Effective Charging Rates for EVs

Electric vehicles are a popular choice for new car buyers and will continue to grow in share of the auto industry. In California for example, there is a target to have all new purchased vehicles be electric by 2035. Edison Electric Institute predicts there will be over 7 million electric cars being used in the United States by 2025. As states strive for energy efficiency and lower emissions, utility companies must begin planning for how they will handle the increase in demand for power. Infrastructure improvements will be necessary to effectively provide service, and new rate structures will be needed to ensure that those improvements can be made without making EVs too expensive to charge.

Time of use rates are one way that energy companies can help to regulate the amount of power used throughout the day. When electric car drivers are not conscious of the times they are charging their vehicles, they tend to plug in as soon as they get to their destination. This causes spikes in energy usage that follow people’s normal patterns: in the morning when most people are arriving to work and, in the evening, when they arrive at home. The evening charging is particularly problematic because energy use is already higher around that time. By incentivizing people to charge their vehicles at times when other energy usage is lower, the energy grid is less stressed at peak times and people can fill their vehicles more economically. Even though estimates predict that some states may have to produce as much as 55% more energy, most energy plants have excess capacity that isn’t used, or is only used during peak times. Smoothing the peaks in energy usage by providing lower costs at off-peak times means that electric companies won’t have to increase capacity as much, because the new energy consumption will be primarily at lower-use times. Time of use rates are not without flaws though. One of the biggest challenges to companies primarily providing time of use rates is in the case of public charging stations. If drivers aren’t bearing the cost of filling their vehicle, they tend to charge in the same patterns described earlier. This means that the businesses and taxpayers that own the charging stations end up paying more than is necessary for energy usage while trying to cover the large upfront costs of installing the infrastructure required for public charging stations.

Subscription options are also available and may be particularly helpful to transportation services and vehicle fleets where their usage is very predictable. They can choose how much energy to purchase in each month at a set cost, which is based on the amount that they purchase. These structures may be less suitable for individual consumers because they often charge fees for overages (much like cell phone providers charge for going over allotted data), and their driving needs may be less predictable.

Effective pricing structure for EVs will depend on many factors and will change as more EVs get on the road. Time of use rates are effective in managing consumers’ energy usage by incentivizing them to charge at off-peak times but are ineffective for public stations where the driver isn’t directly paying for the energy consumed. Subscription structures are good for consumers who have very predictable energy needs but are less effective for more unpredictable customers who may have to pay fees for overages. As rate structures change rapidly in the coming years, RateAcuity can help to make sure you always know the most accurate and up-to-date rates so that you can budget for your charging needs correctly.


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