Free Electricity Is Problematic for Electric Cars

By · February 13, 2013

Electric car charging in Germany

Electric car charging in Germany

There's something great about gasoline: the business model. Oil companies are making fat profits, and small shops take a fair cut when they sell gasoline to drivers. This is one of, if not the most, successful businesses there is. It has been consistently profitable for more a 100 years.

Many people wonder if Apple can still be a great company without Steve Jobs, but nobody doubts that Exxon will still be making big money in 10 years. If only producing and selling electrical energy was as lucrative. The question gains importance in Europe as politicians have called for the installation of thousands of charging stations in every country.

Electric car charging in France

Electric car charging in France

There are some chargers already in the ground and providing juice. Some have been installed by restaurants or hotels. They provide a slow charge and are free to use. It's working now with very few EVs on the road, but it would be a totally different affair if there were millions of EVs everywhere.

On the other side of the spectrum, there are the superchargers from Tesla, which are fast charge and also free to use. Better than that, they're green since they use solar energy. Solar economics say a large investment is needed upfront and that the return will take many years. But if the electricity is given away for nothing, there's no return. The superchargers idea may be nice, but it doesn't scale (even though it might help Tesla sell cars).

Assuming a Tesla Model S has an electrical consumption of 300 Wh per mile, that will make 30,000 kWh after 100,000 miles. That's close to $5,000 of electricity where this writer lives. Tesla has probably set aside some money, even if not this exact amount, for its customers' free electricity. But the point here is that as long as there's free electricity for EVs drivers, there will be no private investors creating networks of charging stations.

Electric car charging in the Netherlands

Electric car charging in the Netherlands

Vast plans are being drawn today, but they'll only get real with public funds. It could happen as planned and be good, or not. Gas stations are great here because they offer a choice of suppliers. If a driver doesn't like one specific oil company, there's another gas station a block or two away. It's much more difficult to shop around for electricity. It will likely be even harder if charging stations have been paid for by public money. A deal will be signed with the local dominant utility, and drivers will have no choice. There may also be an issue with confidentiality. Oil companies have issued their own credit cards, but few drivers use them, and in most gas stations, it's still possible to pay cash, with nothing recorded. With public chargers, will the detail of charging sessions just get handed to the government?

Here's the conclusion: the current free situation cannot last because it can't scale, and actually, public chargers might not be a good solution. Maybe EV enthusiasts shouldn't brag about how great it is to charge for free, or for very little money. Instead, the argument should be made that electric cars will have more of a future if charging stations owners can make a decent revenue from their operation. Even if a large majority of EV drivers charge at home, there is a need for a sustainable business case to support public charging stations.

Comments

· · 1 year ago

I have no problem here in Buffalo Ny with free charging, since there is so very little of it, and its a trivial amount of public expenditure. Our electricity here, while considered pricey since its above our national average, is currently $0,13 / kwh versus your $0,1666667 / kwh.

I'm puzzled as to why you say this is a problem for the EV owner. Unless you mean in Europe, all the mandated charging docking stations are going to cause resentment in the gas and oil driving public since they have to pay for them with their increasing tax burden. But EV's are only a small portion of the taxes Brussels has in store for you.

I'm encouraged by the 'small' diminutive presence of free public charging we have here in buffalo, usually just a 120 volt 'table lamp' outlet. Apparently all other areas of New York State charge around $2,30 / charge, where here in buffalo while we have no level 3's, and the biggest level 2's are 30 amp (usually only 200 volts also, so 6kw) they are always free. No one would want to put a pay public station near a free one since no one would use it. The free one's dont get much use as it is.

I'm in favor of our small free public dock presence since it gives another reason for gasoline powered drivers (not much diesel in the states unlike Europe) to take a chance on a plug-in vehicle.

· · 1 year ago

Laurent,

Interesting argument. However, I think the Japanese study which found that the existence of public charging merely encouraged a higher battery capacity utilization is also informative. People didn't actually use the public chargers regularly, they just felt safer in extending their trip radius because they were there. One thing that must be emphasized when talking about public charging is reliability and availability. The recent stories here about charging stations being ICE'd or simply being regularly offline counteracts much of the secure feeling that drivers would have gained by public charging availability. The fact that I would have to plan for 2 or 3 different public charge points being available in the area where I want to stop on a trip beyond the comfortable range of my EV, would make me think twice about taking my EV on that trip.

Another point regarding free charging is the fact that it encourages opportunity charging when it is actually not needed by the car or driver. This leads to charge points being unavailable to cars that actually need them to complete their journey. I think that charging a fee by connection time, not charging time would also encourage people to remove their cars from the charging location instead of leaving it there for many hours after charging has completed. My point is that when I NEED a charge, I want the charger to be available and I am willing to pay a reasonable fee for it.

· · 1 year ago

I'm not sure there is any weight to this entire argument.

Someone has to drill for oil, refine it into gasoline (or diesel), and then deliver it to a gas station. The very act of doing that demands a profitable business model.

Although most non-corporate gas _stations_ make very little on gasoline sales (often they lose money). They make their money on other services, such as selling us sugar water, candy, and burritos.

Electricty is a different beast. Everyone already has electricity, and they use it predominantly for their own purposes. Most gas stations are not using gasoline primarily for their own purposes - it is mainly a product to sell. On the other hand, almost every building in the USA is using electricity already and needs it to conduct their regular business. In fact, even gas stations need electricity too!

So a large scale commercial network of charging stations doesn't really need to exist. Businesses who are already doing business can install electric charging stations and just provide the electricity as part of their operating costs, much like providing a public restroom or other amenities to attract customers.

Free electricity can be a loss-leader, like it currently is at Kohls or Walgreens.

It can be marketing like it is at a few free sites in my area where the business prominently displays "Sponsored and Provided by ACME Tools".

It can be a civil service, like I have found at a few county and city offices or other facilities. Town centers could use them to attract patrons who might not normally shop or dine there.

It can be provided "free" with price of admission or membership or as part of the parking fee - as it is at Museums, Hotels, or entertainment complexes.

There are even people around my town who have installed their level 2 chargers on the outside of their homes and have them listed in plug-share for others to use as long as there is not already a car plugged in.

Electricity is everywhere, and while building a gas station can cost hundreds of thousands of dollars, and delivering gasoline takes long pipelines, rail cars, or special trucks - almost everywhere already has electricity. A public charger can be installed for a couple thousand dollars, and electricity costs to charge a car is really pretty low compared to some other costs. I have been in small local shops where they have more wattage in decorative halogen lighting than it takes to charge a Leaf...

Think about how this could play out in public use. Movie theaters could provide chargers and print a code on the ticket which gives 3 hours of free charging when entered at the machine.

Restaurants could give free charging while you are dining if you purchase more than a certain amount of food, where you start with a credit card but your receipt shows a code that you can punch in the machine before you leave and then it doesn't charge your credit card. If you don't have the card you can pay an hourly rate.

Malls could do it too, as a way to entice people to shop at their mall instead of the competing one a few miles away.

Electric companies or co-ops could build networks of charging stations in their service areas, and issue cards to their residential customers. When you charge your car out at a charging station they could just then bill you directly on your home bill at your home rate...

These types of systems don't need to be a vast "Exxon" sized network. They can happen in on-offs, or local sized networks.

Even considering all that, Blink and ChargePoint seem to be putting in a lot of commercial chargers. There are more Blink charging stations in my area than there are 76 gas stations.

Since vehicles can be charged while we do other things, anywhere where people may go for a couple hours is a good candidate for a charging station.

· · 1 year ago

"Another point regarding free charging is the fact that it encourages opportunity charging when it is actually not needed by the car or driver. This leads to charge points being unavailable to cars that actually need them to complete their journey."

As more people start using apps like Recargo or Plug-Share, this becomes less of a problem. Those apps allow a user to check in and then others can send them a message if they need the charger.

It's still in it's infancy, and like any social network system it requires people to use it for it to be successful and many people dont want to use it if its not successful.

**Recargo is run by the same people that run PluginCars.com

· · 1 year ago

Well, the best model is for Power companies to pick up where the oil companies left over. It is a simple of transfer of income from oil companies to power companies.

So, in the writer model, Tesla gets about 3.3 miles per KWh @ 300Wh/mile. That is a cost of $0.05 per miles for $0.15/KWh electricity cost. A 35 MPG car with $3.50/gallon car would cost about $0.10 per mile to operate. That is a margin of $0.05 per miles.

Utility companies charge much less than in commerical rate. They can jack up the electricity cost to about $0.20/KWh for public charging and still make a decent profit. That would be a "retail" premium of 25%. If there are millions of EVs, then Utility companies will make a decent profit. If 6.6KW cars use the charger for 8 hours per day, it would generate enough revenue to equal 2-3 typical American home average electricity use. More than enogh to offset the charging station cost. @$0.20/KWh, it would still be competitive enough for the EVs against high MPG cars such as Prius.

· · 1 year ago

I was just trying to imagine how the reasoning would sound if we were going in the other direction from electric cars to gas powered. Imagine trying to sell the gasoline infrastructure model while electric was fully built out.

· · 1 year ago

You are exactly right, Laurent. Good article!

· · 1 year ago

I completely disagree with this article. I think Valkraider nailed the reasons sufficiently, so I won't repeat ... except to flag his response as a must read.

· · 1 year ago

These are all issues that I repeat ad nauseum. Even "free" chargers need to charge something to allow other chargers to be built nearby that aren't "free". The fees should absolutely be based on time plugged in, to encourage the EV driver to move on, and the rate should be based on a formula of minutes / KWh consumed, and peak and off peak times.

It's no surprise that one of the busiest DC chargers in the USA, located in San Juan Capistrano, California, and operated by EVoasis, does just that. While no amount of recharging is free, a short time at the charger might only cost a dollar or two.

There are plenty of folks (almost all current EV drivers) who want to believe against reality that businesses gain by handing out free transportation energy. I don't consider the "free" Tesla Model S/X proprietary chargers to fit this model, since the service is amortized into the cost of the car and owned and operated by Tesla. Fortunately, most businesses are smart enough to see the fallacy in this, even when given a "free" charger.

Who will pay when the $3000 cable is vandalized, driven over, or otherwise broken? What happens when somebody gets injured using the new fangled equipment (like dropping that heavy charging nozzle on your toes)? Who pays for basic maintenance? Who pays when somebody claims damage to their car/battery (real or perceived)? Who pays for insurance? Who pays the demand fees for 50kW of demand? (demand fees are the huge part of the commercial power bill that the "give me free power" crowd never calculate).

EV manufacturer owned, operated and financed (by your Tesla Model S or X car purchase) charging stations are certainly not the case with virtually any other electric cars, including the Tesla Roadster and Nissan LEAF. At least for the early adopter crowd of modern EVs, many have a Toyota Prius hybrid to compete against their electric car, and they aren't afraid to use gasoline if it will cost more for recharge fees with an electric car than to Just-Drive-The-Prius(TM).

In the future, when a typical owner might have only an electric car, the mainstream population EXPECTS to have to pay for their transportation needs, and they are not going to keep a spare Prius around to save a few bucks on recharging fees (penny wise and pound foolish, in my opinion).

Free charging, particularly expensive high powered DC chargers, kills the expansion of anything but more "free" charging, and that model is not sustainable.

· · 1 year ago

" Solar economics say a large investment is needed upfront and that the return will take many years."

The solar equipment is actually pretty cheap. The price for the panels & inverters at a super-charger station is probably only like $30K. And they get 30% of that back in a tax-credit. It is the land and construction that cost big money.

· · 1 year ago

Laurent,

You misunderstand the Tesla SuperCharger Network model. It is accessible for free only to those who purchase the 85kW-hr Model S. It was an attractive selling point that allowed Tesla to sell more cars and more quickly approach economy of scale production. And consumers have paid a premium for this "freebie." Consumers of the 60kW-hr version can also partake of the SuperCharger Network but must purchase it as an option. A $2,500 option. Additionally, all of Tesla's SuperChargers will eventually be solar powered. That means each station will be selling more electricity into the grid than it takes out for recharging vehicles.

· · 1 year ago

Interesting discussion. I like Mike I's comment that "People didn't actually use the public chargers regularly, they just felt safer in extending their trip radius because they were there."

I think the biggest problem with public charging is that it's too expensive. Each station costs the business owner ~$5k, but it can only sell a few hundred dollars worth of electricity per year, so the mark-up has to be huge, and this has to compete with charging at home. We need to drive down the cost of installing public charging stations to under $500/cord. That's my $.02.

· · 1 year ago

http://en.m.wikipedia.org/wiki/Loss_leader

Why do places provide "free wifi"?

Why do places provide free restrooms?

Why do coffee shops and restaurants have newspapers for customers?

Why do places provide free TVs - for example sports bars who pay for the cost of the satellite or cable and TVs, or other places which have TVs playing news or other programs?

What about parking itself? Some places business provide it free (but they have to pay for it via construction/rent/taxes)...

How do car companies provide "free" warranties? And how do they provide "free" courtesy shuttles and waiting rooms with coffee and television?

What about freeway rest stops which provide "free" bathrooms, and sometimes coffee and cookies, or maps and information?

Hotels have "free" swimming pools (which cost a LOT of money to install and maintain) and "free" exercise rooms for guests.

Ikea and other places have "free" monitored child play areas while you shop.

There is a cost to doing business. If providing electric car charging attracts people to a business then business owners will do it.

The cost of building / maintaining a swimming pool or a bathroom or a child play area - far exceeds the cost of an electric charger. The cost of installing 30 HDTVs and subscribing to NFL Sunday ticket is pretty steep. Parking lots don't build and pay for themselves.

· · 1 year ago

I tend to agree with Valkraider. I travel a lot and tend to spend money when I stop somewhere to rest or use the bathroom. The same would apply with an electric car particularily if i could charge for free. By all means charge for level 3 chargers but if you stop for 20-30 mins for a bite to eat and plug your car into level 2 the electricity cost would be negligable compared to the mark up on the food.

I suppose at the end of the day the market will decide for itself. I imagine public places like libraries would probably provide some level of free charging (it costs a fortune to build and service a library compared to a couple of level 2 chargers) Some businesses will look to provide free charging to entice customers and some businesses will try and make money from selling electricity. Only time will tell.

· · 1 year ago

I disagree with Valkraider. Businesses don't give out free everything. I don't see them giving out free gasoline.

Restrooms - required by law in many places
Hotel Swimming Pool - that's the product
Newspaper - cheap or even free to the business
Wifi - very cheap to install and run
Warranties - required to even sell the product
Freeway Rest Stop - built by government with taxpayer money

None of these are free. You are paying for it either with taxes or your purchase.

These comments sound more and more like "I want my free stuff."

· · 1 year ago

I've spent more than 3 month so far trying to make a business plan for EV charging network. It doesn't work out. It's nice to say "they can" or "they should". If it doesn't have economic sense, if it doesn't make profit people wouldn't invest in it.
If you have your ideas supported with numbers it would be interesting to see.
First of all you have to take in account that an average price of commercial level 2 charger with smart card reader and Internet connection is around $5K. And even if you want a charger without smart card/credit card and network connectivity it would still cost you at least $1.5K because its connector and circuitry should be designed for more intense use than home charger. Installation with permits and inspection costs $1K at the very minimum and could easily go to $3-5K and even more if you need to bury the cables for pedestal mounted charger in the middle of parking lot.
So you can use $8K as average cost per charging port.
If this charger generates profit (not income) of $2 per day it would take 4000 days (more than 10 years) for payback.

· · 1 year ago

Michael,

Most businesses do not have gasoline on-site, but most (virtually all) businesses do have electricity on-site.

"Restrooms - required by law in many places"

But not everywhere, also not required by law to let people use them judging by the number of "no public restroom" signs I have come across in my lifetime...

"Hotel Swimming Pool - that's the product"

That's funny, I was under the impression I was renting the room, and the pool was an add-on used to differentiate the hotel from other nearby hotels...

"Newspaper - cheap or even free to the business"

A level 2 charger delivers around $.50 to $2 of electricity per hour (depending on the car and electricity rates). Giving a free hour of electricity to customers would not break the bank.

"Wifi - very cheap to install and run"

It's at least a couple dollars a day, but probably more like $5 a day when you throw in electricity and admin overhead. Certainly not outrageous but also a cost involved.

"Warranties - required to even sell the product"

Not at all. There are plenty of cars sold "As-is : no warranty". Also you never addressed the shuttles and waiting rooms with coffee.

"Freeway Rest Stop - built by government with taxpayer money"

And chargers could be (and are) as well.

"None of these are free. You are paying for it either with taxes or your purchase."

Uhm, yeah? That's what we have been saying. This discussion is about the business model - not the actual tracking of the ultimate funding mechanism.

I personally have experience with many local businesses who have installed EV charging stations to attract customers. Many of them provide them free or at reduced rates to customers.

"These comments sound more and more like "I want my free stuff." "

Not at all. I could care less if it's free. I have used free and paid stations, and I have accounts at Blink and ChargePoint and pay their rates when I use their stations.

The article was all doom and gloom because electricity doesn't work like gasoline, and thus must fail.

My point is that it is precisely the fact that it doesn't work like gasoline which means it will NOT fail.

With electricity we no longer need Exxon and BP. Electricity can be provided on-site with wind and solar. Electricity can be provided by small local or regional electrical co-ops. Electricity can be provided by for-profit companies large and small. Electricity can be provided by local governments.

There is nothing preventing Joe's Coffee and Sasparilla stands from installing chargers, and there is nothing preventing WAL-Mart from installing chargers. We even have a local gas station chain that has installed EV chargers - so that's the business owner being wise to the local customer base.

However it is hard to sell gasoline.

· · 1 year ago

Bogdanpv,

Last week I spent an hour chatting with a man who has a completely successful business building and installing solar EV charging properties. Builds the pads, solar trees and associated infrastructure. He partners with a local company (usually) who builds the chargers themselves (a couple he has used one of the national companies). They usually charge up to 4 vehicles at a time.

He is on his 6th one now, and is working on the and and contracts for 6 more in the region. His short term goal is to have the region within about 200 miles in any direction to have one every 50 miles or so on the major routes.

This is just one guy.

We have hundreds of chargers in our metro area and the number is growing.

I love the people here internet quarterbacking that it can't be done while there are people out they actually doing it.

· · 1 year ago

I don't want to make a holy war here. I'm just looking for a business case to be able accelerate EV adoption without loosing the money.
It's easy to talk in general but it's hard to make it profitable with detailed calculations, at least on paper.
If there is a way to make money here I'd at least tell about this, so other people would be also encouraged to invest and expand EV ecosystem.

· · 1 year ago

Laurent, you wrote: "...gasoline: the business model. Oil companies are making fat profits, and small shops take a fair cut when they sell gasoline to drivers. This is one of, if not the most, successful businesses there is. It has been consistently profitable for more a 100 years...."

That's because we, the general public that "own" the general resources of the planet (along with our future offspring) don't charge anything for the finite fossil fuels and other minerals when we let the mining/gas/oil corporations take it out and sell it back to us. They only lease the surface of the land, and pay little or nothing for the actual, valuable "gold" and other minerals they permanently remove from deep inside our beautiful big blue marble. This has always been the way it is, and nobody really knows why, or talks about it very much. However, it is certainly easy to see why it is an extremely profitable business for them.

When discussing how to power electric cars, the fact that it's not that much electricity, and when you consider the already current state of the performance/cost effectiveness of solar, it's easy to see that it won't be hard to power these inevitable replacement forms of sustainable transportation vehicles.

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