The role of electric vehicles (EVs) in flexibility markets

January 17, 2023

Since 2021, V2Market, the innovative service to incorporate EV batteries into the electricity system as storage and flexibility capacity, has explored the possibilities that Vehicle-to-Grid (V2G), Vehicle-to-Building (V2B) and bidirectional (V2H) technologies can contribute the wholesale and local electricity markets in Spain and Europe.

OMIE,  in close collaboration with the rest of the project partners, analysed the integration of V2G flexibility services in the electricity markets (day-ahead market, intraday auctions market, intraday continuous market, and local flexibility markets), through the participation of an aggregator or EV owners in these markets.

Main conclusions of the analysis

The analysis of the electricity market and its potential for V2G integration within the V2Market project showed that V2G technology could allow electric vehicles to improve the efficiency of the electricity grid, reducing greenhouse emissions from transport and electricity generation.

V2G could be a good solution for solving grid congestion or moments with high demand or high electricity prices, especially during short periods of time (up to 4 hours). V2G can also fulfil requests made with little time in advance, offering generation/consumption flexibility to the distribution grid with the ultimate goal of optimizing investments in distribution grid infrastructure. In order to achieve such scenario, EVs should receive clear market signals in order to react to the needs and opportunities of the electricity system.

Local flexibility markets aim to offer market tools to DSOs and consumers to simplify the use and integration into the electricity market of distributed energy resources. Local flexibility markets can create new revenue streams for V2G users to complement their possible participation in global wholesale electricity markets where aggregators will play an important role by aggregating in their portfolios different types of energy resources such as EVs, photovoltaic energy, storage or assets for demand-response.

Flexibility service and revenues between local flexibility market figures.
Own elaboration.

One of the main advantages of V2G technology is the quick activation service that it can provide to the system and the ability of EVs to charge and discharge their batteries for short periods.

Nowadays, the granularity of the Spanish day-ahead and intraday electricity markets’ product is one hour. In the coming years, and according to European regulation, the wholesale market will reduce the granularity of its products to 15 mins. This new granularity fits better with V2G services and the EV integration into the electricity market. It will allow EV owners or aggregators to trade in shorter periods and V2G would offer higher rates of flexibility.

V2G technology is a good option for providing short-period services in the electricity market. However, at the moment of writing, V2G cannot participate on the global electricity markets since it is considered a stand-alone battery, which is not a technology is currently allowed in the wholesale market.

Local flexibility markets are not yet regulated in Spain and in an infancy stage across Europe. Therefore V2G cannot participate in them at the moment, due to regulatory barriers rather than technology limitations. V2G technologies are starting to be considered in regulation, but there is not a specific road map for their inclusion in the power sector. The changes to allow storage resources to participate in the electricity market are not  difficult to implement and it is expected that regulatory changes will allow them in the near future.

Although EVs and EV infrastructure are expected to be massively deployed on a global scale in the coming years there is a lack of standardization of sockets, connectors, and communication protocol for chargers. For the development of V2G, it is essential that electric vehicles and chargers will be able to communicate under a standard framework, not only in Spain, but at a European level.

EVs are a combination of storage and mobility, meaning that charging and discharging of the battery can occur in different locations. E-roaming technology and interoperability agreements between final users, charging infrastructure operators and aggregators or electricity suppliers have to be developed.

V2G hardware prices are dropping as the interest in this technology grows, but still, smart and bidirectional chargers have  a higher cost than a normal EV solutions. It is expected that in the next few years the price of charging infrastructure will go down, driven by a higher demand from customers and a wider offer of compatible vehicles.