Charging infrastructure: opportunities and challenges
16 May 2019
A widespread charging infrastructure is needed to enable the adoption of electric vehicles – and it means both opportunities and challenges for service providers and real estate professionals
The electric vehicle revolution is happening: the UK has pledged to end the sale of new petrol and diesel cars and vans by 2040, while 120m electric alternatives are forecast to be on Chinese, European and North American roads by 2030. These will require around 40m charge points and $50bn of capital investment.
All the same, price disparity, range anxiety and a perceived lack of access to charging stations still act as barriers to uptake. There is also uncertainty as to how much charging will be done at home, at destinations or en route, given the variable availability of residential off-street parking, and this will also be affected by the transition to autonomous and shared vehicles. The optimal balance of slow, fast and rapid charging and home, workplace, retail, car park, on-street and dedicated recharging stations is yet to emerge, and is likely to change with time.
Business models for charging points will vary, with providers combining different revenue streams such as direct sale and installation fees, subscription and user charging, retail revenues while drivers wait for their vehicle to charge, and vehicle-to-grid power. There are in addition vehicle-to-business or vehicle-to-consumer electricity off-take revenues. Such vehicle-to-grid power represents the return of energy stored in batteries to the grid – the owner would benefit from off-peak or low-tariff charging and exporting the power back to the grid at peak times, pocketing the margin. Project risks including demand, obsolescence, grid connection cost, changes in legislation, effective data protection and intellectual property infringement, all of which will need to be managed.
Direct sale and installation models involve partnerships with local authorities, retailers, hotel chains, corporate landlords, property developers or the automotive industry. Charging may be offered free to support the host’s sustainability agenda, or as a loss-leader to attract footfall and increase the time spent in a shop. User charging models can be built around fast charging in shopping centres or car parks, where cars will be parked for longer.
A key consideration here is how far the grid connection can be futureproofed
For motorway service and petrol stations, rapid charging may become common. At the top end of the market, eight minutes of ultra-fast 350kW charging offer sufficient power for 200km of travel. Such rapid and ultra-fast charging can be viable on the basis of charging the user a fee, or may be compatible with retail revenue opportunities. A key consideration here is how far the grid connection can be futureproofed to enable upgrade to faster charging later in a project’s life.
The sale of vehicle-to-grid power offers huge potential for additional revenue for providers, but bi-directional flow through an electric vehicle’s battery may degrade its performance and lifespan; it remains to be seen whether how this can be mitigated. Vehicle-to-business power will become a viable option in car parks, with parked vehicle energy being used to take an airport, train station or a local corporate off grid at peak times. Vehicle-to-consumer opportunities could offer an integrated solar, battery and electric vehicle energy management package for householders.
The transition must be backed by clean generation: there is little point in moving pollution back up the supply chain. As such vehicles are expected to create an extra 13GW of demand in the UK by 2050 – 20% above today’s peak – the effect on the grid will need to be addressed.
One other option already unveiled this year is charging from an off-grid hydrogen fuel cell. Effectively a portable unit, this could support rural charging where a grid connection is not practical, but it does depend on hydrogen production, which is still prohibitively expensive in large volumes. Fuel cells themselves can act as alternative power units, emitting only pure water, but there are still only a handful of hydrogen supply stations for domestic vehicles.
While charging infrastructure will emerge as a new standalone asset class, success will come in different forms, with distinct approaches to residential, workplace, commercial, fleet, service station and on-street charging.
Paul Stones is associate, real estate, and Alex Harrison is partner, infrastructure, energy resources and projects at Hogan Lovells