THE POWERFUL COMPLEXITY OF CHARGING STATIONS.
The mad dash to electrify travel EV sales are expected to surge in the coming years, but a dominant business model for charging stations has yet to emerge
When Josipa Petrunic pulls up to a charging station in her electric vehicle, it’s always a maddening process to figure out which one of the half dozen apps on her phone to open so she can recharge her car battery.
“I have five different applications and they all have my credit card and I don’t know who runs the charger in (any) parking lot,” Petrunic, president of the Canadian Urban Transit Research and Innovation Consortium, told the Financial Post. “It’s kind of inefficient and at some point, there’s going to have to be an amalgamation.”
It’s a mundane symptom of a problem with far reaching consequences for car culture in Canada. Electric vehicles sales are expected to surge in the coming years, and yet the country faces a massive deficit of charging stations to support this transition. A slew of entities including startups, utilities and fossil fuel companies are competing to grab a piece of this burgeoning market, but a dominant business model has yet to emerge, and when it does it could determine how much it costs to take EVS on long road trips or quickly recharge at public stations.
The electricity market is different in each province, but many are highly fractured with different companies responsible for generation, transmission and distribution.
“You can imagine if everyone on that chain has to make a profit that electron becomes very expensive by the time it comes to you,” said Petrunic.
Of course, she and others estimate that 80 to 95 per cent of EV owners can charge at home in garages or parking spots accessible to a charger. Of course this wouldn’t be practical for longer road trips, but it would help offset any potentially higher cost of charging at public stations and help lower the overall cost of operating an electric vehicle.
Petrunic pointed out people without access to parking at their home, who rely on rapid public charging, which can take as little as 20 minutes compared to hours at a residential unit, may shift their driving habits, or even their car purchases if public charging rates rise too high.
Since 2015, the Canadian government has invested over $1 billion to build out infrastructure, and provide tax writeoffs and incentives to make electric vehicles more affordable. Currently, around 6,000 charging stations scattered across Canada support the estimated two to three per cent of vehicles on the road that are electric.
In June, the Federal Liberals sped up the deadline, to 2035 from 2040, for when all new vehicles sales must be zero-emission, meaning tens of millions of what are expected to be largely battery powered electric cars, will hit the road in coming years.
So far, the cost of constructing charging stations, and also the cost of rapidly charging a battery at a public station, has been subsidized by government and by support from automakers, which have promoted electric cars as cheaper to operate than conventional gasoline burning cars, and have sometimes tabled generous proposals that reduced the cost of charging.
No one expects these subsidies to last. Tesla Inc. initially offered buyers unlimited free supercharging — its term for rapid charging at public stations — for the lifetime of the vehicle; and then in 2017, it reduced its incentive to enough free charging to enable about 1,000 miles of driving per year; but in 2020, Tesla founder Elon Musk acknowledged such freebies weren’t “sustainable” and signalled the end of the programs.
But now other global automakers are taking a page from Tesla’s playbook, and in June, General Motors Corp.’ Chevrolet announced its “everybody in” initiative: It is offering a $750 credit toward charging at public stations in the network of Quebec City-based FLO, a startup that claims it offers the largest number of stations in Canada.
“I cannot share the way the partnership is structured,” Louis Tremblay, chief executive of FLO told the Financial Post. “But at the end of the day someone from GM ... has different marketing materials he can leverage, one is get three years of free charging in the FLO network.”
“Again, I’m a for-profit company so you can guess the details,” he added.
FLO, a private company backed by two Quebec pensions and a group of U.s.-based utilities, among others, does not disclose its revenues or profits.
Tremblay said that while his company derives some revenue from managing public stations on behalf of cities and retailers, in the form of management fees and transactional fees, this is a tiny portion of its overall revenue at present.
Most of its revenues come from the sale and installation of chargers, which the company manufactures at a plant in Shawinigan, Que., and sells to residential customers, offices, businesses and municipalities and companies, he said.
A typical home unit costs $1,200 while a unit for an office building can cost $4,500. Plus, there are installation costs which range from $300 to $5,000.
The company has already manufactured 45,000 chargers, and is expecting 40 per cent growth per year for the foreseeable future. In June, the company announced it was leasing an additional 26,000 square feet and a second plant in Shawinigan to support greater production capacity, citing higher demand for fast-charging and curbside charging station equipment.
“The business model needs to be figured out,” said Tremblay, adding, “But definitely it’s going to be a profitable business model — it’s the fuelling network of the future, or of today.”
Adding another wrinkle to the business, new regulations on clean fuel standards and the carbon tax plus investor pressure on companies to improve their environmental records means that operating charging stations can provide other tax benefits and credits that incentivize companies to look at the space.
Suncor Energy Inc.’s Petro Canada, for example, is one oil company that has traditionally operated gas stations, and is now dabbling with electric vehicle charging stations. Several years ago, it built 57 charging stations across Canada.
Pat Ritchie, vice-president of sales and marketing for Suncor in Mississauga, Ont., said the initial 57 stations were a pilot project to learn about the business model. The coronavirus pandemic upended travel patterns, he said, and disrupted some of that learning although the company still plans to build more charging stations in the future.
“This is going to be how Canadians move around Canada,” said Ritchie, about electric vehicles. “I’m pretty certain of that, so we will definitely be participating.”
In the background, many other companies from startups similar to FLO, such as Calif.-based Chargepoint Inc. to utilities such as Hydro-québec have been installing public charging stations.
Many automakers are striking partnerships that allow drivers of their vehicles to access charging networks operated by private companies such as FLO or Chargepoint, and those companies are forging “roaming” agreements with each other. That should eventually allow drivers to recharge at any public station without having to download multiple apps.
And automakers that are building charging stations, are increasingly opening them to all vehicle makes. Electrify Canada, an offshoot of Volkswagen Group Canada, already operates 32 stations in Canada, and aims to reach 100 by 2025.
“Our business model is we put our charging stations at locations ... where we see EV growth and traffic,” said Mike Moran, communications lead for Electrify Canada. “And we work with site hosts, to find locations that we can bring in utilities.”
Tremblay, the chief executive of FLO, said that given all the data on driving habits available today, companies operating public charging stations will find the price point that allows companies to make profits, and for drivers to take road trips and car culture as we know it to continue.
He predicted there would be consolidation in the future, and three to five major companies would eventually control most of the North American market.
Tremblay also said that while the business model is still being figured out, his company has achieved a type of vertical integration by manufacturing and installing charging units, and managing public stations. Funding is readily available and he saw no need to subject his company to the pressures of a listing on a public marketplace.
“Public is just another means to get funding to grow,” said Tremblay. “I’m a for-profit guy but again this is a long-term investment, and everyone needs to be patient because again this market is just starting.”