Markets

Electric vehicle charging infrastructure – a rapidly emerging new service market

Together with data centers and server farms, wind parks and solar pv installations, electric vehicle charging infrastructure is turning into a new asset class which should become interesting for asset management and maintenance service providers, whether OEMs or third party vendors, particularly facilities services and other providers. For example one of the largest facilities services providers in the US, ABM, has entered this market in partnership with major OEMs, including Chargepoint, NRG, Greencharge and Bosch and offers comprehensive installation and maintenance services for charging points at many types of facilities. Another provider, EV Connect,  offers “EV Charging as a Service“, which includes a charging station, management software, maintenance and 24/7 support for US$ 99 per month.

In the US, California leads the way with over 9,000 public charging installations in 2015 according to the US Dept. of Energy Alternative Fuels Data Centre, though other estimates put that figure at around 15,000, approx. 40% of the US total. Rapid increase in plug-in Electric Vehicle (EV)  numbers in California and other places has created significant charging bottlenecks, according to an article in the NY Times, and therefore the newly formed Electric Vehicle Charging Association (EVCA) expects exponential growth in installations, projecting sales of 6.2 million charging units in the US by 2023.  According to a study by McKinsey & Co there were approx. 20,000 public charging stations in western Europe in 2013, with the Netherlands, Norway, UK, France, Germany and Denmark accounting for over 90% of the total. Based on estimates for EV sales and EV to charger ratios, Frost and Sullivan projected an installed base of 3.1 million units by 2019. Assuming 40% of these to be public fast(er) charging units and an annual maintenance cost of US$400 per unit on average, this implies a market size for aftermarket services of around $ 1.6 billion p.a. in the US and Europe within 5-6 years -not bad to begin with and the estimates are probably conservative.

Development up to now has been mainly national or local government or utility sponsored and subsidized and clear ownership and operations business models have yet to emerge. In general, excluding subsidies, it is currently difficult to generate sufficient revenue purely from power sales to EV owners to recoup investment in charging infrastructure*. Some providers (Chargepoint, EV Connect)  therefore offer additional services such as payment and billing -in essence a turnkey service solution for customers that want to have charging stations installed, including retailers, businesses (parking areas for customers, employees or guests) or municipalities, who also have electricity pricing discretion -with prices ranging from low or zero (when the charging station is used to attract customers or is provided as a fringe benefit) to high. Another business model is based on a paid subscription (by EV owners) for access to the charging service provider’s charging network through a RFID identification card. For the provider, revenues are generated by the hardware sales and the subscription fees from EV drivers, as well as the fees for the back-office services delivered to customers. Based on a mix of these models and potential others the EVCA expects that $ 2.8 billion will be generated annually in charging revenue in the US by 2023. Nevertheless potential killer apps such as Vehicle-2-Grid (V2G) are not included in these calculations. V2G refers to selling back power to the grid from the vehicle at times of peak demand, a type of “demand response” or “balancing energy” service as provided today by some aggregators such as EnerNOC, who either shut down client loads or provide power reserves to the grid at times of peak demand or stress. This helps balance the grid, reduces risk of blackouts as well as required generation investments and can be a significant revenue stream for EV owners and service providers / aggregators, as market penetratiuon of EVs increases -with grid operators developing into both substantial customers as well as regulators for EV based “power capacity services.

The EV charging market is becoming one of the most interesting markets for service business model experimentation and ecosystem evolution.

 

 *Though according to McKinsey hardware costs are falling strongly. For example the cost of a standard charging unit (slow charging: pole-mounted, with two Type 2 “Mennekes” sockets;  3.7 kW power level, using single-phase AC current of 16A-230V; RFID/GSM controller for identification purposes) dropped from €3840 in 2011 to €1995 in 2013. Costs will continue to decline as production volumes increase.

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