EV charging networks: What is working and what has not

By Laura

The hypothetical business cases for EV charging networks discussed in class were useful in helping us to consider the economic problems facing widespread EV adoption. Another way to determine critical success factors in this sector is to look at companies which have successfully, and unsuccessfully, attempted the challenge.

Perhaps the most infamous example of an EV company is Better Place, which declared bankruptcy in 2013 despite having raised over 850M USD in venture capital. Better Place’s strategy however contains certain important choices which enabled it to raise this money and rollout; firstly it began outside of the US which enables driving range problems to be avoided. The US is approximately 500 times as large as Israel, and 200 times as large as Denmark – the first countries Better Place targeted. Secondly, the Better Place philosophy to build a significant amount of the charging network and leasing the batteries in a package combined with use of the charging network, led to satisfied, if few, customers. Ultimately, however, this highly capital intensive leasing model, building out both battery swopping stations and charge points, combined with consumer adoption problems and lack of car producer support caused irreversible financial distress.

Tesla is arguably the most successful EV company with a ~$35B market cap and has succeeded so far by focusing on consumers with high willingness to pay. Tesla addresses one of the class’s key issues with EVs: “How do I go on a road trip?” directly on its webpage through the Supercharging network which removes the need for battery swapping. However, for a road trip through certain states you would be charging for longer than you are driving as only public charging stations are available (20 miles charge takes ~1hour).

Green charge networks, a startup founded in 2009, is tackling the EV charging through a partnership with NRG eVgo, but it is beginning with pure energy storage systems which take advantage of the variations in utility electricity prices. This business model, allows for revenue generation ahead of widespread EV adoption. NRG eVgo incidentally currently owns and operates the ‘Freedom Station Network’ of ~100 stations predominately in California, which has both a ‘pay as you go’ and a subscription business model, although profitability of the stations remains unclear and the roll-out has been slower than expected.

Other players are again looking to become more involved, with EPRI recently announcing it is working with eight car manufacturers and 15 utilities to promote a common smart EV charging technology platform.

There is much still to be done to promote EV adoption in the US and achieve the +30% annual growth rate to 2023 estimates; currently there are only 250,000 plug in cars in the US (40% in California). A potential solution would be a large increase in Government involvement, through enabling upfront investment to solve the infrastructure side of the EV ‘chicken or egg’ situation. Further options include business model innovations such as combining EV charging with renewables, demand management and energy storage, and consumer education campaigns to overcome ‘range anxiety’. In the near term, further incentives for hybrid cars seem a feasible way to improve consumer familiarity with electric vehicles without removing the traditional combustion engine.

Without a comprehensive charging network, electric cars will be limited to families with second or even third cars, unable to be a true alternative to gasoline for the majority of Americans. Successful EV charging business models are critical to deliver substantial greenhouse gas savings and increase oil independence.

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About macomberjohnd

HBS Finance faculty interested in sustainability in the built environment including devices, structures, townships, and cities.

2 Responses to “EV charging networks: What is working and what has not”

  1. By John Macomber

    EV Charging has more roads (sorry) to success than just those mentioned in class. Thank you for extending the conversation and adding this color.

    Last year in this course we had a case on BetterPlace, which was indeed a high profile company for a short period. We dropped the case since the takeaway was largely around the issues you raise…too much too fast, lack of focus, a number of operating mistakes that one can discuss in class but which aren’t particularly satisfying new insights.

    Tesla also has a super high profile model, and a lot more cash. Both situations leave one to wonder whether there is any other approach than hyper-buzz? It could be that incremental add-ons – for example a demand-response concept mentioned in a post here – are lower risk and much higher reward.

    https://innovbusenergyenviro.wordpress.com/2014/10/26/business-model-innovation-a-requirement-for-successful-technology-innovation-in-energy-a-closer-look-through-the-lens-of-ev-charging/

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