Is it worth promoting battery swapping? A social welfare perspective on provider- and consumer-side incentives

Abstract

In countries that promote further EV diffusion, battery swapping opens up a market outlet for time-sensitive consumers as well as another green policy channel. To better understand this phenomenon from the perspective of policy-making, this study establishes a Hotelling model of a competitive market comprising a battery swapping service provider and a charging service provider. The analyses of three scenarios, no subsidization, consumer subsidization, and provider subsidization, reveal how to maximize social welfare. Considering subsidy amount, consumer time preferences, service time, and operating costs, the findings provide valuable insights for policymakers. Whereas incentive programs are generally helpful for battery swapping development and social welfare improvement, it is more effective to subsidize service providers than end consumers. Considering subsidy opportunity cost, it is necessary to control incentive amount and make continuous adjustments to promote battery swapping services without harming charging services.

Keywords: Battery swapping; Electric vehicles; Incentive program; Social welfare.