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Electric Vehicles in Imperfect Electricity Markets: A German Case Study

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  • Wolf-Peter Schill

Abstract

We analyze the impacts of a hypothetical fleet of plug-in electric vehicles on the imperfectly competitive German electricity market with a game-theoretic model. Electric vehicles bring both additional demand and additional storage capacity to the market. We determine their effects on prices, welfare, and electricity generation for various cases with different players being in charge of vehicle operations. We find that vehicle loading increases generator profits, but decreases consumer surplus. If excess vehicle batteries can be used for storage, welfare results are reversed: generating firms suffer from the price-smoothing effect of additional storage, whereas consumers benefit despite increasing overall demand. Results however depend on the player being in charge of storage operations, and on battery degradation costs. Strategic players tend to underutilize the storage capacity of the vehicle fleet, which may have negative welfare implications. In contrast, we find a small market power mitigating effect of electric vehicle recharging on oligopolistic generators. Overall, electric vehicles are unlikely to be a relevant source of market power in Germany.

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  • Wolf-Peter Schill, 2010. "Electric Vehicles in Imperfect Electricity Markets: A German Case Study," Discussion Papers of DIW Berlin 1084, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp1084
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    Cited by:

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    3. Schill, Wolf-Peter & Gerbaulet, Clemens, 2015. "Power System Impacts of Electric Vehicles in Germany: Charging with Coal or Renewables," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 156, pages 185-196.
    4. Wesseh, Presley K. & Benjamin, Nelson I. & Lin, Boqiang, 2022. "The coordination of pumped hydro storage, electric vehicles, and climate policy in imperfect electricity markets: Insights from China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 160(C).
    5. Loisel, Rodica & Pasaoglu, Guzay & Thiel, Christian, 2014. "Large-scale deployment of electric vehicles in Germany by 2030: An analysis of grid-to-vehicle and vehicle-to-grid concepts," Energy Policy, Elsevier, vol. 65(C), pages 432-443.
    6. Arzu Muyesseroglu & Irem Duzdar Argun & Gulgun Kayakutlu, 2023. "Electric vehicle charge station layout planning: A case study in Istanbul Technical University campus," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1767-1778, April.
    7. Micha Kahlen & Karsten Schroer & Wolfgang Ketter & Alok Gupta, 2024. "Smart Markets for Real-Time Allocation of Multiproduct Resources: The Case of Shared Electric Vehicles," Information Systems Research, INFORMS, vol. 35(2), pages 871-889, June.
    8. Will, Christian & Zimmermann, Florian & Ensslen, Axel & Fraunholz, Christoph & Jochem, Patrick & Keles, Dogan, 2023. "Can electric vehicle charging be carbon neutral? Uniting smart charging and renewables," Working Paper Series in Production and Energy 69, Karlsruhe Institute of Technology (KIT), Institute for Industrial Production (IIP).
    9. repec:clr:wugarc:y:2012:v:38i:1p:103 is not listed on IDEAS
    10. Thomas Döring & Birgit Aigner-Walder, 2012. "Zukunftsperspektiven der Elektromobilität - Treibende Faktoren und Hemmnisse in ökonomischer Sicht," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 38(1), pages 103-132.
    11. Chin Hui Hao & Presley K. Wesseh & David Iheke Okorie & Hermas Abudu, 2023. "Implications of Growing Wind and Solar Penetration in Retail Electricity Markets with Gradual Demand Response," Energies, MDPI, vol. 16(23), pages 1-15, December.
    12. 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.
    13. Thomaßen, Georg & Redl, Christian & Bruckner, Thomas, 2022. "Will the energy-only market collapse? On market dynamics in low-carbon electricity systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 164(C).
    14. Pesch, Thiemo & Allelein, Hans-Josef & Müller, Dirk & Witthaut, Dirk, 2020. "High-performance charging for the electrification of highway traffic: Optimal operation, infrastructure requirements and economic viability," Applied Energy, Elsevier, vol. 280(C).
    15. Martínez-Lao, Juan & Montoya, Francisco G. & Montoya, Maria G. & Manzano-Agugliaro, Francisco, 2017. "Electric vehicles in Spain: An overview of charging systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 77(C), pages 970-983.
    16. Hanemann, Philipp & Behnert, Marika & Bruckner, Thomas, 2017. "Effects of electric vehicle charging strategies on the German power system," Applied Energy, Elsevier, vol. 203(C), pages 608-622.
    17. Hanemann, Philipp & Bruckner, Thomas, 2018. "Effects of electric vehicles on the spot market price," Energy, Elsevier, vol. 162(C), pages 255-266.
    18. Hota, Ashish Ranjan & Juvvanapudi, Mahesh & Bajpai, Prabodh, 2014. "Issues and solution approaches in PHEV integration to smart grid," Renewable and Sustainable Energy Reviews, Elsevier, vol. 30(C), pages 217-229.

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    More about this item

    Keywords

    Electric Vehicles; Vehicle-to-Grid; Arbitrage; Electric Power Markets; Market power;
    All these keywords.

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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