Will More Electric Vehicles Raise Rates on Electricity in the Next Few Years?

Remember that economics class you took in high school that taught you supply and demand?

Typically, if supply is fixed and demand rises considerably, prices rise as well. And it sure seems like the demand for electricity is poised to rise.

Car manufacturers are turning to electric vehicles (EVs) in droves to meet clean energy requirements. As such, the market share of EVs vs. gas-powered combustion engines is going to soar in the next three years.

Will electricity prices increase due to higher demand? That’s what a listener of the Clark Howard Podcast recently asked.

Will the Growth of EVs Lead To More Expensive Electricity?

Are electricity prices about to get more expensive due to the growth of electric vehicles? That’s what a listener wondered on the April 27 podcast episode.

Asked Robert in Pennsylvania: “Clark, can you look into your crystal ball? As Americans begin to purchase more EV cars, are we just going to see electric rates going up like fuel prices today?”

Understanding why gasoline prices and electricity prices don’t follow the same governing dynamics requires you to understand the basics of electricity grids.

“This is a great question. And Robert, the thing that’s really cool about how electric vehicles charge. Eighty percent-plus of electric vehicle charging is done at home at night,” Clark says.

“More and more utilities are able to balance their load by offering people time-of-use rates. Because power companies have extreme excesses of power overnight. And it creates a much more efficient power grid when people charge those EVs at night.”

The Efficiency of EVs: Electric Car Chargers vs. Electricity Distribution

There could be a logistical problem for some people in the next few years in terms of a lack of availability of electric vehicle chargers. If you live in an apartment complex, or if you take frequent road trips, you’re subject to available infrastructure limitations.

With a lot more EVs set to hit the market, we’ll need many more battery charging locations. It may take a few years to find equilibrium there.

However, when you find a charging station, you’re able to designate the hours that the charging takes place. Many electric companies offer variable pricing, thereby incentivizing you to charge your EV during the overnight hours at cheaper — or even much cheaper — rates.

“So in terms of strain on the power system, I don’t think it’s any issue at all with most charging done at home at night,” Clark says.

Final Thoughts

Since the onset of the internet and social media eras, we’ve spent a lot of time talking about the theoretical future. Self-driving cars. Virtual reality. Artificial intelligence. And, yes, electric vehicles.

We are rapidly entering that next era of technology. The next several years will bring major changes to the vehicle market in the United States.

Fortunately, electricity prices shouldn’t trace the exact chart of EV production, which will clearly spike soon. Clark predicts that electric grids will be able to better balance the energy load they produce by encouraging most EV owners to charge their vehicles overnight.

Do you agree or disagree with Clark’s take on how EVs will affect electricity prices? Join the conversation in our Clark.com Community!