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Can EV Charge-Site Operators Make Money?

EV Charing Station. Image: Wikimedia Commons

Randy Bryan

We keep hearing that there aren’t enough electric vehicle (EV) charging stations out there. Yet, the auto market is moving to electric drive, and the EV share of the market is growing at over a 30% rate. Why haven’t more entrepreneurs jumped into this car-charging space?

The short answer is that it is difficult to make money providing charging services; occupancy is low and capital and operating costs are high. This is important.

Occupancy: EVs are now about 3% of new vehicle sales, and sales have climbed rapidly. But EVs make up less than 1% of vehicles registered. That means not enough EVs are on the road to make sufficient demand. Even more importantly, 80% of EVs are charged at home. Convenient for the owner but tough on charging station operators. Revenue is low so far.

Capital Costs: Charging equipment is expensive. The charging stations are essentially a custom build in small batches. That means all the product design and manufacturing setup costs are heaped on small build batches. Installation costs are high, too, associated with bringing sufficient power to the charge station location.

Another problem for charging network operators is multiple standards. Tesla has a proprietary standard. Japan developed one (Chademo), and the U.S. did, too (SAE). That’s ok, but the car fueling market has one standard world-wide, and that uniformity is an expectation for EV drivers. So, charging operators must accommodate the multiple standards.

Operating Costs: Electricity is also tough to make money on. Recall that people charge most EVs at home and are familiar with these costs. In NH, it’s about 16-17¢/kWh. Charge service operators may get some discounts for buying in volume but add to that the other major hit of “demand charges.” Demand charges are higher rates according to the highest power demand for commercial accounts in any month. They are intended to capture the extra cost associated with building out the grid network for maximum power demand. Demand charges are low if your demand is steady, but charging cars is a spikey business. High power requirements for short times and low occupancy can nearly double the cost of electricity.

Yet another issue is that most states have forbidden reselling electricity by anyone other than (regulated monopoly) utilities. This means that EV (charge) service operators (EVSOs) must invent some other metric to charge by such as charge time, space time, session initiation, and other means must be used. But slower charging cars will incur much higher charge cost.

The result of all these high costs is that even a large, well run, EV charging network operator will need to charge its customers nearly double to triple what they pay at home for public charging. Ouch. Small operators (entrepreneurs) have it even worse.

Compare that to the early days of gasoline cars. Gasoline started as a useless and dangerous byproduct of making kerosene, and oil companies were only too happy to get some revenue for this stuff. Making money as a reseller of gasoline was easy in the early decades. That easy profitability has disappeared now that oil companies have priced in the value of gasoline.

There are successful charge system operators: Tesla is doing well. However, their charger network is subsidized by car sales, not profit expectation. It just has to keep the customers and salespeople happy.

Some utilities have developed new rates without demand charges for just EV charging, and some states will allow re-selling electricity for EV charging. But these policy fixes are too piecemeal to count on for EVSOs.

EVgo recently announced that they have a stable and working business plan as an EVSO. Others have been successful, too. Chargepoint makes money off selling chargers and back office support for EVSOs. Greenlots has partnered with VW Electrify America to provide back office functionality. Some oil companies are moving in, too. And many individual sites are running their own charge stations. The businesses are run lean. Some operators have not made it.

Fortunately, Volkswagen stumbled into providing several billion dollars in fines (Dieselgate) that are targeted (EPA and Electrify America) to help fund the build out of charge station networks. This funding has helped solve (temporarily) the capital costs of charge networks and additional charge station locations are coming online. But this doesn’t address the costs of electricity.

Is there a silver bullet for charge-service operator success? Not yet. As Kermit the Frog once said, “It ain’t easy being green.” New Hampshire allows resale of electricity by EVSOs, but its utilities are dragging their heels on demand charges. This area is so important to the success of EVs. Make sure your representatives understand the importance of this problem and that New Hampshire should help.

Randy Bryan is one of the co-founders of Drive Electric NH. Bryan has been an advocate for electric cars for eight-plus years. His company, ConVerdant Vehicles, has converted vehicles to plug-in hybrids, including his own Prius in 2008, and developed and sold inverters that turn a Prius into an emergency generator.

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