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Q&A with AEP Chief Customer Officer Phil Dion

09 September 2021 Amena Saiyid

On the Road by Jack Kerouac inspired countless Americans to take road trips across the country, whether in beat-up automobiles or buses.

The one thing they never had to worry about was running out of gas.

The electric power sector wants to make sure drivers of electric vehicles (EVs) are able to experience that dream without fear of being stranded in the middle of nowhere because there is no place to charge their car.

A year ago, Ohio-based American Electric Power and five other US electric utilities began discussing the idea of pooling their resources to develop a seamless network of chargers across the nation. These discussions culminated this March with the birth of the Electric Highway Coalition (EHC), which today has grown to 14 utilities spanning 29 states and the District of Columbia, serving at least 60 million customers.

President Joe Biden, who has made tackling climate change his administration's priority, wants to make that dream a reality for the public. His jobs plan included $15 billion to build a nationwide network of half a million charging stations, but the bipartisan infrastructure plan that the US Senate has approved, and the US House of Representatives is scheduled to consider no later than 27 September, included just half that amount.

The Edison Electric Institute, which represents investor-owned US utilities, including those in the EHC, estimates 18.7 million EVs will travel the roads by 2030, up from 1.8 million EVs registered in the US at the end of 2020. The EEI also said about 9.6 million charging ports will be needed to meet the expected surge in EV numbers.

The EHC aims to build DC charging stations that are less than 100 miles apart and capable of getting drivers back on the road in about 30 minutes. It also envisions a charging station will feature a least two ports, real-time status reporting for drivers, and convenient payment.

Net-Zero Business Daily spoke with AEP Chief Customer Officer Phil Dion about the need for the coalition, its vision for these stations, and how it intends to finance and develop a nationwide network.

Source: Electric Highway Coalition

Net-Zero Business Daily: Tell us about the Electric Highway Coalition, how it came about and why did the six founding utilities see a need for it?

Dion: A confluence of events brought us together, but the major one for AEP was the announcement we made to electrify 40% of our entire fleet by 2030. More importantly, we said that 100% of our light duty fleet, think of our cars and vans, are going to be electric by that 2030 date. When we looked at the map of available charging, however, we found it was really a lot of Tesla stations—and we realized right away we are not probably going to be owning Teslas—and the other charging stations were owned by Electrify America.

(Editor's note: Electrify America is a subsidiary of Volkswagen Group of America that the automaker launched in late 2016 under a $2 billion settlement with the US government and the California Air Resources Board to resolve a diesel emissions scandal. In lieu of paying fines, the automaker was told to set up a nationwide charging network and to promote EVs.)

We noticed these charging stations weren't going into some of the rural areas that we serve, and we were concerned that we have EVs that will be traversing portions of our service territory and it didn't look like the market would be taking care of those areas. So, we began studying our areas and our routes, and essentially identifying gaps for someone who was going to drive an EV through that area. Throughout that process, we identified where we could use Electrify America stations and leverage them, we also noticed the gaps in our service territory. That is when we began looking at it from a customer perspective.

And then we reached out to other utilities. At the time, there were six of us in total. We were all at a similar stage and asking the same questions. It really made sense for us to coordinate, since our service territories in some sense share jurisdictions.

Net-Zero Business Daily: Does the coalition have EV charging stations goals for 2025 and 2030?

Dion: It is too hard to set goals, because each utility is a little bit different, each state is a little bit different. The overall goals of EHC are to traverse the service territories combined, look at it as one big map if you will, and ensure we have enough charging stations within a certain number of miles and ensure there are enough charging stations to make sure the customer experience is a good one.

You have to allow for little tweaks along the way, but the vision is that each of the EHC members will have the gaps identified, as we already did a year ago, and will begin constructing and putting in place some, not all, charging stations by the end of the year. And we are looking to wrap up this whole project in a couple of years to make sure that folks have the ability to charge.

Net-Zero Business Daily: Given that you have not set out any goals yet for the EHC, where are your first efforts being focused?

Dion: Some [EHC] utilities have already begun construction, as it was part of their state plans. From a geographical standpoint, it is kind of happening everywhere and may be accelerated. There's an infrastructure bill under discussion in Washington. If that goes through, we are trying to leverage all the VW dollars we can and then we will try to leverage those infrastructure dollars. If those dollars come through, you will really see these things accelerate even further because we will have the capital that we need to move this [network] forward.

Net-Zero Business Daily: What sort of resources will a utility provide to this network. Will it be responsible for building the stations or operating them or both?

Dion: Each member will have its own choice. Actually, each of AEP's operating companies will have its own choice. But the coalition generally is looking to capitalize or put the money in for a specific number of charging stations. Again, it will depend on each one of them. They will need connections to the electric grid to make that happen. Some utilities will want to own and operate the charging stations, while others will simply turn to a partner, perhaps like Electrify America, to run them and be responsible. But what you will see is perhaps two or three models that come out in the end: it's where a utility builds it and runs it, a utility gives money, or a utility partners with someone and gives a portion of the money.

I think most of us will want to be responsible for the DC chargers and their interconnections. We will want to make sure it's a good customer experience because some people will be using these stations for the first time and we don't want them to fail. I would imagine most of us will be partnering with somebody else, although certainly the coalition is free to do whichever approach it wants, as long as those chargers are of high quality and in the ground within a certain period of time.

Net-Zero Business Daily: Who's going to fund these stations? What is the EHC expecting from the federal and state governments to make its vision a reality?

Dion: We will always leverage federal and state dollars first. Let's put it this way, if there was a market for this and people could make money, these already would be built.

Charging station availability is a barrier for EVs on two fronts: the first is that there are consumers who would buy an EV except they are worried about range. That is, they sort of look at [an EV] and say, 'hey, if I can't go on a long journey in my vehicle and I have to drive far in my vehicle every day and week' then they won't want to purchase it.

It is very hard in the early stage of EVs to make a fast-charging station work, so that's where utilities step in. We often come into areas where we know we are moving for public policy reasons and we know what customers want, but it just doesn't make sense for the market to do anything. We sort of jump start the market, if you will, and get things going.

In other words, if it makes sense for us to invest in charging stations, and it makes sense to take federal and state dollars we will, but if there's not enough of it, we will invest our own money on it because it is important to us.

Net-Zero Business Daily: So, you talk about having at least two charging stations within a 100-mile distance. How will that work out for rural areas versus urban areas?

Dion: The fast answer is we are trying to fill the gaps, whether across the country or across a service area. Assuming you are in an urban area, you probably have a charger at your home, or your workplace, and you are not driving 200 or 300 miles a day. You are probably driving 40-60 miles a day, filling up your gas tank if you will, or I should say electric tank. The challenge lies in those in-between areas between Indianapolis and Columbus. How do I get my vehicle charged there? And if someone has put a charging station there, fine with us, but if there's a gap, we will fill it. So, I think we see ourselves as providing, as we often do, electric service to anyone in our territory. So, if you the customer want to run an EV through our service territory, why shouldn't you have access to a fast charger, even if you live far out from a metropolitan area. You shouldn't have to live in the urban centers to have that luxury.

Net-Zero Business Daily: EVs and charging are a classic example of a chicken-and-egg situation. With the EHC, are utilities in the position of driving the EV revolution or are you responding to automakers or a combination?

Dion: I think we are responding to what we are seeing, and we are seeing a lot of more of our customers, and customers across the nation, buying EVs. If you look at the percentages of total car sales and EVs, they keep increasing. Number one: I would say we are responding to customers. Number two: we are absolutely responding to the plans of the auto manufacturers. They tell us they are going to make all these EVs. Certain brands will be all electric by 2030. It is a combination of seeing customer adoption rates going up, along with announced plans of those automakers as well as some of the announced plans of our policymakers.

Net-Zero Business Daily: What obstacles do you see in achieving your goal since you have no fixed timeline? Is it operating costs, siting, permitting?

Dion: We have learned from experience, so it's not permitting.

And remember, Teslas are all over the place. It's not really siting. The costs are not exorbitant because of what are doing: we are just gap filing. I think more than anything else, I think the hurdles are largely outside our control.

But the one thing that I really do wonder in this is whether we are too far ahead of the curve. And the reason I say this is because we don't know what'll happen if we build these stations. If they get used, that's great. If they are overused and are very popular then that's a very good problem to have. Sure, the customer will get a little frustrated in the short term, but we can always add more charging stations. But what happens if the stations are underused, and if we really miss the mark, and we have spent our money and ask the government for funds then it's a big risk.

The biggest risk is not the things you have cited, but the unknown risk that I probably worry myself about, because as utilities we really do try to plan and have our items be used and be useful. That's why it's chicken-and-egg because it is an uncomfortable position for us to be in because it's a little bit riskier than we are used to.

Net-Zero Business Daily: Speaking of gas stations, what about pricing? Who will set the rates? Will they be based on off-peak demand? How will the pricing be conveyed to the drivers? Will charging stations be like gas stations, advertising their rates?

Dion: The fast answer is: it depends. Each company will probably charge the rates that are on file with its state regulator. If they have an off-peak program or if they have a commercial program, they will do it all according to the laws of their jurisdiction. That one is kind of easy as far as that goes. It is up to each operating company. Certainly, each utility will follow the rules.

As far as rates go, I don't think we have got down to that detail yet, but some places we have EV tariffs, and in other places we are filing to get those.

It's a great question, and it's another reason to talk to our customers. I love that!

Posted 09 September 2021 by Amena Saiyid, Senior Climate & Energy Research Analyst, IHS Markit

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