EV Charging Business Models and Funding Options
With electrical vehicle (EV) adoption growing rapidly, convenience stores, shopping malls, restaurants, hotels, employers, multifamily dwelling owners, and commercial property owners are looking into offering EV charging — not as their primary line of business or purpose, but as a:
- Way to attract shoppers and increase sales
- Benefit or convenience for employees
- Courtesy for visitors, guests, and tenants
- Support for green initiatives and carbon reduction
- Source of additional revenue from EV charging
- Highly visible way to “green” their brand
This blog explains the funding options for installing EV charging infrastructure at an existing business location and possible business models for ongoing EV charging operations.
Funding Options for EV Infrastructure
Whether you are offering EV charging at one location or hundreds, step one in determining your end-to-end business approach is deciding how you will fund the infrastructure investment. This includes permitting, site preparation, purchasing and installing hardware and software, and connecting to the local grid (with possible upgrade costs). While you can do all this on your own, partnering with a Charge Point Operator (CPO) or Electric Vehicle Service Provider (EVSP) offers access to expertise and economies of scale. While there are many variations possible in the details of these agreements, the typical options are:
Business or landowner funded
With this approach, you prepare the site and pay the CPO or EVSP for hardware, installation, and connection costs. Once the charge points are installed, you own the equipment and keep 100% of the profits. You can choose to be fully responsible for operation of charge points, which means you will also need to acquire and use management and billing software. Alternatively, you can pay the CPO or EVSP a monthly fee for equipment maintenance and back-office costs, including access to management software for operations.
Hybrid (partially funded) model
Under this option, you and the CPO or EVSP agree to share the upfront capital costs and the ongoing revenue from the operations. You may still be required to handle site preparation, and the agreement will be dependent upon the EV charging company’s evaluation of your business’s or property’s potential as a revenue-generating location. The CPO or EVSP will handle all operation and maintenance activities for the duration of your agreement.
Fully funded EV charging
Under this approach, if the CPO or EVSP approves of your location, that company will fully fund the capital outlay for the project. This agreement may or may not include the costs of site preparation and onsite electrical upgrades. If you have a large configuration with several Level 3 ultra-fast DC chargers, this investment can be several hundred thousand dollars/pounds/Euros, compared to under five thousand for a single Level 2 charger.
The EV charging company will negotiate a custom business agreement and revenue sharing model based on the scale of the installations, number of locations, EV driver density, adjacency to highway networks, and other commercial factors, including potential co-branding. For example, the arrangement may be a percentage profit share, or a rental fee for use of the landlord’s parking spaces, or a hybrid of the two. Again, the CPO or ESVP retains responsibility for operations and maintenance.
Business Models for EV Charging Operations
Another factor to consider as you evaluate infrastructure investment options will be the business model: will you offer free charging and absorb the overhead as an operating expense, recover your costs with break-even charges, or monetize charging as an additional source of revenue? Each of these business models is suited to different business objectives and driver needs or expectations.
Offer free charging
With this model, you provide EV charging to your customers, employees, or guests at no cost. For retailers, hoteliers, and multifamily developers, for example, this is a “loss leader” model. The goal is to attract and retain new shoppers, guests, or residents and offset the costs of infrastructure and electricity with increased revenue from business growth.
An intangible benefit of this approach is the positive impact on brand image and brand loyalty. For employers looking to attract and retain top talent, free EV charging in the right market can be an appealing perk.
This financial model works best for Level 2 chargers and drivers who have a 45-minute or longer “dwell time”— the typical time a shopper or diner will spend at your location — which is suitable for a “top up” charge. Level 2 charging is also appropriate for overnight charging at hotels or apartments as well as charging at work. And it will assume that you will fund the infrastructure investment, although you may pay a fee to have a CPO or ESVP handle operations and maintenance.
Recover partial or total costs with fee-for-charging
With this model, EV drivers pay a fee to use your charge points. You can set the fee to cover just your operational costs — electricity, maintenance, and the like — or to cover total costs, including operational as well as upfront hardware and installation costs. EV drivers are becoming accustomed to paying for charging. Tesla, for example, now uses the cost recovery model in setting fees for its charging network, and EVSPs have long charged for their public EV charging services.
However, drivers who charge at home are potentially more price sensitive and likely to compare your fees against what they pay for electricity, so the attraction factor will be lower than for the loss leader model for people who don’t need to charge “around town.” Employers can experiment with a blended model, charging fees to visitors or the public while offering free or discounted charging to employees.
If you take a cost-recovery approach, be sure you can offer drivers a seamless experience that makes it easy to pay for your charging service, whether that is via an app, an RFID card, a credit card or through their own charging network membership via roaming arrangements.
Make a profit
This model works just like the cost-recovery model, but the fees for EV charging are set high enough to exceed costs and generate revenue — but not so high as to discourage customers from using your service. This model works best for organizations that serve a captive market — customers that have limited choice on where they can charge. These include long-distance travelers, multifamily dwellers, and homeowners or renters who can’t charge at home. With this model, you can self-fund the hardware installation or take a hybrid or fully funded approach and share revenue with the CPO or EVSP, letting that organization handle ongoing management.
The EV charging industry is growing rapidly. As the number of EV drivers on the road grows over the next decade, infrastructure will need to keep pace — creating new business opportunities, along with potential business risks. Nothing can take the place of deep research and due diligence as you evaluate your approaches, your business model options and objectives, and potential EV charging business partners.