Is TOU pricing enough for electric vehicle charging?

 In EV Charging, EV Industry, Utilities

This summer, the California Public Utilities Commission (CPUC) made a move to transform how utilities charge their residential customers for electricity.

Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric – known as the “big three” – will all soon be switching their tiered pricing scheme over to time-of-use (TOU) pricing; the same system used by their commercial and industrial customers.

TOU pricing is currently already offered by some utilities, but setting it as the default residential rate is expected to have a significant impact. The pilots are set to begin in 2016, with full deployment targeted for 2019.

TOU pricing simply means that customers are billed based on the time of day that the electricity is consumed. For example, PG&E has a summer off-peak period from 9pm– 10am, a partial-peak period from 10am-1pm, an on-peak period from 1pm-7pm, and another partial peak from 7pm until 9pm. Depending on the utility, rates can sometimes more than double based on the time of day.

PG&E Residential TOU rates in the summer

So far the move has been greeted with favorable applause, and TOU pricing can certainly bring substantial benefit to Californians and the electric grid.

For consumers, it offers the opportunity to save money simply by shifting their consumption to off-peak hours.

For utilities, it means avoiding costly infrastructure upgrades required to support peak demand.

For the environment, it means diminishing the use of dirty “peaker” power plants (currently only used a few days a year), and integrating more solar and wind-sourced electricity into the grid.

With California seen as the lead test subject for many environmental policies, utilities are keeping a close eye on the results of the pilots.

Does TOU pricing work?

A recent study conducted by the Sacramento Municipal Utility District (SMUD) confirmed that TOU pricing effectively shifted electricity consumption to off-peak hours among study participants.

“Customers turned off appliances and lights and were less likely to crank up their air conditioners during peak pricing times. SPO’s TOU rates reduced demand by nearly 12 percent during the peak period. Consistent with the larger price differential, CPP (critical-peak pricing) was able to shave around 25 percent of load during peak hours on peak days.”

Pilot customers also strongly agreed that they believed their pricing plans enabled them to save money.

Plugging EVs into the grid

BMW i3 charging

As residential customers continue to adopt electric vehicles, the case for TOU pricing becomes even stronger. Consumers can come home from work and schedule their vehicles to charge at night with cheap, clean electricity.

But what happens in 5 years when EVs begin to represent a much greater share of the vehicle market, and everyone plugs in at 9pm?

The peak simply shifts to the beginning of ‘off-peak’ hours.

Taking TOU one step further

A simple approach to mitigate this issue is to offer EV owners monetary and/or non-monetary benefits in exchange for enrollment in a program that permits utility-controlled charging at the times when curtailment capacity is needed for the grid – also known as smart charging.

Let’s play out an example scenario:

TOU Pricing Only

Doug, Bob, and Jane all finish their work day at 5pm, and arrive back home by 6 pm. Instead of plugging in their EV right away, they wisely wait until 9pm; the beginning of off-peak hours in their region.

Doug, Bob, and Jane: have taken advantage of off-peak pricing, and have a full charge ready for them in the morning.

The utility: has effectively shifted their demand to off-peak hours, but has consequently created a new peak period.

With the Addition of Smart Charging

Doug, Bob, and Jane all finish their work day shift at 5pm, and arrive back home by 6pm. They plug-in right away, and have previously stated in an app that they need a full charge ready for them by 8am the next morning. The utility, still in peak hours, automatically shifts Doug’s charging to 10pm, Bob’s charging to 11pm, and Jane’s charging to 12am.

Doug, Bob, and Jane: have taken advantage of off-peak pricing, and have a full charge ready for them in the morning.

The utility: has effectively shifted their demand off-peak, without creating a new peak period. They also now have control over assets to take load off the grid if needed.

Download the "How Smart Charging Works" infographic

We’ve already seen similar programs in place with smart thermostats. Southern California Edison rolled out a popular Bring-Your-Own-Thermostat program in 2013, offering customers a $1.25 bill credit for every kilowatt-hour saved during peak days. Customers offer the utility control over their thermostat, who in-turn offer a financial incentive and promise minimal impact.

The challenge with EVs

The challenge with EVs is getting vehicle-side data – particularly the vehicle’s battery state-of-charge. Without it, customers are faced with the risk of not having a charge when they need it most.

A third-party smart charging system with real-time battery state-of-charge can serve as an intermediary. It can help the utility determine whether a vehicle is a good candidate for curtailment or not, and add a privacy layer to protect the resident’s needs.

We’ve been testing this solution, and have been running a number of smart charging pilot projects in Canada, the United States and in Europe. One example is the “ChargeTO” residential smart charging pilot in collaboration with Toronto Hydro – the first of its kind.

We clipped in one of our EV monitoring devices into each vehicle and supplied each resident with a networked charging station. With both the vehicle and charging station communicating to our cloud platform (the control path varies based on the setup), we’ve been able to reduce peak demand while protecting the customer’s needs. More analysis on that should be coming out next year.

Smart Charging Daily Load Profile screenshot

Wrapping it up

Time-of-use pricing is a huge step forward for utilities and residents alike, and will become widely adopted as pilot studies continue to prove its case.

As EVs gain mainstream attention, utilities will need to adapt to the increased load on the grid that the vehicles bring. Using vehicle-side data, they’ll be able to systematically curtail vehicles based on grid loads, posing zero negative impact to the end user. This represents new revenue opportunities with fewer infrastructure requirements.

The future of grid load management is exciting.

Next Steps:

  • Utilities: download the How Smart Charging Works infographic below
  • Consumers: what are your thoughts on TOU pricing? Would you allow utilities to shift your charging if they provided an incentive and a means to set your preferences? Let us know in the comments below!

Download the "How Smart Charging Works" infographic

Sunny Trochaniak
Content ninja. EV enthusiast. Tesla Model 3 reservist. Thinks the Maple Leafs will win the cup one day.
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  • Lyss Murphey

    I’m all for allowing the consumer to opt-in to allow the utilities to control the start time of EV charging to maximize savings. Even further, I would like to see an option to allow utilities to remove power from my vehicle battery if necessary to solve capacity issues (while compensating me at high demand peak rates!

    • Thanks for the comment! I think V2G (vehicle-to-grid) technology will also become a very hot topic over the next couple of years.

  • canuckinaz

    Informative post, Sunny. You have covered V1G quite well. I think that describing V2G would also be a good idea here as the next level beyond V1G.

    • Thanks for the feedback! We plan on putting out a V2G article in the
      near future. Is there anything in particular you’d like to see us cover?

      • canuckinaz

        I guess I would like your point of view on the timeline and strategy for V2G adoption in addition to all of the benefits that V2G would bring. V2G is great…but it’s going to take more than just technical progress to get us there.