Utilities could also support the evolution and deployment of software required to modulate charging rates or shift charging events to provide grid services. However, we note that developing the infrastructure and smart grid is an ambitious goal, especially as market demand and return on investment expectations are not well understood.
To compete, utilities can explore partnerships with a variety of ecosystem players, such as oil and gas companies, technology providers, charging location owners, infrastructure operators, service providers, vehicle users, mobility providers, financial services and leasing companies. We have grouped potential opportunities into four main categories:
1. EV batteries and vehicles
In the short term, corporates wanting to explore how to procure an EV fleet may find it more attractive to lease instead of purchase, while the economics grow more favorable. A few EV and original equipment manufacturers are also offering the option to purchase a vehicle and separately lease the battery — which typically needs to be replaced after 7 to 10 years — as a new business model. These leasing agreements are generally packaged with a warranty and battery replacement contracts, to make the most expensive component in an EV today cheaper to afford up front. Additionally, third-party players have started to develop battery-as-a-service business models that are geared toward bringing more moderately priced battery replacement solutions to the market.
There are also opportunities in repurposing and recycling EV batteries. After a typical EV battery is removed, 50% to 70% of the power capacity is retained, which could be repurposed for tasks such as power backup, renewable energy storage and grid stabilization. After these second-life actions, recycling is the final stage. By 2025, about 75% of EV batteries will be reused and recycled to harvest raw material, with commercial vehicles presenting the largest opportunity.2
2. Charging stations
Although many infrastructure operators exist in the US, a standard business model has yet to be established for EV charging stations. Overall, the EV supply equipment (EVSE) vendor landscape is in flux, with numerous acquisitions, cross-industry investments and technological advancements in progress. Utilities, oil majors, network operators, software developers, etc., are becoming active in the market, to gain early-mover advantage.
Requirements for commercial and industrial charging infrastructure vary greatly, based on region and utility market structure. This presents an opportunity for utilities to help fleet operators evaluate and develop charging station strategies. Installation services will serve as the primary revenue driver.
Many utilities offer special tariffs or plans for the retail of electricity for EV charging. Operators of charging networks typically provide charging station hardware, cloud-based software services, technical support and other EVSE management services, such as payment processing. Utilities and EVSE operators should focus on smart charging capabilities and their evolution, such as vehicle-to-grid charging.