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Ex-ante evaluation of profitability and government's subsidy policy on vehicle-to-grid system


  • Hong, Junhee
  • Koo, Yoonmo
  • Jeong, Gicheol
  • Lee, Jongsu


Although the electric vehicle reduces pollutant emissions and results in reduced energy costs, lack of battery charging infrastructure and relatively high vehicle prices create challenges to the automobile industry and affect government support policies. To create a battery charging infrastructure, such as a vehicle-to-grid system, stakeholders need a quantitative analysis that decreases profitability uncertainty. The high cost of an electric vehicle can be offset by government subsidies that promote early marketing efforts, but an ex-ante evaluation of consumer demand is needed to analyze the effectiveness of any policy. This study provides information about optimal pricing based on consumer demand as well as the social welfare change effected by possible government subsidy polices for electric vehicles. Results show that the maximum profit for a vehicle-to-grid service provider will be 1.27trillion Korean won/year with an annual subscription fee of 0.65million Korean won. The government subsidy of 1 trillion Korean won, given annually, will increase social welfare by 1.94trillion won and also boost the profit of vehicle-to-grid service provider to 1.98trillion won.

Suggested Citation

  • Hong, Junhee & Koo, Yoonmo & Jeong, Gicheol & Lee, Jongsu, 2012. "Ex-ante evaluation of profitability and government's subsidy policy on vehicle-to-grid system," Energy Policy, Elsevier, vol. 42(C), pages 95-104.
  • Handle: RePEc:eee:enepol:v:42:y:2012:i:c:p:95-104
    DOI: 10.1016/j.enpol.2011.11.053

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    1. Zulkarnain & Pekka Leviäkangas & Tuomo Kinnunen & Pekka Kess, 2014. "The Electric Vehicles Ecosystem Model: Construct, Analysis and Identification of Key Challenges," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 12(3 (Fall)), pages 253-277.
    2. Sovacool, Benjamin K. & Kester, Johannes & Noel, Lance & Zarazua de Rubens, Gerardo, 2020. "Actors, business models, and innovation activity systems for vehicle-to-grid (V2G) technology: A comprehensive review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 131(C).
    3. Kim, Imjung & Kim, Junghun & Lee, Jongsu, 2020. "Dynamic analysis of well-to-wheel electric and hydrogen vehicles greenhouse gas emissions: Focusing on consumer preferences and power mix changes in South Korea," Applied Energy, Elsevier, vol. 260(C).
    4. Charle Augusto Londoño Henao, 2020. "Cost-Efficiency Index of the Development Plan of Medellín, 2015," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 152(1), pages 335-367, November.
    5. Kwan Byum Maeng & Jiyeon Jung & Yoonmo Koo, 2019. "Quantitative Analysis of Consumer Preferences of Windows Set in South Korea: The Role of Energy Efficiency Levels," Energies, MDPI, Open Access Journal, vol. 12(9), pages 1-1, May.
    6. Cansino, José M. & Román, Rocío & Colinet, María J., 2018. "Two smart energy management models for the Spanish electricity system," Utilities Policy, Elsevier, vol. 50(C), pages 60-72.
    7. Jiyeon Jung & Yoonmo Koo, 2018. "Analyzing the Effects of Car Sharing Services on the Reduction of Greenhouse Gas (GHG) Emissions," Sustainability, MDPI, Open Access Journal, vol. 10(2), pages 1-1, February.
    8. Kim, Junghun & Seung, Hyunchan & Lee, Jongsu & Ahn, Joongha, 2020. "Asymmetric preference and loss aversion for electric vehicles: The reference-dependent choice model capturing different preference directions," Energy Economics, Elsevier, vol. 86(C).
    9. Zhishuang Zhu & Hua Liao, 2019. "Do subsidies improve the financial performance of renewable energy companies? Evidence from China," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 95(1), pages 241-256, January.
    10. Shafiei, Ehsan & Davidsdottir, Brynhildur & Fazeli, Reza & Leaver, Jonathan & Stefansson, Hlynur & Asgeirsson, Eyjolfur Ingi, 2018. "Macroeconomic effects of fiscal incentives to promote electric vehicles in Iceland: Implications for government and consumer costs," Energy Policy, Elsevier, vol. 114(C), pages 431-443.
    11. Shin, Jungwoo & Hwang, Won-Sik & Choi, Hyundo, 2019. "Can hydrogen fuel vehicles be a sustainable alternative on vehicle market?: Comparison of electric and hydrogen fuel cell vehicles," Technological Forecasting and Social Change, Elsevier, vol. 143(C), pages 239-248.
    12. Park, Yuri & Koo, Yoonmo, 2016. "An empirical analysis of switching cost in the smartphone market in South Korea," Telecommunications Policy, Elsevier, vol. 40(4), pages 307-318.
    13. Byun, Hyunsuk & Shin, Jungwoo & Lee, Chul-Yong, 2018. "Using a discrete choice experiment to predict the penetration possibility of environmentally friendly vehicles," Energy, Elsevier, vol. 144(C), pages 312-321.
    14. Dongnyok Shim & Seung Wan Kim & Jörn Altmann & Yong Tae Yoon & Jin Gyo Kim, 2018. "Key Features of Electric Vehicle Diffusion and Its Impact on the Korean Power Market," Sustainability, MDPI, Open Access Journal, vol. 10(6), pages 1-1, June.
    15. Noel, Lance & Sovacool, Benjamin K., 2016. "Why Did Better Place Fail?: Range anxiety, interpretive flexibility, and electric vehicle promotion in Denmark and Israel," Energy Policy, Elsevier, vol. 94(C), pages 377-386.
    16. HyungBin Moon & Hyunhong Choi & Jongsu Lee & Ki Soo Lee, 2017. "Attitudes in Korea toward Introducing Smart Policing Technologies: Differences between the General Public and Police Officers," Sustainability, MDPI, Open Access Journal, vol. 9(10), pages 1-1, October.
    17. Sánchez-Braza, Antonio & Cansino, José M. & Lerma, Enrique, 2014. "Main drivers for local tax incentives to promote electric vehicles: The Spanish case," Transport Policy, Elsevier, vol. 36(C), pages 1-9.
    18. Kyuho Maeng & Sungmin Ko & Jungwoo Shin & Youngsang Cho, 2020. "How Much Electricity Sharing Will Electric Vehicle Owners Allow from Their Battery? Incorporating Vehicle-to-Grid Technology and Electricity Generation Mix," Energies, MDPI, Open Access Journal, vol. 13(16), pages 1-1, August.

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    Electric vehicles; Mixed logit; Vehicle-to-grid;


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