Flex and the city: Cities need dynamic pricing for public charging
City dwellers without their own parking space, small business owners such as taxi drivers and a growing number of car-sharing users rely on the public charging network to access electric driving. The affordability of electric vehicles (EVs), compared to the fossil-fuelled cars they replace, in part, relies on not only upfront cost but also lower running costs.
The recent fossil gas crisis has led to high energy prices that make fixed-price electricity contracts expensive and affect those running costs. This should get those who procure, operate and use public charging infrastructure thinking: Which charging models help reduce fossil fuel dependence in transport and energy, and make public charging more affordable?
Currently, most public charging prices are flat rates. Users pay the same price whether they charge during the evening peak or overnight. Tariffs are high to cover peak prices within the energy supply contract. Yet they do not help reduce peak electricity demand, nor are the lower costs of charging off-peak passed on to EV drivers.
Smart charging is a solution that reduces costs for EV drivers, provides assurance for future EV users and supports the electricity system in the transition to renewable energy sources. It also, importantly, maintains or even improves the profitability of charge point operators. We need to extend the benefits of smart charging to users of public charging networks, as high prices turn otherwise interested drivers away from EVs.
Where current public charging tariffs fall short
Electricity prices on wholesale markets fluctuate: there are clear differences between days and within each day. In 2022, these differences increased six-fold compared to 2020, meaning that there is even more money to be saved if drivers can take advantage of price fluctuations.
EV charging flexibility can enable a reduction in energy demand at peak times. This not only lowers the price for individual drivers, but it also decreases costs for all power system users as it reduces the need for peak power plants that run on expensive fossil fuels.
EV drivers with their own home charging port can keep their bills under control by shifting sessions to cheaper periods, for example, through a time-varying or dynamic pricing contract with their supplier.
A dynamic tariff reflects wholesale prices in retail tariffs, for example with hourly prices communicated a day in advance. Homeowners can also save by investing in rooftop solar for their charging needs.
What can be done to offer EV drivers who rely on public charging points equal opportunities?
Removing obstacles to smart public charging
The UK government and energy regulator Ofgem recognise the importance of extending the benefits of smart charging for users and the energy system and included public charging in their joint 2023 Smart Charging Action Plan.
This requires changes to the status quo, however, in the UK and across Europe. Currently, customers and the electromobility service providers offering charging subscriptions have little choice but to accept the energy prices set by the charge point operator (CPO). Unfortunately, charging subscription prices usually reflect the most expensive CPO rates—so even if cities keep prices stable in their concession to operate the charging infrastructure, EV drivers often still pay more because of rising prices in other places.
Giving users the tools to save
CPOs and electromobility service providers could help EV drivers lower their bills by enabling user-centric smart charging services. As the name indicates, these services place consumer needs first, including enabling access to the lowest possible rate within the driver’s desired charging period.
Automation can help with the lower charging speeds typical for on-street charging when parked. For fast charging, an activity where people typically stay nearby their vehicle while the charging is happening, time-varying pricing—as offered by a growing number of operators—could affect when drivers show up at the station.
EV drivers can see the prices a day in advance, allowing them to plan and benefit from lower off-peak charging rates.
Delivering additional benefits at the local level
Cities can also look for ways to maximise local benefits. One way to do so is by connecting EV charging to locally produced clean energy from citizen-owned renewable energy communities.
The same smart charging technology that is based on dynamic prices from wholesale markets can also match EV charging sessions with wind and solar energy. In some countries, renewable energy communities even benefit from reduced network tariffs as they help use local networks more efficiently.
Provided discounts are genuinely reflective of the value added, this allows the expansion of renewable energy generation and the charging network to go hand-in-hand while ensuring predictable and affordable prices. Combined with car-sharing, EV charging within a renewable energy community offers the benefits of both generating renewable electricity and promoting the use of electric cars to city dwellers.
This solution can further reduce private car ownership by making sharing an attractive option.
Dynamic public charging extends smart savings beyond the driveway
A wide range of available smart charging services have demonstrated that the perceived complexity of dynamic prices can be handled in a user-friendly way, such as with retail rates that offer off-peak extra points. Consumers will benefit from a broad diversity of offerings, as not all will have the same preferences and needs. They might want to try out different options to find their perfect match. It is important that consumers feel confident in offering and benefiting from the flexibility that EV charging can provide.
Facilitating dynamic pricing is an important step forward that can benefit the entire energy ecosystem, minimising the costs of the transition. Everyone benefits from energy system cost savings achieved through EV charging responding to dynamic price signals. The local planning process offers the perfect opportunity for authorities and grid operators to reflect the value of smart charging in their vision for a decarbonised energy system.
Governments and regulators can give EV drivers with and without off-street parking the same opportunities to participate in and benefit directly from smart charging. It is a sustainable way to bring smart charging rewards to all EV users.
A version of this article originally appeared on Foresight Climate & Energy.