Do Electric Vehicles Actually Cut Utility Costs?

Does increasing the number of electric vehicles (EVs) on the grid actually result in lower utility costs for all customers?

That is just what a recently revised study found. The study shows that EV users are not receiving subsidies from other customers and that, in fact, they are driving prices down. Overall, EV consumers have provided more than $1.7 billion in net revenue to utility customers between 2012 and 2021 in three US-based utility service areas that have the most EVs.


Chart source: Synapse Energy Economics

To avoid the worst effects of climate change and protect public health, the transportation sector must be restructured. The transport sector is one of the country’s largest sources of global warming pollution and a big source of harmful local air pollution. Simply put, this calls for the broad adoption of electric vehicles such as cars, trucks, buses, etc. that are powered by electricity. The grid is already clean enough that EVs cut emissions enormously, but it is increasingly based on emissions-free sources such as wind and solar.

It’s a common misperception that widespread EV charging will strain the electrical system and require expensive upgrades that raise electricity prices. The opposite, however, has been observed in the real world, according to a Synapse Energy Economics analysis of the three utility service territories that have the most EVs of any grids in the United States: Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E). EVs typically charge overnight when people are sleeping and there is plenty of spare capacity on the grid.

Only 9–14 percent of EV charging for time-of-use (TOU) rate customers occurs during on-peak hours when overall power demand is at its highest. EVs that operate on default rates still use less electricity during peak hours than typical households — although, there is still a need to transition these folks to time-of-use rates, which improves fuel cost savings by encouraging off-peak charging.

Since EVs are not straining the grid, there are few marginal costs involved with providing EV charging, but there are considerable additional revenues that are returned to all customers in the form of lower rates and bills. Money that would have gone to the oil industry otherwise.

From 2012 through 2021, Synapse examined the revenues and expenses related to EVs in the service areas of PG&E, SCE, and SDG&E. In addition to the costs of any associated upgrades to the distribution and transmission grid and the costs of utility EV programs that are deploying charging stations for all types of EVs, they compared the new revenue utilities received from EV drivers to the cost of the energy required to charge those vehicles.

Drivers of EVs are projected to have contributed $1.7 billion more than the costs involved. The fact that the majority of EV drivers continue to pay high upper-tier costs and are in default rates is not the only reason for this finding. The drivers would still have generated almost $1.4 billion in net income, even if three out of four were using time-of-use rates intended for EVs.

Some might think that the additional $1.7 billion went to utility shareholders, but thanks to an accounting method called “revenue decoupling,” utility customers actually receive that money back in the form of lower rates and bills. Although there may be a delay between utility rate cases in regions that have not yet adopted revenue decoupling, EV charging should nevertheless put downward pressure on rates to the advantage of all customers.

EV adoption is heading in the right direction, but programs that promote EV use and make sure EV charging is done in a way that supports the grid require greater funding. With this study, researchers have observed firsthand the downward pressure that EVs are putting on rates in the real world. Electric vehicles have the potential to make American highways cleaner, protect consumers from the whims of the global oil market, and reduce the amount of money utility users have to spend on their electric bills.

So, does increasing the number of electric vehicles on the grid actually result in lower utility costs for all customers? The answer is yes — increasing the number of EVs on the grid does actually result in lower utility costs for all customers.




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