EV charging stations

Are Flat Rates Hindering EV Charging Station Growth?

The widespread adoption of electric vehicles (EVs) faces a significant hurdle – charging station congestion. This problem exists alongside range anxiety and high upfront costs, deterring many potential EV owners.

EV Charging stations

While building more stations seems like a straightforward solution, Professor Kevin Shang of Duke University proposes a more nuanced approach. He argues that the current business model of EV charging stations is fundamentally flawed.

The culprit? Flat-rate pricing. Currently, most stations charge a fixed fee per minute, regardless of how busy they are. This model disincentivizes companies from investing in faster chargers or building more stations, as the potential revenue doesn’t justify the high costs of land and infrastructure.

Shang, along with colleagues Peng Sun and Chen-An Lin, propose a dynamic pricing model. This approach would adjust charging costs based on real-time wait times at the station. Currently, even the fastest charging technology takes around 20 minutes to reach 80% battery capacity. Yet, most stations charge a flat fee regardless of congestion

“Think of it like Uber,” Shang suggests. “When demand is high and wait times are long, prices can be adjusted to reflect that.” Conversely, when stations are empty, prices would decrease, encouraging drivers to fully charge their cars without feeling pressured by rising costs.

Real-world data from Caltech supports the model’s effectiveness. Shang and his team analyzed daily transactions at 54 EV charging stations in 2019. Their findings show that dynamic pricing could generate 6% higher revenue on average compared to flat rates, while still maximizing customer satisfaction.

Dynamic pricing has proven successful across various industries, including ride-hailing, airlines, and online retail. Its adoption by EV charging stations has the potential to benefit everyone involved, paving the way for a smoother transition to a more sustainable future.

Reference- Duke University’s Fuqua School of Business, Journal of Management Science, Forbes India, Inside EVs