With bi-directional Vehicle-to-Everything (V2X) technology, residential electric vehicle (EV) owners can potentially tap into the revenue potential of wholesale electricity markets while providing critical grid services. Given the current state of V2X technology, it is suitable to ask: what is the full economic potential of V2X?  We developed a simulation-based value-stream framework to answer this question and identify profitable V2X revenue streams. Leveraging Fermata’s proprietary EV dispatch-optimizer, we ran thousands of residential-driving behavior and wholesale-market scenarios to determine the possible range of V2X revenues. We specifically investigated the revenue potential of wholesale markets in this study, which represents one of the more complex value streams for V2X.

Initial Case Study: Texas
The Texas grid is unique: it is the only state in the US with a self-contained power grid (interconnection) administered by the state’s independent system operator, Electric Reliability Council of Texas, commonly abbreviated to ERCOT. Less stringent regulatory policies, simpler interconnection rules, strong competition in transmission and retail energy sectors, and geographical factors such as favorable weather and access to inexpensive land, have made Texas a leader in renewable energy projects in the country*. However, this unprecedented growth has led to increased volatility injected by wind and solar farms into the Texas power grid, which incidentally makes it an attractive market for new storage installations. Figure 1 highlights the burgeoning year-to-year growth in renewable and battery capacity installations in Texas. Moreover, deregulated wholesale markets in Texas also provide massive revenue opportunities for storage assets during contingency events driven by ever frequent extreme weather events. For example, amidst widespread power outages during the winter storm of 2021, the spike in demand resulted in electricity prices rising over 10,000%** in a few areas of the state. ​​To avoid a repeat of such dire contingency scenarios, Texas needs additional electric capacity that could be delivered on a moment’s notice and stabilize the grid. That’s what batteries do best, and makes Texas an attractive proposition to investigate the revenue potential for V2X utilizing parked EVs to supplement the increasing energy needs. 

Figure 1: Year-on-year growth in installed and estimated capacity of renewables and batteries in ERCOT. Source

Residential V2X Opportunities 

V2X is a relatively new technology that allows controlled bi-directional energy flow between EV batteries and connected assets (e.g., building, grid, home). This bi-directional nature allows a parked EV to derive additional value by providing flexible energy services during times of no-use. In this study, we focus on the revenue potential for V2X under the idealized assumption that wholesale market participation is allowed for residential behind-the-meter EV owners. Our study is partly motivated by recent developments in Texas, such as the ADER pilot project*** that will allow distributed energy resources (including energy storage assets) with capacity of 1 megawatt or less to participate in the ERCOT wholesale markets. In our study, we focus on two primary wholesale revenue opportunities in Texas:

• Arbitrage in energy markets: V2X technology can allow asset owners to exploit arbitrage opportunities by bidding into wholesale day-ahead and real-time energy markets (buy when prices are low, sell when high). 
• Participation in ancillary markets: V2X’s fast response to grid frequency changes provides opportunities to earn revenue by providing a variety of ancillary grid services, such as frequency regulation, responsive reserves, spin and non-spin reserves.

Primary study objectives

At Fermata Energy, we’ve developed a novel V2X value-stream framework as means to better communicate and categorize the revenue potential of electric vehicles participating in wholesale energy markets, and are applying it initially to the Texas wholesale energy and ancillary markets. To accurately estimate the V2X revenue, the study considers simulated but realistic scenarios of driving behavior and residential energy consumption. From this study, we answer the following questions:

• How much annual revenue (per kW) can be generated by a residential EV owner by participating in the Texas wholesale markets?
• How valuable is the residential V2X market in Texas?
• How much additional value can be extracted by using a sophisticated V2X energy scheduling platform compared to a basic platform?

The general methodology of our simulation study is illustrated in Figure 2. We used data inputs for residential driving behavior, loads, price forecasts, and system-level constraints to run annual V2X simulations using Fermata’s EV dispatch-optimizer for thousands of operational scenarios. In the next post, we will discuss the methodology and the key insights from the study in more detail.   

Figure 2: High-level description of the study methodology

Stay tuned for our next installment of this series where we share our three key takeaways from the study.

Sources:

  *https://www.cnbc.com/2022/02/18/texas-led-the-country-in-new-renewable-energy-projects-last-year.html

**https://www.reuters.com/article/us-electricity-texas-prices/texas-wholesale-electric-prices-spike-more-than-10000-amid-outages-idUSKBN2AF19A

***https://www.ercot.com/mktrules/pilots/ader