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Equilibrium Effects in Complementary Markets: Electric Vehicle Adoption and Electricity Pricing

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  • Pascal Heid
  • Kevin Remmy
  • Mathias Reynaert

Abstract

The transition to electric vehicles (EVs) shifts the complementary market for passenger transport from oil to electricity. We develop and estimate a joint equilibrium model of the German electricity and automobile markets, emphasizing the timing of EV charging, as electricity generation costs and pollution vary intraday. Our results show that under Germany’s current electricity pricing scheme, EVs create a significant pecuniary externality: electricity expenses rise by €0.66 for every €1 spent charging. Exposing charging to wholesale price variation eliminates the pecuniary externality, makes EVs greener, and increases adoption—a triple dividend.

Suggested Citation

  • Pascal Heid & Kevin Remmy & Mathias Reynaert, 2024. "Equilibrium Effects in Complementary Markets: Electric Vehicle Adoption and Electricity Pricing," CRC TR 224 Discussion Paper Series crctr224_2024_615, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2024_615
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    More about this item

    Keywords

    electric vehicles; electricity markets; charging; complementary markets;
    All these keywords.

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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