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Charging electric cars

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Electric vehicles are rolling off assembly lines – but what about the charging infrastructure? Gil Forer reports.

As growing numbers of plug-in electric and battery-electric car models are produced globally by established and emerging manufacturers, the moment of truth for electric vehicles has come.

A variety of charging infrastructure solutions are being piloted or deployed by private companies, governments and public-private partnerships to meet expected demand and enable further EV adoption. These include battery swapping stations, public fast-charging and home-based charging solutions.

Start-ups to multinationals are entering the charging market. Pike Research predicts the market for charging equipment alone will reach US$4.3 billion by 2017. Most players see an even bigger opportunity from the plugged-in nature of electric vehicles – the ability to provide services like vehicle-to-grid, vehicle-to-home, telematics (tracking vehicles on the move) and smart transportation solutions.

Billion-dollar bets are being made on the electric vehicle as a platform for innovative business models.

Utilities face a number of questions

  • EVs are coming – are you ready for the infrastructure and charging demands?
  • Have you thought about how EVs will enable (and require) you to relate to customers in a new way?
  • What role do you want to play in the charging market and related new business models?

Deciphering the value chain

We have identified 143 companies globally with a claim to the emerging EV charging infrastructure. The value chain's configuration is still unclear though.


EV-charging business models

EV-charging business models

EV-charging business models

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To understand this, we analyzed these companies and chose 18 business activities grouped to develop five potential business strategies. These (shown on the graph below) are at different levels of complexity, with different risks and rewards.

As we see in Figure: EV-charging business models, although smart grid and infrastructure management has traditionally been a utilities area, new entrants classified as gridmasters and guardians are moving in. It's decision time: do you want to compete for these roles, co-operate with new players or, more likely, do both?'

With different barriers to entry, the five business strategies will mature at different rates. Some companies want to operate in several at once, or even be active in all, such as Better Place.

Segmenting 143 business strategies brought several findings, which we explore in our report, Beyond the plug: finding value in the emerging electric vehicle charging ecosystem


Michigan's plug-in EV collaboration

DTE's experience: Michigan's plug-in EV collaboration

Michigan's Public Service Commission established a state-wide task force, including the utility DTE, to make charger installations and the transition to EVs as straightforward as possible for the customer.

It set up home-based charging systems to accustom customers to off-peak home charging, with plans for public charging stations later. It also helped discussion between regulators and utilities so they could make prudent investments to the grid, with some certainty of recovery.

DTE estimates that excess night-time capacity will mean a 10% increase in load will only require a 4% increase in energy generation. Ongoing feedback from early EV adopters has helped it see which transformers are most likely to be affected.

Addressing the distribution circuits in need of upgrading is one unresolved issue, as are incentives for the utility to continue installing chargers after completing installation of the 2,500 free home chargers.


Charging infrastructure in key markets

Growth of the EV charging infrastructure will be an exciting stage in the vehicle electrification process.

We explored the perspective of three key automotive markets (the US, Germany and China), through our Ignition Sessions, which bring together a diverse stakeholder group to debate opportunities and challenges facing an aspect of the cleantech industry. In 2011, we covered electric vehicles for the second year running, as they shift from concept to product – a defining moment for the industry.

In our discussions about infrastructure in Detroit, Bonn and Beijing, opinion varied widely, especially about unconventional ownership, charging and services business models to spur growth.

Participants generally agreed on steps to boost EV take-up, like better and cheaper batteries and global standards for batteries and chargers. Europeans appeared more satisfied though than their Chinese and North American peers about the whole coming together through creative partnership between utilities, OEMs and integrators.

The US

  • In Detroit, attendees underscored the need to fill gaps between who manages, owns and pays for the charging station. Key issues were seen as business models, collaboration across sectors and rollout challenges. Opinions were mixed as to how much public infrastructure is needed.
  • Different business models will emerge to meet contrasting needs, as the automaking and utility industries overturn the long cycle times and planning and control approach from a different era.
  • Utilities' needs will vary depending on whether a local utility is regulated; required to break even on investments; must convince public utility commissions before it can spend capital; or competes to sell electricity, they said.

Germany

  • New business models were a hot topic in the Bonn session, where participants focused on financing, charging and use packages that might push industry growth.
  • Several current financing business models were suggested, including EV leasing services (similar to car dealerships) and monthly packages including car, battery and charger.
  • For charging, the cell phone pricing model was discussed repeatedly for EV pay-as-you-use options, or bundled, unlimited monthly services on a subscription basis.

China

  • To accelerate EV deployment, Chinese participants focused on the powerful role of government and state-run utilities in infrastructure, broader international R&D collaboration, a better business case, and initiatives like showcasing successful projects.
  • Although Chinese EV infrastructure rollouts are slow and varied, the lack of a clear business case for investment – especially for utilities, which take the most risk – preoccupied participants. A participant from a large Chinese utility said utilities are already stretched meeting China's core electricity needs. Developing China's grid is therefore an economic need.

Conclusion

The rise of EVs will involve developing a substantial amount of new infrastructure. While charging solutions will vary from market to market – with multiple solutions most likely – all will drive new customer relationships and service opportunities. A number of new players are entering the EV charging value chain, like equipment manufacturers, software, networking and consumer electronics companies.

The role of utilities will vary in the charging market, depending on area, regulatory environment and ambition, but, as power provider and primary contact point for consumers, it is an essential one.

The adoption of EVs and the related rollout of the charging infrastructure could be a huge social, political and economic change, every bit as important as the introduction of the internal combustion-powered automobile.

For success, more cross-sector collaboration is needed, especially between original equipment manufacturers and power providers, to enable efficient EV rollouts.

Utilities need proper incentives to make the best investment in EV enablement, and regulators must allow them to test demand and grid impact and gauge new business models in their communities. As Michigan's experience demonstrates, the greatest success comes when utilities and regulators work together toward an EV future.

For more information


Finding value in the electric vehicle charging ecosystemBeyond the plug: finding value in the emerging electric vehicle charging ecosystem

Moment_of_TruthCleantech matters: moment of truth for transportation electrification

Our 2011 global Ignition Sessions report.



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Gil Forer

Gil Forer

Global Cleantech Leader
Tel: +1 212 773 0335
gil.forer@ey.com

Gil Forer
Gil oversees the strategic development, implementation and management of our Global Cleantech Center globally. He is also responsible for building and managing our relationships with venture capital firms and other key cleantech market stakeholders.
Download Plug in April 2012 as a printable document

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