The upcoming rollout of a generation of plug-in vehicles — and the commitment of many governments to support it — brings with it a new ecosystem of opportunities related to vehicle charging, from building and installing equipment to operating charging stations to developing software that manages the flow of electricity. But among the key uncertainties facing this nascent market (and potential investors in it) is the question of how utility regulators will handle providers of charging services. This includes companies like AeroVironment, Better Place, ClipperCreek, Coulomb Technologies and eTec, among others.

In California, expected to be one of the earliest and largest markets for plug-in vehicles and a model for other markets, the state’s Public Utilities Commission (CPUC) has stepped closer to answering that question in recent weeks. The CPUC is looking at whether it has the authority to regulate companies that provide access to charging (and thus, electricity) as a service the way it does public utilities, and if so, how it should apply that authority in such a way that it fosters innovation, prevents overload on the power grid and aligns with the state’s greenhouse gas reduction goals. CPUC President Michael Peevey, heading up the commission’s ongoing rule-making process for alt-fuel vehicle infrastructure, issued a preliminary ruling late last month saying the CPUC does not have “regulatory authority regarding the price that an electric vehicle charging operator charges for charging services or other aspects of the operation of such facilities.”

Last week, stakeholders invited to weigh in on the ruling filed their responses with the CPUC, revealing some common ground (opposition to firm price controls, for example) but also tension. As Better Place spokesperson Julie Mullins put it to us this week, “Most parties agree that over-regulation of EVSP’s [electric vehicle service providers] is not desirable at this early stage of the market and would hamper EV adoption.” The market should pick the best solutions, she said, “provided charging entities meet basic safety and interoperability requirements, as the industry intends to do anyway.” But not everyone agrees on the details of how those requirements should be set or enforced.

The ongoing back-and-forth offers a glimpse of how the upcoming rules will shape opportunities in the market for electric vehicle infrastructure and services, and also of business models and partnerships that are likely to see success in coming years.

The Predecessor: Natural Gas Providers

Partly at issue in this latest round of discussion in the CPUC’s proceeding is whether EV charging service providers are analogous to natural gas providers, which the commission has previously concluded should not be regulated as public utilities. Better Place, Coulomb and eTec argue that the parallel works, writing, “As was the case with natural gas providers, regulation of EV charging services could threaten an open and competitive market for third party service providers.”

But other stakeholders have pointed out key differences that could justify regulation of charging stations more than natural gas. There’s the potential for charging service providers to affect the electric grid (not a risk for natural gas stations), and also different requirements for energy storage and matching production with consumption “on the timescale of a fraction of a second.”

Friends of the Earth and the Natural Resources Defense Council note in comments filed this week with the CPUC that, “It is not until the electricity has been transferred to the vehicle battery that it is more analogous to the CNG storage tank. However, even then, there is no expectation that CNG would ever be sent back upstream, as is the case with PEVs that offer vehicle-to-grid or bidirectional capability.” All of these factors complicate the regulatory process, but they also highlight the range of technology solutions that will be required to make the whole system work.

Multiple Business Models

For providers of charging services targeted at the upcoming generation of electric vehicles, a few key elements of their business model could significantly affect what level of regulation they face. NRDC and Friends of the Earth see a couple options. First, the utility model, in which charging companies “procure electricity directly, instead of purchasing electricity from local utilities.” This model would put a company in the role “classically occupied by utilities, and should be required to fully comply with statewide environmental mandates such as the Renewable Portfolio Standard (RPS), the system benefits charge, and greenhouse gas emissions performance standards for procurement.”

A second category of business model could find considerably more leeway. This is what NRDC and Friends of the Earth call the utility customer model, in which companies provide electricity purchased from local utilities.  The duo recommends that the CPUC take a light touch with these companies, requiring mainly communication and cooperation between utility customer model firms and local utilities “to ensure utilities are aware of the presence and location of all charging infrastructure,” as well as the size and time of the electricity load. Utilities, meanwhile, should be required to provide this type of company “with the information necessary to allow intelligent load management and other innovative services in a manner that supports grid reliability and minimizes negative impacts.”

California utility Pacific Gas & Electric (s PCG) shares a view with several other stakeholders that while regulations are needed to ensure “the safety, inter-operability, and reliability of the providers’ equipment and services,” traditional cost-based regulations on how providers price their charging services would be a poor fit. However, the market has to be competitive. Charging service providers, PG&E argues, should “demonstrate that they do not have market power in relevant product and geographic markets.” In other words, consumers need to have choice among multiple service providers. So, while infrastructure providers have been racing to stake their claim and establish charging networks region by region — Better Place in the San Francisco Bay Area, for example, and eTec in the San Diego area — a range of players will likely emerge in each market. “All these different business models have real value,” said Ann Bordetsky, who works on policy for Better Place.

Balancing Act

Still, preparing the power grid and infrastructure for new demand from electric vehicles requires a balance of risk and benefits. Friends of the Earth and NRDC warn that uncoordinated placement of charging infrastructure could create problems for the electrical system and “dampen both the market and public acceptance” of plug-in vehicles. They said it’s important for the CPUC to not give up its jurisdiction over charging service providers until it can ensure these risks are minimized.

Bordetsky emphasized in an interview with us this week that the CPUC proceedings illustrate not a challenge for startups like Better Place, but a move to avoid problems down the road. The commission is asking, “Where might there be some confusion that we want to remove,” she said, adding that it “hasn’t done anything to foreclose any doors. This will keep doors open.” EV service providers currently face “the opposite of regulatory hurdles” in California. Bordetsky also noted that other states, many of which have focused more on trying to generate demand for electric vehicles than on establishing a regulatory framework for charging services, “are watching what happens here.”

Charging infrastructure startups Better Place and Coulomb Technologies, along with ECOtality subsdiary eTec, together make up the Electric Vehicle Service Provider Coalition, which in its latest comments to the CPUC describes the high stakes of regulations in this space. “Over-reaching regulation in this case would stifle competition, innovation and investment,” they wrote this week, “which in turn would undermine EV adoption by making it less convenient and desirable for consumers.”

The (Other) Players

The value of competition, innovation and investment, and of well-managed deployment of charging infrastructure, extends beyond electric vehicle service providers to what Bordetsky described as “a panopoly of different players.” As Coulomb notes in its latest comments, electric charging service providers may include:

• owners of shared station arrangements;
• residential and commercial landlords that provide charging as a service to tenants;
• condominium association owners, their guests; and
• other employers that provide access to recharging facilities as a service to their employees.

In addition, as we’ve noted here on GigaOM Pro before, the charging stations being built by companies like Coulomb and Better Place will use software to communicate with utilities and grid operators, and also manage services like point-of-sale payment. According to IBM Energy & Utilities VP Allan Schurr, charging-station makers will likely end up integrating software from outside developers, much the way mobile phone companies do, so they can focus on the hardware.

Key Takeaways

• A wide range of business owners, from commercial landlords to employers to specialized equipment makers, have a role to play in providing electric car charging services. Rule-making efforts in California are meant to keep doors open for them.
• Key things to watch for as the proceedings continue include whether the CPUC concludes it has jurisdiction over third-party providers of electricity for vehicles, and if it does, how tightly it controls the buildout of infrastructure in the interest of minimizing grid overload.