In China, a programme called "Interim Measures for the Management of the Recycling and Utilization of Power Batteries for New Energy Vehicles" was established to reduce battery waste. It holds vehicle manufacturers responsible for the end-of-life treatment of the vehicle battery. Furthermore, battery manufacturers are encouraged to design batteries that are easy to dissemble since dismantling is the first major step for each recycling process. They also have to provide the technical details of the battery and its dismantling to the companies they supply. Some measures concern the improvement of the traceability system developed by various stakeholders along the supply chain (Government of China, 2018). 45

In the European Union, the Battery Directive has set standards for industrial and automotive battery waste management since 2006 including the ban of landfilling and incineration (Article 14). It mandates companies to collect and recycle them. It fixes a minimum required recycling rate for different types of battery (EC, 2014).46 Nevertheless, this policy was determined based on former battery technologies, when zinc-based batteries were dominant, and lithium-ion (Li-ion) batteries had not yet emerged. To adhere to this regulation, the focus is given to materials for which recycling is cheapest, regardless of its criticality or a view to minimise impacts due to extraction (Tytgat, 2013). However, the directive is being revised (EEA, 2018; Dahllöf and Romare, 2017). With the deployment of EVs, volumes of Li-ion batteries are expected to soar. The legal framework thus would benefit from being strengthened and adapted to take account of the new challenges of the EV transition and associated batteries. This could be applied, for example, via recovery mandates for each critical battery material separately, instead of a mandated recovery rate for the battery as a whole.

Implications of electric mobility for power systems

Challenges

The charging requirements of a growing EV fleet are a source of increased electricity demand on power systems, (See Chapter 3, Impacts of electric mobility on energy demand.)

High EV uptake, with uncoordinated charging, can pose a challenge for power systems if this demand coincides with peak demand periods and pushes the peak demand on a system, which could translate to the need for additional generation capacity. Clustering effects in the increased uptake of EVs can also lead to local overloading of distribution networks, resulting in the need to upgrade the distribution network. This includes the replacement of transformers and reinforcement of lines.

Solutions

Potential for controlled EV charging to deliver grid services and participate in electricity markets

Controlled EV charging enables access to a range of solutions for power systems through the provision of demand-side response (DSR) services. In particular:

45The Ministry of Industry wants to develop a universal traceability information system that will store specific data about the batteries such as the owners of the after-sale car in which it is contained. Automobile manufacturer have to ensure that car sales are updated in the system to include the new data about the owner of the car (Government of China, 2018).

4665% for lead-acid battery by average weight, 75% for nickel-cadmium battery and 50% for the other batteries (EC, 2014).

PAGE | 183

IEA. All rights reserved.

•EVs can minimise impacts on a power system by shaping the electricity demand pattern through changes in the timing of charging events to low-demand periods.

•EVs have the potential to provide energy into the power system when needed. The properties of EV batteries allow very fast and precise response to control signals, as well as the ability to shift demand across longer time periods. These capabilities enable EVs to provide DSR services to the system across a wide range of time scales and to participate in electricity markets (Table 5.3 and Box 5.3). This is a major advantage EVs have compared with other sources of DSR.

•EV batteries can store energy that may be used for other purposes than powering the vehicle, thanks to the opportunities offered by vehicle-to-grid (V2G) and similar technologies (V2X, for example vehicle-to-home). With V2X, EVs serve as battery storage capacity which can discharge energy to buildings and, more generally, the power grid to maintain system stability. This feature can have significant advantages to address

challenges at a local level, avoiding overload on a distribution grid, as well as at the main network level.47

47 Negative impacts on battery durability could be a possible downside of V2X and the related battery services provided to power system. This is an issue that is likely to depend on the depth and frequency of the discharge cycles and on technology advances. It requires the remuneration of negative impacts in terms of battery durability to EV owners. Ensuring that potential drawbacks in terms of durability are properly accounted for is important, especially in the presence of policy environments encouraging the emergence of aggregators to facilitate demand-side response (while taking into account rapid technological changes in batteries).

PAGE | 184

IEA. All rights reserved.

Global EV Outlook 2019 5. Challenges and solutions for EV deployment

Notes: VRE = variable renewable energy. The capability of EVs to contribute to long-term flexibility is complemented by other actions that can take place across the whole power system, for example, including shifts in demand for other electrical devices.

Source: Adapted from IEA (2018b).

Box 5.3. Characteristics of various electricity markets

There are many electricity markets across the world and their configurations vary from one another. Electricity markets usually consist of a combination of wholesale markets, which trade for the bulk supply of energy, and a range of complementary markets that ensure secure and reliable system operation by supplying flexibility across various timescales

The need for and presence of these complementary markets is quite dependent on the configuration of the electricity market, and in particular how close to real time the energy market is settled (gate closure time). For energy markets settled close to real time, more flexibility procurement is effectively incorporated into the energy market, while for energy markets with longer gate closure time, more of the flexibility requirements need to be represented in additional explicit markets.

Ultra short-term and very short-term flexibility markets involve lower energy volumes than energy markets, but they provide both a payment for the availability of response mechanisms and a payment for supplied electricity when these mechanisms are called upon. They can typically be expected to give higher revenues per unit of energy. Energy markets such as the intra-day markets that may be used to enable load shifting are characterised by higher overall energy volumes, but may also be coupled with lower monetary value per kWh, depending on price differentials across the day. The participation in capacity markets involves an availability payment as well as additional compensation when activated.

Due to the variability and uncertainty of variable renewable energy (VRE) generation, electricity system operators are faced with challenges to reconcile supply and demand of electricity.48 The

48 Countries enter various phases of system integration with the need for flexibility options at different points of VRE uptake. The transition depends not only on the share of VRE generation in the total electricity mix, but also on other factors such as the complementarity between VRE generation and demand profiles as well as the size of the power system, which are context specific. In systems where VRE generation and demand profiles are not well matched and where power systems are smaller (e.g. islands), they are faced with greater operational challenges and therefore enter higher phases of system integration earlier. As discussed in

PAGE | 185

IEA. All rights reserved.

capability of EVs to participate in DSR services enables them to contribute to enhanced system flexibility for the power sector, playing an important role to maintain the reliability of the system as shares of VREs increase.

The potential revenue available from electricity markets for the provision of grid services depend on multiple factors. Increased competition, including from a larger pool of EVs as well as increasing participation of batteries and other distributed resources, acts to reduce average market revenues as more flexibility providers participate. On the other hand, increasing flexibility needs (particularly with increasing shares of VRE) can be expected to increase the trading volumes of market products that supply flexibility. In general, it is likely that very shortterm markets would provide greater benefits to EV owners and demand aggregators in the near term, but saturate earlier than energy markets as DSR (including from EVs) becomes more widespread over time.49 Some studies indicate that the value of offering an EV battery for flexibility services will be greater when bi-directional charging control is available (V2G) , but significant flexibility benefits already could be available with unidirectional charging (with lower complexity and investment requirements).

Enabling flexibility from EVs

In the context of the growing electrification of end-uses (including transport) and their potential to contribute to flexibility services via DSR, the key is to ensure the necessary mechanisms are in place to unlock DSR from EVs. Fundamentally, to enable DSR the customer must be able to obtain a cost benefit from charging in a way that benefits the system. This can happen in three main ways:

•Direct load control, where the utility has the ability to directly control the electricity demand and has the right to discontinue it.

•Dynamic pricing arrangements that provide a price signal directly to customers so they can voluntarily react to the prices.

•Participation through an aggregator in electricity markets where price signals incentivise DSR activity.

The direct control is most relevant in industries with no electricity markets, and in this case the customer (traditionally a large-scale electricity consumer) obtains a lower tariff or some other incentive from the utility to participate. Dynamic tariffs require smart metering as a prerequisite and rely on the spontaneous response to price of many independently operating units which may be difficult to predict and control. DSR participation in markets through an aggregator comes with a benefit over dynamic tariffs in terms of the precision of control because the aggregator needs to estimate the response capability of the resource it controls at any point in time and take the responsibility for the DSR.50 From a technology perspective, market participation through an aggregator can involve smart metering, but it could also be mediated through other communication channels, for example solutions embedded in the charging system controlled by software applications. An example of how price signals, smart charging of

the World Energy Outlook 2018, it is expected that before 2030, many countries will have shares of VRE that require advanced flexibility services (IEA, 2018c).

49In practice, this is dependent on the specific market design and system requirements.

50From a system operations point of view, this is much simpler than trying to manage the load through a dynamic tariff only, relying on the consumer’s willingness to individually react to the variable tariff signals. From an EV owner perspective, it is also much simpler as it takes away the effort of keeping track of price signals and adjusting the charging pattern accordingly. In addition, the time scale of control required for the very short-term services of which EVs are capable is much shorter than the communications intervals of many smart meters installed today.

PAGE | 186

IEA. All rights reserved.