Electricity Rates and Tariff Schedules for EV Charging Projects

How Utility Companies Shape EV Charging Project Economics

Introduction

Utility rate structures are crucial components of the energy market, determining how much consumers pay for their electricity usage. These structures vary widely depending on factors such as customer type, time of use, and energy demand. They also can significantly impact the economics for renewable energy and EV charging projects, and also work to incentivize or disincentivize certain behaviors. 

As the energy landscape evolves, particularly with the increasing adoption of EV and the rise of data centers, utilities face the challenge of developing new rate schedules and tariffs that accommodate emerging technologies and usage patterns. This article looks into a real-world example of an EV charging utility rate schedule from Pacific Gas & Electric and a breakdown of charging station costs. It also explores the general process of creating new rate tariffs, with a particular focus on the development of rate schedules for EV fast charging.  

Understanding Utility Rate Structures

Utility rate structures are designed to recover the costs of providing electricity to consumers, including individual, commercial, and industrial accounts. These costs include generation, transmission, distribution, and administrative expenses, along with more unique additional expenses that vary by location. Common rate structures include:

1. Flat Rate: A constant rate per kilowatt-hour (kWh) regardless of usage level or time.

2. Tiered Rate: Different rates based on the level of consumption, with higher usage tiers typically costing more per kWh.

3. Time-of-Use (TOU) Rate: Rates vary based on the time of day, encouraging users to shift consumption to off-peak periods.

4. Demand Charges: Charges based on the peak power demand during a billing period, in addition to energy consumption charges.

5. Seasonal Rates: Different rates for different seasons, reflecting variations in energy demand and supply.

Utility Rate Structure Example - Pacific Gas & Electric 

To dive into a real example, we’ll take a look at the ELECTRIC SCHEDULE BEV from PG&E, used for EV DCFC charging stations and commercial fast charging depots.

Utility rate schedule for EV charging from PG&E

This schedule has a time-of-use component, designating different prices for Peak, Off-Peak, and Super Off-Peak. Here are the definitions for these periods:

Time period screenshot pulled from the rate schedule PDF

One more interesting section is their definition of subscription charge and block size: 

With these definitions we can paint a picture of how the rate structure shapes the economics of an EV fast charging station. 

For sites in PG&E’s territory, DCFC stations will pay a usage based $/kWh charge, which varies based on the time-of-use (peak, off-peak, or super off-peak). In addition, they must sign up for a certain number of “blocks”, 50kW units of power paid per increment and a subscription charge paid per kW. If the station’s power usage exceeds their subscription size they pay an additional per kW overage fee on the largest power overage event during the billing period. 

PG&E has structured the rate schedule to reduce its own total cost of providing service to EV fast charging stations. Time-of-use rates incentivize charging during cheapest electricity times when the sun is shining, while encouraging less consumption during peak time, where the $/kWh price more than doubles from 4PM-9PM. The concept of subscription “blocks” also helps from a capacity planning perspective and forecast needed power. Finally, penalizing customers for exceeding their subscription size through overage charges encourages the stations to accurately size their peak demand, reducing cost for the utility in improved forecasting and more optimal market dispatching of energy resources. 

Latitude Media last month heralded the increase in utility companies adopting time-of-use rates, driven by the growth of electric vehicles and increasing renewable generation on the grid. Rate structures like this one from PG&E are a perfect case for a battery backed DC fast charging station. A battery backed station design uniquely reduces cost in two main ways: 

• reducing $/kWh charges through time of use rate arbitrage with energy storage

• reducing $/kW charges through peak power shaving and lower demand charges

We’ll explore both scenarios in more detail. 

Reducing $/kWh

A standard EV charging station without a battery backed design pulls all station power directly from the grid. Cars charging at peak, off-peak, and super off-peak times all have different electricity costs, with peak charging costs 2x super off-peak costs. 

Incorporating a battery storage system into a charging station design allows for a new degree of control over time-of-use rate arbitrage. A battery system, as long as it is connected in parallel to all chargers in the station, can store cheap super off-peak energy and deliver it during peak times to save on energy costs. 

If we assume an average charge is 35 kWh, peak cost to deliver energy to one car would be $14.53, the off-peak cost would be $7.07 and super off-peak cost would be $6.26. These costs of more than double during peak significantly add up when sizing for 100+ sessions per day. Even assuming charging demand is evenly distributed (it’s not), at 100 sessions per day there would be ~20 charging sessions during the 5 hour peak period, and it would cost $145 per day more or over $50,000 per year more to deliver electricity for these customers. The economics for a battery storage system quickly make sense when faced with these types of rate schedules. 

Reducing $/kW 

In addition to saving on total cost from time-of-use arbitrage, battery systems allow savvy charging station owners and operators to also minimize total cost through demand charge reductions. For PG&E’s rate schedule specifically, adding in a battery system allows you to deliver the same amount of instantaneous power (kW) to a car while pulling less power from the grid versus a charging station without a battery system. 

The graphics below illustrate the two different configurations. The first diagram below shows the typical configuration of a charging station, with a direct connection to the grid for all power: 

One connection to grid must supply all power to chargers

The second graphic from Electric Era shows the change when a battery system is added. Dispatching power from both the grid and the battery in parallel allows for both a smaller grid interconnection at time of construction and lower demand charges during operation. 

Battery backed EV fast charging station, capable of delivering power from both grid and battery system

The smaller grid interconnection means you can step down the size of the transformer required by the utility. I previously wrote about transformers and their role in EV charging projects here.  The difference in fixed cost of a transformer can be tens of thousands of dollars. The table below from EVgo provides a good breakdown of costs in DCFC station projects compared to Level 2: 

Financial data on lowest costs and highest costs for EV charging projects

Adding a battery storage to your EV charging station allows you to size down the transformer, saving money in construction budget and saving time in installation schedule. 

Regardless of the size of the transformer, having a battery system also allows you to reduce the peak power consumption from the grid. In the battery backed charging station graphic, you can see power delivered from both the grid and the battery combined to the charger. Because the battery can charge up at low kW and discharge at high kW, you’re reducing the impact on the grid for instantaneous power delivery and end up paying less in demand charges.  

Utility rate structures with these characteristics create compelling financial incentives to integrate battery storage into DC fast charging station designs. Batteries enable both power and energy arbitrage and are a flexible resource for the grid. As utilities continue adopting complex rates to manage renewable and EV growth, battery-backed charging will become essential for optimizing the economics of DC fast charging infrastructure.

Now we’ll look at what goes into creating these utility rates. 

The Process of Creating New Rate Tariffs

Creating new rate tariffs is a comprehensive process involving multiple stakeholders and regulatory bodies. The general steps include:

1. Needs Assessment: Identifying the need for a new tariff based on factors such as changes in energy consumption patterns, technological advancements, and regulatory requirements. Utilities today are facing multiple challenges that could justify a needs assessment

2. Stakeholder Engagement: Consulting with stakeholders, including utility companies, regulatory authorities, consumer groups, and industry experts, to gather input and address concerns

3. Cost of Service Study: Conducting a detailed analysis to determine the costs of providing service to different customer classes. This involves evaluating generation, transmission, distribution, and administrative costs

4. Rate Design: Developing the rate structure based on the cost of service study. This includes determining the appropriate rates for different customer classes and usage patterns

5. Regulatory Approval: Submitting the proposed rates to regulatory authorities for review and approval. This process often involves public hearings and opportunities for stakeholder feedback

6. Implementation: Once approved, the new rates are implemented, and utilities communicate the changes to customers. I’ve spent a lot of time looking into publicly available utility rate data, and almost all tariff schedules are available online in PDFs 

7. Monitoring and Evaluation: Continuously monitoring the impact of the new rates and making adjustments as necessary based on feedback and changing conditions

Developing Rate Schedules for EV Fast Charging

The rise of electric vehicles presents unique challenges and opportunities for utility rate design. EV fast charging stations require specialized rate schedules due to their high power demand and variable usage patterns. The development of new rate schedules for EV fast charging involves several specific considerations:

1. Assessing Demand Patterns

Understanding the demand patterns of EV fast charging is crucial. Fast charging stations typically draw high power levels for short periods, leading to significant peaks in demand. Utilities must analyze data on charging station usage, including the frequency, duration, and time of charging sessions, to design appropriate rates. 

2. Encouraging Off-Peak Charging

To manage grid stability and reduce peak demand, utilities often design rates that encourage off-peak charging. Time-of-use rates can be effective, offering lower prices during off-peak hours and higher prices during peak periods. 

3. Balancing Fixed and Variable Costs

EV fast charging stations incur both fixed costs (e.g., infrastructure) and variable costs (e.g., energy consumption). Rate schedules need to balance these components to ensure cost recovery while remaining competitive. Demand charges, which reflect the maximum power drawn during a billing period, are commonly used to address the fixed costs associated with high-capacity charging infrastructure.

4. Supporting Grid Integration

Integrating EV charging stations with the grid presents opportunities for demand response and grid services. EV charging stations that include battery storage can additionally provide frequency regulation and other ancillary services. Utilities can design rates that reward charging station operators for providing grid support, such as reducing demand during peak periods or supplying stored energy back to the grid. These rates can help enhance grid reliability and promote efficient energy use.

5. Ensuring Affordability and Accessibility

To promote widespread adoption of EVs, it is essential to ensure that fast charging remains affordable and accessible. Utilities can offer incentives, rebates, or lower rates for certain customer segments, such as low-income households or commercial fleets, to encourage the deployment of fast charging infrastructure in underserved areas. In a prior article I highlighted the work that utilities are doing in this area, linked here. 

Conclusion

Utility rate structures have a significant impact on the economics of emerging technologies like EV charging. Understanding complex rate designs with elements like time-of-use pricing and demand charges allows charging operators to optimize their project designs and cut costs through solutions like battery storage. 

As EV adoption grows, utilities must develop new rate offerings that balance grid management with keeping charging affordable and accessible. Getting utility rates right is crucial for facilitating the broader transition to electric vehicles and cleaner energy. 

I hope you’ve learned more about the fascinating ways that utility rate designs can impact EV charging project costs! If you have, please consider subscribing or sharing with a friend.