4 minute read 27 Feb 2023
Charging of electric vehicles at workplace destination

How charging infrastructure can drive the eMobility wave

Andreas Oulie Kirkerød
By Andreas Oulie Kirkerød

Senior Manager, EY-Parthenon Strategy & Operations, EY Norway

Senior Manager focusing on strategy and transactions based in Oslo, Norway.

4 minute read 27 Feb 2023
Related topics Advanced Manufacturing eMobility Automotive retail transformation Strategy by EY-Parthenon Transportation
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  • How charging infrastructure can drive the eMobility wave - September 2022

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To realize the opportunities in the charging space, industry stakeholders will need to plan and cooperate to a larger extent than before.

In brief

  • The market for EV chargers has reached a tipping point, and is now profitable
  • Key to unlock the growth is a customer centric approach, understanding the need for compatibility across use-cases and geographies
  • This requires successful coordination among industry stakeholders, to overcome hurdles in the infrastructure and roll out of technology

Due to the growing presence of electric vehicles, the demand for chargers is expected to grow rapidly. In 2022 more than 1/5 of new vehicle registration in Europe was electric. While EV’s represent only 1,5% of Europe’s total 326 million vehicle park today, EY analysts predict the EV share will grow to 65 million by 2030, and double to 130 million by 2035. This represents a need in chargers in Europe from 374k today, to 65M in 2035, an impressive 45% CAGR. Currently, more than 86% of new cars sold in Norway are electric, and by 2030 it is expected that 33% of the car fleet in Scandinavia is electric. 

The volume of EVs has reached a tipping point, and it is now profitable to invest in chargers. This was not the case three years ago. However, the size of the investments limits the stakeholders capable of participating to Private Equity, Utility, Oil & Gas, Charge Point Operators (CPOs) and Governments.

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Both regular charging and fast charging, if paced adequately, can yield 25-35% but with different Revenues and NPV economics/charging point.
A graph showing metrics for regular charger vs fast and ultra fast charger

Source: EY-Parthenon Analysis, 2021

Although the investments are sizable, if rolled out adequately, the investments are expected to yield IRR of ~25-35%, with payback of 4-5 years depending on regular or fast charging focus, numbers that will only increase the next 10 years. As a result of the improved business case, there is growing interest from infrastructure funds to invest in charging infrastructure. 

There are several strong business cases for charging solutions. However, different types of charging infrastructure, whether is for home or work, public or destination, have different success factors and require various levels of public support, intervention and coordination to secure sufficient infrastructure and compatibility of standards. 

The home market will be a key business case, with 85% of the charger demand expected to be for home usage. Here, Utilities, with their existing infrastructure and built-in customer base are well positioned to gain a competitive advantage by moving early. However, key questions remain regarding how long they want to have an active role given that the consolidation has already started, and who will solve the problem with network capacity.

Customers want to be able to charge their EVs with ease, for example over night at home or at work.
Andreas Oulie Kirkerød
Senior Manager, EY-Parthenon Strategy & Operations, EY Norway

In the workplace and destination market, CPOs are well positioned to win as they can leverage their flexibility and ability to industrialize. However, this segment is also the most complex as it requires coordination between retailers, hospitality, city parking lots and workplace parking lots. Professional CPOs have the strongest capabilities to manage both the electricity and the financial flows. The workplaces and destinations can choose to partner with CPOs in several ways, with revenue splits depending on how the partnership is structured. CPOs, on their part, can provide the one-stop-shop approach that consumers want. 

Additional business cases include highway rest stops and on-street parking. Both old players (oil & gas), with existing infrastructure, and new (CPO) players with their know-how are well-positioned to take a dip into highway charging infrastructure. However, it is also a value pool that requires investors with deeper pockets. Chargers need to be more powerful (to meet consumer demands for shorter charging times) and thus are more expensive, especially with heavier segments entering the roads. 

Finally, on-street parking will require local governments to step up. Street charging is the hardest charging option to build a business case, largely given the mismatch between length of stay and duration of charge. It also presents the highest operation and installation costs of all the charging types. Local governments can partner with CPOs or other qualified charging infrastructure professionals to install, manage, and maintain the charging infrastructure using concession-like business models.

Large players are already entering the fray through a series of acquisitions and partnerships along the EV charging infrastructure value chain in several countries. Utilities, oil & gas companies, private equity players and highway infrastructure companies are the most prominent incumbents to buy their way into the charging infrastructure market. These acquisitions create an ecosystem including both historical players and CPOs, that offer differentiated value to a variety of customers.  

The competitive advantage of building a robust customer base early extends beyond the constant flow of service fees generated. Early entrants into the EV charging market will gain a strong advantage over the late joiners, have the foundation to make further investments and be able to build opportunities for cross-selling to establish long-term stable relationships with their customers. Moreover, given the growth of EVs and complex business models, there is a case for intervention and coordination.

For charging infrastructure to accelerate at the speed at which eMobility is traveling, there is a need for non-negotiable intervention and coordination among a variety of stakeholders.

Examples of coordination include 

  • Effective local government intervention to make real estate available and fast-track permits for charger installation.
  • Grid connection and power network strengthening. Delays (as long as three years in some European countries) and disagreements on who should bear the cost are hampering progress.
  • Interoperability among charger networks. An absence of common standards (hardware and software) restricts user choice about where to charge and how to pay. 

Greater cooperation across supporting ecosystems can address some of these challenges. For example, CPOs should collaborate with city planners, local authorities, and administrative functions to ensure that infrastructure is sited in the right locations, where it will get the highest usage, make the greatest environmental return on investment and deliver maximum convenience to the customer. Distribution system operators (DSOs) and governments need to plan investments in advance to prepare the grid, build resilience and accelerate the process for connection. At the same time, local authorities need to develop an infrastructure plan that oversees a plethora of opportunities, supporting and incentivizing investments where the demand will be high, and the charging infrastructure is underrepresented.

Without acceptable availability and reliability of chargers, and the power to support it, there is a risk of derailing the current ambitions. Getting the fundamentals right is critical. The eMobility system designed today needs to serve everyone well into the future, and industry stakeholders need to come together too: 

  • Forecast EV adoption and design an infrastructure scheme.
  • Plan and effectively implement distribution, digital, IT and grid infrastructure investments in ways that promote greater EV adoption.
  • Simplify local authority approval processes for installing charging infrastructure.
  • Promote and facilitate faster and more cost-effective grid connections for EV chargers.
  • Enable load balancing of the grid to maximize available electricity for EV charging.
  • Collaborate to achieve interoperability across charger networks.

The vision of a fully integrated and automated future of connected eMobility is close to becoming a reality.  It’s time for industry players to get together and make it happen.

 

Author: Andreas Oulie Kirkerød

Contributor: Daniel H. Pedersen

Summary

Customers want flexibility and compatibility to ensure they can charge their EVs when they need to, at the speed they want. To ensure the successful roll out of a holistic charging infrastructure, and to capture the demand inherent in the current growth, industry stakeholders need to come together to plan and coordinate the successful implementation and interoperability of the EV-charging network.

About this article

Andreas Oulie Kirkerød
By Andreas Oulie Kirkerød

Senior Manager, EY-Parthenon Strategy & Operations, EY Norway

Senior Manager focusing on strategy and transactions based in Oslo, Norway.

Related topics Advanced Manufacturing eMobility Automotive retail transformation Strategy by EY-Parthenon Transportation
Upvote