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For anyone who drives an EV.

Charging an EV will cost as much as fueling an ICE car

Jan 1, 2021

One of the good things about being an EV owner is knowing that regardless of where I charge I’m not going to be paying the outlandish prices fossil fuel car drivers pay to fill up. In addition, being someone with off-street parking (i.e. a driveway of my own) I can take advantage of home charging at cheap domestic rates. In fact as I sit writing this my electricity provider has emailed me to say that due to high winds expected this evening there will be a surfeit of power and they will actually pay me to charge my car. 
 
For EV owners with solar panels on their house the prospect of ‘free’ fuel is a regular occurrence and nothing to be remarked upon.
 
But once you leave the comfort of your own home - or you’re one of the significant minority of the car-driving population who can’t charge at home -  you fall into the realm of public charging.
 
At the moment this is a little like the wild, wild, West. There are numerous charge point operators out there providing numerous charging options at numerous charging tariffs. We’ve already discussed several times on the podcast how companies such as bp Pulse have 8 different tariffs for a single kWh of electricity depending on the speed of the charger and the method of payment. 
 
However, regardless of the supplier you use the price you pay will usually be less than the equivalent fossil fuel price. The exception to this is if you’re using the Ionity network and you don’t have a subscription via one of their automative founding partners.
 
But - as Ian Johnston from Osprey Charging told us on the podcast recently - the pricing model for public charging has been kept artificially low and doesn’t reflect the true cost of charging.
Drivers are demanding more and more high speed chargers but are complaining when Charge Point Operators (CPOs) charge higher tariffs to use them. A 150kW High Powered Charger (HPC) can cost upwards of £50,000 to buy and will need more money spending on ground works etc. before it can go live. At the prices being levied by CPOs today the return on that investment is projected over a long time frame. Once the infrastructure catches up with the volume of EVs on the market you’re going to end up with a number of CPOs carrying large amounts of capital expenditure with a relatively small amount of income to pay that down.
 
Remember CPOs have to pay for the electricity they deliver and - despite the fact that I can get paid for using electricity on my tariff - CPOs don’t get a huge discount on the average price per kWh available to the public. An average price might be 12p/kWh to the public. Let’s assume the CPOs get it at 10p/kWh. With CPOs like bp Pulse charging 15p/kWh for 50kW charging on their Polar Plus subscription model, 5p/kWh income doesn’t go far when it has to pay for maintenance, wages, a call centre, and other centralised company overheads before it can go towards paying down the cost of the install itself.
 
Even at 35p/ kWh - the tariff Osprey levies for its charging - the number of kWhs that need to be dispensed just to cover the cost of a £50,000 charger alone (after removing the VAT element and the 10p/ kWh electricity cost) is a little shy of 270,000. To put that into perspective that’s filling a Jaguar iPace from 10% to 80% state-of-charge 4,500 times. Only after that many charges is the cost of the unit covered. Nobody has been paid for their work, no maintenance contracts have been paid, no call centres and customer support paid for. That's just covering the cost of the unit itself.
 
As anyone who has studied economics will tell you this must change. Free market forces mean that sooner or later the cost of public charging will increase. With the huge Capex costs CPOs will need to bear to service the government’s 2030 new fossil fuel vehicle sale ban, it will have to change.
 
But how expensive will charging be?
 
The short answer is ‘as expensive as the market can support
 
At the moment government initiatives and a growing EV base mean CPOs are ‘happy’ to keep prices relatively low. The know that they are building their customer base and encouraging the uptake of EVs. Many of them are backed by venture capital funding or Big Oil money. Making a short term profit is not their priority right now. Even so:
 
  • bp Pulse recently increased their HPC tariff from 40p/kWh to 42p/kWh - the second such rise in 15 months.
     
  • Charge Place Scotland - which had provided free charging on all its chargers - recently introduced a tariff for charging.
  • Ionity - which used to have an £8/8 Euro fixed price tariff - moved to a high price per kWh tariff last year.
But this is only the tip of the iceberg.
 
I can envision a time when it costs as much to charge an EV at a HPC as it does to fill a similar car with fossil fuel now. £60? £70? £90? The market will push and the consumers will pay. Once EV ownership hits a critical level the market will cease to be price elastic in the same way the fossil fuel market ceased to be price elastic. By that I mean that everyone will price their charging at or around a base set tariff. Nobody will radically undercut that price to gain customers as they know they’ll lose money.
 
Even today the price differential between the most expensive litre of petrol and the cheapest litre is no more than a few pence (ignoring the higher prices charged for the captive markets at motorway service stations). When was the last time anyone reduced petrol by 20p a litre lower than a competitor? It doesn’t happen. Any small price differentials are usually temporary.
 
The same will happen for EV charging.
 
Much has been made of the fact that once fossil fuel sales dwindle the government will lose a substantial proportion of income from fuel duty. They will need to find ways to recoup that lost income elsewhere. Many have speculated that home charging through smart meters will be a target. Road pricing per mile is another option (and quite a fair one)
 
But targeting Rapid and High Powered Chargers and levying a duty per kWh is a sure-fire way of bringing in additional income. The beauty of this is that it doesn’t penalise those users without home charging as they can use fast chargers (7kW or 22 kW as appropriate) which won’t have the duty applied, but it does target those who use high powered charging a lot. Tom Callow from bp Pulse told me recently on the podcast that they have chargers in Central London that are used 30 times per day.
 
Imagine if each of these just adds 10 kWh of charge and the government levies a 10p/kWh duty. That’s £10,950 per year just from that single charger. Calculate the duty on ALL rapid and high powered chargers currently being used in the UK (3867 as at Dec 27 2020) and that can start to add up. Remember, also, that the number of actual rapid and HPCs in the UK will ramp up dramatically as the UK prepares for the 2030 ban to kick in. A government which doesn’t consider this as a potential source of revenue is certainly one that is missing a trick.
 
At the moment EV charging is still relatively cheap for public charging. But we need to reconcile ourselves to the fact that this will  ultimately change. Market forces and government duties will conspire to push the price of charging inexorably upwards in the same way as it did for fossil fuels.
 
And we’ll accept it in just the same way.