Plug-in Hybrid Electric Vehicles in the Smart Grid Environment: An Economic Model of Load Management by Demand Response

Department of Economics, Heriot-Watt University, Edinburgh, UK

^a e-mail: Rp128@hw.ac.uk

Abstract

Environmental concern regarding the consumption of fossil fuels is among the most serious challenges facing the world. As a result, utilisation of more renewable resources and promotion of a clean transport system such as the use of Plug in Hybrid Electric Vehicles (PHEVs) became the forefront of the new energy policies. However, the breakthrough of PHEVs in the automotive fleet increases concerns around the stability of power system and in particular, the power network. This research simulates the aggregate load profile of the UK with presence of PHEVs based upon different price scenarios. The results show that under the fixed rate and time of use programmes in the current grid, the extra load of the electric vehicles intensifies the consumption profile and also creates new critical points. Thus, there should always be excess standby capacity to satisfy peak demand even for a short period of time. On the other hand, when the consumers do not pay the price based on the actual cost of supply, those who consume less in peak hours subsidise the ones who consume more and this cross subsidy raises a regulatory issue. On the contrary, a smart grid can accommodate PHEVs without creating technical and regulatory problems. This positive consequence is the result of demand response to the real time pricing. From a technical point of view, the biggest chunk of PHEVs' load will be shifted to the late evening and the hours of minimum demand. Besides, from a welfare analysis standpoint, real time pricing creates no deadweight losses and corresponding demand response will limit the ability of suppliers to increase the spot market clearing price above its equilibrium level.