Publication Type
Journal Article
Version
acceptedVersion
Publication Date
9-2022
Abstract
Problem Definition: By providing an environmentally friendly alternative to traditional vehicles, electric vehicles will transform urban mobility, particularly in smart cities. In practice, once an electric vehicle is plugged in, the charging station completes charging as soon as possible. Given that the procurement cost of electricity and associated emissions vary significantly during a day, substantial savings can be achieved by smart charging—delaying charging until the cost is lower. In this paper, we study smart charging as an innovative business model for utility firms. Practical Relevance: Utility firms are already investing in charging stations and they can achieve significant cost savings through smart charging. Methodology: We consider a mechanism design problem in which a utility firm first announces pairs of charging price and completion time. Then, each customer selects the pair that maximizes their utility. Given the selected completion times, the utility firm solves the optimal control problem of determining the charging schedule that minimizes the cost of charging under endogenous, time-varying electricity procurement cost. We assume that there are ample parking spots with chargers at the charging station. Results: We devise an intuitive and easy-to-implement policy for scheduling charging of electric vehicles under given completion times. We prove that this policy is optimal if all customers arrive at the station simultaneously. We also characterize the optimal pairs of charging price and completion time. By using real electricity demand and generation data from the largest electricity market in the U.S., we find that cost and emissions savings from smart charging are approximately 20% and 15%, respectively, during a typical summer month. Managerial Implications: In contrast to the current practice of charging vehicles without delay, we show that it is economically and environmentally beneficial to delay charging some vehicles and to set charging prices based on customers’ inconvenience cost due to delays. We also find that most of the savings from implementing smart charging can be achieved during peak-demand days, highlighting the effectiveness of smart charging.
Keywords
Electric Vehicles, Business Model Innovation, Smart-city Operations
Discipline
Operations and Supply Chain Management
Research Areas
Operations Management
Publication
Manufacturing and Service Operations Management
Volume
24
Issue
5
First Page
2481
Last Page
2499
ISSN
1523-4614
Identifier
10.1287/msom.2021.1019
Publisher
INFORMS
Citation
WU, Owen; YUCEL, Safak; and ZHOU, Yangfang (Helen).
Smart charging of electric vehicle: An innovative business model for utility firms. (2022). Manufacturing and Service Operations Management. 24, (5), 2481-2499.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/6465
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1287/msom.2021.1019