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

Pascal Heid, Kevin Remmy and Mathias Reynaert

No 19631, CEPR Discussion Papers from Centre for Economic Policy Research

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 linking the German vehicle and electricity markets, emphasizing the timing of EV charging as generation costs and emissions vary intraday. A 10% EV stock raises wholesale electricity prices by about 2%, creating a sizable pecuniary externality. Time-varying tariffs shift charging to cheaper hours and spur adoption, only partially alleviating the aggregate price pressure. Time-varying tariffs sustain EV adoption when the electricity market faces higher demand or carbon costs.

Keywords: electric; vehicles (search for similar items in EconPapers)
JEL-codes: L5 L6 L9 Q4 Q5 (search for similar items in EconPapers)
Date: 2024-10
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