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

Pascal Heid, Kevin Remmy and Mathias Reynaert

No 24-1589, TSE Working Papers from Toulouse School of Economics (TSE)

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.

Keywords: Electric vehicles; electricity markets; charging; complementary markets (search for similar items in EconPapers)
JEL-codes: L5 L6 L9 Q4 Q5 (search for similar items in EconPapers)
Date: 2024-10
New Economics Papers: this item is included in nep-ene, nep-reg and nep-tre
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Related works:
Working Paper: Equilibrium Effects in Complementary Markets: Electric Vehicle Adoption and Electricity Pricing (2025)
Working Paper: Equilibrium Effects in Complementary Markets: Electric Vehicle Adoption and Electricity Pricing (2024)
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