Time-of-use (TOU) pricing might seem like the ultimate solution to ensure electric vehicle charging loads won’t overburden the grid. But will TOU rates guide drivers’ behavior when it’s time to...
Smart Pricing, Smart Charging
Can time-of-use rates drive the behavior of electric vehicle owners?
Recognizing the societal benefits of plug-in electric vehicles (PEVs), President Obama in his State of the Union speech set a national goal of putting 1 million PEVs on the road by the year 2015. Most benefits arise from a reduced dependence on imported oil and lower carbon emissions, in areas where marginal power generation comes from combined-cycle natural gas or renewable energy. Additional benefits arise because PEVs act as a bridge toward greater use of renewables—by building load during periods of high renewable generation output. Drawing from other work, we can estimate the present value of these gross societal benefits over the next four decades at $340 billion for the U.S. as a whole. 1
Nevertheless, the near-term impact of PEVs will be felt by the distribution grid and specifically by distribution transformers that exist on each neighborhood block and cul-de-sac. That impact is unlikely to be positive. The typical transformer serves anywhere from four to 10 homes. In an area where the pre-PEV household load is about 3 kilowatts (kW), the post-PEV load could easily double and become 6 kW per house. In areas where it’s 6 kW per house, it could rise by 50 percent and become 9 kW per house—or more. Since PEV adoption is expected initially to cluster in neighborhoods where demand for PEVs is strongest, the new load might overload transformers and sap much-needed distribution capacity. Thus the national goal of putting 1 million PEVs on the road by 2015 could easily become the bane of distribution engineers. 2
Whether PEVs will help or hinder electricity provision will depend on how customers charge their vehicles. That behavior will be driven in part by the rate structures that are offered by utilities and by the price responsiveness of PEV owners to those rate structures. In this article, we show 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. 3 Will that financial incentive be sufficient to induce PEV charging regimens that avoid overloading the distribution grid? The answer depends on the price elasticity of demand. If the price elasticity is consistent with what has been observed in whole-house applications of time-of-use (TOU) pricing, then the outcome might be disappointing. 4 On the other hand, if price elasticities are substantially higher, then positive outcomes can be envisaged.