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EV Charging Business Models

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August 27, 2023

Electric vehicle (EV) adoption is accelerating globally, driven by consumer demand, government incentives, and automaker commitments to phase out internal combustion engines. As EV ownership grows, charging infrastructure must expand to meet driver needs. For many businesses, installing EV charging can attract customers, benefit employees, and support sustainability goals. When developing an EV charging program, key factors to consider include funding models for the upfront investment, ongoing operating models, and monetization approaches.

Funding the Upfront Costs

The first decision for any organization looking to install EV charging is how to pay for the required infrastructure. This includes the charging hardware, software, permits, site preparation, grid connection, and installation. While doing it all independently is an option, most businesses choose to work with an experienced Charging Point Operator (CPO) or Electric Vehicle Service Provider (EVSP). These companies have existing relationships with hardware vendors, software providers, and electrical contractors. They can guide customers through all technical, legal, and regulatory requirements for a smooth project.

EV Charging Business Models

When partnering with a CPO/EVSP, there are three primary options for funding the upfront capital costs:

Business/Property Owner Funded

The business or property owner pays all hardware, software, construction, and installation costs directly. They own the charging equipment outright and keep 100% of revenue. The business handles ongoing management or pays the CPO/EVSP a fee for maintenance and software access.

Hybrid Funded

The business and the CPO/EVSP share upfront costs based on a negotiated agreement. The split depends on the site’s revenue potential. The CPO/EVSP operates the chargers and the partners share ongoing revenues.

Fully CPO/EVSP Funded

The CPO/EVSP covers all hardware, construction, and installation costs in exchange for a long-term exclusive operating agreement. The business provides the location and site logistics support. The CPO/EVSP owns the chargers and handles all operations. Revenue share percentages are negotiated upfront.

The fully funded model shifts all capital risk to the CPO/EVSP in exchange for long-term revenue from the location. The business owner gains charging with no upfront cost. The hybrid model allows the partners to share costs and benefits. Self-funding maintains full control for the host business.

Operating Models

The next key decision is choosing the right operating model for managing the EV charging stations on an ongoing basis. There are three main options:

Free Charging Model

The business provides complimentary EV charging for customers/employees. This is a loss leader but can drive loyalty and employment branding. Ongoing costs are absorbed as an operational expense.

Cost Recovery Model

EV drivers pay a fee for charging set to cover electricity, network fees, maintenance, and other operating costs. This model recoups expense outlay but does not generate direct profit.

Profit Generation Model

EV charging fees are set higher than just cost recovery to generate additional revenue for the business. Price is optimized to maximize profitability based on local market conditions.

The free charging model is best suited to increase customer dwell time or provide workplace benefits. Cost recovery offsets operating expenses while staying affordable. Profit generation works best with a captive audience like apartment renters or long-distance travelers.

Monetization Approaches

If EV charging fees will be charged, the business must determine the right monetization approach. This impacts the driver payment experience and required back-end software. Main options include:

Monetization Approaches

Pay Per Session
Drivers pay a set fee to connect and charge their vehicle. Simple for drivers but provides little cost transparency on electricity consumed.

Pay Per kWh
Drivers pay per amount of electricity delivered to their vehicle. More complex billing but closest to a utility model for customer fairness.

Subscription Model
Drivers pay a recurring fee for unlimited charging access. Provides predictable revenue but is less aligned to utilization.

The payment process must also be defined – via mobile app, RFID card, credit card swipe, or network roaming. Choosing the right monetization model requires balancing customer experience, operating cost, and profit goals.

Read More: Benefits of Smart Charging in Your Business

Key Factors to Consider

Some key factors for businesses to consider when evaluating EV charging options include:

  • Driver dwell time – Level 2 charging fits customer stays of 45+ minutes. DC fast charging caters to travelers needing a 20-30 minute rapid “fill up.” Understand user needs.
  • Upfront costs – Fully funded models provide charging with little upfront investment. However, businesses give up some revenue share. Evaluate tradeoffs.
  • Revenue potential – Confirm sufficient local EV adoption exists now. Partner with an EVSP that offers site evaluation expertise.
  • Grid capacity – Many locations require electrical upgrades to support EV charging loads. Factor these costs into plans and budget.
  • Operating responsibility – If funding chargers directly, ensure internal resources exist to handle maintenance, software, billing and driver support or outsource to a CPO/EVSP.
  • Payment options – Frictionless payment results in best driver experience. Determine which payment methods and systems are optimal.
  • Future expansion capability -Select hardware and software solutions that allow easy charging capacity growth as demand increases over time.

Installing EV charging can bring benefits to many businesses by attracting customers, providing workplace perks and supporting sustainability. Determining the optimal funding mechanism, operating model and monetization approach requires careful analysis of site-specific conditions, business objectives and customer needs. Partnerships with experienced CPO/EVSPs provide access to industry expertise that can help guide intelligent EV charging investments.

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