Optimization of incentive polices for plug-in electric vehicles

Abstract

High purchase prices and the lack of supporting infrastructure are major hurdles to the adoption of plug-in electric vehicles (PEVs). It is widely recognized that the government could help break these barriers through incentive policies, such as offering rebates to PEV buyers or funding charging stations. The objective of this paper is to propose a modeling framework that can optimize the design of such incentive policies. The proposed model characterizes the impact of the incentives on the dynamic evolution of PEV market penetration over a discrete set of time intervals, by integrating a simplified consumer vehicle choice model and a macroscopic travel and charging model. The optimization problem is formulated as a nonlinear and non-convex mathematical program and solved by a specialized steepest descent direction algorithm. We show that, under mild regularity conditions, the KKT conditions of the proposed model are necessary for local optimum. Results of numerical experiments indicate that the proposed algorithm is able to obtain satisfactory local optimal policies quickly. These optimal policies consistently outperform the alternative policies that mimic the state-of-the-practice by a large margin, in terms of both the total savings in social costs and the market share of PEVs. Importantly, the optimal policy always sets the investment priority on building charging stations. In contrast, providing purchase rebates, which is widely used in current practice, is found to be less effective.