Electric vehicles to the grid: Costs, benefits, and pricing mechanisms

Decarbonizing the transportation sector is essential for meeting global climate targets. However, transportation electrification imposes substantial costs on power systems. This study develops a novel data-driven approach that leverages comprehensive grid measurement data to quantify these costs, referred to here as social costs. The results indicate that advancements in power transfer technologies, particularly vehicle-to-grid (V2G) integration, can substantially reduce social costs and, in some cases, generate net social benefits. When the proposed method is applied to two regions in China with contrasting power system characteristics, V2G leads to significant reductions in social costs in both low (Guangdong) and high (Gansu) renewable penetration regions. The reduction is greater in Gansu, primarily driven by a stronger decline in capacity investment costs, reflecting the greater reliance of high-renewable power systems on dispatchable capacity. Based on the estimated social costs, we propose a pricing mechanism to enable economically efficient V2G integration, demonstrating the first-best market-based mechanism and the second-best direct-pricing mechanism.