Summary
- While the charging network is roughly 60/40 between Tesla/Everyone Else, all of them need electricity to charge EVs
- The so-called “Energy Chain,” much like a supply chain, operates in two ways: The upstream providers and the downstream users
- Providing electricity for the charging network has become a highly competitive and lucrative business, as chargers are getting busy enough to make money
- Through multiple charge network operators, many manufacturers are jointly investing to build the network, much like how Tesla self-funded their own network construction
- We think that the more charge stations there are, one of the main points affecting EV sales, range anxiety, can be allieved.
Just a couple of weeks ago, we analyzed who owns what part of the charging network after Tesla shuttered their Supercharger Development and Deployment division. One of the things we did not cover at that time was the way that the power flowed to the charging stations, to make the charging network actually function.
We didn’t cover it then as there was a significant amount of research and data to pore through, but now that we know what we know, we can analyze it!
The Upstream: Sourcing The Electricity & Land
Electricity
Across the US, there are over 7,300 power plants and 160,000 miles of high-voltage power lines supplying millions of low-voltage power lines that distribute to communities, schools, office buildings, and EV charge points.
Electricity across the nation is generated in one of four major ways, according to the EPA: 20% from renewable sources such as wind, geothermal, biomass, solar, and hydro; 20% from nuclear reactor powered steam turbines; 19% from coal-fired steam turbines; 40% from natural gas fired steam turbines. The final 1% is from the last few petroleum/kerosene oil burning plants, which are likely to close in 2025.
The upstream industry is both a very small, yet at the same time very competitive market. This is because most power, roughly 80%, in the USA is generated by private, investor-owned utilities. It is competitive because it really is up to which entity gives the charging station or sub-network the best rates for access to their grid, and those contracts a highly lucrative.
The other roughly 20% of electricity generated in the USA is from the public sector. Most often owned by state governments, sometimes in cases of metropolises such as New York or Los Angeles, municipal utilities provide the electricity for their respective areas.
Land Usage
The other major aspect of the upstream side of the whole thing is land rights. Around 85% to 90% of the time, charging stations are attached to some kind of already-in-use land. For example, you’ll find charge stations at parking lots, service stations, office buildings, hotels, universities and colleges, and the like.
To put those charging stations in, if you are not the land owner directly, it requires some form of land agreement. Roughly 50% of the time it is the actual land owner installing the chargers, but outsourcing management of them to charge networks. The other roughly 50% of the time is when charging networks find prime locations to install chargers, and work towards an agreement with the land owner that is mutually beneficial.
The only time this is majorly different is in the case of office buildings, where it is often the building leaseholder that has final oversight and ownership of the charging stations. Payment for these usually comes from rents and leases collected from corporate tenants
This is why in the private parkades under many office buildings, those chargers often don’t require you to pay a fee to use them. They are seen as a bonus for having an office or company in the building, and are paid for already by your company.
The Downstream: Providing The Charge
The downstream part of the charging network is where one finds massive capital expenditure. At this point, power grid access has been agreed to, the land where the charging station/network has been leased, sub-let, or bought up, and the actual charge station needs to be built.
Since infrastructure is expensive, they often can’t do this on their own. To alleviate this financial hurdle, a surprising source of investment comes in: Automotive manufacturers.
In the same way that Tesla bought the land and did the installation themselves, other manufacturers are following their example but contracting the actual work out.
All manufacturers that make EVs have investments in multiple charging network providers, even the luxury brands such as Rimac-Bugatti and Rolls-Royce. This is both so that they can advertise their vehicles as fully compatible with that network, as well as help build the network so that they can consequently sell those same vehicles.
In fact, it is one of the few areas that manufacturers will band together around. One such partnership is GM, BMW, Honda, Hyundai, Kia, Mercedes and the Stellantis Group all agreeing to a multi-billion dollar investment to build 30,000 DC Fast Charging stations across Canada and the US, announced in July 2023.
While the total amount is not disclosed, what has been revealed is that each company will shoulder roughly 13.5% to 14.5% of the investment load. In the case that the total is over $7 billion, which is highly likely, that means that each manufacturer is putting in over $1 billion dollars each.
When completed, the new stations would account for roughly 25% of all chargers in North America, combining Canada and the USA. They will operate under the auspices of charge network providers that are not Tesla, such as Electrify America/Electrify Canada, EVGo, and the like.
It is ultimately those network operators that are the end of the energy chain. Through either partnerships or their own investments/acquisitions, they manage the connection to the upstream and provide that energy to the end user.
In Sum
While the balance of ownership of the charging network is set to change drastically in the next few years as Tesla is no longer the majority producer of charging stations, it is too early to say by how much the network will swing.
With the major investment still being put forth even as EV sales stall out, it is likely that by the time of the expected EV resurgence happens in 2026 or 2027, the charging network will have grown to over 50,000 stations in North America alone.
We think that the biggest thing holding back EVs sales is range anxiety, so having more fast chargers across more of the continent, accessible to more people, is always a good thing. As well, with renewable or clean energy becoming more and more prevalent, this means that the future does hold some promise.
The only thing that all this revolves around is if EVs actually do have a resurgence, so, as the saying goes, only time will tell.
