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Economic Benefits of Smart Parking Lots Jurica Babic*, Arthur Carvalho + , Wolfgang Ketter + , Vedran Podobnik* * University of Zagreb, Croatia + Erasmus University Rotterdam, Netherlands Abstract 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

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Page 1: Economic Benefits of Smart Parking Lots - Semantic Scholar€¦ · Economic Benefits of Smart Parking Lots Jurica Babic*, Arthur Carvalho+, Wolfgang Ketter+, Vedran Podobnik* *University

Economic Benefits of Smart Parking Lots

Jurica Babic*, Arthur Carvalho+, Wolfgang Ketter+ , Vedran Podobnik*

*University of Zagreb, Croatia

+Erasmus University Rotterdam, Netherlands

Abstract 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

Page 2: Economic Benefits of Smart Parking Lots - Semantic Scholar€¦ · Economic Benefits of Smart Parking Lots Jurica Babic*, Arthur Carvalho+, Wolfgang Ketter+, Vedran Podobnik* *University

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?

Approach

We propose a simulation-based approach (Ketter, Collins, & Reddy, 2013) to estimate the parking lot

owner’s profit during a certain period of time. For ease of exposition, we define the smart parking lot

setting using three entities: (i) the parking lot owner (broker), (ii) the electric cars (customers), and

(iii) the parking lot itself (the physical structure). Since the smart parking lot itself is conceived as IS-

based broker (Peters, Ketter, & Collins, 2013), we define its innovative IS artifacts: (i) smart parking

lot model with entities and interactions among them, (ii) methods for smart parking lot management

regarding electricity trading in the context of smart markets, and (iii) operationalization of the

parking lot model in the form of simulation.

Figure 1 presents the smart parking lot ecosystem which consists of 3 entities, namely the Smart

Parking Lot, the Electric Vehicles, and the Electricity Market, and 2 relationships, namely the Smart

Parking Lot - Electric Vehicles relationship and the Smart Parking Lot - Electricity Market relationship.

We model entities and relationships through, respectively, agents and markets. The Smart Parking

Lot acts as a broker connecting both markets, as we detail later.

Page 3: Economic Benefits of Smart Parking Lots - Semantic Scholar€¦ · Economic Benefits of Smart Parking Lots Jurica Babic*, Arthur Carvalho+, Wolfgang Ketter+, Vedran Podobnik* *University

Figure 1: Smart parking lot ecosystem

The smart parking lot (SPL) is defined in terms of a variable representing the amount of money it is

willing to pay/receive for a unit of electricity at a certain timeslot. Clearly, this reservation price is

dependent on the current market price in the target electricity market. In summary, the SPL

performs the following hourly activities (Figure 2):

Calculation of free parking spots and queue size. If EV wants to enter the SPL, the SPL will

provide the EV with a free parking spot from its pool of free parking spots (if the pool is not

empty) or the EV will be put in the SPL.

Calculation of electricity price. In the beginning of every time-slot (hour), the SPL fetches the

current electricity price from the Electricity Market agent (EM) and uses its profit margin to

calculate its selling and buying electricity prices.

Payment for parking and (dis)charging services. The EV needs to pay to the SPL agent for

both parking and the electricity service provided.

Page 4: Economic Benefits of Smart Parking Lots - Semantic Scholar€¦ · Economic Benefits of Smart Parking Lots Jurica Babic*, Arthur Carvalho+, Wolfgang Ketter+, Vedran Podobnik* *University

Figure 2: Smart parking lot activities

Each electric vehicle (EV) is described by two variables: (i) the amount of electricity required by the

car owner when arriving at the parking lot at a certain timeslot; and (ii) the price the car owner is

willing to pay/receive for a unit of electricity at a certain timeslot. Similar to the smart parking lot,

the EV reservation price is defined in terms of the market price plus a premium representing the car

owner’s willingness to pay for using the smart parking lot facilities. The EV lifecycle is described with

a flowchart on Figure 3:

Figure 3: Electric vehicle activities

Calculation of parking duration. We model arrivals and staying at the parking lot using a

M/M/c/0 queue with time varying parameters, allowing different timeslots (hours) to have

different arrival rates and service rates.

Calculation of the amount of electricity an EV is willing to (dis)charge. We assume that the

amount of electricity an EV is willing to (dis)charge follows a normal distribution with mean

Page 5: Economic Benefits of Smart Parking Lots - Semantic Scholar€¦ · Economic Benefits of Smart Parking Lots Jurica Babic*, Arthur Carvalho+, Wolfgang Ketter+, Vedran Podobnik* *University

equal to 15 kWh, truncated at 30 kWh, the standard deviation being equal to 10. A positive

value of the (dis)charge quantity means that EV is willing to charge its battery at the SPL,

whereas a negative value means that it is willing to discharge, i.e., sell electricity. By setting

the mean value to 15 kWh, we mimic the real-world situation where more cars want to

charge their batteries rather than discharge.

Determining whether the EV is willing to (dis)charge regardless of price. This activity

decides whether EV will take into account the electricity price when deciding whether to

engage in (dis)charging. The electric vehicle EV will engage in charging or discharging,

regardless of the current electricity price with the specified probabilities. This way we mimic

the real-world situation where a car arrives at a charging station and needs to charge its

battery regardless of the price, e.g., because the battery is almost empty or because there is

no other charging station nearby.

Calculation of the reserve price for (dis)charging. In case of charging, the EV decides to

proceed with the transaction only if the EV's reserve price is higher than the current

electricity price offered by the SPL. In case of discharging, the EV decides to proceed with the

transaction only if the EV's reserve price is lower than the current electricity price offered by

the SPL. For the calculation of EV's reservation prices, we assume that EV has the alternative

choice of (dis)charging at home, where its home supplier forms an electricity price

analogously to the SPL, but with different profit margin. We assume that the profit margin

follows a normal distribution with mean equal to 0.2, standard deviation equal to 0.1, and

truncated at [0, 1]. Further, we assume that EV was parked at home for some hours before

entering the SPL in case of discharging or, in case of charging, that EV will be parked at home

for some hours after leaving the SPL. The exact amount of hours is drawn from a uniform

distribution with range [1, 12].

Determining whether the EV will stay parked longer to fully complete the electricity

service. This activity is event-based and triggered after an EV enters the SPL and decides to

(dis)charge a certain amount of electricity. If the electricity amount cannot be processed

under the given parking time and charger speed this means that there is enough time for the

EV to fully (dis)charge its battery during its parking. In this situation the EV has two options: i)

to partially (dis)charge its battery; or ii) to prolong its parking time until the full (dis)charging

is complete. The EV will go for the latter option of parking time prolongation with the

probability defined in the simulation setup.

Finally, for the parking lot itself, we need to take into account the number of available parking spots,

the number of arriving vehicles, and the amount of time each vehicle will be parked during a certain

timeslot. In order to handle the inherent uncertainty regarding these variables, we model the parking

lot using a M/M/c/0 queue with time varying parameters.

By allowing different timeslots to have different arriving rates and service (parking) times, traditional

equilibrium results in queueing theory are not always valid. Consequently, we have to rely on

simulations, instead of traditional queueing theory closed-form equations, to estimate the expected

number of parked cars and parking times throughout multiple timeslots.

Page 6: Economic Benefits of Smart Parking Lots - Semantic Scholar€¦ · Economic Benefits of Smart Parking Lots Jurica Babic*, Arthur Carvalho+, Wolfgang Ketter+, Vedran Podobnik* *University

Preliminary Findings

In order to simulate a real-life scenario, we derived arrival rates and service times from the work by

Ferreira et al (Ferreira et al., 2014). In particular, the timeslots in our simulations represent different

hours in a day and, consequently, we derived 24 arrival rates and service times. Also, we use real-

world electricity prices from the day-ahead Nord Pool Elspot market (i.e., prices from a year 2014).

Our analysis of the SPL ecosystem identifies potential consequences for the SPL business by

considering different investment pathways. In particular, we scrutinize the 9 different SPLs from the

perspectives of both electricity trading and extended parking due to the provision of electricity

service. Furthermore, we define the SPL utilization, which is an important key performance indicator

(KPI) that provides insights on the usage of the parking and electricity services.

Table 1: Scenario-dependent parameter values and results

It can be noticed that profits from electricity trading increase with parking size and charger speed.

Although this outcome is intuitive and somewhat expected, the low absolute values, including low

profit discrepancies between the 9 scenarios, might make one question about the profitability of the

SPL business. However, the overall benefit from the energy service is not only measured in terms of

electricity trading profits, but also from the extra time an EV was parked in order to fully complete

the (dis)charging operation.

Interestingly, the results show that the most profitable investment option is to buy the slowest type

of charger. The rationale behind this result is that, in comparison to other charger types, the slowest

charger increases the chance that the requested amount of electricity cannot be transferred

between the EV and the SPL within the initial parking duration. Another interesting point is that the

results show that the SPL's main source of income is due to the extended parking service.

We introduce three types of KPIs that explain how well a particular SPL is utilized. Parking utilization

measures how many EVs were parked at the SPL. Charger utilization is defined as the ratio between

the amount of electricity EVs (dis)charged and the maximum amount of electricity that could be

(dis)charged in case chargers from occupied parking spots ran at 100% rate while EVs were parked.

Electricity utilization is defined as the ratio between the amount of electricity EVs (dis)charged and

the potential amount of electricity that could be (dis)charged in case all chargers ran at 100% rate all

the time. Figure 4 shows the hourly mean values for the three KPIs in each scenario.

Page 7: Economic Benefits of Smart Parking Lots - Semantic Scholar€¦ · Economic Benefits of Smart Parking Lots Jurica Babic*, Arthur Carvalho+, Wolfgang Ketter+, Vedran Podobnik* *University

Figure 4: Hourly mean values for charger, parking and electricity utilizations

Current status of manuscript

We are currently fine-tuning our model, designing more comprehensive EV model and performing

more sensitivity analyses.

References

Bichler, M., Gupta, A., & Ketter, W. (2010). Designing Smart Markets. Information Systems Research, 21(4), 688–699. doi:10.1287/isre.1100.0316

Ferreira, M., Damas, L., Conceicao, H., D’Orey, P. M., Fernandes, R., Steenkiste, P., & Gomes, P. (2014). Self-automated parking lots for autonomous vehicles based on vehicular ad hoc networking. In 2014 IEEE Intelligent Vehicles Symposium Proceedings (pp. 472–479). IEEE. doi:10.1109/IVS.2014.6856561

Ketter, W., Collins, J., & Reddy, P. (2013). Power TAC: A Competitive Economic Simulation Of The Smart Grid. Energy Economics, 39, 262–270. doi:10.1016/j.eneco.2013.04.015

Khalen, M., Ketter, W., & van Dalen, J. (2014). Balancing with Electric Vehicles: a Profitable Business Model. In Proceedings of the European Conference on Information Systems (ECIS) 2014 (pp. 1–15). Tel Aviv, Israel.

Page 8: Economic Benefits of Smart Parking Lots - Semantic Scholar€¦ · Economic Benefits of Smart Parking Lots Jurica Babic*, Arthur Carvalho+, Wolfgang Ketter+, Vedran Podobnik* *University

Kumagai, J. (2012). Virtual Power Plants, Real Power. IEEE Spectrum, 49(3), 13–14.

Peters, M., Ketter, W., & Collins, J. (2013). Design by Competitive Benchmarking : Tackling the Smart Grid Challenge with Innovative IS Artifacts. In Conference on Information Systems and Technology 2013. Minneapolis, Minnesota.

Watson, R. T., Boudreau, M.-C., & Chen, A. J. (2013). Information Systems and Environmentally Sustainable Development: Energy Informatics and new directions for the IS community. MIS Quarterly, 34(1), 23–38.