Ensuring driving on electricity is cheaper than driving on gasoline

Published: 2018.02.26

This briefing provides an overview of the energy cost per mile for a vehicle using gasoline versus the energy cost per mile using electricity in the United States. It highlights the imperative to consider electricity costs for electric vehicles in the context of all competing gasoline alternatives including gasoline hybrids. In addition, this briefing provides an overview of opportunities to lower the cost of electricity for electric vehicles by better reflecting the utility cost of service. The briefing makes the following three conclusions:

Pricing electricity too high risks losing electric vehicle customers and electric miles. When using electricity costs as much or more than using gasoline, the value for the consumer of plugging in or buying an electric vehicle is eroded. Hybrids today are less expensive to operate on an energy basis per mile than electric vehicles in some utility jurisdictions, highlighting the need reduce electricity price when driving electric approaches the price of driving on gasoline. Utilities can better encourage the market for electric vehicles by providing a lower cost per mile than any gasoline alternative.

The marginal cost to serve electric vehicles with time-of-use rates or smart charging is very low. Unused distribution capacity often exists at certain times of day such that plugging in a vehicle will have low marginal impact. Time-of-use pricing allows utilities to reflect this in lower electricity prices. Smart charging that adapts to rate signals allows for an even lower cost to serve those vehicles. Our time-of-use scenario suggests that the cost to serve off-peak electricity is $0.04-$0.08/kWh, but some utilities charge up to $0.20/kWh for this type of load, even with time-of-use rates. This means that many utilities currently have a significant financial surplus for each electric vehicle they serve. Retail rates for electric vehicle charging can be significantly reduced in many cases while still ensuring that utilities are financially equipped to invest in the necessary infrastructure upgrades needed to support the transition to transportation electrification.

Separate metering of an electric vehicle provides the consumer with a clearer view of costs and a transparent evaluation of system impact. When consumers switch from using gasoline to electricity to power their vehicles, the change is often very confusing. Suddenly, household costs are mixed with vehicle costs and consumers don't know if they will be paying more or less for the pre-existing household electrical load. If vehicles are metered separately, the existing household usage and bills are unaffected, lowering the barrier to buying a vehicle for some. Further, new vehicle- and station-based meters can be tailored to electric vehicles. With communication, they can take advantage of the flexible timing of charging a vehicle. Charging impact on the grid can be reduced and charging price lowered.