How to make EV charging pay

As demand for 5.5 million¹ public EV chargers heats up, the business case for US$13b of investment needs to be rewritten.

No one wants to set off on a long road trip without the certainty of refueling. But that decision could face drivers if anticipated growth in electric vehicles (EVs) – predicted to increase 18-fold between 2020 and 2030² – isn’t matched with a swift and very significant uptick in public charging stations. 

Homes and workplaces are expected to account for more than 90% of global EV charging facilities, with a further US$41b likely to be spent on residential installations by 2028.³ A total of 5.5 million public chargers are needed by 2028 to meet anticipated growth in EVs, overcome drivers’ range anxiety and cut carbon emissions from transport. This comes with an investment price tag of US$13b.

But here’s the rub: public charging infrastructure just isn’t enticing mainstream investment.

The business case struggles to justify investment

Poor cashflow and returns are jeopardizing the case for investment in public charging infrastructure.

EY research finds that a typical charging station, with two slow (6.6kW) and two fast (50kW) chargers, will take five years to yield positive cashflow. Our analysis shows that the payback periods for charging infrastructure investments are longer than 10 years. 

For example, in the US, a leading charge point operator (CPO) has been generating extra revenues by participating in the California Independent System Operator (CAISO) day-ahead and real-time markets for years, where they get paid by CAISO for providing demand response services using smart EV charging. And in the UK, city boroughs in London are acting as neutral hosts for CPOs. With the help of funding received from a local government body, boroughs are funding capital costs of EV chargers while CPOs are installing, operating and managing on-street charging points in return for a major portion of revenues.

Creating a better ending

It’s critical to understand the levers that can increase revenues and reduce costs to make the business case more appealing to mainstream debt investors. But how do you go about creating a better investment outcome?

Make a plan – understand how your particular scenario and geography can impact revenue enhancement and cost-reduction opportunities:

• Undertake market, regulatory and geospatial analysis to identify the right locations for your charging stations; consider real estate, demographics and commercial activity in the vicinity, as well as electricity grid constraints
• Go deeper with a second-level market analysis to select and plan the optimal combination of levers relevant to the location
  

Understand the indirect value – recognize the indirect value that investment in charging infrastructure can add to the existing business:

• Factor intangible benefits from charging infrastructure investments into your business case (it might indirectly enhance your brand appeal, community value, customer satisfaction, etc.)
• Consider the opportunity to provide additional services, such as EV or battery leasing, fleet management or vehicle-to-grid services for customers using your charging stations
  

Evaluate financing options – identify innovative financing opportunities to raise additional capital:

• Explore ways to structure your project by separating out more predictable revenue streams against which you can raise more mainstream debt 
• Leverage government incentives and stimulus packages (e.g., European Green Deal and post-COVID-19 crisis recovery programs) to accelerate rollout
  

Deploy the right technology – leverage technology to help solve challenges associated with the operation and ownership structure of your business:

• Consider using emerging technologies (e.g., distributed ledger) to manage fractional ownership of assets 
• Invest in a technology platform to translate data from vehicles and chargers into informed decisions for planning and operations