A future where electric-car owners can charge up in minutes using public fast-charging stations at malls and grocery stores around the U.S. is in jeopardy, due to the high demand charges slapped onto bills by utilities.
That’s according to a new report published Thursday by the nonprofit research group the Rocky Mountain Institute (RMI). The report examined the charging and billing data from 230 public fast-charging stations operated by EVgo, the largest public electric-car charging company in the U.S.
The report, which was funded by EVgo, found that utility demand charges are “a significant barrier to the development of viable business models for public DCFC [direct current fast charger] network operators.”
RMI's Chris Nelder said in an interview with Greentech Media that “fast public chargers basically don’t have a real business case.”
The findings are important because many other companies like Tesla and ChargePoint are also trying to build public electric-car fast charging networks around the U.S. In order to make public electric-car charging continue to exist, the rate structure needs to be changed to make the economics work.
The companies should be able sell electricity to electric-car owners for 9 cents per mile or less, says the report. At that price, the public fast chargers would be competitive with gasoline.
But the infrastructure companies struggle to hit that price because of their rate structures.
Demand charges are fees that were originally created to help utilities charge big commercial companies, office buildings and industrial facilities when they have a large spike in electricity use, far above the norm. These types of users are asking a lot of the power grid to gain that much more electricity, and are often willing to pay for the unusual use pattern.
However, small electric-car chargers, like ones operated by EVgo, are also being hit with these major demand charges. One electric-car charger could deliver little electricity in a month, but could have one customer plug in for 30 minutes, and get hit with an exorbitant demand charge.
In one example in the Rocky Mountain Institute’s report, EVgo had a charger that generated a monthly bill of $1,938, of which $1,362 was demand charges. That’s likely a very unprofitable charger.
The good news is that the issue is being addressed, at least in a few regions in California.
Regulators at the California Public Utilities Commission have pushed two California utilities -- Southern California Edison and San Diego Gas & Electric -- to propose new rate designs that significantly reduce the burden of the demand charges on public fast-chargers.
Southern California Edison and San Diego Gas & Electric submitted their new proposals in January, and down the road the regulators could adopt the new rate structures. Pacific Gas & Electric has not yet submitted a proposal.
Looking again at that very unprofitable charger, RMI found that the utilities’ new proposed rates could turn the economics of the infrastructure around. Without the demand charge, the charger understandably had a much lower monthly bill.
The report suggests that other utilities in California and around the U.S. should adopt these types of newly designed rates that eliminate or reduce demand charges in order to improve the business case for public fast charging. States that support the proliferation of electric cars, as California does, have a social objective as well.
At the end of the day, the charging companies need to sell electricity for around 9 cents per mile or less to compete with gasoline. If they can’t do that, then public fast chargers can’t be a profitable business.
A company like Tesla, which makes most of its revenue off of manufacturing and selling electric cars, could still justify building out chargers as a supplemental business. But standalone public charging station companies could really struggle.
“It’s like telling everyone to drive, but none of the gas stations can turn a profit,” said Nelder.