May 21, 2024

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President Biden’s electric car plans hinge on having enough chargers

In President Joe Biden’s vision of a green future, half of all new cars sold in 2030 will be electric. But something really basic is standing in the way of that plan: enough outlets to plug in all those cars and trucks.

The country has tens of thousands of public charging stations — the electric car equivalent of gas pumps — with about 110,000 chargers. But energy and auto experts say that number needs to be at least five to 10 times as big to achieve the president’s goal. Building that many will cost tens of billions of dollars, far more than the $7.5 billion lawmakers have set aside in the infrastructure bill.

Private investors are pouring hundreds of millions of dollars into building chargers, but the business suffers from a chicken-and-egg problem: Sales of electric cars are not growing fast enough to make charging profitable. It could be years before most charging companies break even, let alone mint big profits like Exxon Mobil and Chevron.

Fast chargers — ones that can fill up an electric car battery in 20-40 minutes — cost tens of thousands of dollars but are typically used less than humdrum gas pumps. Yet the auto and energy industries need to build them to reassure people they won’t be stranded in an electric car with no plug in sight.

“EV charging infrastructure is the single biggest barrier to EV adoption,” said Asad Hussain, a senior analyst at PitchBook, a research firm. “You talk to anyone who’s on the fence about buying an EV and the No. 1 concern that comes to mind is range anxiety.”

TVA and the state of Tennessee are teaming up to add 50 more fast-charging stations across the state in the next three to five years to provide fast chargers spaced 50 miles apart along major highway routes in Tennessee. The charging stations will support the effort by Drive Electric Tennessee to have at least 200,000 light-duty electric vehicles in Tennessee by 2028.

At the end of last year, there were only 11,034 light-duty EVs registered in Tennessee, but that number is projected to jump with new electric vehicles soon to be produced in the state by General Motors and Volkswagen along with Nissan’s ongoing production of the all-electric Leaf.

GM is spending $2 billion to begin making the Cadillac Lyriq, a small electric SUV, at the Spring Hill factory, while VW is investing $800 million to add a battery-powered small SUV to its lineup of cars made at its Chattanooga assembly plant. Nissan in Smyrna has been making electric vehicles for the past decade.

Combined, the Tennessee auto plants will soon make the Volunteer State the biggest state in the Southeast — and the No. 3 state in the nation — for EV production.

TVA Vice President Joe Hoagland said about 80% of the recharging of electric vehicles is expected to be done at home by EV owners. But Hoagland said to convince more people to buy electric vehicles, more and quicker rechargers are needed for many travelers to allay so-called “range anxiety” by motorists fearful they won’t be able to recharge their electric vehicles on the road for longer trips.

In Tennessee, there are currently 24 high-voltage recharging stations standardized for all-electric vehicles, although there are other high-voltage stations for particular models such as the Tesla electric car and there are hundreds of low-voltage recharging stations that take longer to re-energize vehicle batteries.

Chattanooga currently has one-third of the rapid charging stations due to early investments by EPB, CARTA and Tesla in the city. Chattanooga also has dozens of other public charging outlets for slower recharging of EVs in public parking lots, restaurants and attractions, according to Chargehub.com.

Chattanooga was an early leader in testing battery-powered vehicles at the electric vehicle test facility TVA built in the late 1970s, and Chattanooga pioneered one of the first electric-powered downtown shuttle systems in the 1980s built in Chattanooga by Advanced Vehicle Systems.

Chattanooga was once home to the Electric Transit Vehicle Institute, later renamed the Advanced Transportation Technology Institute, and the Chattanooga Area Regional Transportation Authority started one of the state’s first electric vehicle rideshare programs in 2016 to allow drivers to rent battery-powered Nissan Leafs by the hour.

But AVS later filed for bankruptcy, the TVA test track was idled and transferred to UTC, the research institutes shut down and CARTA suspended its electric car rental program due to limited usage.

The state Department of Environment and Conservation and TVA are now seeking initial project proposals from local power companies like EPB in Tennessee to develop the Fast Charge TN Network across Tennessee.

TVA spokesperson Malinda Hunter said the program will provide up to 80% of the cost to purchase, install, operate, and maintain eligible EV fast-charging infrastructure that will be located within a prioritized corridor gap and made available to the public.

The European Union, which is further along in electrifying cars, had nearly 200,000 public charging points last year. China, where electric cars are even more common than in Europe, had more than 800,000 in 2020.

European and Chinese officials have offered better incentives and imposed tougher regulations in part because they want to win a global race to build the cars and trucks of the future. U.S. policies, including the infrastructure bill, have been more modest because most Republicans and some Democrats oppose the regulation and spending needed to quickly ditch fossil fuels.

Soon, even $7.5 billion won’t be enough to lay the groundwork for the electric age, Nick Nigro, founder of Atlas Public Policy, a consulting and research firm based in Washington, said about the proposed federal spending on charging stations. “Is it sufficient? No,” he said. “But it gets things going.”

Most drivers today plug in their electric cars at home, and only occasionally use public charging stations. But those stations will be crucial, especially to those who live in apartments and people who drive long distances.

For years, startups, automakers and other companies have been slowly building chargers, mainly in California and other coastal states where most electric cars are sold. Those businesses use different strategies to make money, and auto experts say it is not clear which will succeed. The company with the most stations, ChargePoint, sells chargers to individuals, workplaces, stores, condo and apartment buildings, and businesses with fleets of electric vehicles. It collects subscription fees for software that manages the chargers. Tesla offers charging mainly to get people to buy its cars. And others make money by selling electricity to drivers.

Once the poor cousin to the hip business of making sleek electric cars, the charging industry has been swept up in its own gold rush. Venture capital firms poured nearly $1 billion into charging companies last year, more than the five previous years combined, according to PitchBook. So far in 2021, venture capital investments are up to more than $550 million.

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Staff file photo / This electric vehicle charging station is in a parking lot next to Outdoor Chattanooga in Coolidge Park.

On Wall Street, publicly traded special purpose acquisition companies, or SPACs, have struck deals to buy eight charging companies out of 26 deals involving electric vehicle and related businesses, according to Dealogic, a research firm. The deals typically include an infusion of hundreds of millions of dollars from big investors like BlackRock.

“It’s early, and folks are trying to wrap their heads around what does the potential look like,” said Gabe Daoud Jr., a managing director and analyst at Cowen, an investment bank.

Those businesses could benefit from the infrastructure bill, but it is not clear how the Biden administration will distribute money for charging stations.

Tesla, which makes about two-thirds of the electric cars sold in the United States, has built thousands of chargers, which it made free for early customers to use. The company could open its network to vehicles made by other automakers by the end of the year, its CEO, Elon Musk, said in July.

Volkswagen also owns a charging network, Electrify America, which is already available to all makes of cars. In Europe, Volkswagen, BMW, Ford Motor, Daimler and other automakers jointly own a charging company called Ionity. Drivers pay fees to charge in both cases, but some automakers offer free charging for a few years to entice car buyers.

Energy giants like BP and Royal Dutch Shell have gotten into the business, too, by buying charging companies in Europe and the United States.

And TVA and 13 other electric utilities from Maine to Texas have formed the Electric Highway Coalition to build stations at intervals of 100 miles or less. Utilities elsewhere are also building chargers, as are cities like Los Angeles and New York.

They are all competing in a tiny market: Less than 4% of new car sales and less than 1% of vehicles on U.S. roads are electric.

Volta, a smaller charging company, places chargers near the entrances of retailers like Whole Foods Market and Walgreens. The chargers show ads, generating revenue, and the stations pay for themselves within a few years, said the company’s president and a co-founder, Chris Wendel. “It’s a sponsored service brought to you by brands that care about what you’re doing.”

But some companies have stumbled. In December, TPG Pace Beneficial Finance, a SPAC backed partly by TPG, the private equity firm, announced it would buy EVBox, an Amsterdam-based maker of charging equipment, valuing the company at $1.4 billion.

In January, Jim Cramer, the host of CNBC’s “Mad Money,” said EVBox was his favorite charging company because it is an established player in Europe. Shares of TPG Pace Beneficial climbed to $31 in February, from around $10.

But this month, the companies delayed the merger’s closing because EVBox has not yet released its audited financial statements for 2020. TPG Pace said in a regulatory filing that there was “significant uncertainty” about the deal’s completion, and its shares have fallen back to about $10.

Cramer no longer stands by the EVBox pick. “I suppose we put too much faith in the financials as presented to investors at the time,” he said in an email.

Since the start of 2020, 16 proposed SPAC mergers have been canceled or withdrawn. And investors and regulators have raised questions about the optimistic claims made by executives and promoters of SPACs.

Yet, investors continue to pour money into charging. One charging company, EVgo, completed a SPAC deal and started trading in July. Trading in Volta started last month. Several other deals have been announced in recent months, including for Tritium, which makes fast chargers; Wallbox, which sells charging equipment, software and related services; and Allego, which operates a large charging network in Europe.

Some investors think charging cars might not be the best approach.

Last month, Ample, which aims to build stations where drained EV batteries are replaced with charged ones, raised $160 million. Raed Masri, founder of Transform VC, an investor in Ample, said battery swapping would be better for people without a place to plug in their cars because it is much faster. “They need a quick energy delivery system, and only swapping provides that,” Masri said.

Other investors are making lots of bets. Energy Impact Partners, a private equity firm based in New York, has invested in several charging networks, a repair app for charging stations and an app that optimizes charging.

Cassie Bowe, a principal at the firm, said that with electric vehicle sales growing fast, it was urgent to build a network to support them. “There’s no more time,” she said. “We need this infrastructure fast.”

This story was reported by The New York Times and by staff writer Dave Flessner of the Chattanooga Times Free Press.

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