NVVE: Software & Energy-As-A-Service Company Earning Recurring Revenues from V2G Services
NASDAQ:NVVE
Founded in 2010, Nuvve (NASDAQ:NVVE) believes it is the only pure-play V2G ("Vehicle-to-Grid”) software and energy-as-a-service company trading publicly in the world today. Specifically, Nuvve developed and commercialized a proprietary intelligent energy software platform that is capable of “moving” large amounts of energy at-scale by aggregating electric vehicles into a Virtual Power Plant (“VPP”).
Nuvve’s cloud and edge software platform, named “GIVe™” (Grid Integrated Vehicle), enables VPPs to respond to grid demand signals on a second-by-second basis, according to management. As such, Nuvve is able to control the energy flow from integrated bidirectional-capable EVs and chargers so that available energy and power capacity stored in the batteries of aggregated EV fleets or stationary batteries can be resold back to the local electric grid.
The company has historically built its pipeline for future growth by selling and deploying third party chargers fully integrated with its GIVe™ software platform. In select segments such as school buses, Nuvve also supports its customers in a consultative fashion during each step of their electrification process by advising on grants, infrastructure planning, buildout, project management, and throughout the interconnection process with the local utility.
Nuvve’s main business objective is to build and scale its megawatts under management (“MWUM”) — that is, the aggregate amount of electric power capacity from its deployed chargers, so that it can generate recurring revenues through the provision of grid services. Examples of such grid service revenue-generating activities include a growing array of available V2G / energy storage programs and tariffs, including demand response programs (automating a change in power consumption to better align with power supply), emergency load reduction programs (calling on assets to backfeed power at times of extreme grid stress), and frequency regulation market participation (preventing deviations in the electrical frequency that can lead to disruptions in power supply and cause potential damage to equipment). Nuvve’s technology is backed by what management views as a robust and defensible V2G patent portfolio that continues to grow and includes some of the first V2G-related patents in the industry. To-date, Nuvve has deployed its technology in the U.S., Europe and Asia.
Ultimately, it is expected that EVs and renewable energy—especially when combined— create volatility on the grid. The solutions to address this include to 1) scale the grid and increase the cost of energy for everybody—even for those that cannot afford an EV, or 2) use EV batteries as stationary storage devices that can be shared based on EV usage schedules. At scale, Nuvve believes its technology can be an important way to keep the cost of energy equitable.
By increasing the utilization of EVs and transforming them into monetizable grid assets, Nuvve believes it can help accelerate the global transition to clean energy by 1) spurring greater EV adoption through a reduction in the total cost of ownership (TCO) of EVs, and 2) enabling increased penetration of renewable energy, such as wind and solar. California Gov. Newsom referred to V2G as a "game changer" during a 2022 news conference following a summer heatwave that broke all-time records and put tremendous stress on the California grid.
Overall demand for energy has increased dramatically in the U.S. (see above), stressing an aging grid infrastructure. By selling excess energy and power capacity to utilities to perform valuable grid services or in easing network congestion problems by stabilizing energy levels over peak and off-peak consumption times, Nuvve has already begun to form multiple revenue generating VPPs across the world. The company believes its technology can provide multiple types of vehicle-grid integration (VGI) and V2G services required to improve grid operations that are challenged by deteriorating infrastructure and overall rising energy consumption and cost.
Demand for the company’s solutions, platform: expected drivers include growing EV adoption …
EVs and hybrids have comprised only a small fraction of the total number of cars sold in the world, but there has been an inflection in the last few years with the number of models proliferating as 1) vehicle range has continuously improved and 2) EV prices have come down. Data from the International Energy Agency (IEA) estimates that EVs represented ~2.5% of global new vehicle sales in 2019, and this dramatically increased to ~14% in 2022.
Most industry experts agree that there are many advantages to EVs. In addition to satisfying the needs of environmentally conscious vehicle owners, EVs hold other advantages compared to gas-powered cars. These include 1) eliminating the cost of diesel and gasoline (electric bills associated with charging EVs are generally less than what it costs for diesel and gasoline) and 2) reducing the costs of maintenance (due to factors such as no oil changes or engine maintenance). Nuvve estimates that over the 12-year life of a school bus, the annual maintenance costs averages approximately $2,000 for an EV bus compared to $10,000 for a diesel bus.
A social and regulatory focus on green automotive options and optimism about the EV space is leading to development of infrastructure to support EVs, including charging infrastructure. In 2022, the Biden administration, U.S. Department of Transportation (DOT) and U.S. Department of Energy (DOE) announced their agreement to deploy $5 billion over 5-years to support the development of a national EV charging network in what they refer to as “designated alternative fuel corridors, particularly along the interstate highway system.” They refer to this as “an important step towards making EV charging accessible to all Americans.”
Inflation Reduction Act & other government measures are potential tailwinds
The number of charging stations across the U.S. has been rapidly growing and was up to an estimated 140,000 (~28,000 of which were DC fast chargers) at year-end 2022 versus a total of 53,000 at the end of 2017. According to the DOE, “EV charging continues to experience rapidly changing technology and growing infrastructure.” Even many existing gas stations are adding electric charging equipment to position themselves for the anticipated uptick in EVs. The Biden administration has a stated target of constructing a national public charging network of 500,000 ports by 2030. Specifically, we believe the Inflation Reduction Act (IRA) and other measures underscore and potentially expand prospective opportunities for growing EV adoption. The IRA includes an estimated $369 billion earmarked for investments related to climate change and securing U.S. energy security, including renewable energy technologies. The U.S. federal government has incentivized consumer purchases of EVs using tax credits since 2010. Most EVs and even hybrids have been eligible for a federal tax credit of up to $7,500 subject to certain conditions. In addition to federal credits, many states also offer incentives for purchasing a new EV.
With EV adoption on the rise, NVVE believes its opportunity set is substantial
Management believes V2G technology offers a solution to a pending challenge the grid is already facing, and which the aforementioned EV growth is expected to exacerbate. By enabling the aggregation of EVs so that they can charge and discharge megawatts of energy from these networked batteries to add capacity to the grid and/or perform services that help stabilize the grid, the company indicates that it has already seen its V2G solutions help alleviate stress on the grid to prevent blackouts and mitigate expensive fluctuations in user energy demand.
Initial focus on electric school bus fleets…
The company’s initial focus is on school bus fleets, but its customers and partners also include owners/operators of light duty fleets, heavy duty fleets and automotive manufacturers, among others. The company strives to ensure that its customers’ EV batteries aggregated with its GIVe platform will always have sufficient charge to enable drivers to complete their routes without issues, while the company operates within OEM battery warranty limits and generates cost savings and potential revenue from grid services. School buses comprise the largest vehicle fleet in the U.S., according to management, and are characterized by consistent route-based energy needs. Moreover, the buses are parked for a significant part of the day during the school year and mostly go unused when school is not in session. The company expects that the electrification of the U.S. school bus fleet will enable Nuvve to further scale its MWUM and boost recurring grid services revenue while also leading to a substantial reduction of diesel consumption and greenhouse gas (GhG) emissions.
Sustained regulatory tailwinds are also expected to help Nuvve’s school bus electrification business. In 2022, the EPA kicked off its five-year Clean School Bus Program, which is set to award $5 billion for school districts and school bus fleet operators to replace existing vehicles with zero-emission and low-emission models. Nuvve’s own grant-writers successfully assisted ten school districts in securing awards for 61 school electric school buses last year, with Nuvve providing the associated charging equipment and other services for its partners in 2023, according to management. The 2023 funding installment of this important government program has already kicked off and Nuvve is optimistic about its ability to generate further wins. The company is seeing bus manufactures respond to the increased demand – for example, earlier this year, industry leader Blue Bird confirmed that it had expanded its EV bus manufacturing capacity.
Nuvve established in the summer of 2023 a division named “Nuvve K-12” to further capitalize on its position in the electric school bus segment. This business unit provides needed technical and operational expertise to help transportation directors with the electrification process— customers increasingly recognize that electrifying their fleet is not as simple as just buying the vehicle. All told, the company believes it has amassed significant experience from partnering with more than 100 school districts and performing more than 400 charging station installations.
Access to MWs for resale of power to the grid
Nuvve believes it leads the V2G field with more than 25+ years of R&D experience and has continually operated its commercial V2G technology and services for more than six years worldwide, beginning with its first customer (a Copenhagen-based utility) in 2017. As Nuvve continues to engage with new fleet customers, the company has grown its volume of school buses and other vehicles connected to its GIVe™ platform, and now has more than 21 ‘megawatts under management’.
California has been a core market for Nuvve, with some landmark projects in the San Diego area (where it has partnered with San Diego Gas & Electric) demonstrating the benefits of V2G technology. Indeed, the company continues to expand its circuit within and beyond California. For example, the California Energy Commission recently awarded Nuvve a proposed $1.9 million to fund “RESCHOOL”, a project that will showcase the impact of electric school buses and bi-directional charging infrastructure on enhancing the resilience of the power grid. Elsewhere, Nuvve’s K-12 business unit deployed what the company believes is the first all-electric school bus fleet in the U.S. in partnership with Blue Bird, replacing a five diesel bus fleet in Martinsville, Texas. The company believes Texas is a very promising state for EV adoption and thus V2G, and Nuvve has partnered with one of the large utilities, Vistra Corp., to push for school bus fleet V2G adoption.
All the while, Nuvve believes it continues to be at the forefront of technology and seeking ways to diversify its business model so as to remain competitive. In early 2022, the company formed an artificial intelligence (AI) joint venture named ASTREA to provide features such as improved forecasting, a worldwide tariff database, predictive maintenance and energy insights and reporting. In mid-2023, the company announced the deployment of its AI technology to optimize revenue from energy market forecasting in the Nordics, and also introduced this technology into its FleetBox® charge management app to improve the user experience.
It is important to note that even when not being used to generate grid services, management believes Nuvve’s V2G technology can be used to optimize EV usage given the charge management app’s capabilities. Nuvve’s charge management platform is based on three key aspects:
- Vehicle readiness: The platform also monitors charging sessions and informs the driver if it detects any need for preventive maintenance—either for the vehicle or the charging station
- Energy management: GIVe™ seeks to ensure that a vehicle is charged at the lowest cost, while providing grid services and generating some revenue while it is parked
- Battery life extension: Nuvve’s GIVe™’s platform recommends an appropriate state of charge for the trip and keeps the usage of the battery in the most resilient area, reducing the impact of time and net energy throughput on battery health
Consistent with Nuvve’s goal to accelerate V2G adoption and bring forward revenue generation, the company struck a partnership with convenience store operator Circle K in the Nordics to integrate its GIVe™ software onto existing third party chargers, with the project currently ramping up. As the company looks ahead, another potential initiative could be into the consumer space.
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