Toward Sustainable Electricity Markets: Capacity-Based Pricing for Electric Vehicle Smart Charging
Speaker: Wolfgang Ketter
Abstract: We present a novel IS-enabled pricing artifact for variable-rate electric vehicle (EV) charging that can facilitate a sustainable EV introduction. EVs can significantly reduce carbon intensity in modern cities and address important sustainability challenges. However, large-scale EV introduction is expected to increase electricity demand peaks, threatening grid stability and reliability. Most proposed methods to coordinate EV charging have shortcomings, such as the inability to guarantee incentive alignment between grid and EV owner objectives, or avalanche effects, which might create new demand peaks as EV owners receive the same price signals and make similar charging decisions. To address this issue, we present a capacity-based pricing artifact that includes a dynamic, charging-rate-based price component and a set of price-setting methods based on analytical or computational heuristics. The proposed approach benefits from a variety of available information in the environment, allows rational EV agents to optimize their own costs through planning and scheduling in the presence of their individual charging needs and constraints, while at the same time re-balancing the total charging demanding to mitigate avalanche effects in EV charging. Furthermore, even in the presence of stochastic EV owner preferences, our artifact achieves near-optimal overall charging profiles. The proposed artifact is highly effective in reducing demand volatility or, alternatively, in achieving a desired match between the output of renewable energy sources and overall charging demand. We demonstrate the benefits of the proposed approach empirically, by comparing it to traditional, currently used pricing benchmarks in several realistic scenarios. Our artifact supports grid operators in their effort to re-balance the overall EV charging demand across time. Furthermore, the proposed approach enables energy providers to maintain the overall revenues (i.e., to achieve re-balancing without changing the total charging cost for the same energy needs), while respecting market-imposed price constraints. Finally, energy market stakeholders can use our pricing scheme to induce demand profiles that follow renewable generation patterns, maximizing renewable usage and reducing inefficiencies in renewable energy utilization by the grid.
Short Bio: Wolfgang Ketter is professor of Information Systems and Director of the Cologne Institute of Information Systems at the University of Cologne, where research he leads focusses on how digital transformation can create a faster and more stable transition to sustainable energy and mobility. He is also professor and director at Erasmus University and energy policy advisor to the German government. He has served as editor for ISR and MISQ and has won, among other prestigious prizes, the best ISR paper award for the year 2020.