Lower electricity prices for households due to electric vehicles

26.11.2018

The number of electric vehicles is rising steadily. Because these are powered electrically, they have an impact on the entire electricity system and therefore on electricity prices as well. Fraunhofer ISI has calculated that, although investments in power grids will probably be needed, overall the electricity prices for households could fall if large numbers of electric vehicles drive on German roads.

There is significant growth in the number of electric cars worldwide. Because these are powered electrically instead of with gasoline or diesel, this growth has impacts on the energy system as a whole. In a recent study, the Fraunhofer Institute for Systems and Innovation Research ISI analyzed the influence of electric mobility on electricity prices for households in Germany in the year 2030. This date was chosen because the transformation of the energy system is likely to be well advanced by then. Among other things, this implies that electric vehicles (EVs) and other sector coupling technologies like heat pumps are widespread.

Charges for using the power grid (grid fees) are an important factor when calculating future electricity prices: Fixed costs account for more than 90 percent of power grid costs and are passed on to consumers in the form of grid fees. Increased electricity sales due to electric vehicles improves the utilization of the capital-intensive power grid. According to the study, this could lead to a reduction of the specific fees and therefore significantly decrease the electricity prices for households. However, the study’s authors emphasize that the situation varies greatly among the distribution networks in Germany and that some regions may experience an electricity price increase due to higher grid fees.

Another main result of the study is that significant additional grid investments due to electric vehicles only occur if a higher charging power of 11 kilowatts (kW) and more coincides with uncontrolled charging of EVs. With a lower charging power or controlled EV charging, usually no additional grid investments are required. This is why the authors recommend supporting controlled EV charging, for instance, by setting relevant tariffs. According to the study, technically limiting the charging power to 11 kW may also make sense – and would hardly affect the vehicle user’s mobility at all.

For 2030, the research team’s calculations are based on four million EVs (about 10 percent of the total stock of passenger cars) that will have a net electricity demand of around 11.6 terawatt hours (TWh). The additional demand for power caused by electric mobility means that power stations with higher variable costs will be needed. Simulation calculations by Fraunhofer ISI show that this would slightly increase the price of electricity in Germany. Controlled charging here would also lead to lower additional costs for power generation, because charging is shifted to periods when cheaper electricity is available.

The study’s authors compared the savings due to better utilization of the power grids with the costs for power station use and grid investments. Prof. Martin Wietschel sums the results up as follows: “It has been shown that, as a rule, the fee-reducing effects outweigh the others and that, overall, the electricity prices for German households can drop by up to four percent”. For this to take place, it is essential to consider the possible positive effects of electric mobility in the future when regulating electricity prices. Only then will the potentially lower electricity prices caused by electric mobility actually reach the households in Germany.

The Fraunhofer Institute for Systems and Innovation Research ISI analyzes the origins and impacts of innovations. We research the short- and long-term developments of innovation processes and the impacts of new technologies and services on society. On this basis, we are able to provide our clients from industry, politics and science with recommendations for action and perspectives for key decisions. Our expertise is founded on our scientific competence as well as an interdisciplinary and systemic research approach.