Is ‘smart charging’ policy for electric vehicles worthwhile?

Plug‐in electric vehicles (PEVs) offer the potential for both reducing reliance on oil and reducing greenhouse gas emissions. However, they may also increase the demand for electricity during peak periods, thereby requiring the construction of new generating units and increasing total costs to electricity consumers. We evaluate the economic costs and benefits of policies that shift charging demand from daytime to off‐peak nighttime hours, using data for two different independent system operators and considering a number of sensitivity analyses. We find that the total savings from demand‐shifting run into the billions of dollars, though as a percentage of total electricity costs they are quite small. The value of smart charging policy varies significantly across electric grids. Time‐of‐use pricing is worthwhile under all of the cases we study, but the economic benefits of optimal charging of electric vehicles do not appear to justify investing in the smart grid infrastructure required to implement real‐time pricing.