An Infrastructure Bright Spot: EV Charging

June 2020

Looking for an infrastructure sector doing well in spite of COVID-19?  Try Electric Vehicle Charging Infrastructure.  EV charging reached one milestone this month, with another prospective major one also announced.  Investors have been noticing, and the prospective market is large.

On June 17, Electrify America announced that they had completed the first cross-country fast charging EV corridor, from Washington DC to Los Angeles.  The new direct current fast charger network stretches close to 3,000 miles over 11 states, with an average 70 miles between stations.  Electrify America runs the largest open DC fast charging network in the US, and plans to have a second cross-country route — Jacksonville to San Diego – completed by September.  These East-West corridors complement their existing north-south open access corridors on both coasts.  The range of the average EV is now, according to Consumer Reports, 200 miles per charge, putting the stations well within the range of all EVs.

Tesla Supercharger station

On June 18, a consortium of utilities proposed building a corridor along Interstate-5 on the West Coast for electric truck charging stations, called the West Coast Transit Corridor Initiative.  High-volume charging stations would be established every 50 miles along the way, as well as one feeder routes.  The plan calls for availability to medium-duty EVs by 2025, and large trucks by 2030.  Estimated price tag is $850 million.

We can see that, whereas EV producers and renewable generation companies’ shares have been hit by the decline in energy demand during the pandemic, startups serving the EV charging market have continued pulling in new investments in spite of the uncertainty.  Of late these include managed fleet charging specialist Amply, which raised $13 million, FreeWire Technologies, whose chargers use batteries rather than the grid, which raised $25 million, HEVO Power, a specialist in wireless charging which raised $5.5 million, and Australian fast charger company Tritium, which secured $45 million in debt.

The COVID-19 pandemic has slowed EV sales of electric vehicles, but their efficiency advantages over combustion engines continue to grow (Lyft just this week announced a commitment to full electrification of its fleet), and the market for supportive infrastructure technology is expected to be quite large.  In the last five years, the number of public EV chargers has increased by about 40% per year, and the Brattle Group projects needed EV infrastructureat between $75-125 billion in the US before 2030, of which $30-50 billion for the addition of 1 to 2 million additional public chargers, another $30-50B for additional generation and energy storage, and $15-25B for related T&D improvements.  Outside of the US, a number of markets are more advanced, notably in Europe and China.  EV chargers now outnumber gas stations in some countries.  Wood Mackenzie forecast last month that between North America, China and Europe, nearly 30 million EV chargers would be installed by 2030, up from just over 3 million today.  With between about 1/3 of these outlets being public stations, this would represent a global market on the order of $150-200 billion over the next decade, with another $200-300 billion for matching investments in generation, storage, transmission and distribution.  These are big numbers.

As noted in previous Infrastructure Ideas comments on the EV charging sector, the business model – and who gets to channel most of this investment – is an evolving question.  Utilities, EV manufacturers, gasoline retail companies, public authorities, and specialized players continue to jockey for position.  A major factor in the US market is a regulatory environment that limits potential ownership of EV charging and related services by utilities.  This opens the door for players like Electrify America, which has taken the lead in cross-country network build-outs, and for car companies, of which Tesla and Ford have been leading the way in EV charging.  The US is also characterized by relatively high penetration of at-home charging point for vehicles, which has been less practical in Europe, and even more so in China.  China’s public charging market is a mixture of utility-owned and privately owned stations, with public incentives for fast-charging outlets.  Regulatory incentives in China also include rules in some cities, such as Shenzhen and Guangzhou, that ban new registrations for ride-sharing with gasoline combustion-engine cars, along with the quota system in some cities that makes the cost of license plates for gasoline-powered cars nearly equal to the cost of the vehicle.

Opportunities for investors and players will continue to expand rapidly in the coming decades, and be more diversified than for EV production itself.  Charging networks will differ geographically, and at least initially by type of vehicle chargeable.  There will be competition on placement of outlets, as well as the type of technology deployed (and therefore the speed of charging), and to some extent on amenities offered while drivers wait.  Charging technology providers should have several waves of opportunities to sell products to operators of public charging points, as the technologies themselves continue to evolve rapidly – along with EVs themselves.  Wireless charging, being tested by HEVO and others, would significantly alter the playing field.  Niche companies, like Amply which specializes in charging fleets, will compete with generalists.  In Emerging Markets outside of China, where deployment of EVs and charge points is still nascent yet where car ownership is expanding faster than anywhere, one can expect another $50 billion-plus market to develop over the next decade/ decade and a half.  Regulation will also play a major role in Emerging Markets, where one could expect, among other things, to see attempts by technology providers to gain exclusive rights in cities and/or countries to deploy charging technologies, as well as attempts by governments to bring providers in by providing exclusive rights.  Procurement practices will make important differences in the speed of deployment, and the costs of EV charging services, in different countries.

As headlined, this is one bright spot in the infrastructure world.  Who will make money, and which business models will succeed, remains to be seen.  What is clear is that there will be a big opportunity cost to ignoring the EV charging business.  Another example of where technology change is driving the direction of infrastructure investments.