Smart Charging of Electric Vehicles

39 Pages Posted: 12 Nov 2019

See all articles by Owen Q. Wu

Owen Q. Wu

Indiana University - Kelley School of Business

Yangfang Zhou

Singapore Management University - Lee Kong Chian School of Business

Şafak Yücel

Georgetown University - McDonough School of Business

Date Written: November 1, 2019

Abstract

Problem Definition: By providing an environmentally friendly alternative to traditional vehicles, electric vehicles will transform urban mobility, particularly, in smart cities. In practice, once an electric vehicle is plugged in, the charging station completes charging as soon as possible. Given that the procurement cost of electricity and resulting carbon emissions vary significantly during a day, substantial savings can be achieved by smart charging — delaying charging until the cost is lower. In this paper, we study smart charging as an innovative business model for utility firms.

Practical Relevance: Utility firms are already investing in charging stations and they can achieve significant cost savings through smart charging.

Methodology: We develop a sequential game in which a utility firm first announces pairs of charging price and completion time. Then, each customer selects the pair that maximizes his/her utility. Given the selected completion times, the utility firm solves a dynamic control problem to determine the charging schedule that minimizes the cost of charging under time-varying electricity procurement cost.

Results: We devise an intuitive and easy-to-implement policy for scheduling charging. We prove that this policy is optimal if all customers arrive at the charging station simultaneously. We also characterize properties of the optimal pairs of charging price and completion time. By using real electricity demand and generation data from the largest electricity market in the U.S., we find that cost and emissions savings from smart charging are approximately 20% and 15%, respectively.

Managerial Implications: In contrast to the current practice of charging vehicles without delay, we show that it is economically and environmentally beneficial to delay charging for some vehicles and to set charging prices based on the utility firm's cost of electricity procurement. We also find that most of the savings of smart charging can be achieved by implementing it only a few peak-demand days in a month, highlighting its practical relevance.

Keywords: Electric Vehicles, Business Model Innovation, Smart-city Operations.

Suggested Citation

Wu, Owen Q. and Zhou, Yangfang and Yücel, Şafak, Smart Charging of Electric Vehicles (November 1, 2019). Available at SSRN: https://ssrn.com/abstract=3479455 or http://dx.doi.org/10.2139/ssrn.3479455

Owen Q. Wu (Contact Author)

Indiana University - Kelley School of Business ( email )

Business 670
1309 E. Tenth Street
Bloomington, IN 47401
United States

Yangfang Zhou

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
Singapore 178899
Singapore

Şafak Yücel

Georgetown University - McDonough School of Business ( email )

3700 O Street, N.W.
Washington, DC 20057
United States

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