Optimal regulatory policies for charging of electric vehicles

Abstract

Electric vehicles (EVs) and their associated charging stations are characterized by indirect network effects. In this paper we propose a theoretical model covering both the entry of charging stations and the sales of EVs. The model is used to study policies for developing an adequate charging network for existing and future EV owners. First, we find that governments should subsidize both the variable charging costs at each station and the costs of market entry for charging stations. The charging subsidy should ensure marginal cost pricing on charging, while the entry costs subsidy internalizes the indirect network externality. Second, we also find that the ongoing transition to one charging standard in Europe will unambiguously mean higher market shares for EVs and higher welfare for EV owners.