Brattle economists Ahmad Faruqui, Ryan Hledik, and Armando Levy and senior advisor Alan Madian have published a paper that discusses the near-term impact of plug-in electric vehicles (PEVs) on the distribution grid and explores the relationship between PEV charging behavior and varying time-of-use (TOU) rates. The paper, “Will Smart Prices Induce Smart Charging of Electric Vehicles?” addresses the question of whether PEVs will help or hinder electricity provision, which will depend on how customers charge their vehicles. This charging behavior will be driven in part by the rate structures that are offered by utilities, as well as the price responsiveness of PEV owners to those rate structures. The authors demonstrate that even those rate structures that significantly favor off-peak charging, such as heavily time-differentiated rates, will save customers less than $50 per month on charging costs. They conclude that while TOU rates may help reduce future grid reliability problems as PEVs penetrate the vehicle market, the extent to which properly designed rates could assist in maintaining grid reliability will remain unknown until we are able to empirically test PEV owners’ price responsiveness through experimental pilots. The discussion paper offers suggestions for conducting a well-designed pricing experiment that will determine whether varying rates will help reduce future grid reliability problems as PEVs penetrate the vehicle market. To download the report, please follow the link below.

Ahmad Faruqui|Ryan Hledik|Armando Levy|Alan Madian