Source: McKinsey – By Peter Fröde, Morgan Lee, and Shivika Sahdev
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And here’s an excerpt:
Although electric vehicle (EV) adoption in the United States has historically lagged behind other regions, the country is now experiencing remarkable growth. In 2022, approximately 8 percent of all new passenger cars sold in the United States were EVs, up from around 5 percent in 2021. By 2030, this figure could potentially rise to 53 percent.
To meet the growing demand for electricity by zero-emission passenger vehicles, the United States will require approximately 28 million charging ports by 2030. Out of these, private charging ports are expected to increase from around 2.5 million to nearly 27 million, constituting about 95 percent of the total.
There are two primary types of public charging: direct current fast charging (DCFC), typically used for highways and quick fill-ups, and slower Level 2 (L2) charging, commonly found at places like grocery stores, malls, car dealerships, golf courses, banks, and areas where extended parking is common. L2 charging may also be situated near sidewalks or street parking. Presently, there are about 150,000 L2 and DC plugs available across the United States, but this number is expected to reach 1.5 million by 2030, comprising roughly 5 percent of the total.
However, it’s important to note that the profitability of public fast charging stations remains challenging due to the current low demand for electricity by EVs. To help charging station operators enhance their financial viability, we conducted an analysis of the EV market, changes in ownership patterns, and charging demand. We also examined the factors influencing charging station revenues and identified potential levers to optimize profitability, with a focus on utilization and pricing being among the most critical.
While most EV owners tend to have home chargers and second vehicles for long trips, public charging remains essential for various scenarios, such as when overnight charging is forgotten or when the workplace’s slow L2 charger is unavailable. Additionally, long journeys exceeding 150 to 200 miles necessitate public charging.
As EVs become more widespread and their owners become more diverse, the percentage of charging occurring at home is expected to decrease to 50 percent by 2030. Many people lack garages or face installation cost barriers, making public charging vital, especially for apartment dwellers.
Recognizing the growing need for public chargers, numerous new players are entering the domain. Major automakers, for instance, are jointly investing at least $1 billion to build stations with approximately 30,000 fast chargers in urban and rural areas of the United States.
The economics of fast public charging stations are challenging, with high upfront capital costs. For example, a 150 to 350kW DCFC charging unit can range from $45,000 to over $100,000, installation costs from $40,000 to over $150,000, and grid upgrades costing millions, depending on the number of chargers.
Two common business models for charging stations are owner-operator and solution providers (site-host owners or third-party operators). Regardless of the model, the initial capital costs for fast charging stations remain high.
We conducted an analysis for a hypothetical DCFC charging station with an owner-operator model in California. Assuming 15 percent utilization, our analysis showed that the station would generate annual revenue ranging from $265,000 to $285,000, while incurring yearly costs of $220,000 to $250,000. With these metrics, the station would experience a negative EBIT (earnings before interest and taxes) of approximately $40,000 to $50,000.
If the same station received government subsidies or credits, the economics would improve significantly. For instance, the Inflation Reduction Act offers up to a 30 percent tax credit for EV charging stations in certain areas. With these subsidies, the station could achieve a positive EBIT of around $25,000 to $30,000.
To achieve profitability, charging stations can leverage various factors, including utilization rates, electricity costs, pricing strategies, demand charges, hardware costs, and ancillary revenue streams. Aggressive application of these levers can make a substantial difference in station profitability.
In conclusion, as EV sales continue to gain momentum in the United States, the demand for more public fast-charging stations will grow. Careful planning, location selection, dynamic pricing, subsidies, and the exploration of ancillary revenue streams are vital for the long-term success of public charging stations, helping sustain the growth of EVs across the country.