During interviews for this month’s cover story, “Customer Service: 2020,” leaders in the world of back-office information technology (IT) spoke with Fortnightly about customer service and...
Smart Pricing, Smart Charging
Can time-of-use rates drive the behavior of electric vehicle owners?
on their home charging station, their tolerance for a less-than-fully charged battery, the regularity of their driving, or other factors. An aggregate charging profile for a hypothetical population of PEV owners is illustrated in Figure 3. 14
The question, then, is to what extent will the collective charging behavior change if these customers are enrolled in a TOU rate? The answer will be driven in part by the ability of customers to reduce their electricity bills on the TOU rate. To bound the bill savings possibilities created by the TOU rates, we ask the following questions:
• What is the charging cost when the PEV is plugged in at various times of day under the three TOU rate regimes—assuming a continuous four-hour charge? 15
• How does this compare to the cost of charging at the 21 cents/kWh flat rate?
Using a simple spreadsheet model, we find that charging the PEV will cost about $69 per month on the flat rate. 16 The charging cost varies under each TOU rate, depending on when the charge is initiated and which TOU rate is being used. The range of charging costs from the three TOU rates is displayed as the red bars in Figure 4.
A driver on the Low TOU rate has the least incentive to charge during the cheapest periods, since his or her cost exposure is much less than that of an owner on either the Medium or High TOU rates. A priori , one would expect drivers on the High TOU rate to display the largest price responsiveness and drivers on the Low TOU rate to display the least.
Even in the High TOU rate case, the savings might be considered modest. The difference between doing all charging at 6 pm (the default charging profile) and 1 am (the least-cost charging profile) is about $60 a month ($85 vs. $25). Will a LEAF owner pay much attention to saving this sum of money? While one might be tempted to say no, research from related fields suggests that the answer might not be so obvious. Our research with other dynamic pricing and TOU pricing pilots suggests that despite the modest savings that accrue to customers on such pricing designs, people do move their load profiles in response to higher prices. 17 Drawing upon empirical evidence from more than 100 tests with dynamic pricing, we would expect a peak-to-off-peak price ratio of 8:1 to produce a drop in peak load of around 15 percent. The implied arc elasticity is fairly small (around -0.04) but still capable of producing significant demand response with a potent rate design.
Simulation modeling also will help us better understand the level of price responsiveness that could produce meaningful impacts on charging regimens. Already, we have established illustrative TOU rates (Figure 2) and an aggregate charging profile for a hypothetical population of PEV owners (Figure 3) , but still need a measure of how responsive PEV owners are to TOU rates. A starting point for this measure is the already noted arc price elasticity of demand of -0.04.