Collaborative Vehicle-to-Grid Operations in Frequency Regulation Markets

Problem definition: We study the operations of electric vehicles (EVs) providing frequency regulation services to the electric grid in vehicle-to-grid (V2G) systems. In particular, individually owned EVs collaboratively bid in the regulation market, coordinated by a platform that operates the network of charging equipment. We study how the platform determines optimal pricing incentives for drivers to plug in their EVs, accounting for heterogeneous driving schedules. Methodology/results: We model the platform’s pricing optimization problem as a bilevel program: At the upper level, the platform determines hourly rebates for EV owners to plug in their EVs and capacity bids in the regulation market; at the lower level, individual travelers optimize their travel and charging schedules in response to pricing incentives. To account for uncertainties and heterogeneity in regulation market prices and travel patterns, we adopt distributionally robust optimization techniques to formulate the problem as a mixed-integer second-order cone program. We conduct a computational study based on the California Household Travel Survey data set and actual frequency regulation prices. Our results show that the ability to offer time-varying rebates and install workplace chargers can significantly improve the V2G platform’s expected profits. Managerial implications: As EV adoption progresses past the nascent stage, V2G business models become more viable. Successful implementation of V2G provides economic incentive for switching to EVs, potentially helps sustain adoption growth, and complements the growth of renewable power by helping stabilize the grid. Our findings shed light on the design of driver incentives for V2G systems. Funding: R. Tang acknowledges support from the National Natural Science Foundation of China Grant 72201206. Supplemental Material: The online appendices are available at https://doi.org/10.1287/msom.2022.0133 .