by Jeff Turner and Hannah MacDonald
Public charging is critical to enable EV adoption because it provides charging for those who cannot at home, it eases range anxiety, and it showcases local infrastructure availability. Yet, the majority of EV drivers do most of their charging at home. This dominant preference makes the business case for public charging inherently difficult. The challenge is even more significant for public fast-charging stations due to the high operating cost and uncertain utilization and revenue potential. This article will review the challenges of the business case, recent efforts to improve profitability in the City of Vancouver, and two key drivers of station profitability.
Looking to the private sector
Until recently, various levels of government and many utilities have led the efforts to build out public charging. These efforts have included direct investment in infrastructure as well as funding for private actors to cover upfront costs. These investments have not necessitated profitability, as the infrastructure build-out aligns with policy and climate action for government, or with beneficial electrification objectives for utilities. Increasingly, these entities are looking to the private sector to expand and accelerate the public charging infrastructure build-out. However, the business case remains challenging. Even with public sector funding to cover some of the upfront costs, the operational challenges limit profitability.
Innovations in Enabling EV Business Cases
The City of Vancouver has an ambitious climate plan and a target that 50% of the kilometres driven on Vancouver’s roads will be by zero-emission vehicles by 2030. The City has developed its own network of EV charging infrastructure but is looking to understand how to invigorate the private sector offerings. Last month, Council reviewed a staff recommendation for new licensing fees to achieve this end. All gas stations and parking lots in the City will need to pay a $10,000 fee when renewing their business license if their site does not offer Level 2 or DCFC charging. To avoid the fee, gas stations would be required to provide 50 kW of charging capacity (e.g., a single 50 kW DCFC) and parking lots (with over 60 stalls) would need to have 26.6 kW of charging capacity (e.g., 4 Level 2 chargers on dedicated circuits).
Vancouver is building the case for this fee based on modeling to assess the potential profitability of charging infrastructure under different scenarios. Dunsky completed this analysis on behalf of the City of Vancouver using our Charging Site Business Case tool, which accounts for a variety of factors, including installations costs, operations and maintenance costs, and various revenue streams.
Two Key Factors with a Significant Impact on Profitability
Through the Vancouver analysis and our experience in other jurisdictions, our Mobility team identified two key factors in BC that can have a significant impact on the private sector business case for investing in charging infrastructure.
Demand charges can make up a major portion of operating costs in many jurisdictions. The value of the demand charge under many commercial businesses’ current rate depends on the peak power consumption of that site, regardless of how frequently that peak was attained. This can be particularly problematic if charging site utilization is relatively low, and the revenue collected by that site is small compared to the demand charge. For a deeper discussion of the demand charge challenge, check out the February 2022 In Focus: Leveling the playing field for fast charging.
One effort to mitigate this challenge is Hydro Quebec’s Tariff BR, targeted at fast-charging station operators. This rate offers lower demand charges in exchange for a higher energy charge, depending on the overall utilization of the site. If a charging site sees relatively low utilization, reduced demand charges will make it easier for the site owner to recover operating costs through user fees. As utilization increases over time, the rate transitions gradually back towards the standard rate structure, given that the impact of demand charges is not as severe if that fixed cost can be distributed across a larger number of users.
Low carbon fuel credits (LCFC) are available to EV station operators in British Columbia, based on the amount of energy dispensed to vehicles. LCFC offer a substantial revenue source, which can improve a site’s business case. These types of credits are not yet available across the country but may become a revenue source under the upcoming federal Clean Fuel Standard.
A Still Uncertain Business Case
The profitability of private-sector public charging is not yet a given in Canada. The demand charge rates and the availability of low carbon fuel credits vary widely across provinces and territories, and station utilization varies greatly within them. Improving the business case through regulatory and policy changes can help to drive private investment in charging infrastructure, which will ultimately enable and accelerate EV adoption.