Author: Jordan Brinn Published: 4/16/2024 Utility Dive
Electric vehicle drivers are saving everyone billions of dollars on their monthly electricity bills, a recent study by Synapse Energy Economics found
Electric vehicle drivers are saving everyone billions of dollars on their monthly electricity bills, a recent study found. The analysis from Synapse Energy Economics compared how much EV owners paid for electricity with the cost for utilities to build, generate and distribute that power. In aggregate, EV drivers provided more than $3 billion in net revenue to the grid between 2011 and 2021.
The net effect is that the cost of electricity for all consumers is lower largely because many EV drivers are charging at home overnight when demand for electricity is far below the electric grid’s capacity. Customer savings will only increase in the coming years as there are more EVs and more renewable energy production.
Many future-looking studies have predicted that vehicle electrification would have this downward pressure effect on rates. This study uses real-world data to show that this effect isn’t just a future theory — it’s been happening for over a decade across the U.S.
And EV drivers are saving money too. They pay less to charge their car than to fill up their gas tank, while generating revenue for their electric utility instead of oil companies which is then returned to all customers in the form of lower rates and bills.
More than 1 million EVs were sold in the U.S. last year alone. This is good news for consumers, public health and our planet. Transportation is the largest source of climate-warming pollution and dangerous local air pollution. Reducing this pollution requires widespread adoption of electric cars, trucks, bikes and buses charged by electricity generated from clean resources like wind and solar. And luckily, electric cars are quickly becoming a cheaper option compared to their gas-powered equivalents.
One common misconception about EVs is that charging them will crash the electric grid or require massive new upgrades to the grid that will drive up the cost of electricity. In recent weeks there have been a spate of news stories highlighting the change in forecasts from power companies and the resulting scramble to build new electricity generation and a predicted increase in customer bills. While much of the focus has been on data centers, one other factor cited has been the growth in electric vehicle sales and use.
The Synapse analysis, which was sponsored by NRDC, found that EVs can help keep the grid in balance because so much of the charging is done during lulls in overall power demand — at night.
How exactly do EVs put downward pressure on electricity rates for everyone?
Utilities get a new source of revenue from EV drivers paying for the electricity to charge their car. As the number of EVs on the road increases, so does this new source of revenue for utilities. However, it costs utilities money to make this electricity and get it to home and public chargers, i.e., electricity generation, transmission and distribution costs. The net revenue, or rate impact, is how the revenue from EVs charging compares to the cost of providing the electricity.
Some utility customers are on time-of-use rates, so they are charged different amounts for electricity depending on what time of day they charge their car. These rates are structured to encourage charging during off-peak hours when total demand for electricity is lowest — it’s easier and cheaper for utilities to provide electricity during times such as overnight periods of low demand or when there is lots of solar power in the mid-afternoon. A separate report by Lawrence Berkeley National Laboratory, Pacific Gas & Electric and the Natural Resources Defense Council shows that charging EVs at off-peak times could accommodate all homes having EVs with very minimal upgrades to the electricity distribution system.
However, since these types of rates are not widely available across the U.S., the study assumed people in many states charge their cars in the early evening at the end of the workday. Even with some charging taking place on-peak, utilities are making money on EV charging. But as the study concludes, to continue this trend, more customers need to charge at off-peak times, like overnight, and time-of-use rates are an effective way to incentivize this shift while reducing costs for utilities and customers alike.
A few utilities spend additional money on EV programs that are designed to deploy charging stations and make owning EVs more accessible. This leads to more upfront costs that should help accelerate EV adoption and charging, resulting in more revenue a few years down the road. Even when these additional costs are included, utility revenue has still outpaced cost by $2.44 billion.
Utility shareholders do not get to keep all that extra revenue because utilities have different accounting mechanisms. Many states require “revenue decoupling” that mandates additional revenue is returned to utility customers in the form of lower rates and bills. Even in states that haven’t adopted revenue decoupling yet, utilities still have to report revenue through rate case proceedings and rates and bills are adjusted accordingly, meaning that there may be some lag between rate cases, but EV charging should still put downward pressure on rates to the benefit of all customers, not just EV owners.
Further, this study shows that there is a correlation between the net rate impact, or revenue, and the number of EVs on the road in a given state. The more EVs there are on the road, the higher the net revenue is for utilities, and the lower utility bills are for all customers.
EV charging currently is resulting in savings for EV owners and non-EV owners alike. Implementing time-of-use rates and targeted charging infrastructure program investments will further encourage the EV adoption needed to slow climate change and improve public health while saving everyone money on their electric bills.