EV charging stations need new funders — study
By David Ferris
09/12/2024 06:33 AM EDT
A new study calls on policymakers to find fresh sources of funding to build public electric vehicle charging stations. The most obvious source — sales of electricity — isn’t doing the trick.
The study by a California nonprofit looked at data on the use of public fast chargers in California over a five-year period. It found that electricity sales get the stations nowhere close to paying for themselves over a period of three years, the benchmark that many businesses use to consider an investment worthwhile.
The study was released Tuesday by Next 10, a nonprofit bankrolled by Noel Perry, the founder of venture capital firm Baccharis Capital and a philanthropist.
How to make charging stations pay their own way is becoming an increasingly important issue. Republican presidential nominee Donald Trump has built skepticism of EVs and charging stations into his campaign for the presidency and has threatened to pull funding for them. Because they rely on public support, local charging projects tend not to get built in areas run by Republicans.
Today, the government plays a heavy role. The most well-known program is the $7.5 billion that the Biden administration dedicated to building charging stations in the 2021 bipartisan infrastructure law. But localities, states and utilities have also played a large role in funding the stations, which are expensive to build and maintain.
But, the study said, “Public funding alone is unlikely to be sufficient to build the necessary network of charging to meet the needs of drivers.”
The Department of Energy estimates that the country will need 182,000 fast-charging stations by 2030. According to its most recent data, there are now just under 11,000.
Electrons and dollars
The study is large — covering 5.6 million charging events in California — but it is unclear how relevant its conclusions are to today’s reality, given that its data concluded in 2019.
‘That’s like before Christ,” quipped Loren McDonald, the founder of Adoption, a consultancy that tracks EV charging data.
In 2019, many EVs now becoming common on the road like the Ford Mach-E and the Hyundai Ioniq 5 didn’t exist yet, and EV sales were far lower than they are now. Charging providers like EVgo are reporting their chargers are busy and getting busier every quarter.
“Their data is really old, and so it’s irrelevant, basically,” McDonald added.
But Alan Jenn, an assistant professor who studies electric vehicles at the University of California, Davis, and who authored the study, said his results still likely hold true.
Most of the California charging stations included in his survey were “nowhere near able to pay back the capital and operating costs” within three years, even when the installation was as inexpensive as it could possibly be, the study said.
The average station in the study would have needed a payback period of more than 10 years, and most wouldn’t have been in the three-year payback window even if they were twice as busy and delivered twice the energy.
The basic problem is that only a small margin exists between the costs that EV drivers are willing to pay for fast charging and the amount of money that utilities bill a business for that electricity. And at times, the electricity costs can get out of control.
“If it’s a business that is operating on selling electrons, it’s not going to work,” Jenn said in an interview. “The amount of money compared to what it costs to install the infrastructure, that gap seems to be too big.”
Neighbors profit
The study pointed to a new set of stakeholders who could help overcome the cost hurdle: retail establishments that benefit from being in the orbit of a charging station but lie outside the typical business arrangement.
A charging session can last 15 to 45 minutes, far longer than a gasoline fill-up. That leaves a driver with available time tovisit a local establishment and spend money.
Capturing that customer lies at the foundation of where public fast chargers are located. Charging networks like those run by Tesla, EVgo and ChargePoint are hosted by restaurants and stores that offer their valuable parking spaces in hopes of generating new customers. Volta, a company that put its charging stations in retailer parking lots and plastered them with digital advertising, was bought last year by oil major Shell.
The Next 10 study compared this phenomenon to the business model for most gas stations, which sometimes make little to no money on selling gasoline but are able to profit off selling Cokes and Cheetos in the nearby mart.
And gas stations and truck stops are getting into the game. They have been on a hunt for the Biden administration’s EV
charging funds in order to capture the wayward dollars of the EV driver, and with significant success.
According to an analysis last week by EVAdoption, that class of retailer has won 64 percent of federal awards for charging stations along major highways.
Some businesses, however, are quietly winning customers simply by being next door.
Some of the most high-traffic stations that the study found in California were within walking distance of dozens of shops and restaurants but were not hosts.
A separate study published last week, written by researchers at the Massachusetts Institute of Technology, put a dollar value on these interactions with local businesses. Looking at California businesses within 500 meters of a charging station, it found that in 2019 they earned about $1,500 more, and between early 2021 and mid-2023, about $400 more.
This study did not differentiate between charging hosts and non-hosts.
Charging stations result from complex arrangements among charging networks, equipment providers, real estate owners, business operators and electric utilities. Such complexity makes it difficult to contemplate a solution that brings in yet more parties.
Any of the above “can significantly impact the economics of any individual station,” said Michael Krauthamer, a consultant who advises companies on building charging infrastructure. “It’s really hard to come up with conclusions across the industry.”
But Jenn, the study author, said there’s no reason not to try.
“It’s kind of the Wild West for how to figure out these business opportunities,” he said.