Electric vehicle adoption in a market environment in 2035: The impact of market penetration and charging strategies

Abstract

This paper analyzes the profitability for adopting battery electric vehicles (BEVs) in the year 2035 accounting for different charging options and their feedback on the electricity sector. We propose a multi-level equilibrium model for the electricity market to determine charging costs, which incorporates endogenous determination of generation capacity investment, network expansion and redispatch, including demand for large-scale deployment of BEV mobility. The model allows to investigate the impact of BEV mobility and different charging options on the electricity system and its endogenous feedback on charging prices. For different degrees of BEV penetration, we calibrate our model for the German electricity market in 2035 and consider various charging options: (i) non-smart charging based on a standard charging profile, (ii) smart charging, where the charging load can be shifted throughout the entire day to provide flexibility to the system and (iii) a mixed charging strategy, where smart charging is only possible during night hours. We then analyze the impact of those charging strategies on charging and electricity prices, generation and transmission investment, RES curtailment, CO2 emissions and total system cost. In a next step, those endogenously determined charging prices are incorporated in a total cost of ownership analysis to investigate BEV profitability. Our results reveal that larger BEV penetration yields lower CO2 emissions even in those scenarios with smaller availability of green electricity production. Charging prices and resulting CO2 emission substantially depend on the chosen charging strategy. Even for large-scale deployment of BEV, however, electricity prices will remain comparatively low and thus charging prices in all considered scenarios account only for a small fraction of total vehicle cost. Thus, the profitability of adopting an electric vehicle crucially depends on the initial investment cost and potentially granted public support schemes.

Keywords: Battery Electric Vehicle Adoption, Large-scale Market Penetration, Equilibrium Problem, Electricity Market

JEL Classification: D24, D58, Q47, R42