- Electric cars are helping to lower electricity rates in the United States, according to a new study.
- They bring a lot of income to utilities, but the cost of providing energy is not very high.
- Since utilities cannot generate unlimited profits, EVs help keep rates down.
According to a recent study funded by the Natural Resources Defense Council, electric vehicle owners are not only reducing their own carbon footprints, but helping everyone lower their electricity bills.
Researchers at Synapse Energy Economics focused on three California utilities serving electric cars (more than 735,000 at the end of 2021) to large numbers of homes. They compared the costs of powering these EVs with the revenue generated by customers and found that from 2012 to 2021, EV owners generated a net profit of $1.7 billion on utilities.
So utilities and their shareholders are getting richer from Tesla drivers? Not quite: Because utilities are highly regulated and their income is capped, they must return their excess profits to their customers at lower rates. (In California and some other states, this is done through a mechanism called “income split”.)
The key here is that although EV customers use significantly more electricity than others, they are relatively inexpensive for utilities when the costs of power generation, transmission and distribution are taken into account. A large part of this is that drivers tend to charge their vehicles during off-peak hours, such as at night, when there is a lot of backup grid capacity and utilities can provide electricity cheaply.
“What they’re doing is using the power grid infrastructure more efficiently, since electric vehicles don’t add so much additional capacity costs, mainly because they charge at off-peak times,” said Melissa Whited, one of the study. the authors told Insider.
In an alternate reality, where EV owners consume most of their electricity at peak demand, costly investments in power transmission would require the use of “highest” power plants that are expensive to operate. But in our reality the opposite is true.
To arrive at the $1.7 billion figure, the researchers assumed that EV owners were billed at a higher rate than other customers, in keeping with California’s staggered rate system that increases prices for larger energy consumers. Whited said the results could be different in other regions.
Other studies have come to similar conclusions. A 2021 report from MJ Bradley & Associates, a consulting firm focused on environmental issues, found that more EVs charged in Nevada could reduce each household’s annual electricity bill by $123 by 2050.