Harnessing TOU Rate Complexity to Reduce Residential EV Charging Costs

Time-of-use (TOU) electricity rates have been proposed as a tool to reduce electric vehicle (EV) charging costs and shift consumption away from periods of system stress. TOU rates can be complicated, however, and the potential benefits of that complexity have not been comprehensively investigated. In this paper, I assess the value of two kinds of rate complexity on EV charging costs. Scope complexity relates to the number of pricing periods on the rate, while scale complexity relates to the fraction of costs given a time-varying dimension within the rate. Looking across 17 efficient, cost-based rates, I find that adding complexity can consistently reduce EV charging costs. The most complex rates can reduce costs by half, compared to flat rates. I also find that increasing scope complexity can reduce EV charging costs more than increasing scale complexity, all else equal. A high-scope/low-scale rate triples the benefits compared to a low-scope/high-scale rate. So, instead of trying to create retail rates with many pricing periods, regulators can spur large benefits by promoting simple two-season/two-period TOU rates which span energy, capacity, transmission, and distribution cost categories.