal; if mismanaged, there are going to be a lot of upset people, and that is a real risk. That’s a risk for regulators. That’s a risk for politicians, and that’s a risk for utilities.”

Shumavon said that if grid infrastructure doesn’t keep up with the EV boom, drivers can expect charging difficulties such as long queues or only being able to charge at certain times and places. An overly strained grid will also be more vulnerable to extreme weather events and prone to blackouts, which California experienced in 2020.

The most straightforward way to meet growing electricity demand is to bring more energy sources online, preferably green ones. But though it’s easy to site coal and natural gas plants close to population centers, the best solar and wind resources are usually more rural.

That means what the U.S. really needs is more high-voltage transmission lines, which can transport solar and wind resources across county and state lines.

But Gramlich said that while we’re constantly spending money replacing and upgrading old lines, we’re hardly building any new ones. “I think we need probably about $20 [million] or $30 million a year on new capacity, new line miles and new delivery capacity. We’re spending close to zero on that right now.”

There are major regulatory hurdles when it comes to building new transmission lines, which often cross through multiple counties, states and utility service areas, all of which need to approve of the line and agree on how to finance it.

“If you just think about a line crossing two or three dozen different utility territories, they have a way to recover their costs on their local system, but they kind of throw up their hands when there’s something that benefits three dozen utilities, and who’s supposed to pay, how much, and how are we going to decide?” Gramlich said.

Permitting is a major holdup as well. All new energy projects must undergo a series of impact studies to evaluate what new transmission equipment is required, how much it will cost and who will pay. But the list of projects stuck in this process is massive. The total amount of electricity generation in the queues, almost all of which is renewable, exceeds the total generating capacity on the grid today.

The Inflation Reduction Act has the potential to cut emissions by about 1 billion tons by 2030, according to Princeton’s REPEAT project. But by this same analysis, if transmission infrastructure buildout doesn’t more than double its historical growth rate of 1% per year, more than 80% of these reductions could be lost.

An ‘in-between period’

Efforts are underway to expedite the energy infrastructure buildout. Most notably, Sen. Joe Manchin, D-W.Va., introduced a permitting reform bill in May after similar measures failed last year. President Joe Biden has thrown his support behind the bill, which would speed up permitting for all types of energy projects, including fossil fuel infrastructure. The politics will be tricky to navigate, though, as many Democrats view the bill as overly friendly to fossil fuel interests.

But even if the pace of permitting accelerates and we start spending big on transmission soon, it will still take years to build the infrastructure that’s needed.

“There’s going to be an in-between period where the need is very high, but the transmission can’t be built during the time period where the need happens, and distributed energy resources are going to play a very active role in managing that process, because no other resources will be available,” Shumavon explained.

That means that resources such as residential solar and battery systems could help stabilize the grid as customers generate their own power and sell excess electricity back to the grid. Automakers are also increasingly equipping their EVs with bidirectional charging capabilities, which allow customers to use their giant EV battery packs to power their homes or provide electricity back to the grid, just like a regular home battery system. Tesla doesn’t currently offer this functionality, but has indicated that it will in the coming years, while other models such as the Ford F-150 Lightning and Nissan Leaf already do.

Ford’s all electric F-150 Lightning offers bidirectional charging, allowing customers to use the truck’s EV battery to power their home.

Ford Motor Company

There will also likely be greater emphasis on energy efficiency and energy timing use. PG&E, for example, is thinking about how to optimize charging times for large electric vehicle fleets.

“One thing that we’re trying to do is to work with some of these companies that are putting in substantial loads to provide flexible load constraints where we can say you can only charge 50 EVs at 7 p.m., but at 2 a.m. you can charge all 100,” Krefta said.

Krefta hopes constraints on charging times are temporary, though, and said that moving forward, PG&E is looking to incentivize consumers through dynamic pricing, in which electricity prices are higher during times of peak demand and lower at off-peak hours. And the utility is working with automakers to figure out how electric vehicles can provide maximum benefit to the grid.

“What kinds of things do you need to do in your garage to enable your vehicle to power your home? How can you leverage your vehicle to charge whenever there’s renewables on the grid and they’re clean and low cost and then discharge back to the grid during the evening hours?” Krefta said it’s questions like these that will help create the green grid of the future.

Watch the video to learn more about how the U.S. power grid can prepare for the boom in electric vehicles.

Technology

China drives EV boom this year amid strong demand for hybrid vehicles

Published

55 mins ago

May 14, 2024

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China drives EV boom this year amid strong demand for hybrid vehicles

New energy vehicles for export at Lianyungang Port, Jiangsu Province, China, on April 25, 2024.

Nurphoto | Nurphoto | Getty Images

Electric vehicle sales have risen sharply this year, led by growth in China and a strong demand for hybrid vehicles in particular, according to a report from Counterpoint Research.

The report, released Monday, showed that sales of EV units globally, including fully battery-powered vehicles (BEVs) and hybrids, were up 18% in the first three months of 2024 compared with the same period last year.

Sales of hybrid vehicles, which have both electric motors and combustion engines, vastly outpaced those of full battery-powered alternatives, rising 46% year over year. BEV sales rose 7%.

“The cheaper upfront cost of [hybrids] when compared to [battery EVs] and the availability of a fuel tank that eliminates range anxiety were among the main reasons for high [hybrid] demand,” Counterpoint research analyst Abhik Mukherjee said in the report.

The data follows recent reports that suggest hybrid adoption is now outpacing that of fully electric vehicles amid concerns about weak resale values of the former and the possibility of current BEV technology becoming obsolete soon.

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“Buying mid-priced [hybrids] is a more logical choice for consumers since their prices are comparable to or lower than most of [battery electric vehicles],” the report said.

China extends lead

Chinese companies have been a huge beneficiary of the rise in demand for electric vehicles, especially firms that sell both BEVs as well as hybrids.

According to Counterpoint, EV sales in China jumped 28% in the first quarter of 2023, amid an ongoing price war that has pushed down costs for consumers.

The country’s largest EV maker, BYD, saw sales of hybrid vehicles increase by 7% in the first three months of this year, accounting for nearly one-third of the global hybrid market, followed by Geely Holdings and Li Auto.

Sales of EVs in the United States were second highest globally, followed by Europe. But, while overall EV sales in the U.S. rose 2%, those of battery electric vehicles declined by 3% in the quarter.

Tesla, the leading U.S. EV maker, which only produces BEVs, saw a 9% year-on-year decline in sales in the first quarter. It was still in the top position globally in BEV sales in Q1 2024, commanding a 19% market share. BYD and Volkswagen had a 15% and 6% share, respectively.

Among the top three BEV makers only BYD recorded growth, with sales jumping 13%, while Tesla and Volkswagen’s sales declined 9% and 4% respectively, the report said.

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BYD’s strong performance comes as the company aggressively expands globally. According to the report, the company exported almost 100,000 EVs last quarter, a 152% year-on-year growth, driven primarily by shipments to Southeast Asia.

Liz Lee, associate director at Counterpoint, said BYD’s remarkable exports highlight the growing global demand for EVs, including hybrids, with the market “poised for significant growth.”

“[Y]et signs of a slowdown also loom and the annual growth may dip below 20%,” she added, noting that companies such as Tesla face declining interest in BEVs.

A Gallup poll in April found that less than half of U.S. adults — 44% — said they were seriously considering or might consider buying an EV, down from 55% in 2023. Meanwhile, the proportion of those not looking to buy an EV rose to 48% from 41%.

Other headwinds to the market could include an increase in protectionist measures in 2024, with both the EU and the U.S. reportedly set to enforce new tariffs on EV imports from China.

Technology

AI boom to keep supply of high-end memory chips tight this year, analysts warn

Published

5 hours ago

May 14, 2024

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AI boom to keep supply of high-end memory chips tight this year, analysts warn

A Samsung Electronics Co. 12-layer HBM3E, top, and other DDR modules arranged in Seoul, South Korea, on Thursday, April 4, 2024. Samsung’s profit rebounded sharply in the first quarter of 2024, reflecting a turnaround in the company’s pivotal semiconductor division and robust sales of Galaxy S24 smartphones. Photographer: SeongJoon Cho/Bloomberg via Getty Images

Bloomberg | Bloomberg | Getty Images

High-performance memory chips are likely to remain in tight supply this year, as explosive AI demand drives a shortage for these chips, according to analysts.

SK Hynix and Micron – two of the world’s largest memory chip suppliers – are out of high-bandwidth memory chips for 2024, while the stock for 2025 is also nearly sold out, according to the firms.

“We expect the general memory supply to remain tight throughout 2024,” Kazunori Ito, director of equity research at Morningstar said in a report last week.

The demand for AI chipsets has boosted the high-end memory chip market, hugely benefiting firms such Samsung Electronics and SK Hynix, the top two memory chipmakers in the world. While SK Hynix already supplies chips to Nvidia, the company is reportedly considering Samsung as a potential supplier too.

High-performance memory chips play a crucial role in the training of large language models (LLMs) such as OpenAI’s ChatGPT, which led AI adoption to skyrocket. LLMs need these chips to remember details from past conversations with users and their preferences to generate human-like responses to queries.

“The manufacturing of these chips are more complex and ramping up production has been difficult. This likely sets up shortages through the rest of 2024 and through much of 2025,” said William Bailey, director at Nasdaq IR Intelligence.

HBM’s production cycle is longer by 1.5 to 2 months compared with DDR5 memory chip commonly found in personal computers and servers, market intelligence firm TrendForce said in March.

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To meet soaring demand, SK Hynix plans to expand production capacity by investing in advanced packaging facilities in Indiana, U.S. as well as in the M15X fab in Cheongju and the Yongin semiconductor cluster in South Korea.

Samsung during its first-quarter earnings call in April said its HBM bit supply in 2024 “expanded by more than threefold versus last year.” Chip capacity refers to the number of bits of data a memory chip can store.

“And we have already completed discussions with our customers with that committed supply. In 2025, we will continue to expand supply by at least two times or more year on year, and we’re already in smooth talks with our customers on that supply,” Samsung said.

Micron didn’t respond to CNBC’s request for comment.

Intense competition

Big Tech companies Microsoft, Amazon and Google are spending billions to train their own LLMs to stay competitive, fueling demand for AI chips.

“The big buyers of AI chips – firms like Meta and Microsoft – have signaled they plan to keep pouring resources into building AI infrastructure. This means they will be buying large volumes of AI chips, including HBM, at least through 2024,” said Chris Miller, author of “Chip War,” a book on the semiconductor industry.

Chipmakers are in a fierce race to manufacture the most advanced memory chips in the market to capture the AI boom.

SK Hynix in a press conference earlier this month said that it would begin mass production of its latest generation of HBM chips, the 12-layer HBM3E, in the third quarter, while Samsung Electronics plans to do so within the second quarter, having been the first in the industry to ship samples of the latest chip.

“Currently Samsung is ahead in 12-layer HBM3E sampling process. If they can get qualification earlier than its peers, I assume it can get majority shares in end-2024 and 2025,” said SK Kim, executive director and analyst at Daiwa Securities.

Technology

Early Facebook investor Accel raises $650 million fund to back European and Israeli startups

Published

7 hours ago

May 13, 2024

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From left to right, Accel general partners Harry Nelis, Sonali de Rycker, Andrei Brasoveanu, Luca Bocchio, and Philippe Botteri.

Accel

Venture capital firm Accel said Tuesday it’s raised $650 million for its eighth fund targeted at investing in European and Israeli early-stage startups, in a sign the venture capital market may be showing signs of a recovery.

The firm, which made prolific early bets on the likes of social media app Facebook and music streaming service Spotify, said in a press release it raised the fund to “support ambitious founders building global category-defining companies” in Europe and Israel.

Harry Nelis, general partner at Accel, said the European tech ecosystem in particular has evolved drastically in the nearly 25 years since it opened up its London office as a separate fund in 2001.

“The environment has dramatically changed since then,” Nelis told CNBC. “People would ask us, can Europe generate $1 billion outcomes?”

“Now, there are more than 360 venture-backed unicorns across Europe and Israel, and the whole ecosystem has evolved from one that raised about $1 billion in capital to now $66 billion in 2023.”

Talent ‘flywheel’

Nelis said Europe is producing a more promising talent pool now thanks to a “flywheel” of experienced employees from other companies that have hit unicorn status becoming founders of new companies themselves.

A report released by the firm last year citing Dealroom data showed that employees of 248 venture-funded unicorns in the region have fueled 1,451 new tech startups across Europe and Israel.

Nelis noted that there are emerging geographies in Europe that investors aren’t paying as much attention to, but that are showing huge potential in technology innovation.

He called out Lithuania and Romania as examples of countries where major technology successes are emerging. In Lithuania, for example, secondhand marketplace Vinted is now a $4.5 billion “unicorn” company, while in Romania, UiPath has attracted a $10.9 billion valuation in the public markets.

Accel expects to invest in between 25 and 30 companies from its latest early-stage fund.

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The launch of Accel’s eighth European fund comes as funding for high-growth tech startups has plunged sharply in the past two years.

That’s as macroeconomic uncertainty caused by Russia’s full-scale invasion of Ukraine, coupled with higher interest rates from central banks, has caused something of a reset in technology valuations.

Against this backdrop, Accel’s ability to raise such a large fund for European and Israeli ventures suggests the grim environment for technology may be showing signs of easing.

The firm managed to close its eighth fund for the region in just a couple of months, according to a source familiar with the matter speaking on condition of anonymity, since the details aren’t public.

It comes after Plural, a venture capital firm established by the founders of Wise, Skype and Songkick, raised its own 400 million euros ($431 million) fund in January to back technology startups in Europe.

Climate-focused VC firm World Fund closed a 300 million euro fund in March.

Magnus Grimeland, CEO of seed investor Antler, told CNBC earlier this year that early-stage venture activity and private company valuations have been inching up since the start of this year — and he expects Europe to follow the trend.

“It’s on its way back,” Grimeland said in an interview at Antler’s London office in March. “We see a lot more activity in the portfolio. In New York, we made eight investments in January, and seven of them already have follow-on investments. The U.S. tends to always act quicker.”

Europe’s AI opportunity

Even as startup funding has waned, though, excitement about artificial intelligence has led to a rush of capital flowing into startups focusing on AI.

For example, the likes of OpenAI, Anthropic and Cohere have raised billions of dollars.

Nelis suggested that Accel doesn’t want to get distracted and focus solely on a hyped area like AI with its latest fund.

Instead, he said, the firm will focus on using its “prepared mind” philosophy — which encourages deep focus and a disciplined and informed approach to investing — to approach its next startup bets.

“We’re lucky that with DeepMind here in London and with Fair [Facebook AI Research] in Paris, there’s at least two big centers that have great AI expertise,” Nelis told CNBC.

“Together with smaller centers across Europe, we think that Europe is extremely well-positioned to create some important AI companies, the same way we created important enterprise businesses.”

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Nelis said that the way Accel thinks about AI can be broken up into three layers: the “foundation model” layer, referring to algorithms underpinning advanced AI systems, the “tooling layer,” which helps applications that sit on top of these algorithms run, and the “application layer.”

He added that he thinks Europe will excel when it comes to AI application companies, as opposed to foundation models where U.S. technology giants have a big advantage.

“My expectation is Europe is going to generate some really interesting AI application companies,” Nelis told CNBC. “The foundation layer is a layer where at least for now the U.S. incumbents currently have a real advantage — they have the advantage of compute power, large datasets, and lots of capital.”

The firm has previously invested in Synthesia, a $1 billion generative AI startup backed by U.S. chipmaker Nvidia that helps companies make presentations with AI-generated avatars.

Victor Riparbelli, CEO and co-founder of Synthesia, told CNBC his company partnered with Accel last year as the firm’s team knows “how to strike the right balance between visionary and useful technology.”

“Over the last year, there have been a lot of cool demos and perhaps too much frothiness in the AI industry,” Riparbelli told CNBC via email. “It was really important to us to partner with a fund that is as focussed as we are on delivering real, tangible business value.”