America’s coast-to-coast EV-charging network rollout: PwC

As electric vehicle adoption in the US rises, so, too, will the need for an expanded public charging infrastructure to support that adoption. Indeed, a recent PwC analysis estimates that there will be 27 million electric vehicles (EVs) on the road in the US by 2030 (up from about three million currently, or about 1% of registered vehicles), with the number of charge points climbing to 35 million from about four million over the same period (including public, semi-private, private fleet, private residential and private mobile cable chargers). While the $7.5 billion allocated for EV charging in the 2021 Infrastructure Investment and Jobs Act could double the number of public chargers to more than 220,000, according to a PwC analysis, the bulk of a national charging network will likely be developed through private investment and supported by additional municipal and state public sector incentives.

The verdict, however, is still out on precisely what a national public EV-charging rollout could look like and how it will mature over the next decade and beyond. What could be the most viable business models? Who could be the dominant players? Which partnerships could be forged?

Picking the right charging business model can be complicated

While the need for a charging network is abundantly clear, it is important that all players entering, or planning to enter, the space will need to create a carefully considered and robust strategy. This is especially true given the numerous operational challenges: for instance, identifying the right charging integration requirements (i.e., hardware, utility/grid, original equipment manufacturers (OEM) partnerships, as well as integration of grid, driver, IT/network and the cloud) that best align with a given EV-charging business model. There are also challenging economics which must be considered: which value pools, for example, are being tapped to yield the highest potential for profitability and return on investment?

Charge-point operators (CPOs): A main driver of the national rollout

PwC estimates that the EV supply equipment (EVSE) market will hit $100 billion by 2040. CPOs – public EV fast-charging networks such as EVgo, Electrify America, Tesla, Rivian and GM Energy that install, operate or maintain charging stations – are forecast to account for 65% of that market, followed by hardware makers (20%), installation services (10%) and software-only developers (5%), as described in a recent PwC analysis. So, CPOs will likely be at the vanguard of rolling out a viable, coast-to-coast national charging network.

Some power utilities, too, are very well positioned to build out networks for their territories especially since, as producers of electricity, they are in the position to carry out a vertically integrated business model. However, the prospect of some utilities potentially dominating the market has attracted some controversy. At issue is whether it is in the public interest for public utilities to potentially control the charging market and thus compete head-to-head with private-sector entrants.

Which sectors are ready for prime time to enter the charging business?

A mosaic of private and public players are already jockeying to enter the evolving EV-charging marketplace, with some players being particularly well-placed to put a stake in the ground.

Filling stations and rest stops

Filling stations and rest stops along the nation’s most highly trafficked corridors (and in cities and suburbs), for instance, are prime candidates to offer EV charging alongside their gas and diesel pumps. With more than 145,000 fueling stations in the US, there is a turnkey opportunity for stations to accommodate both EVs and internal combustion vehicles. This opportunity is already bearing fruit, with owners of travel stops along interstate highways partnering with CPOs as well as automakers to install, maintain and operate fast-charging stations.

Value proposition:

New bolt-on business that can generate revenue streams through EV charging, data partnerships, advertising and increased ancillary sales. Can also help to meet environmental, social and governance (ESG) and decarbonization targets as well as enhance customer loyalty.

Parking it: Hotels, office buildings, retailers.

Places where EV owners are likely to park for reasons other than simply charging up are also good candidates, including hotels/motels, office buildings, retailers, multi-unit residential buildings, malls, etc. We expect more residential and commercial real estate owners and developers to build EV charging into their properties.

Value proposition:

Provides convenience for guests and patrons, and can generate new revenue streams through EV charging, data partnerships, advertising and increased ancillary sales. Can also help to meet ESG and decarbonization targets as well as enhance customer loyalty. Provides convenience for guests, adds revenue stream, improves environmental, social and governance (ESG)-driven brand.

Public and private fleets

Public and private fleets (such as the US Postal Service and private logistics and delivery companies), too, are building out charging infrastructure to power their increasingly alternative-fuel fleets. For example, UPS now has 1,000 electric and plug-in electric vehicles (and has committed to buy 10,000 more) as part of a plan to have alternative fuel account for 40% of its ground operations by 2025.¹ The company also recently unveiled a plan to power its electric fleet with off-grid, solar-powered charging stations.² Amazon announced it has ordered 100,000 electric Rivian trucks, but it is unclear whether the entirety of that order will be fulfilled by the end of the decade.³ Meanwhile, the US Postal Service announced that 50% of 165,000 new delivery trucks would be electric.⁴

Value proposition:

Helps fleet owners generate new revenue streams through EV charging, data partnerships and advertising and also help to meet ESG and decarbonization targets as well as enhance customer loyalty.

Three basic business models to enter the EV-charging infrastructure space

Surely, there’s no one path to establish a foothold or expand in the fledgling EV charging sector. And, looking ahead, we expect to see more types of entrants – and more business models – emerge. As previously mentioned, the biggest opportunities lie in the CPO segment.

Here are three business models to consider for those businesses best positioned to follow them (i.e., owners of businesses and land that could be prime locations for charging up).

The hand-off: Rent space to CPOs. This is the simplest path to entering the sector. It involves renting land (typically parking spaces) to CPOs which install, operate and maintain the chargers. Revenue is captured through that rent and, possibly, through a percentage share of the charging revenue. Depending on the business – for example, a gas station with a convenience store – the charge points could attract added revenue with those EV owners charging also making purchases at the convenience store.
Wading in: “low-maintenance” ownership. This business model is more involved than renting, but potentially with a much higher return. It involves forging partnerships and relationships with other vendors, yet assuming some investment in capital and labor. As with renting, it requires partnering with a CPO, which will install the chargers at a fixed cost, then operating them independently. This will typically apply to those businesses that plan to carry out quick and simultaneous deployment across multiple sites (e.g., a national hotel chain adding chargers at numerous hotels). There is also an option to engage the CPO to provide full back-end and front-end needs (i.e., maintenance and software services).
Fully integrated CPO (charge station owner/operator). This model is the most involved, and will likely require the highest capital costs and in-house capabilities and expertise. It also holds, potentially, the greatest return on investment. Essentially, it means operating as one’s own CPO. It starts with sourcing charge stations and software providers and requires in-house hardware, software and procurement capabilities. Additionally, this model includes capitalizing on available rebates, incentives and regulatory carbon credits. It captures 100% of charging revenue and can, as with the other business models, help generate ancillary sales, such as with EV owners making additional purchases, or revenue from data partnerships and advertising.

What to consider when evaluating an EV-charging business model

Investment plan and returns

Establish your available capital for initial outlay based on grid capacity and any necessary upgrades needed, hardware and software requirements, etc.
Assess the potential utilization rates that you can reasonably expect at the sites you are considering.
Assess break-even points for your proposed investments.
Determine the number of chargers needed to execute your business model and estimate the revenue stream (both from charging and other streams including advertising and upselling) that can be reasonably expected.
Assess all costs you are required to take on regarding hardware and software, labor, operations, repair, as well as the ability to secure rebates and allowance.
Build a solid case that your business model demonstrates a strong potential to yield sustainable, long-term returns on investment.

Capabilities build-up

Given that we expect consolidation in the CPO sector (due to the challenging economics of the charging sector), it is crucial to forge the right partnerships with vendors – and particularly the right CPO with the right capabilities to ensure continuity and optimized customer experience.
Ensure that you have the right operational capabilities, including maintenance and repair of hardware as well as software maintenance and upgrades to deliver good customer experience.
Put in place your in-house technical and operational teams that possess the right skills, or gain access to necessary external resources.

Time to market

Position your business to achieve speed-to-market in the following areas:

Ascertain the availability of hardware and software options.
Consider how to optimize customer experience during charger downtime and demand spikes.
Identify the right integration requirements for your targeted customer base.
Ensure that you have selected the best site infrastructure, and that it will accommodate potential upgrades.

^{_{1. “Electrifying our futures”, UPS company website, May 23, 2022.

2. “UPS and PD World delivering world firsts”, UPS company website, October 4, 2021.

3. “Amazon wants 100,000 electric vans. Can Rivian deliver?” newyorktimes.com, July 21, 2022.

4. “Postal service will make half of its new mail trucks electric,” caranddriver.com, July 21, 2022.}}