While EV sales keep soaring, we might have neglected the second step of the transformation: charging. Going for small trips close to home is easy, but how will governments and industry implement charging solutions to satisfy long-distance needs? Everyone seems to be very late on their schedule.
Key takeaways of the grid implementation challenge
- 300,000 electric vehicles were sold in the US in 2020. The country expects to have 35 million EVs on its roads by 2030.
- EV charging represents different challenges than internal combustion engine (ICE) vehicles.
- Both the US and Europe will have a really hard time developing their grid on time to keep up with EV sales, creating a potential bottleneck for the technology.
- Charging station companies barely make any money today, but they could become the EV stocks to watch of tomorrow.
The Switch to Electric Vehicles
The time of electric vehicles (EVs) has come. Since 28% of US carbon emissions come from transportation and that the country wants to cut emissions by 50% by 2030, they will need to act fast.
EV sales and production are progressing and forecasts for the coming years are all very optimistic. In 2020, 300,000 EVs were sold in the US– 2% of the total automobile market. That’s only a start, as some estimates show an expected 35 million EVs on US roads by 2030.
One limiting factor is that EVs are generally more expensive than internal combustion engine (ICE) vehicles. While this issue will be solved with a $100 billion plan for EV rebates, owning an EV is only the first step. One needs to be able to charge it to make it run. How will governments, perhaps working with industry, manage to install a decent grid solution to support one of the greatest mobility transformations in history?
Big challenge in the US: getting enough charging stations for everyone
35 million vehicles on US soil is quite a number. How will they manage to charge them all?
If we consider the process of charging ICE vehicles, things could not be easier. First, gas stations are everywhere, finding one is never an issue. Second, fuelling one’s car takes between 3 and 5 minutes.
EV drivers, on the other hand, developed a new trauma called range anxiety. This is due to two reasons. First, there are clearly not enough charging stations. If you do not have one at home, finding one in the wild might be a challenge, at least for now. Second, charging an EV can take time: depending on the station and battery type, charging time can take anywhere between 6 minutes to 26 hours. There are 3 types of charging outlets:
Level 1 – 120V AC outlet (where you charge your phone), 2-5 miles per hour of charging.
Level 2 – 240V AC outlet, 10-60 miles per hour of charging.
Level 3 – 480V DC. 180-240 miles per hour of charging.
The chicken and egg dilemma
Today, 80% of US EV drivers charge their car at home with type 1 or type 2 charging stations. The dilemma is now based on demand and we enter a chicken and egg problem: on the one hand, many electric drivers charge their car at home and have thus no use for so many public charging stations. On the other hand, many people will not adopt EVs if there are not enough public charging stations.
How many will the US need? A study conducted by the US National Renewable Energy Laboratory estimated that per 1,000 EVs, the US would need 3.4 level 3 ports and 40 level 2 ports. If we stick to the 35 million EVs by 2030 and their estimated distribution around the country, that is around 50,000 level 3 ports and 1.2 million level 2 ports. This will mean that the country would need to build 380 charging station every day for the next 9 years. So far, the US has only installed an average of 30 per day in the last 10 years. There is quite a gap.
One other limiting influence for charging stations – in addition for their implementation costs – is that so far, they do not make any money.
According to Chris Nedler, researcher at the RMI energy research institute, the transformation will take years of investment before producing any return, but in the long run, it will eventually become profitable.
Fuelling cars has always been a tough business with tight margins. That is why most gas stations will try to grow their sales by offering snacks, coffee, and cigarettes. And EV looks to be an even tougher business because users also have the option to charge at home.
What about Europe?
Europe is also struggling with the implementation of its grid, which looks way too slow to keep up with global EV sales. Not only are the stations not uniformly distributed across the territory, the payments systems are not harmonised and force drivers to use different subscriptions to refill.
The nearest target is to have 1 million charging stations by 2025, meaning that the EU would need to build 3,000 a week to close the gap.
The EU aims to have 30 million EVs on its roads by 2030, paired with the very ambitious goal of reducing emissions to zero by 2050. Like the US, the EU will have to double down its charging station implementation for their large scale zero emissions plan to work.
EV Charging stations stocks to plug into
As mentioned previously, charging stations companies do not turn in any profit yet. Firms such as Blink Charging Co. and Beam Global combined generated less than $10 million in revenue last year. Business models also greatly vary depending on the company, with some charging only for the installations, and others opting for a per charge fee.
Despite very shy numbers today, these small players might well become the Chevron and Ford of tomorrow, once the system is well-implemented. A play worth having a look at for long term investors who are bullish on EV technology. Here are 3 stocks listed pureplay stocks.
- Blink Charging Co. – with thousands of EV chargers all over the US located at strategic points such as airports, hotels and healthcare facilities, Blink Charging Co. is one of the most popular stocks of the industry. The company has an easy-to-use platform that provides users all the info they need.
- ChargePoint Holdings – After having took over 9,800 charge points for General Electric, the company started a fast expansion, now controlling over 114,000 charging stations across Mexico, Australia, Canada and the US. It is one of the world’s leaders in the industry. Moreover, it has a growing portfolio of over 20 patents.
- TPG Pace Beneficial Financial Corp – the smallest of the three, TPG is a SPAC set to merge with EVBox, which has the largest installed base of charging stations in Europe. Considering that the EU has outstanding EV penetration rates (more than 50% in Norway vs. 5% in the US), playing on this side of the Atlantic might be worth considering.
While these are the main pureplay charging stations stocks, many other larger companies are working on developing the grid, through either their name, subsidiaries, or external investments such as: