The future of mobility will be electric, with electric vehicles squarely in the center of climate-friendly transportation options. But as the EV ecosystem evolves, the industry finds itself in a classic chicken-or-egg dilemma: Which comes first, the electric vehicle or the charging station?
EVs require charging—but charging stations in most countries are still relatively few and far between. When consumers consider buying their first EV, therefore, many have “range anxiety”—wondering if they will be stranded on the highway as gas-powered cars sail by. In fact, a June 2021 survey led by Nissan revealed that “56% of European internal combustion engine (ICE) drivers who are not considering buying an EV believe there are not enough charging points.” Simultaneously, potential investors in EV charging points (CPs) or other EV infrastructure are hesitating until more electric vehicles are sold, creating a financing gap.
While many EV drivers use privately funded chargers at home or work, we still expect 20% to 50% of charging to take place on the road and at destination chargers, depending on the region. And according to a recent survey of European EV drivers by NewMotion, 33% of respondents cannot install a CP at home. Without public charging infrastructure, therefore, EV adoption will remain slow. And with the private sector left to its own devices, this dilemma could bring EV markets to a standstill.
As a result, many governments have already stepped into the gap to kick-start the market. Yet they tend to do so without a clear plan or goals, resulting in early stage open-market chaos. Private players may compete wildly in the more profitable urban areas, adopting competing standards and installing incompatible technologies and redundant charging stations, while rural areas and many highways, with a hazier business case, are left bare—risking hundreds of miles of charge-free road for anxious EV owners.
Government orchestration to resolve these issues is thus essential, especially in immature markets. Most governments have yet to design a central, coordinating mechanism and are struggling to achieve a workable infrastructure; instead, their efforts to stimulate the market have primarily focused on passing CO2-related regulations or creating incentives to increase demand for EVs and reduce sales of ICE vehicles. They must now turn their attention to ensuring the appropriate, and timely, availability of charging infrastructure.
To do this, governments should coordinate with players throughout the EV ecosystem to create a master plan for the buildout—including the location, timing, type, and number of CPs. They should communicate the plan’s goals to all stakeholders as clearly as possible. And they should incentivize the buildout of CPs until the private sector is ready to step in, especially along highways or in more sparsely populated areas—locations that are less profitable, but essential.
Only then can the dilemma be resolved, setting the stage for private investment and creating a self-sustaining market structure—one that will be economically viable without subsidies and other government support.
THE CHARGING CONUNDRUM
Electric vehicles reduce the emissions that contribute to climate change and pollution, and they have already begun to cut global reliance on oil and gas: according to the International Council on Clean Transportation, the lifecycle carbon emissions of standard EVs are 66% to 69% lower than those of ICE vehicles in Europe and 37% to 45% lower than those in China (where EVs run on electricity that is less green due to a higher reliance on fossil fuels). In addition, EVs are up to 40% cheaper to run than ICE vehicles and their once prohibitive prices are dropping as the technology matures and the cost of batteries declines.
Nonetheless, range anxiety is slowing EV adoption. Many consumers are hesitant to buy EVs until they know that they will be able to recharge when and where they want. A 2019 global survey of licensed drivers by AlixPartners indicated that 46% of respondents would buy an EV only if charging stations were as common as gas stations.
These low utilization rates early in the market’s development make for a difficult business case, creating a gap in the ability to fund new infrastructure. The difficulty is compounded by the need for a variety of charging options and locations. Most CPs will be slower units installed where owners spend extended periods away from their cars; for example, in homes, offices, shopping malls, and commercial buildings. However, the CPs placed along highways, in short-term parking spaces, and in rural areas—where drivers may stop only to charge their cars en route—must be faster. The business case for these public CPs is particularly hard to make, especially in the early market stages when CPs are not economically feasible: an ultra-fast charger on a highway requires an investment of $100,000 and more, but utilization is still very low.
GOVERNMENT KICK-STARTS AND EARLY STAGE OPEN-MARKET CHAOS
In many countries, governments have responded to this conundrum by kick-starting the market through public funding for charging infrastructure. But they have typically done so without planning the market’s growth, allowing the open market to decide where and what CPs to build.
The results of these early efforts have often been chaotic. In the early stages of Berlin’s program (2010 to 2015), for example, the government launched a variety of subsidies to grow charging infrastructure but failed to establish adequate guidelines or requirements, resulting in underutilized EV charging stations that were not commercially viable.
The EU also failed to establish central coordination, planning, and standardization in the early stages of the market—inadvertently generating CP redundancy and a lack of interoperability. In fact, instead of a seamless experience, 63% of EV drivers in the EU needed multiple charging membership cards as of 2020, with an average of 2.5 cards per driver, according to NewMotion.
In the US, competing standards have led to many CPs being unable to service more than one type of vehicle. As a result, drivers have arrived at CPs they found on a map, only to discover that they can’t use them—a frustrating situation that reduces trust in the EV charging experience. In addition, a lack of open access to charging data has meant that numerous EV services end up advertising incomplete or outdated station information to drivers.
Given the lack of successful infrastructure development to date and the issues often resulting from the early stage free-market approach, it is time for governments to do more, orchestrating a response that boosts EV adoption and incentivizes and subsidizes the buildout of optimal public CP infrastructure. In addition, they will need to determine:
- How they will attract private-sector involvement and interest
- How to set pricing and tariffs
- Whether to establish mandates on standards, interoperability, and roaming platforms
- How to use and govern the data generated by CP usage and payments
Governments should begin by defining the high-level market structure they believe most likely to be sustainable in the long run, the role of the different players, and the level of competition to be allowed, bearing in mind country-specific targets and conditions. In addition, they should determine which part of the value chain they want to control and how they envision market development.
To make the EV charging business self-sustainable, the general trend is toward establishing a market-based model that can be economically viable in the mid- to long term without significant subsidies or other government support.
CREATE A NATIONAL MASTER PLAN
To succeed in this complex undertaking, our experience in the most advanced markets tells us that governments should create a national master plan for EV charging infrastructure and accessibility, one that will ensure that the EV ecosystem is supported, that public-private partnerships have the right frameworks, and that the private sector is confident this is an attractive sector worth participating in. This plan must include six key components.