The Role of Public Investment in Building Up an Electric Vehicle Charging Grid

The transition from conventional cars to electric vehicles requires a suitable public charging infrastructure. The paper presented in this Decarbonization Seminar investigates the role of direct public investment, such as by municipality-owned utilities, in building up a charging grid. First, the paper provides a two-sided model of electric vehicle adoption and charging station investment. Extending existing adoption models, the author introduces public investment and shows that public investment can crowd out private investment in the short-run. However, it may spur accelerated and larger private investor entry in the long-run. The author illustrates the results using numerical examples. Second, the author empirically tests the predictions of the model. For that purpose, the author builds a novel panel data set of municipality-level charging markets in Germany, including charging stations and electric vehicle registrations. For identification, the author leverages the fact that municipalities in Germany differ substantially in the share of charging stations owned by publicly-owned investors. To correct for selection biases, the paper uses methods of matching and synthetic control to mediate the identification problem. The author finds that municipalities with publicly-owned local investors experience higher numbers of installed charging stations. Moreover, the paper investigates whether public investment is effective in incentivizing private investment, or whether it discourages private investors. The author finds first evidence of the latter.