LOS ANGELES — Electric vehicle sales represent a challenge for utilities that must prepare for them, but the anticipated growth in demand should be a boon.

“We see electric transportation as a big opportunity,” said Marvin Moon, director of power engineering for the Los Angeles Department of Water and Power.

If everyone in L.A. purchased an electric car, LADWP’s power sales would go up by 50%, said Moon.

Such adoption is a long way off, but the electric utility projects that Los Angeles will have 145,000 electric vehicles on the road in 2021, up from the current 32,000.

“EV expansion is a potential bright spot for electric utilities’ credit quality given declining electricity usage and limited generation-related capital opportunities amid the current low gas price environment,” S&P analysts wrote in a Sept. 12 report.

Driver prepares to charge an electric Chevrolet Bolt
Demand to charge electric cars, such as this Chevrolet Bolt, could be a boon for utilities, analysts say. Chevrolet

The 1% to 4% growth in electric load demand S&P estimated could occur over the next eight years would not move the needle nationally, but could result in a boost for individual utilities depending on the concentration of EV growth in their service territory and the size of the utility, S&P analysts wrote.

LADWP would like to see 15% of new vehicle sales in L.A. be electric cars over the next five years, Moon said. Currently, the percentage of new car sales that are electric is 0.9% nationally, 5% in California and 10% in the San Francisco Bay Area, he said.

“BMW told us that 10% to 11% of their sales in California are plug–in vehicles,” Moon said.

S&P ran two projected growth analyses from 2017-2035. One anticipated 1% to 3% growth that would be the equivalent of having 4 to 8 million new customers. The more optimistic analysis contemplates 2% to 4% growth over that time frame, which is equal to adding 16 to 25 million new customers.

The impact is hard to quantify at this point, said Paul Dyson, a director in S&P’s Global Ratings Public Power Group.

“There has been a relatively slow adoption rate by drivers so far, but we are expecting the adoption of electric cars to increase over the next several years,” Dyson said.

Increased electric car sales are dependent on how fast charging stations are installed, but development of that charging infrastructure also represents potential income for utilities.

“The wild card is that as electric vehicle demand grows it might be offset by energy efficiencies in household appliances or air conditioning; or it could be the opposite where it coincides with a lot of construction and household growth,” said Peter Murphy, an S&P managing director in public power and transportation.

If it is the latter, it could put pressure on utilities.

The potential impact differs from state to state. It’s more of a factor in California, as the state is a leader on energy issues and has greater access to charging stations, than say Nebraska, Murphy said.

“EV is on everyone’s radar,” Murphy said. “How deep they are involved depends on the region. California is very car-driven. I’m in the New York office, so we take mass transit. California has car-culture, huge highways and millions and millions of people.”

Sales of fully electric and plug-in electric cars represent 4.5% of the California new-car market through the first three quarters of 2017, according to the California New Car Dealers Association, a pace that would put more than 90,000 on the state's roads by year's end.

Electric cars are less of a factor for other states than they are in California, said Kathy Masterson, a director on Fitch Rating’s public power team.

“Utilities in other parts of the country are thinking about it, but they are a decade behind California, which is in a situation where it is closer to being a reality,” Masterson said.

California, Washington, New York and Washington D.C. all have set targets for the number of electric charging stations they want, Dyson said.

The extent of the impact from electric vehicles depends “on trends in EV car sales, which we expect to grow at an accelerated pace,” S&P analysts wrote.

Utilities could actually reap more benefit from constructing charging stations than from the increase in electricity usage, S&P analysts wrote.

“We think that utilities stand to benefit from growth in electric cars and associated infrastructure requirements, assuming they can manage the associated risks,” S&P analysts wrote.

Those risks are investing in infrastructure when widespread adoption largely rides on whether batteries evolve fast enough to reduce charging times and costs. Otherwise, S&P analysts said electric cars could fail to reach their potential. EVs also face competition from hydrogen cell cars.

Electric demand from electric cars could equalize some of the problems between the times that solar and wind produce power, which doesn’t always match up with the peak power use. It’s less of a problem for LADWP then for other utilities, because the municipal utility has sufficient storage capacity at the Castaic Power Plant, Moon said.

As utilities plan ahead they are crafting incentives to encourage electric car drivers to plug in during off-peak hours, Masterson said.

As consumers and business adopted the state-mandated energy efficiency programs, such as purchasing environmentally-friendly appliances, electric demand has flattened out.

If utilities are successful in encouraging electric users to plug-in during off-peak hours, the increased demand could make up for slowing demand wrought from energy efficiencies.

While demand for electricity has flattened out at LAWDP, peak demand has increased, according to LADWP’s 2016 Power Integrated Resource Plan.

In planning for the adoption of electric cars, Moon said, the key is to incentivize drivers to plug in during off peak hours.

Consumer electric demand peaks from 1 to 5 p.m., so LADWP will encourage electric car owners to plug the cars in between 8 p.m. and 10 p.m. and on the weekends when power demand declines.

LADWP has been working to educate drivers about the benefits of electric vehicles and increase the availability of chargers to make the cars more practical for consumers, Moon said.

Los Angeles currently has 1,300 chargers, but has a goal of 10,000 commercial chargers in five years, Moon said. Of that number, 4,000 would be on city property such as power poles.

The utility also is working with other city departments to shift from fossil fuel-powered to electric buses, trucks and cars.

The Los Angeles County Metropolitan Transportation Authority is evaluating shifting all of its buses to electric power, beginning with the Orange Line in the San Fernando Valley and the Silver Line that serves the South Bay.

Los Angeles Department of Transportation just purchased its first electric buses and the city has a demonstration project using electric trash trucks.

LADWP has 114 plug-in hybrid sedans and six plug-in hybrid bucket trucks and digger derrick trucks. It plans to add 225 electric cars and 26 plug-in hybrid cards for a total of 371 electric and hybrid vehicles, according to its 2016 Briefing Book.