Promoting vehicle-to-grid deployment: Should subsidies target bidirectional charging station construction or operation?

As a vital pathway toward net-zero emissions, the rapid growth of renewable energy has intensified electric supply-demand imbalances and underscored the need for flexible grid regulation. Vehicle-to-Grid (V2G) technology, which enables bidirectional electricity exchange between electric vehicles (EVs) and the power grid, provides a promising solution for flexible net-zero grid regulation but requires costly deployment of bidirectional charging stations. To incentivize firms, governments have introduced both operational and construction subsidies, yet the most effective policy remains unclear. To address this question, we account for uncertainty in consumers’ hassle cost of daily bidirectional charging and develop a game-theoretic model involving the government, the EV firm and consumers. Our equilibrium analysis shows that, even without any government subsidy, if the time-of-use price differential offered to consumers exceeds their utility loss from battery degradation, the firm can still earn profits and thus has incentive to build bidirectional charging stations. Furthermore, construction and operational subsidies complement the time-of-use price differential. When the V2G-enabled vehicle price is exogenous, providing only the construction subsidy minimizes government subsidy cost, whereas under endogenous pricing, the optimal subsidy scheme depends on construction cost and the time-of-use price differential. Specifically, when construction cost is large or the time-of-use price differential is low, only the operational subsidy is most cost-efficient; when construction cost is low or the price differential is large, only the construction subsidy is most cost-efficient; and when both factors fall within an intermediate range, a combination of the two subsidies yields the lowest government cost.