FERC: Electric Vehicles Must Be Integrated Into Grid

January 26, 2009

Dow Jones & Company, Inc.

Federal Energy Regulatory Commission Chairman Jon Wellinghoff said
Monday regulators and the automobile industry must integrate electric
vehicles into the national power grid.

The call by the newly appointed FERC chairman is in line with
President Barack Obama's plan to reduce greenhouse gas emissions and wean
the country off of crude imports, and comes as the President announced two
major initiatives that would increase vehicle fuel efficiency standards.

FERC has the power to implement rate structures that could encourage
the growth of the hybrid industry.

"Consumers are going to understand from an economic standpoint that
these automobiles make a lot of sense, so we have to integrate them into the
grid," Wellinghoff said at a PJM Interconnection conference in Pennsylvania.

PJM is a regional transmission company that coordinates wholesale
electricity flows across more than a dozen Northeastern states.

"You can see that if you're an automobile company, you'd better get on
the bandwagon, because if you don't, you're going to be left out of the band
because there is definitely going to be a move toward electrification
worldwide," Wellinghoff said.

By using electric generation from coal, nuclear, renewable and natural
gas sources, battery-power cars could dramatically cut demand for crude
products.

Obama said Monday his administration would review a request by
California to set its own emission standards that would force higher fuel
efficiency standards, a decision being watched by more than a dozen other
states that want to implement similar new standards.

The President also said he was considering increasing national fuel
standards beyond what the previous administration had recently ruled.

"Any emission-related focus will encourage the market for plug-in
vehicles, hybrids, and fuel efficient cars," said Arshad Mansoor, vice
president of power delivery and utilization at the Electric Power Research
Institute.

With cars often used only a small fraction of a 24-hour day,
battery-operated vehicles could be paid for services to make the national
grid more efficient, as part of an artificially intelligent transmission
system, Mansoor said.

Batteries in plug-in vehicles could help in an essential part of
managing a grid called balancing, the second-by-second matching of power
supply with demand.

"You are using the battery as a shock absorber, two-way energy flows
that are either dumping energy into or out of the system," Mansoor said by
telephone from the conference.

"It is creating a market where there's a value to the electric utility
industry and to the consumer," Mansoor said.

Wellinghoff said the FERC could create rate structures that could help
to encourage the plug-in market, paying car owners for services such as
balancing and helping to solve intermittancy challenges that arise with some
renewable energies such as wind and solar. When the sun isn't shining and
the wind blowing, a vast multitude of batteries in cars stored in sleeping
owners' garages could help provide supply.

Besides the long-term effects of reducing greenhouse gases and oil
imports, the advantages of a cash-back hybrid include "saving owners money
on the total energy bills, and it will cost less than a conventional car in
three years or less of ownership," Wellinghoff said.

If gasoline prices return to $4 gallon, which many energy industry
analysts predict will happen especially if the government fulfills its vow
to put a premium on emitting greenhouse gases, then consumers who want to
buy electric vehicles could help to finance their costs through a FERC
cash-back policy.

"Incorporating that savings into financing could lower first costs for
the car," the FERC chairman said.

New electric cars can cost double conventional combustion-driven
vehicles, creating a barrier to demand and keeping production costs higher
than if manufacturers were able to mass produce the new technology.

In an effort to jump-start the industry, federal lawmakers are
considering $2,500 to $7,500 tax credits for consumers who want to buy an
electric vehicle.

Mansoor said one of the first tests for the industry will be how well
Chevrolet's electric Volt model sells. Chevrolet is a unit of General Motors
Corp. (GM).

Although the Volt won't have the two-way-electricity flow technology
that's necessary, Mansoor said, "If that (model) is successful, then the
market evolving for balancing resources and a smart grid evolving to
accommodate that communication... you're looking at a five- to 10-year time
frame."

-By Ian Talley, Dow Jones Newswires; 202-862-9285;
[email protected]