Tiered Electricity Rates: An EV Killer?

A study by Purdue University researchers suggests that California’s tiered electricity rate structure could make plug-in hybrid electric vehicles a poor economic choice, dealing a blow to the state’s ambitious goals for getting such vehicles on the road.

The Purdue team noted that California’s already high electricity rates – 14.4 cents per kilowatt hour (kWh), on average – rise as consumers increase their monthly electricity use. For instance, Pacific Gas & Electric charges 12 cents per kWh for the first 294 kWhs used by most Bay Area residents. That rate rises to 14 cents/kWh for the next 88 kWhs used, all the way up to 39 cents for amounts over 589 kWh. According to the Department of Energy, the average California household uses 580 kWh each month.

electric vehicle charging, Chevy Volt

image via GM

Add in the electricity it takes to charge a plug-in, and that makes the plug-in a bad choice, the researchers say.  “In California, the unintended consequence (of tiered pricing) is that plug-in hybrid cars won’t be economical under this system,” said Tyner, whose findings were published in the journal Energy Policy. “Almost everyone in California reaches the third pricing tier each month. If they add a plug-in hybrid, they are charged the highest rate.”

The Purdue team ran simulations comparing the costs of operating a Chevy Volt in California to the Toyota Prius hybrid and Chevy Cobalt gasoline-powered car. They said that to make the Volt the best option, oil prices would have to rise to between $171 and $254 per barrel. Oil is currently hovering around $90/barrel. Tyner and his colleagues said that in order to encourage plug-in adoption, California should offer time-of-use pricing.

Pete Danko is a writer and editor based in Portland, Oregon. His work has appeared in Breaking Energy, National Geographic's Energy Blog, The New York Times, San Francisco Chronicle and elsewhere.

  • L.P.Baldwin

    Well, the utilities will have to give a break to the EV consumer. Maybe give a refund or grant to those registering the fact that they are charging an EV at home. Another thought is that the utility companies could encourage charging at off-peak times (ie the middle of the night) by selling that electricity at lower rates.
    This is an opportunity for SOLAR charging on EV as well. Why can’t each vehicle have a solar panel on the roof?

    • John W

      Solar panels put out about 10 watts of power per hour per square foot.  If you had about 10 square feet of roof to work with you would generate about 100 watts of power in a hour.  The sun is only directly over head at noon the rest of the day will be much less efficent.  So lets say you park your car in the sun for two days, given that most of the day the sun is at an angle or obstructed by an ocasional cloud, you might generate 1000 watts total, and that’s assuming your charging and battery system is 100% efficient, and it isn’t. 
      A Chevy Volt’s 80 horse power motor consumes 59,655 watts per hour at full power.  In other words that two days of charging would last less than 1 minute at full power.  So drive slow and don’t turn on the air conditioner.

  • reinCARnate

    @LP Solar charging onboard sounds like a great idea, but is not practical for a number of reasons, unfortunately. Turns out it’s best to install the panels at home.

    But off-peak charging will be the next logical step for utilities. There is an abundance of energy that is usually wasted at night. So, it is actually ideal for utilities to charge less during off-peak.

    But oddly, many CA utilities have not been amenable to this strategy, so it will probably come down to legislation being passed to force them to offer a break to EV owners. It makes sense because EV owners will be helping to keep CA air clean and fresh. Hopefully the public will understand this is a win-win strategy.

  • Brian

    CA utilities offer separate EV rates where the customer gets a separate meter for the charging with TOU pricing. This allows the main residence power to be priced on the tiering plan and the EV to be priced based on time of use and separated from the main residential power usage. If the customer failed to get a separate meter to segregate the energy usage of the car from the home than this study is accurate, however, it’s highly unlikely anyone opt for that.

  • Shlepkie-2

    Southern California Edison rates for plug in vehicles are much higher than the ordinary tiered electrical rates.  SCE needs to do some calculations based on real plug-in vehicle charging requirements, over a large range of different driving scenarios.  The Volt uses 12cents/KW-Hr to calculate it’s energy efficiency.  Such a rate is basic summer tier 1 SCE pricing, and not applicable in practical vehicle charging.  I’ll keep my 2006 Prius at 46mpg city/highway until a more cost effective plu-in hybrid comes along!