EV charging infrastructure: the evolving business models

At one extreme companies such as Chargepoint and NRG EVGO are putting up independently owned and operated charging stations which customers can access for a fee. The revenue model varies widely from a flat monthly fee to pay-as-you-go to bundled electricity with home charging.  At the other extreme, regulated utilities and private entities (such as Tesla) are also putting up charging stations throughout the nation with currently unproven business models. There is prevailing debate around who should own this charging infrastructure. On one hand, allowing third parties to install these charging stations promotes competition, and the conventional wisdom is that competition eventually results in the customer benefitting. Or does it? On the other side, critics of this approach argue that overall societal benefit is ignored as the stations are often put in areas that are affluent and provide a meaningful revenue base for the companies installing such infrastructure, thereby ignoring the low to middle income families.

A new approach that some third parties are already embracing seems to be working quite well, an approach that involves “partnership”.

Our Energy and Utilities Practice has evaluated numerous business cases involving EV charging infrastructure, and it is clear that private companies cannot fund a nearly ubiquitous fast charging network on their own. The model of “build it and they will come” is not going to work – at least not in the foreseeable future. The long term revenue does not offset the initial capital cost, ongoing operational costs and cost of funds, which results in a negative NPV. However, business models that capture the indirect value of the private sector from charging infrastructure may hold some value. Some examples of this indirect value include increased sales of other products and services at businesses located near EV chargers and “clean energy” marketing and brand-strengthening opportunities. These partners could share some of the indirect value they derive from EV charging stations by contributing funds to the charging service providers to help stations get deployed.

So who could these “partners” be? Automakers (increased sale of EVs), retail establishments (increase foot traffic to stores) and utilities (increased revenue through sale of electricity, economic development incentives, time based pricing plans that improves power factor) can all be effective partners. Local utilities seem to hold the most potential. The business cases that we have prepared for utilities related to EV charging infrastructure highlight the immense value that charging infrastructure brings not only to the utility but also to its customers. There are good reasons utilities such as Kansas City Power and Light, San Diego Gas and Electric and Indianapolis Power and Light are feverishly installing charging stations in their service area.                                                                          

Utilities provide a perfect “partner” for independent providers of charging stations. Utilities are typically not interested in the routine operation of a charging infrastructure. Instead, utilities tend to focus on providing safe, reliable electricity to its customers. There are a number of operational issues associated with running a successful and reliable charging infrastructure, including the ability to provide call center support when the charger does not work, security cameras to monitor for vandalism and routinely performing preventive maintenance. The independent providers already possess those capabilities which, in a partnership, utilities can leverage. Utilities can select the locations where they want the charging stations to be installed to ensure optimal societal benefit. In return the utilities pay some portion of the capital expenditure required to install the infrastructure in return for a portion of the indirect revenue with the service provider. This approach ensures benefit to all parties: charging stations are deployed to maximize societal benefit, competition is promoted by having multiple infrastructure providers compete for utility’s business, infrastructure providers can finally make the business case work as the utility realize an additional source of revenue and customers benefit by having access to safe, reliable charging stations that work.