Electric Vehicles Lack Infrastructure Despite Surging Demand
Consumer trends point to a rise in electric vehicles in the coming years. However, investing in the infrastructure to support battery-powered cars and hybrids has been surprisingly thin, according to multiple market participants.
Driven by government’s increased efforts to de-carbonize the transport sector and consumer trends away from gas-fueled vehicles, EV grew to 890,000 in 2018 from 300,000 in 2015. Through popular cars such as the Nissan Leaf and Tesla Model S, electric vehicles are expected to account for 14% of the market by 2025.
The estimated cost required to support large EV market growth through 2035 ranges from $7.8 billion to $8.1 billion per year, according to the National Renewable Energy Laboratory’s estimates. With only about one-fourth of the public chargers required to support expected EV market growth being operational, additional charging infrastructure deployment will have to grow at about 20% per year according to the International Council on Clean Transportations.
Investors in the space are grappling with an inefficient business model where the cost of installation of EV technology is too high and consumers can’t charge their vehicles at cost-efficient levels. The end result is that utilities, best positioned to handle this, have skirted the issue entirely, private investment is low and state incentives are still nascent.
For the moment, this leaves oil and gas companies positioned to build the infrastructure. Though they feel threatened by the growing sales of EV, their knowledge of energy distribution already gives them a foot in the door.
BP and Shell have acquired charging station companies Chargemaster and Newmotion, respectively, companies which develop the infrastructure technology but do not focus on deploying the infrastructure. A public policy advisor with knowledge of the market says these companies generally don’t invest in charging station deployment because of the lack of a private business model.
Public utilities in theory should be in a position to provide the infrastructure, but their involvement is low. Utilities in the US and Canada own merely 156 of the total 26,341 operational electric vehicle charging stations. The ownership is equally divided between networked stations, which predominantly encompass charging companies that do not focus on deploying charging infrastructure, and privately-owned charging stations.
However, despite increases in demand, utilities would require even higher demand to provide attractive returns.
Legislative packages continue to be included in state and municipal legislation to promote charging station developments. On 20 June, the Michigan legislature introduced a bipartisan package that would increase access to EV charging by allowing the state to install EV charging stations at park-and-ride lots and state parks either directly or by lease.
Unquestionably, despite incentives and an increase in market growth, energy companies understand that a competitive market requires competitive buyers and, correspondingly, competitive prices. Investors will not act and a system within the market will not begin to develop until the market reaches a break-even point. Until this happens, the private sector’s involvement remains limited – it’s simply a waiting game.
Daniela Urias is a New York based Analyst with Inframation North America, focused on Power and Energy. Inframation is a sister publication to Mergermarket under the Acuris umbrella. Inframation provides real time financing, trading news and data for the global infrastructure and energy sectors.
Source : forbes
