MOVING TO EV CHARGING 2.0
Do you drive an electric vehicle or know someone who does? A question that has long bugged most EV drivers is: “Why am I still using dirty energy to charge my clean vehicle?” That’s one step forward and at least one step back. We can do better. We can finally change this.
Today’s EV Charging is Version 1.0
The grid is our primary source of energy. This is why 99%+ of the 50,000 EV chargers available for public use today rely on the grid. These chargers are relatively easy and inexpensive to install. State and local governments, and businesses that want to offer EV charging have long had an easy button to press: simply buy chargers and plug them into the grid. We’ve bought easy and affordable at the price of increased GHG emissions and grid fragility. I call this EV charging version 1.0. As with all first versions, something is better than nothing…and there’s plenty of room for improvement.
Moving Towards EV Charging 2.0
EV charging version 2.0 focuses on renewable energy as the primary energy source for EV chargers. This just makes sense. Clean cars should be powered by clean energy. Imagine a scenario where solar arrays feed onsite batteries to dispense clean energy to EV chargers. The more renewable energy infrastructure is used, the more GHG emissions are avoided and the more the grid is protected. If sufficient renewable energy capacity is built to support EV charging demand at specific locations, the cost of this energy can be near nil.
Let’s push the boundaries of EV charging 2.0 further. Utility pricing for daytime use ranges between $0.07 and $0.28 per kWh. The customer price range for EV charging is between $0.29 to $0.49 per kWh. Solar generated electricity is around $0.03 cents per kWh. If privately owned land, such as a parking lot that hosts retail shops, hosted the renewable energy powered EV chargers, then at a near nil energy cost, the real estate host could collect a fee including the asset payment and applicable taxes yet still profit. Producing electricity for $0.03 and selling it for $0.30 is a 900% profit. For comparison, the profit for gas distributors is around 17%.
Solving the Elephant in the Room: Infrastructure Investment
There is a sizeable obstacle to bringing version 2.0 to life: infrastructure investment. All second iterations have this cost. Think about the tipping point when cars first became readily accessible to people: the Ford Model T. You could have any car color you chose, as long as you chose black. Investment in new assembly lines, which became the lifeblood for generations of American workers, moved us to a world with both greater abundance of cars and choice of car colors. Or consider when we moved from accessing the internet from AOL disks received in the mail. You could get online, for a price, and access AOL’s “walled garden” of content. Investment was needed to move us to Internet 2.0, where accessing the internet became free and commerce was done beyond AOL’s content. Hard to argue that the second versions of mass-produced vehicles and mass accessibility to the internet wasn’t a significant improvement over their version 1.0 predecessors.
In our conversations with various states, we’ve been made aware of many state agencies developing their own GHG emission reduction plans. Using renewable energy infrastructure to power EV chargers would also be a useful step to take to reduce GHG emissions.
That’s the intellectual argument for moving from EV charging version 1.0 to 2.0.
But what about the practical argument: who will pay for this infrastructure and how will they find the investment capital?
Installation of renewable energy infrastructure requires a larger investment than simply buying and installing grid-tied EV chargers. Depending on the amount of energy capacity needed at a specific site, the renewable energy infrastructure could cost $2.5 million or more per megawatt. The energy cost savings over say 10 years of a renewable energy powered EV charging site isn’t greater than the renewable energy infrastructure that’s needed to be installed. Something more is needed to make EV charging 2.0 a financial reality.
That’s where the public and private sectors – specifically companies that focus on specialty finance – fill this gap. First the public sector. Over the past couple years, the Federal government has made several billion dollars available to states to install EV charging stations in strategic places. In addition, the newly passed Inflation Reduction Act of 2022 sets the Solar Investment Tax Credit (ITC) at 30 percent for renewable energy infrastructure projects through the next 10 years. In addition to the ITC, there are various state and local level incentives for low carbon projects and projects that focus on development in disadvantaged communities (DACs) to further help reduce the project cost to install renewable energy infrastructure.
However you have to pay taxes to claim a tax credit. This is the main challenge with the ITC, since tax exempt entities, such as states and local municipalities, and near tax exempt entities, mainly real estate investment trusts, would otherwise make excellent charging site host partners. So that’s a significant coupon that these entities can’t access…until now. Our company, Charge-Zero, is the first specialty finance company in the US specifically focused on turning those hefty renewable energy infrastructure coupons into discounts that tax exempt entities can use. We work with well-known financial institutions to use these tax credits and related tax deductions to lower infrastructure costs for tax exempt and related organizations. Finally consider the number of jobs that will be created to install renewable energy infrastructure across the country. Employment is an economic incentive that we all can understand.
EV charging 1.0 played a vital role in the increased adoption of electric vehicles. For example, they have calmed the range anxiety that I – and I’m certain many readers – have had to work through to use an EV. Grid-tied EV chargers still have a role to play in version 2.0. Not every site will have the space to host solar and battery equipment. The benefits of version 2.0 are significant. There are levers to lower the infrastructure costs to pave the way to 2.0. Now is the time to take the leap of faith to move to 2.0. Companies like ours are ready to work with your organization to address the infrastructure costs needed to access the benefits of powering clean vehicles with clean, redundant energy.
Eric Lowitt is a general partner of Charge-Zero. He is a sustainability and business strategy thought leader, the author of two books and dozens of articles on this topic. He has worked with elected leaders in both the US and the EU to create constructive policy to support clean infrastructure and has advised CEOs and senior business leaders during their journeys to adopt sustainability into their business strategies. He can be reached at eric@charge-zero.com.
