Economic Benefits of Smart Parking Lots

The ever-increasing number of electric vehicles (EV) on the road promotes the idea of sustainable transportation by reducing CO2 emissions. This inherently means there is a growing need for charging stations as well. A potential solution to address the need for charging stations is to transform traditional parking lots into smart parking lots, in a sense that smart parking lots provide not only parking services, but also the possibility for EV owners to charge and discharge their cars for a price. Due to the inherently complex and dynamic environment, a potential obstacle, from a business perspective, to the process of transforming parking lots into smart parking lots is the complexity of estimating the profit of the smart parking lot's owner and, consequently, the length of time required to recover the cost of the initial investment. We propose a simulation-based approach to estimate the smart parking lot owner's profit during a certain period of time. We use real-life data from existing parking lots, charging stations and wholesale electricity market for analysing a variety of different investment strategies. Using a set of the most relevant "what-if" scenarios, we discuss the potential impact of smart parking lots to energy business. Introduction and Background The alteration of the vertically integrated markets into open, free and smart markets (Bichler, Gupta, & Ketter, 2010) forms the energy landscape of the future. Electric vehicles (EV) will play a critical role in the future energy landscape, which is well recognized by both US government (i.e., a target goal of 1 million EVs by 2015) and German government (i.e., a target goal of 1 million EVs by 2020). As a consequence of increasing number of EVs on the road, there is a growing need for charging stations as well. A potential solution to address the need for charging stations is to transform traditional parking lots into smart parking lots, in a sense that smart parking lots provide not only parking services, but also the possibility for electric vehicle owners to charge and discharge their cars for a price. With this perspective, the parking lot’s smartness comes from the extensive use of energy informatics (Watson, Boudreau, & Chen, 2013) and thus behaves as an electricity retailer by acting as a player on a target electricity market. A single EV is, to a certain degree, a prosumer (Khalen, Ketter, & van Dalen, 2014), in a sense that it can procure electricity from its battery as well as consume electricity. A single EV is not able to participate in the target electricity market on its own due to the fact that it only has a modest amount of electricity available to buy or sell. However, multiple EVs can form a virtual power plant (VPP) (Kumagai, 2012), and together act as a competitive player on the target electricity market. Our proposed model tackles this issue by putting the parking lot owner in the role of an electricity broker which trades electricity between EVs and the target electricity market. Due to the inherently complex and dynamic environment, a potential obstacle, from a business perspective, to the process of transforming parking lots into smart parking lots is the complexity of estimating the profit of the parking lot's owner and, consequently, the length of time required to recover the cost of the initial investment. For example, the parking lot’s owner must deal with the uncertainties related to the electric vehicles, including:  How many cars will be parked on the parking lot and for how long will they stay parked?  How much electricity a car owner is willing to buy/sell?  How much money a car owner is willing to pay/receive for a certain amount of electricity?  Given the current market conditions, what is the expected market price for a certain amount of electricity?