Dynamic pricing for EVs could lead to $2.6 billion in benefits for Illinois consumers, study says

Energize Weekly, April 10, 2019

A well-designed electric vehicle (EV) program in Illinois could create $2.6 billion in consumer benefits, according to the Citizens Utility Board (CUB), a consumer watchdog group.

The key to those benefits is simultaneously promoting the adoption of EVs and creating a rate structure that optimizes the charging of those vehicles at off-peak hours, particularly late at night and early morning.

“We find that well-managed, or optimized, EV charging can put downward pressure on the statewide costs of energy, capacity, and delivery of electricity,” the study said. “Additional savings will flow to consumers when the electricity cost savings of commercial and industrial customers are reflected in lower costs of goods and services they provide.”

CUB calls for EV owners to be automatically enrolled in “dynamic” pricing programs, where rates vary depending on the time of day when power is consumed. The rates would only apply to the cost of powering the EV—other household usage would be billed separately according to whatever pricing plan the customer chooses—and car owners could opt out of the program. 

The key to this dynamic-price regime would be time-of-use rates (TOU), which set different rates for different periods of the day based on the demand for electricity. EV owners under TOU rates would get the most benefit by charging during the lowest cost periods.

“We think TOU rate plans are one of the most practical forms of dynamic pricing, but there are many others,” David Kolata, CUB executive director, said a statement. “The key point for policy makers is that we can harness money-saving power from EVs if we provide car owners with pricing plans that encourage them to charge their cars overnight when the grid is brimming with unused and extremely cheap electricity.”

EV owners on a dynamic pricing plan could cut their electricity supply costs by more than 50 percent, according to an earlier CUB study.

There are currently about 15,000 EVs in Illinois, and the study projects that number could reach at least 690,000 by 2030.

The benefits extend beyond the owners of EVs to the overall system and all customers:

  • Lower wholesale market energy prices resulting from optimized charging, as compared to unmanaged charging, total as much as $2 billion by 2030
  • The more efficient use of generation and the grid could lead to $124 million reduction in capacity costs for the system
  • An additional $536 million in additional utility revenue from EVs could allow for a 12 percent rate reduction for all customers

“Electric vehicles produce many rewards for the public at large, including a reduction in pollution from autos and diminishing dependence on foreign oil,” Kolata said. “Our analysis shows that EVs not only allow drivers to charge a car at a much lower cost than to fill at the pump, but they also have the potential to keep a lid on electric bills for all consumers.”

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