Seminar

Equilibrium Effects in Complementary Markets: Electric Vehicle and Electricity Pricing

Mathias Reynaert

April 10, 2025, 10:00–10:45

Room A3

TSE internal seminars

Abstract

The transition to electric vehicles (EVs) shifts the complementary market for pas- senger transport from oil to electricity. We develop and estimate a joint equilibrium model of the German electricity and automobile markets, emphasizing the timing of EV charging, as electricity generation costs and pollution vary intraday. Our results show that under Germany’s current electricity pricing scheme, EVs create a significant pecuniary externality: electricity expenses rise by €0.66 for every €1 spent charging. Exposing charging to wholesale price variation eliminates the pecuniary externality, makes EVs greener, and increases adoption—a triple dividend.

Keywords

electric vehicles, electricity markets, charging, complementary markets;