Proceed with caution: charging for EV charging

ChargePoint President and CEO Pat Romano on the danger that high fees for public charging could pose to the industry.

ChargePoint (formally known as Coulomb Technologies) does not install, own, or set rates for EV charging stations – although it often gets confused with companies that do.

ChargePoint provides a broad-based, open network for EV charging station management and administration. As an open, standards-based platform, ChargePoint is compatible with charging stations from many manufacturers. It claims the title of largest online network of independently owned charging stations in the world, with almost 9,000 charging spots and “a lot more” in the pipeline.

Working with all that usage data gives Pat Romano, ChargePoint President and CEO, unique insight into shifting trends. His biggest concern for the future: lack of understanding of the issues around charging for charging. “Given the size of our network we are starting to see issues emerge.”

Like many others in the industry, Mr. Romano is concerned with the political nature of EV discussions. The industry tends to be at the center of a lot of unnecessary debate.

“It is the most maligned successful industry I’ve ever seen. I think all of us have a responsibility to not let smoldering fires turn into large ones, and there are some things happening in the pricing area that could potentially hurt the industry as a whole.”

The question is how to think about fees for public charging. Until recently, most of the early companies and cities with public charging stations offered the service for free. Romano sees this situation changing rapidly. “Now that there is real power being dispensed, we’re seeing a concern that people are starting to switch from free to fee.”

 

Charging by time

Many charging station hosts rate their usage fees by the hour, which is problematic. For one thing, Romano explains, all EVs do not have the same capacity to draw power. Some cars draw 3.3 kW, some 6.6 kW, and the J1772 spec will let you go up to 16.6 kW.

“16 kW is a bit impractical because of infrastructure requirements, but you have cars coming out at all places in between. This means charging by time unfairly penalizes drivers of certain cars and really gives an advantage to drivers of other cars.”

To further complicate the hourly-rate model, future energy management and demand management scenarios could result in chargers being instructed to adjust the power they are delivering to a vehicle instantaneously.

“So, if I’m being charged by the time, but San Diego Gas & Electric decides that life is not great right now – it’s three o’clock in the afternoon in August on a hot day – [they] could actually dial down the charging.”

To illustrate the point, Romano poses a simple price analysis. “If you charge a fee of $2.00 per hour, then an EV driver [with 3.3 kW charging] experiences the same price structure as driving a 20 mile per gallon car,” assuming a gas price of $4.00 per gallon and that EVs get about 3 miles per kWh.

“I see numbers that look like that all the time. EV drivers, especially the early ones, are quite educated and quite vocal. They blog a lot. They do the math. In many cases they understand that number better than the business owner who put in the charging station.”

Romano fears this could be “the next football, so to speak, to get kicked around in our industry. If you don’t have a thriving and healthy commercial model, prospective EV buyers’ willingness to purchase is limited.”

“Why should I buy an electric car? You’re getting gouged for the rates commercially.”

 

Charging by kWh

Romano recommends station owners set their rates on a kWh, not hourly, basis. However, in 41 of our 50 states, it is illegal to do so, because utility regulations restrict the resale of electricity.

Back in 2010, ChargePoint, ECOtality, and Better Place successfully lobbied California to exclude EV charging providers from being regulated as if they were utilities. Since then, Colorado, Oregon, Washington, Florida, Minnesota, Maryland, Hawaii, and Illinois (pending the governor’s signature) have followed the lead. If you offer public charging in one of these nine states, Romano recommends you use a per-kWh pricing model, which “completely levels the playing field.”

If you want people to actually use the charging station on a regular basis, he recommends a rate no greater than $0.30 per kWh. “We have a lot of relevant usage data from our network and at [a rate] above $0.30 per kWh, we think you will find usage in a must-charge scenario, but not in topping-off scenarios.” For vehicles with 3.3 kW onboard chargers, this corresponds to a 40 mpg gas equivalent car assuming $4.00/gallon of gasoline.

For those forced to charge on an hourly rate, based on where you operate, Romano says, “you have to be very conscious about how that pricing is being set.”

“For states that don’t allow the sale of EV charging services by the kWh, our recommendation is that if you exceed $1.33 an hour, which is 30 miles per gallon equivalent at 3.3 kW/hour at $4.00 per gallon of gasoline, no one is going to use that station. It would be far more attractive at about $1.00 per hour, which would give that same driver about 40 miles per gallon gas equivalent cost.” However, he suspects many more states will quickly follow the trend and also change their utility regulations.

 

Do you really want to charge for charging services?

Romano insists that, for most, public charging is not about profiting from the sale of power. “At large people have a gas station model on the brain, and EV charging is not about replacing liquid fuel with electrons. When it’s placed in a business, EV charging is about aligning an amenity with your current business.”

“It may be something that you want to profit from in certain scenarios and certain places, like cities and towns replacing parking meters with charging stations. That’s a great scenario where recovering costs and maybe profiting a little from the power is good, but if you’re a retailer, you may not want to charge your customers.” (See our recent feature, The Economics of Free Charging)

Romano sees a future in which Level 2 is the primary means for charging in parking spots where vehicles will spend an hour or so. “Given that, we’ve got to encourage the top-off model, because it really allows us, from an industry perspective, to let cars with reasonable size batteries be practical. If we require cars with very large batteries – if we make that the only way that it’s practical to drive an EV – it will take so many years for the cost structure of those cars to fall into line. We will be waiting for a long time for this thing to hit scale.”

“The only way to hit scale, as an industry, is to make sure that Level 2 is pervasive. And the only way to make sure that Level 2 is pervasive – and used – is to price it effectively, because the EV drivers are doing the basic math.”

 

Issue: AUG/SEP 2012