Does taxation hamper the vehicle-to-grid business case? Empirical evidence from Germany

Felipe Sabadini and Reinhard Madlener

Applied Energy, 2025, vol. 381, issue C, No S0306261924024255

Abstract: The literature extensively discusses how taxation — more specifically, double taxation — interferes with vehicle-to-grid (V2G) business models. In this paper, we analyze existing grid regulations affecting the participation of electric vehicles in the ancillary services market. We also study future governmental policy frameworks as possible solutions to overcome barriers, potentially unlocking the economic benefits of EV battery storage technologies. Additionally, we examine other barriers to V2G applications, such as additional battery degradation or the need for battery replacement. We empirically explore the V2G business case using the situation of Germany to assess the economic feasibility of V2G operation for frequency regulation. Finally, we investigate how taxation affects revenues to determine whether it restricts V2G’s full potential. We use multiple scenarios with different dispatch-to-contract ratios, explicitly considering battery degradation. Our results show profitable outcomes across all scenarios. Although taxation is frequently cited as a barrier to V2G, many taxes and tariffs are already exempted when V2G operation is considered. For the remaining tariffs, taxation occurs only when electricity is fed into the grid, thus avoiding double taxation. However, the value-added tax (VAT) applies in both directions. Nevertheless, we can conclude that while barriers still exist for fully exploiting V2G operations, the financial results are positive for both V2G operators and EV owners.

Keywords: E-vehicle; Vehicle-to-grid; V2G; Taxation; Ancillary services; Frequency regulation; Germany (search for similar items in EconPapers)
JEL-codes: Q42 Q47 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1016/j.apenergy.2024.125041

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