How regulation can help clean up the messy EV charging landscape
Electric vehicle drivers face a question every time they pull up to a charging station: Will I be able to charge successfully? Unfortunately, poor charging experiences are all too common for today’s EV drivers. This is the result of a systemic market failure to reward reliable EV chargers and punish chronically unreliable ones.
This isn’t how it has to be, and it’s not fair to the driving public that this is the current state of our industry. It’s time to bring best-in-class market constructs to the EV charging industry that will assure drivers of consistent and reliable charging experiences while enabling private sector investors to maximize their business opportunities as they bring the EV revolution to life.
Poor customer experiences
Poor customer experiences are often blamed on nascent technology within the EV charging ecosystem. But technology is not the root cause.
Poor EV charger reliability is acutely harmful to customers and has major implications for the broader industry, including private capital being deployed in the sector. Chargers are financed with an underlying utilization assumption – how much energy will be pushed through a charger or the number of hours of the day it will be in use. When there is a reliability problem with a charger, it not only hurts the driver but also contributes to “utilization leakage” – the loss of revenue opportunity for the owner. And that will come back around to drivers via higher charging prices, fewer chargers deployed, and a slower pace of EV adoption.
The technical reasons for unreliable EV charging fall into a few categories – headlined by failed ‘handshakes’ (EV talking to EV charger), faulty payment systems (failed app transactions, broken credit card readers), and damaged charging hardware (power electronics issues, broken connectors). There has been steady progress in addressing each of these issues – from physical design improvements by EV charger manufacturers to better collaboration between automakers and charge point operators (CPOs) to technological advances in payment systems. But these technical challenges are not the reason for unreliable EV charging infrastructure, and solving the technical challenges alone will not result in an acceptably reliable EV charging ecosystem.
We operate much more complicated systems at far higher reliability than these EV charging assets. The U.S. electric power system delivers electricity to customers with 99.98% reliability, which equates to only about two hours of interruption per year on average, excluding events such as major storms. If EV charging were as dependable as our electric power system, a driver would only expect to have a few failed charging attempts in a lifetime.
Systemic market failure is to blame for unreliable EV charging
Thus far, no effective market construct has been put in place that promotes consistently reliable EV charging.
Proponents of utility-owned EV chargers argue that these chargers will be more reliable than those operated by CPOs because utilities have many decades of operating analogous assets with extremely high levels of reliability. Critics claim that utility-owned chargers will ultimately cost customers much more, and it is inappropriate to place an existing monopoly in complete control of the new EV charging ecosystem. The reality is that there will be varying levels of utility charger ownership throughout the country, but given the divisiveness of this issue, there is no chance of ubiquitous utility ownership of chargers to resolve the EV charging reliability crisis.
Another tact recently implemented has been the inclusion of operational performance metrics within the program requirements for EV chargers that receive subsidies, with direct financial ramifications for failure to meet the performance metrics. An example of this is the National Electric Vehicle Infrastructure (NEVI) program in Nevada, where 20% of incentive funds are withheld from CPOs and distributed over a five-year period contingent on meeting performance requirements. But Nevada’s approach does not apply to EV chargers outside the NEVI program and will inevitably have loopholes within operating performance metric definitions. Moreover, putting just 20% of incentive funds at risk is not enough financial incentive to drive operational changes at the magnitude required.
In short, partial solutions to the reliability challenge have been proposed, but the industry has fallen short of a system-wide path to acceptable reliability.
While widespread deployment of EV charging may be new, establishing independently administered markets to promote desired societal outcomes certainly is not. For instance, the role of capacity markets in several regions of the U.S. is to ensure that adequate electrical power generation resources are built and maintained to meet our needs whenever we choose to flip on the lights or turn up the air conditioning. EV chargers could collectively operate within an analogous market construct. It is time to institute formal markets for EV charging that reward reliable charging performance, penalize failure to provide this essential service to customers, and ultimately deliver a more sustainable outcome for all stakeholders in the EV ecosystem.
A regulated EV charging market
The creation of a regulated EV charging market will underpin expanded private investment and encourage operational behavior that benefits the entire EV charging ecosystem.
Private investment in EV charging infrastructure would grow, spurred by reduced risk through controllable elements of the business such as charger reliability. CPOs would devote appropriate focus to charger operations because failure to deliver acceptable customer experiences would not only lead to lost charging revenue but also come with financial losses that threaten the business; conversely, high reliability would drive profitability.
This market construct can be expanded to address related challenges within the EV charging network, such as the lack of infrastructure in certain areas. In addition to encouraging behaviors that enhance customer experience, locational value can be placed on EV chargers that meet a societal need.
There are multiple parties that could manage the regulated market once created. An independent administrator could step in, likely under the jurisdiction of the relevant state public utilities commission. An existing market operator could take on the role, extending the capacity of independent system operators that exist in the wholesale power market, for example. Or perhaps this sort of responsibility to provide a societal good is an appropriate long-term role for electric utilities to play in the EV charging sector, rather than directly owning a material amount of charging infrastructure.
Is such a market system possible for EV charging? I believe it is because all stakeholders – from CPOs to EV drivers to electric utilities – will ultimately benefit from a substantially higher bar being set for EV charging reliability through effective regulation.