Starting a business in a new and rapidly evolving market always comes with significant risk. That’s especially the case when it comes to electric vehicle charging stations. The industry barely existed five years ago, but it’s quickly become a key component of future plans for renewable energy-based transportation.
But owning and operating a public EV charging station definitely isn’t a way to get rich quick. These specialized pieces of electrical infrastructure require reinforced construction and specialized equipment like locking electrical junction boxes. Moreover, they have a lot of differences from established business models like gas stations.
Let’s take a look at the business fundamentals behind owning an EV charging station below.
Why EV Charging Stations Aren’t Like Gas Stations
Gas stations, since they serve an ostensibly similar purpose to consumers, are a tempting point of reference when discussing the EV charging business. But the two are so dissimilar in practice that it’s not a very useful comparison.
- Consumers can’t build gas pumps in their homes, but they can install EV chargers. The overwhelming majority of EV owners charge their vehicles primarily at home because they rarely get anywhere close to running out of battery charge during their daily activities. An average commuter might only need a public charger a handful of times per year.
- Gas stations have a constant stream of customers who rarely stay longer than a few minutes. Even the ultra-fast Level 3 EV chargers require approximately 30 minutes to one hour to charge an EV battery to 80 percent capacity. Thus, even in areas where demand can support them, EV charging stations need large numbers of chargers to be useful.
- EV charging stations that operate as businesses must often charge many times over what they pay for electricity to make a profit. That means consumers will rarely “top off” at these stations, as one might do at a gas station, and will instead opt to pay a normal rate at home. Only drivers who don’t have another choice will use a charging station.
Thus, it’s essential to evaluate the business perspective on EV charging stations from the ground up. First, it’s time to look at how much they cost to build.
The Cost of Building EV Charging Stations
EV charging stations are expensive to build and maintain. A single Level 2 charger costs, on average, between $6,000 and $10,000 to install. High-speed Level 3 chargers often cost as much as $50,000 due to the specialized high voltage charging equipment they require.
Protecting and maintaining an EV charging station is also not cheap. Maintenance on Level 2 chargers can cost around $300, while Level 3 chargers might require $2,000 or $3,000 annually. These numbers are also unpredictable due to the extreme wear and tear that public amenities receive.
In areas prone to flooding and other extreme weather conditions, EV charging stations also need serious protection like NEMA 6P enclosures and reinforced structural elements. All of these needs add up to high upfront costs that will often be difficult to recoup using a gas station model.
State of the EV Charging Market
The public EV charging market currently operates on a handful of different business models. Companies like EVgo are the closest to a traditional gas station model, and a series of them have recently gone public. But these companies all have diversified models that emphasize sales to businesses and institutions.
ChargePoint, to name another highly valued example, doesn’t perform the day-to-day business of selling electricity. Instead, they offer EV charger installation and maintenance as a service to other businesses that own the stations. This approach allows ChargePoint to minimize its ongoing liability for charging as a business and focus on infrastructure.
The mom-and-pop small business selling public EV charging is generally not a model that the current market will support, according to recent studies. Rather, the dominant players in this field will continue to be infrastructure companies that build EV chargers for other entities.
EV Charging in the Next Five Years
The major automakers kicked off the 2020s with big expansions in their EV lineups. So, we know that many new EVs are on the way, and that they’ll arrive accompanied by the marketing muscle of auto industry giants.
However, it’s still unlikely that the gas station model will come to dominate the EV charging market any time soon. Instead, we’ll probably see increasing numbers of EV chargers installed in apartment buildings, hotels, workplaces, parking garages, and other centralized locations. As businesses move to electrify their fleets, we’ll also see them installing and maintaining in-house EV stations.
Other types of businesses and public entities will find new ways to roll EV charging into the services they currently offer. Hotels and condo buildings will add EV charging as an amenity, and employers will offer it as a perk. Towns and cities will also continue to add free or low-cost public EV chargers as part of their commitments to green infrastructure.
The Future Horizons of EV Charging
Technological advances will doubtless push EV charging in new and unexpected directions, as happens with all young technologies. Some of these advances will likely create new business models within the industry that will open different avenues of possibility for EV charging as a profitable enterprise.
The push for public money behind EV charging will have a significant long-term effect on the development of EV charging business models. If the U.S. government commits to major funding of EV charging, expect to see further advances in business models that emphasize public-private partnerships.
On a related note, it’s important to consider the role that the rollout of electric cars in China will have on the future of EV charging. The Chinese government is aggressively funding EV charging infrastructure in quantities that dwarf those in the U.S. As China’s EV charging market grows, it will be interesting to see which of its successful technologies cross over to the U.S. market.
Although EV charging is still in its infancy, the industry is growing up fast. Those who make smart investments now will reap the rewards of the coming transition to electric cars, but it’s important to be aware of just how different successful business models will look from what’s come before.
