Can grid tariffs be fair and efficient? A comprehensive evaluation of tariff designs for smart electric vehicle integration

Abstract

The rapid adoption of electric vehicles (EVs) is increasing electricity demand and raising capacity requirements on distribution grids that in many countries are already near their limits. Grid tariffs that reflect capacity costs can promote more efficient use of the grid infrastructure and encourage smart charging of EVs, including optimization of the timing and speed of charging to reduce peak loads. However, most existing tariffs provide limited incentives for such behaviour. In recent years, various alternative tariff designs have been proposed, yet comprehensive evidence on their impacts remains limited. This study introduces a framework to evaluate tariff structures against regulatory principles, including efficiency, fairness, and simplicity. Using a case study of public EV charging stations in the Netherlands, the analysis examines how tariff designs, ranging from flat to time-varying and capacity-based, affect smart charging by charging point operators (CPOs), grid expansion costs, and the distribution of costs between households and CPOs. The study further explores how retail electricity pricing schemes (dynamic vs. fixed) and varying EV adoption rates shape these outcomes. The results suggest that existing tariffs lead to high expansion costs and place a disproportionate burden on households without EVs. Alternative tariff designs can reduce grid and total system costs relative to current tariffs and improve fairness by aligning grid charges more closely with users’ contributions to grid peaks. However, no single design performs best across all regulatory principles, implying inherent trade-offs in design of tariffs.