Transportation Energy Institute Evaluates EV Demand Charge Strategies

High operating costs for chargers remain an impediment to retailers.

March 05, 2024

The Transportation Energy Institute’s Electric Vehicle Council (EVC), comprised of more than 60 stakeholder organizations, released a new study, Demand Charge Mitigation Strategies for Public EV Chargers.

“Demand charges represent a significant impediment to the deployment of EV chargers in the U.S.,” said John Eichberger, executive director of the Transportation Energy Institute. “To mitigate the effects of these charges, many utilities and site host operators are experimenting with different strategies, but there are many different opinions about the overall effect of these strategies on different stakeholders. The Electric Vehicle Council commissioned this study to provide objective insight into the effects of these various strategies on all stakeholders so that effective and equitable solutions can be implemented to benefit the market.”

According to the EVC, high operating costs can make it difficult for charging station site hosts to recover costs or operate profitably. Stakeholders, including many utilities, recognize that electric utility demand charges can have significant impacts on the business model of EV charging stations. The new study presents insights to help decision-makers understand the positive and negative implications of their options to determine the best solution for their situation. 

The study was written by E Source, a nonprofit organization with more than three decades of utility-focused experience. The EVC then subjected the report to multiple rounds of peer review, receiving nearly 200 comments, to ensure the study represented a balanced and objective assessment of the situation and the available options.

By reviewing market conditions, existing rates, current and potential mitigation strategies and data from existing charging stations, E Source categorized the most viable options into four categories:

  1. Reduce or eliminate demand charges for direct current fast chargers (DCFC).
  2. Cap the total per-kWh monthly energy cost for low-use stations.
  3. Install co-located batteries to help manage peak demand.
  4. Manage EV charging during peak periods. 

E Source determined the only strategy to be 100% effective at mitigating demand charges for the EV charging site host is to eliminate demand charges from the rate tariff. But this strategy is not without consequences for other stakeholders, most notably the utility and potentially other rate payers. E Source ran a number of models and simulations to examine the relative costs and benefits of each strategy and provided recommendations for stakeholders to navigate the options available to them, detailing considerations for utilities, station hosts and EV drivers.

Download the free report.