Our team: Sam Tye
Following completion of the Liberty Charge joint venture between the Charging Infrastructure Investment Fund, managed by Zouk (who were advised by Fladgate) and Liberty Global, Sam Tye, the Head of the Green Energy Group at Fladgate considers some of the issues facing the roll out of electric vehicle charging infrastructure and the UK Government’s recent approach to these issues.
The UK Government released its “Road to Zero” Strategy on 9 July 2018. In the UK Government’s own words the Road to Zero “sets out new measures to clean up road transport and lead the world in developing, manufacturing and using zero emission road vehicles”. In the Road to Zero the UK Government stated it would end the sale of new conventional petrol and diesel (internal combustion engine (ICE)) cars and vans by 2040. On 4 February 2020 the UK Government announced an intention to move forward the ban on the sale of new ICE vehicles to 2035. It is not inconceivable that the ban could be brought forward to an even earlier date.
There is, however, still much to be done to bring the consumer along in the journey to a decarbonised transport system. During the last few months new electric vehicles (EV) increased their market share of new vehicle sales but this was in no small part down to the collapse in new car sales in other categories rather than a surge in EV sales.
This article does not focus on businesses which are considering the electrification of their vehicles: UPS and Amazon being recent notable examples. The economics are different when the installation of EV charging infrastructure is being considered for the charging of private EV fleets. Here, there are consistent patterns of use in relation to those vehicles such as taxi companies and companies operating distribution centres. It is likely that there will be a significant move by such businesses over the next few years to EV fleets on both economic and ESG grounds.
Market commentary has focussed on three major stumbling blocks to mass adoption of EVs:
The above three factors are no doubt still relevant, if nothing else, as a matter of public perception. A public perception that will need to be changed by the EV industry to encourage the mass adoption of EVs. In the last couple of years, however, market commentary has shifted to, and the Road to Zero focuses extensively on, the need to ensure that EV charging infrastructure is in place to encourage and cope with mass adoption of EVs. The Road to Zero identified the need for a “fit for purpose infrastructure network”. The charging infrastructure network needs to address the so called “range anxiety”: the concern that an EV motorist does not have sufficient battery capacity or available suitable charging options to complete their journey or journeys without running out of power.
A fit for purpose infrastructure network that overcomes range anxiety is one that will need to address the following issues:
There will need to be sufficient volume of charging points. A rapid charging point currently takes around 30 minutes to charge an EV. Drivers will not be prepared to accept that they will also need to wait for another EV to complete its charge before starting their own charge. A refuelling process that could take up to 45 minutes (or longer if charging facilities are significantly lacking) will deter consumers from purchasing EVs.
EV charging infrastructure will need to be located where it is actually needed. Motorways and A roads in particular will need sufficient charging infrastructure to cope with demand from motorists who are travelling on longer journeys where any charging at home will not be sufficient to complete the entire journey.
The infrastructure will also need to be in place to cope with human behaviour. In theory, most journeys undertaken by the average motorist will be within the range of a fully charged EV battery. I know from personal experience that I do not always remember to charge my phone! I suggest that this same issue is likely to apply to EVs. Motorists are likely to need the infrastructure to charge their cars for shorter journeys.
The charging infrastructure that is put in place needs to adequately address the charging needs of the motorists in that location. Whilst home charging will be suitable for people with off street parking it will not be a workable solution for those motorists who do not have the luxury of a garage or driveway. A combination of streetlight, wireless and under pavement charging solutions will be required to service those areas, particularly in town and city centres where on street parking is most commonplace. Indeed, it is often these areas that are most affected by air quality issues that would benefit significantly from the electrification of transport.
Away from the home, charging infrastructure in office developments and business parks that are available for use by people during their working day would assist in resolving the issue of EV battery charge becoming depleted during the day.
In 2019 the Renewable Energy Association identified the need for collaboration amongst charge point operators to ensure that there was a seamless service across charging networks so as to encourage EV uptake. If a customer of one charging network only has access to charging provided by that network it will drastically reduce the available chargers for that person. In addition, it would result in significant duplication of charging infrastructure on motorways and other busy roads as well as a strain on the electricity network which is already experiencing significant change and challenges due to digitalisation, decentralisation and decarbonisation.
The chair of the All-Party Parliamentary Group on electric vehicles made it clear in an open letter to charge point operators Pod Point, Ecotricity and BP Chargemaster in October 2019 that if charge point operators failed to put in place systems to facilitate roaming between different charging networks within 12 months the government may feel compelled to intervene. Interoperability was also a key point in the Electric Vehicle Energy Taskforce report issued in January 2020 and in the policy paper relating to the Rapid Charging Fund issued by the UK Government on 14 May 2020.
Whilst some charge point operators have started to cooperate to ensure a seamless customer charging experience (Octopus Energy recently launched a new roaming service under its Electric Juice brand), others continue to operate a ring fenced charging network. Until such time as potential users of EVs have fluid access to all or a significant proportion of the charging network without hassle they will be deterred from investing in EVs.
At present the cost of installing EV fast charging infrastructure is significant. A charge point operator needs to pass on the capital expenditure of installing, maintaining and connecting (to the electricity grid) the charging infrastructure, as well as the cost of the electricity itself, on to the consumer whilst retaining a profit margin. For so long as the cost of EV charging infrastructure remains high, and usage low, the cost to the motorist of using fast charging infrastructure will be relatively expensive.
The initial cost outlay and low likely usage of the infrastructure is also a significant barrier to entry for new participants in the EV charging market. The EV charging infrastructure industry will need to see the same kind of reduction in cost through innovation and streamlining that has been seen in the solar and wind industries.
UK Government action
The Road to Zero made it clear that the UK Government is aware of the issues set out above. Private sector innovation and capital will no doubt be required to play a part in overcoming these issues. It is evident, however, that at this point in time that the UK Government will be required to assist the private sector if the ban on the sale of new ICE’s is going to be implemented in 2035 (or earlier). The UK Government has acknowledged as much.
The UK Government has made public money available to assist the growth of EV charging infrastructure in the UK. It has invested £200 million in the Charging Infrastructure Investment Fund (CIIF). The CIIF is “intended to focus on supporting faster expansion of public electric vehicle chargepoints along key road networks, in urban areas and at destinations” with the aim of increasing the amount of capital invested in the sector.
The Clean Growth Fund, in which £20 million of public funds is to be invested by the UK Government is intended to “speed up the deployment of innovative clean technologies that reduce greenhouse gas emissions, by making direct investments in companies seeking to commercialise promising technologies”. In the press release issued by UK Government on 21 May 2020 transport is stated to be one of the sectors in which the Clean Growth Fund will be looking to invest.
In the March 2020 budget the UK Government announced the intention to provide £500 million over the next five years to support the rollout of a fast-charging network for electric vehicles, the Rapid Charging Fund forms part of this investment. According to the Rapid Charging Fund policy paper dated 14 May 2020 the Fund will be used to “fund a portion of costs at strategic sites across the strategic road network where upgrading connections to meet future demand for high powered chargepoints is prohibitively expensive and uncommercial”.
The On Street Residential Chargepoint Scheme which was launched in 2017 made funds available to local councils to fund the installation of public EV charging on residential streets. The UK Government increased the funding available under the Scheme to £10 million for the 2020-21 financial year.
Beyond the UK Government making direct capital contributions it is able to use other levers to incentivise the transition to EVs. An example of this approach is the exemption from tax for the use of an EV as a company car in the financial year 2020-21. Looking ahead, the UK Government may consider, as the 2020s progress, increasing tax on petrol and diesel, increasing road tax for ICE vehicles and/or make anti-pollution standards even more stringent on manufacturers of ICE vehicles to push the adoption of EVs. In addition, if charging infrastructure is not being deployed in sufficient quantity further significant sums will need to be committed by the UK Government if it is to meet its Road to Zero ambitions and net zero by 2050.