Electric Vehicle charging stations have one fundamental problem today; they are most often not profitable. This makes deployment contingent on government grants, corporate sponsorship, or an exceptionally long-term financial view. As we discovered in the solar industry, it is profits that make the industry take off. Dependence on government grants and other incentives, while appropriate and necessary in the early stages of a new industry, will eventually act to constrain and bridle growth.
This inability to create a profit is often blamed on low utilization rates. But at V E L O C E E N E R G Y , we do not expect utilization rates to reach over 20% to 25% for most stations, and to be around 15% usually. (Think about gas station utilization. People fill their cars during the morning and late afternoon rush, with a sub-peak at lunch. Almost no one fills up at 1 AM. The utilization percentage is in the teens.) We believe we need to create the opportunity for profitability with a utilization of anything over 10%.
If we cannot artificially increase utilization, and we cannot raise the ‘price to charge’ to the point where it is not competitive against gasoline, then we need to reduce the Total Cost of Ownership (TCO). TCO is made up of the cost of purchasing and installing the system, with operating costs over the long term. Breaking the components of TCO down further, we have the following costs:
· Connection to the utility. There is also a time component, which adds indirect costs. This includes engineering, permitting, and construction of any utility upgrades required. Some utilities pay for this “make-ready” work, but most charge for it one way or another.
· Station hardware. Not just the chargers, but transformers, distribution equipment, meters, etc.
· Installation. Engineering design, then supervision and performance of all the work of construction including cutting the surface (usually concrete or asphalt) and digging up the entire site, then putting in all the underground works, burying it, pouring concrete, and finally wiring it together.
· Operation. Utility demand charges often represent the most significant operating cost impact on a low utilization station.
V E L O C E E N E R G Y is developing products and an overall system architecture to address each of these areas. We will immediately be delivering cost-savings for many sites. Our two-year road map sets a target of a 50% reduction of TCO. More about how we will do that in a later post.