Are We Caught in an Electric Vehicle Infrastructure Pickle, Or Is It Really All About the Benjamins?
How much does charging infrastructure matter in determining how quickly EVs get adopted? In this post, I share my perspective on how I think charging infrastructure will develop and be utilized. My thesis: while charging infrastructure will have a role to play in encouraging EV adoption in certain instances, price is the real driving factor.
Transportation is the largest source of emissions in the US, and personal vehicles are a big part of that. Electric vehicles (EVs) have an important role to play in helping to decarbonize transportation, but uncertainty abounds about how quickly EVs will be adopted by consumers. What matters when consumers are making vehicle purchasing decisions?
Interesting recent survey data suggests that people hold a number of misconceptions about EVs. Those surveyed think the vehicles are more expensive than they actually are (reasonable, given the very recent changes occurring in the industry with battery costs dropping and more models being introduced) and are quite concerned about range and charging infrastructure. People that don’t own EVs are actually more concerned about range and infrastructure than those that do, but range and charging infrastructure continue to be areas actual EV owners care about as well. I personally think that these concerns are overblown and will largely dissipate once electric vehicles become cost-competitive on their sticker price, but they undoubtedly play a role in consumer psychology.
Many consumers worry about not having enough charging stations near their home or office. An implicit assumption is that they’ll want and need charging infrastructure similar to gas station infrastructure today. Nope! If someone can charge at home (or the office), they typically depart with about a 100% charge (ie a driving range of more than 200 miles today). This is in contrast to the way we use gas station infrastructure today, where we deplete the energy storage (ie gas tank) in the car down to empty over the course of a few days or weeks before refilling it.
Most EV owners are likely to almost never use charging infrastructure near their home or office, because they typically already have charging available to them and are usually leaving their homes and offices with a good deal of range (my Dad, for example, has owned an EV for about a year and has never used a public charging station). The charging stations EV owners will use will be fast chargers located on or near highways, in the midst of long drives — a very different use case. That is not to say that additional stations have no value — indeed, a significant aspect of their value may be in providing psychological comfort to potential vehicle purchasers, reminding them that there will be charging stations out there for them.
From an actual utilization perspective, however, having more charging stations in town will be “nice to haves” and may end up with fairly low utilization rates (since people will mostly be charging at their home and office already and may be reticent to pay to top off their battery when they can do so more cheaply at home). This appears to be the thesis for Volta Charging, which deploys ad-revenue-supported free EV charging stations in high-traffic areas like shopping malls - they are positioning the charging stations as amenities for shoppers.
Importantly, with a bit of gumption and coordination, the buildout of public charging infrastructure will happen anyways, allaying consumers’ fears. In the United Kingdom, there are now more charging stations than gas stations. This can and will happen in the U.S. as well. After all, our electric infrastructure is already robust, especially in the areas consumers most frequently cite as having charging access issues, such as multi-family housing and dense urban areas. These are the types of consumers who might balk at buying an EV because they lack a parking spot with a plug nearby, even if they are interested in the concept. While having more plugs at shopping centers may be marginally useful, I think a robust public buildout of publicly accessible stations — such as street parking spots in urban areas (in addition to fast chargers along interstates) — will make more of an impact on new categories of consumers for EVs in dense areas.
Also, EVs could reach a high level of adoption even without significant traction in dense urban areas — after all, a majority of Americans self-report as living in suburban neighborhoods (and another 20% are in rural areas), where the vast majority of people have access to plugs they could charge from at home if they wanted to. This suggests that price and model availability may be more important limiting factors than charging infrastructure today. Looking further into the future, shared autonomous vehicles can also relieve challenges with charging in dense urban areas by driving themselves to charge in lower-density areas.
This buildout of charging infrastructure will require new investment by cities, but it is not rocket science. I’m happy to report that it is also not at all controversial! An infrastructure bill that would provide $1 billion to support infrastructure for EV, natural gas, and hydrogen fueling is currently moving forward with broad bipartisan support — even President Trump has tweeted his support for it. This will support increased infrastructure buildout over the next few years — good timing, since EVs are anticipated to start having lower sticker prices than equivalent gasoline-engine models in just a few years, in the 2022–2024 time frame (the comparable EVs already have lower cost of ownership, but their initial costs are currently higher). Local efforts will also lead to more charging — Los Angeles County building codes now require infrastructure for EV charging in new retail construction projects, for example.
What are the investment implications of these ideas and predictions? Well, as noted above, I think free ad-supported charging (like those built by Volta) will be interesting because they are in line with the idea that most people will charge mostly at home and work. Even with the battery costs declining as an overall percentage of the retail price of an EV, superior batteries which can provide additional range at lower cost have the potential to capture a significant share of a quickly growing market (although this is, of course, a capital intensive space with significant technology risk).
I am less excited by some of the proposed innovations on the equipment side, such as autonomous chargers. There are a couple of companies developing chargers that use robotics to plug in and charge vehicles, planning ahead for then these vehicles are autonomous. I am skeptical of this approach — besides the fact that autonomous vehicles aren’t for sale commercially right now, there are other reasons why such technology may not get adopted. Even with fast chargers, an EV is likely to be plugged in for at least 5 minutes, if not significantly longer. You have to have a lot of vehicles needing to be charged at the same time for the robot to be a cheaper solution than just paying someone $15 an hour to walk around plugging and unplugging EVs.
If my thesis on what will motivate consumers to purchase EVs is correct, it will raise interesting questions about the business model for charging infrastructure developers and operators, especially as California is moving towards requiring interoperability between charging networks (Tesla’s network is excluded), which will reduce the benefit of network effects that any one company can leverage. Now, charging installers who build out large networks for municipalities and corporations are going to have a lot of business over the next decade as state and local municipalities and businesses invest in charging equipment — especially those focused on fast charging; it may provide a good risk/return profile for certain investors. However, I think this will be a relatively low margin business because of the required interoperability (read: available substitutes), robust competition, and capital intensity of the business.
While these coming investments in EV infrastructure may not be strictly necessary to support consumers’ driving habits, it will play a role in a consumer’s purchasing decision and will help to assuage the concerns of reticent buyers. That said, I think the bottom line is about price — the availability of a breadth of EV models priced similarly to their internal combustion peers will be what really drives EVs purchasing behavior beyond innovators and early adopters and into the mainstream. When this happens (probably around 2023 in the US), I believe it will drive significant growth in EV sales, regardless of how our charging infrastructure evolves.
