Strategic investment in charging infrastructure : sharing costs or taking over?

Abstract

The substantial upfront investment required for the installation of charging infrastructure deters many potential charging station adopters, such as shopping mall operators and real estate owners, from independently undertaking the deployment. Some government agencies (Govs) offer subsidies as a means of encouraging the extensive implementation of charging infrastructure. Nonetheless, this approach is not viable in the long term owing to the constrained public budget. An improper subsidy scheme may induce adopters to become overly reliant on Govs support. To tackle this issue, some local Govs have initiated cost-sharing schemes with adopters who are willing to install chargers. In a typical cost-sharing scheme, the Gov initially assigns the cost-sharing rate to adopters. Subsequently, the adopters determine the quantity they are willing to install through cost-sharing. Despite the potential benefits of the scheme, there are still some challenges: (i) The public budget is limited, (ii) The charging infrastructure penetration goal is uncertain, (iii) Adopters are heterogeneous and their decisions are interdependent, and (iv) Adopters possess dissimilar beliefs regarding the policy of the Gov. These factors could potentially prompt certain adopters, who possess the financial capability to cover the installation expenses, to employ deceptive tactics aimed at persuading the government to assume the entire cost. In consideration of the aforementioned challenges, we propose a sequential-move game model to assess the strategic interactions between the Gov and charging station adopters. We demonstrate that there exists a many-to-one mapping between the optimal cost-sharing rates and the optimal number of installed chargers. Then, we derive the conditions when the Gov withdraws from the market and when it intervenes to share costs with adopters. The results suggest that a reduction in the level of competition intensity leads to an increased probability of adopters engaging in the cost-sharing scheme. This is in contrast to scenarios where policy uncertainty increases or where the correlative effects arise among all adopters’ strategies.