Do retail businesses have efficient incentives to invest in public charging stations for electric vehicles?

• Published in: Energy economics 2023-08, Vol.124, p.106777, Article 106777
• Main Authors: Arlt, Marie-Louise, Astier, Nicolas
• Format: Article
• Language: English
• Subjects: Charging network; Economics and Finance; Electric vehicles; Humanities and Social Sciences; Investment incentives; Pricing
• ISSN: 0140-9883; 1873-6181
• DOI: 10.1016/j.eneco.2023.106777

Many public charging stations for electric vehicles in the United States are chargers installed at the premises of pre-existing businesses such as grocery stores or restaurants. This paper investigates the incentives of these retail businesses to install and operate charging stations. First, we note that observed pricing schedules for charging stations significantly depart from both first-best and monopoly pricing. We argue that a possible explanation is that many hosting facilities may install a charging station primarily as a strategy to attract more customers to their core business. Second, we use an imperfect competition model to study retail businesses’ incentives to invest in charging stations. We show that hosting facilities may be trapped in a prisoner’s dilemma where investing in a charging station decreases their profit in the long run. However, the equilibrium level of investments in public charging stations need not differ from the socially optimal outcome. •More than 50% of charging stations are co-located with retail businesses.•Charging at many stations is free or billed with increasing block-duration fees.•Observed pricing differs from first-best pricing.•Pricing could be rationalized if stations attract additional customers.•Retail businesses’ investment incentives may result in a prisoner’s dilemma.