Toward Sustainable Electricity Markets: Capacity-Based Pricingfor Electric Vehicle Smart Charging

Abstract

We present a novel information systems (IS)-enabled pricing artifact for variable-rate electric vehicle (EV) charging that can facilitate a sustainable EV introduction. EVs cansignificantly reduce carbon intensity in modern cities and address important sustainabilitychallenges. However, large-scale EV introduction is expected to increase electricity demandpeaks, threatening grid stability and reliability. Most proposed methods to coordinate EVcharging have shortcomings, such as the inability to guarantee incentive alignment betweengrid and EV owner objectives, or avalanche effects, which might create new demand peaksas EV owners receive the same price signals and make similar charging decisions. Toaddress this issue, we present a capacity-based pricing artifact that includes a dynamic,charging-rate-based price component and a set of price-setting methods based on analyticalor computational heuristics. The proposed approach benefits from a variety of availableinformation in the environment and allows rational EV agents to optimize their own coststhrough planning and scheduling in the presence of their individual charging needs andconstraints, while at the same time rebalancing the total charging demand to mitigate ava-lanche effects in EV charging. The proposed artifact is highly effective in reducing demandvolatility or, alternatively, in achieving a desired match between the output of renewableenergy sources and overall charging demand. We demonstrate the benefits of the proposedapproach empirically, by comparing it to traditional, currently used pricing benchmarks inseveral realistic scenarios. Our artifact supports grid operators in their effort to rebalancethe overall EV charging demand across time. Furthermore, the proposed approach enablesenergy providers to maintain the overall revenues (i.e., to achieve rebalancing withoutchanging the total charging cost for the same energy needs), while respecting market-imposed price constraints. Finally, energy market stakeholders can use our pricing schemeto induce demand profiles that follow renewable generation patterns, maximizing renew-able usage and reducing inefficiencies in renewable energy utilization by the grid.