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Navigating Electricity Cost Structures: Optimizing BEV Charging Economics
Electrifying freight means mastering grid costs. Peak demand, not fuel price, defines BEV economics.
Navigating Electricity Cost Structures: Optimizing BEV Charging Economics
Battery-electric vehicle technology and charging infrastructure have crossed the threshold of operational viability for commercial freight. With long-range electric trucks now available and over 350 heavy-duty charging stations for trucks deployed across Europe’s [reference to LOTS Pathfinder], the challenge has shifted from technological readiness to economic competitiveness. The critical milestone now is achieving total cost of ownership (TCO) parity with diesel trucks, which hinges primarily on securing low charging costs to offset the higher upfront investment in electric vehicles and charging infrastructure.
“Achieving these favourable economics requires a deep understanding of charging cost structures and which cost components can realistically be influenced. This is markedly different from today’s diesel paradigm, where prices are established on global commodities markets, leaving virtually no leverage for regional stakeholders to meaningfully reduce the energy cost.” Says Oscar Spinos, Sales and partnership manager at LOTS Group
Charging cost on the other hand, have several components that are subject to regional influence.
“This spring/summer I believe that all of Sweden will see retail prices around or below 0,1 EUR/kWh during a majority of the off-peak hours (~10.00-16.00). Today’s electricity retail prices are quite typical for how I believe the situation will look during the summer” says Christian Holtz, Energy Market expert and co-founder at Merlin & Metis*.
However, this is just one component of total charging cost. In reality, these dramatic electricity cost variations often occur just periodically throughout billing cycles and remain difficult to control. The more significant factor—and the component CPO’s and Carriers can most effectively influence—is grid tariffs.
Macro level electricity cost components
While electricity systems vary between countries, they generally follow a similar structure. Electricity is first generated in power plants, then travels through a tiered grid system, consisting of high-voltage national transmission grid, regional network, and finally local distribution grids that deliver electricity directly to homes. This grid system is managed by two actors, TSO’s (Transmission System Operator) and DSO’s (Distribution System Operator).
This setup translates into three different cost components: payments to electricity retailers (electricity cost), cost paid to network companies for using and maintaining the physical infrastructure (grid tariffs), and taxes/fees collected by the government. For an average Swedish household, the electricity cost is today the smallest of these three (26% of total) while the grid tariffs (27%) barely beat it on cost.(1) These grid tariffs will increasingly be based on power usage (kW) through new “effekttariffer” (power-based tariffs) that all Swedish electricity network companies must implement by January 1, 2027. However, for actors with larger subscriptions (>63A), grid tariffs are already in place, but the trend is that the this (capacity) component is increasingly getting more important and replacing the energy-based component. This pricing model aims to optimize grid usage by creating financial incentives for consumers to spread out their electricity consumption and shift power-intensive activities like EV charging to off-peak hours, helping to smooth out demand peaks and enabling more efficient use of existing infrastructure as society becomes increasingly electrified.
While not universal across all European countries, there is a strong regulatory trend toward power-based tariffs (capacity tariffs) with two-thirds of EU countries already implementing or planning major changes to their network tariff methodologies that often include increased emphasis on power demand (kW) rather than just energy consumption (kWh). (2)
The impact of tariff structures for heavy duty charging – A case example from Sweden
The graph (Figure 1) from Örebro län demonstrates how strategic scheduling of charging sessions can dramatically reduce costs under SE3 DSO grid tariff structures.
Cost Comparison: Non-Optimized vs. Optimized Approaches
In the non-optimized scenario, multiple charging sessions occur simultaneously, creating high peak power demands (1,600 kW). Since the , these spikes significantly impact total costs. At low utilization (600 kWh/day), this results in costs of 7.8 SEK/kWh, gradually decreasing to 2.6 SEK/kWh at higher utilization (3,000 kWh/day).
By contrast, the optimized approach—scheduling only one charging session (400 kW peak) at a time—reduces costs substantially: just 3.0 SEK/kWh at low utilization and 1.6 SEK/kWh at high utilization.
Christian again – “This type of tariff design is common in Europe, and one big challenge in optimisation of costs is that consumers/customers doesn’t know in advance what their average peak consumption will be for the remaining part of the month. This makes a great potential for improvements in regards to the cost optimisation of the grid related cost component.”
Cost Breakdown Analysis
The dramatic difference stems primarily from peak power components. In the non-optimized scenario, fixed peak power charges (both yearly and monthly) constitute 82% of total costs at low utilization. With proper scheduling in the optimized scenario, these charges drop to just 52% of total costs.
While electricity prices are a minor cost component, and they fluctuate beyond operators’ control, grid tariffs based on peak power demand represent the most significant cost component that can be strategically managed through thoughtful planning and scheduling, making them the critical leverage point for achieving competitive charging economics. While you can further optimize electricity prices, this requires even more flexibility to alter charging sessions, such as scheduling charging during nighttime when rates are lower or investing in Battery Energy Storage Systems (BESS) to store energy when it’s cheap. However, these approaches present greater challenges, as they either demand additional freedom in scheduling that significantly impacts logistics planning, or require substantial capital investments in battery storage technology.
European DSO Tariff Structures: Regulatory Constraints and National Variations
As evident by the example in Örebro län, grid tariffs play a critical role in reducing the charging cost. However, navigating these tariffs is complex because they vary significantly both within and between countries.
This variation stems from two key factors:
- Differences in grid architecture across regions
- The diverse stakeholders involved in electricity distribution
While Distribution System Operators (DSOs) across Europe have significant autonomy in designing their tariff structures, they must operate within regulatory frameworks. These frameworks impose several important constraints:
- Non-discrimination: Tariffs cannot unfairly favor certain user groups
- Cost reflectiveness: Tariffs should reflect the actual cost of grid usage
- Policy alignment: Tariff designs must support broader energy policy goals
Despite these variations, all tariff designs ultimately balance three core components: energy charges (kWh), capacity charges (kW), and fixed charges.
These three core components—energy, capacity, and fixed charges—are implemented differently across Europe, creating distinct national models. Below are key examples that showcase this diversity:
Germany
- Basic price (“Grundpreis”): A monthly fee (€/month) covering administrative costs of connection, metering and billing
- Capacity price (“Leistungspreis”): Charges (€/kW) based on highest measured power demand within a specific period
- Variable grid fee: Mandatory since April 2025, with pricing that varies by time of day and grid load conditions
France
- Fixed component: Annual standing charge (€/year)
- “Tarif bleu”: Standard constant price per kWh consumed
- Time-of-use option: “Heures Creuses/Heures Pleines” (Off-Peak/Peak Hours) featuring higher standing charges but lower rates during 8 off-peak hours (typically overnight)
Spain
- Time-differentiated structures: Progressive implementation of time-of-use tariffs
- Capacity-based charges: Fees structured around power capacity (€/kW)
These variations demonstrate how countries balance the need for cost recovery with broader policy objectives like demand management and grid stability.
Conclusion:
Achieving TCO parity with diesel trucks primarily hinges on securing low charging costs to offset the higher upfront investment in electric vehicles and charging infrastructure.
Oscar – “Electric freight requires a new focus on managing peak power demand rather than just monitoring fuel prices. Grid tariffs represent the most controllable cost component in the charging ecosystem. As Europe continues its trend toward capacity-based tariffs, understanding local grid structures and adapting charging patterns accordingly becomes critical to achieving competitive economics.”.
“I also believe that the trend towards more capacity-based costs structures is building momentum, therefore it’s crucial that actors which are entering the energy sector has a rigid knowledge of cost drivers and how business cases can be built”, Christian concludes.
All in all, this requires new competencies in electricity cost management focused primarily on peak power demand reduction rather than just responding to electricity price signals. By bringing stakeholders together from both logistics and energy sectors, we can accelerate the transition to sustainable logistics while maintaining economic viability.
Sources:
Merlin & Metis is a consulting firm particularly focused on energy markets which offers strategic advisory and services related to market analysis and business intelligence to, among others, energy companies, investors, energy users, and public authorities.
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