Will EV recharging soar to very high costs?

I recently read a complaint by an EV driver that the charging station at De Anza College cost 55 cents/kwh. The national average price for electricity is around 10 cents, and at that price a typical electric car costs under 3 cents/mile for electricity. Gasoline costs about 8 cents/mile in a Prius, about 13 cents in a decent non-hybrid and 18 cents/mile in the average car which gets 22mpg. (At least here in California.) But the college’s charger’s electricity is almost 15 cents/mile in most electric sedans today, which is more than the gasoline in any gasoline car an eco-conscious person is likely to buy. (California Tier III electricity is 30 cents/kwh and thus almost as much.)

The price of charging stations varies wildly. A lot of them are free still, financed by other motivations. Tesla’s superchargers are free — effectively part of the cost of the car. It’s not uncommon for parking lots to offer free charging if you pay for parking, since parking tends to cost a fair bit more. After all, you won’t put more than 20kwh in a Leaf (and probably a lot less) and that costs just $2 at the average grid price.

This got me thinking of how the economics of charging will work in the future when electric cars and charging stations are modestly plentiful. While the national grid average is 10 cents, in many places heavy users can pay a lot more, though there are currently special deals to promote electric cars. Often the daytime cost for commercial customers is quite a bit higher, while the night is much lower. Charging stations at offices and shops will do mostly day charging; ones in homes and hotels will do night charging.

Unlike gasoline pumping, which takes 5 minutes, charging also involves parking. This is not just because charging takes several hours, but because that is enough time that customers won’t want to come and move their car once full, and so they will take the space for their full parking duration, which may be 8 or more hours.

Charging stations are all very different in utility. While every gasoline station near your route is pretty much equivalent to you, your charging station is your parking spot, and as such only the ones very close to your destination are suitable. While a cheap gas station 2 miles off your route would have a line around the block, a free charging stations 2 miles away from your destination is not that attractive! More to the point, the charging point close to your destination is able to command a serious premium. That have a sort of monopoly (until charging stations become super common) on charging at the only location of value to you.

Put another way, when buying gasoline, I can choose from all the stations in town. When picking an EV charge, I can only choose from stations with an available spot a short walk from my destination. Such a monopoly will lead to high prices in a market where the stations are charging (in dollars :-) what the market will bear.

The market will bear a lot. While the electricity may be available cheap, EV owners might be easily talked into paying as much for electricity as gasoline buyers do, on a per-mile basis. The EV owners will be forgetting the economics of the electric car — you pay the vast bulk of your costs up front for the battery, and the electrical costs are intended to be minor. If the electricity cost rivals that of gasoline, the battery cost is now completely extra.

Naturally, EV owners will do at least half their charging at home, where they negotiate the best rate. But this could be worse, as they might well be talked into looking at the average. They could pay 80 cents/kwh in the parking lot and 10 cents/kwh at home, and figure they are getting away with 45 cents and “still beating gasoline.” They would be fooling themselves, but the more people willing to fool themselves, the higher prices will go.

There is another lack of choice here. For many EV drivers, charging is not optional. Unless they have easy range to get back home or to another charging place they will spend lots of time, you must charge if you are low and the time opportunity presents itself. To not do so is either impossible (you won’t get home) or very foolish (you constrain what your EV can do.) When you face a situation where you must charge, and you must charge in a particular place, the potential for price gouging becomes serious.

Charging station owners could even get sneaky. They might learn to know their customers. They will know who you are from the token you use to activate and pay for charging, and they will also know your car and how much charge it needs once they plug into it. They could use this information against you. They might charge more to somebody who has little choice about where to charge, and give a lower price to people who are flexible and not so low in charge as to be desperate. This sort of price discrimination is a common tactic in business — figure out which customers will pay the most, and charge them more.

Stations also can download the prices and even the availability of other charging stations over the internet. You need that so you can find a free one. That means stations could deliberately charge more when they know they are your last available choice. What do you do if you plug into the last available station at your office, and it notices you are near empty, and decides you should pay more? You can’t really argue with its logic. If the online databases of prices allow you to reserve a spot and fix the price, this becomes harder — so that’s a good idea.

There are costs to operating a charging station of course. As noted, cars stay parked at stations for many hours at a time, so each station can only serve a few customers a day. It’s a far cry from a gas pump. The stations cost money, the land in front of them costs money, and the added power line capacity can cost a lot of money too. The electricity is small potatoes, at least at first, but all the costs must be recovered.

One approach that could be useful is charging stations that serve 4 or more parking spaces, and come with 4 or more plugs, so all the cars can be plugged in, even if the station can’t charge them all at once. In such a situation, you can charge the cars in some priority order, so that the charging station is not wasted if the first person to pull up only needs an hour’s charging but 8 hours of parking. The station will know how much each car needs and be able to tell later arrivals how much power they can get. In addition, as cars fill up they can accept less power and the extra can go to the others waiting. This strategy is useful if you can’t wire the station to charge all 4 cars at once. It’s cheaper if it suffices.

Right now, charging is free or subsidized for various reasons. Parking lots figure that if they can attract a parking customer who will pay $20, giving out $2 of electricity is no big deal. Companies like to give perks to employees or encourage greener transportation. But a subsidized market is a dysfunctional market, and this can’t be sustained if there is widespread EV adoption. Indeed, as adoption grows, the ability to sell electricity during the peak of the day below the peak-use rates (which are more like 25 cents/kwh) becomes unsustainable.

The parking market is a good example of these factors. Some parking lots are $40/day and lots not far away are $15/day. Nearby is metered parking ($3/hour) and often some free parking. This won’t change, but now your transportation energy will follow the same rules and be as variable in pricing based on location.

What solves this problem?

  • Bigger/cheaper batteries, so you don’t fell you must charge at a given spot — though it will still be very tempting.
  • So many charging stations that you really still have a choice, even including your time to walk to your destination
  • Robocars which can move themselves to the cheapest available charging location, even able to shop online for the very best prices.
  • Battery swap so most charging can take place at night rates, and it can be done in a quick stop along the route.

But nothing, other than the robocars, truly solves the problem. Stations will charge what the market will bear, and little can change that rule.

Update: Ecotality, one of the few companies attempting to build a public charger network using the chademo level 3 charging system used by the LEAF, has declared bankruptcy. It was appearing that chademo was not likely to win in any event, faced with both the SAE combo plug and the Tesla supercharger plugs, which will also fight it out.

Do you think charging

Do you think charging stations would be an interesting business opportunity?

For example, we create the charging station and install it. We approach gas stations and parking areas with a proposition such as "we'd like to install a charging station and split revenues with you".

Possibly

As EVs grow, charging could be a good business — or it could be one in a fake market, with all sorts of subsidies on one end driving prices down in one block while aggressive pricing as I describe pushes them up on the next block. I am not sure we know enough. Today there are suppliers building charging stations, and installers. Betterplace did a deal that when you bought their car they installed to charge poles, one at your office and one at your house. (That made sure you would not swap very often.) They went out of business, though.

More considerations

Why would anyone park for eight hours at a charging station they knew was charging them five times the price for electricity they pay at home?

There's no doubt that if gouging at charging stations becomes commonplace, car owners will be given the option by car manufacturers to set their cars to stop charging at a certain point. e.g. "Based on current GPS location, stop charging after there's enough power in the battery to drive home from here," or just enough power to reach the next stop which includes a charging station (which may have much better rates).

With the increasing "Internet of things" the car will be able to send a message to the owner's phone letting him or her know that its battery has reached a certain minimum charge.

If price gouging becomes commonplace based on how depleted a car's battery is, I'd expect either a marketplace reaction (negative reviews on Yelp, plus bad reviews and "not recommended!" ratings in the crowdsourced reviews data of various "Find a charging station near you" apps) or government regulation, or both.

Another thing to consider is who is offering the charging stations, and what are their motivations?

Let's try making a list, with potential motivations/reasons/notes:

Shopping centers - Want you to stay. Spending more time means spending more money. There's an argument that they'd want to turnover the parking spot, but people need to eat after a certain amount of time, presumably in an on-site restaurant. So there's a desirability curve that's high for short trips (stop, buy something, go) and long ones (lots of shopping, plus dining in an on-site restaurant), low in the middle, and low beyond shopping + one meal (though some people might start with lunch, spend the afternoon shopping, and then stay for dinner).

Workplaces - Likely included as a job perq for high-skilled jobs. High potential for gouging for low-skilled jobs, but then would people with that kind of job be paying the high up-front cost for an electric vehicle anyway?

Parking garages - You're paying for parking up front. Offering charging is a competitive advantage.

Parking lots near central business districts - Similar to parking garages, though the lot itself might be free, so there's potential for gouging there.

Hotel parking - Variable. Can be a competitive advantage. Hotels frequently charge daily rates for parking now. High likelihood of gouging. Cheaper hotels or motels are more likely to offer cheaper or free charging like they have with "Free cable TV!," "Free WiFi!" as incentives vs larger chains.

Airport medium or long term parking - Similar to parking garages, but there are fewer options, you're more captive, and less likely to drive around looking for a better deal. With a limited number of charging stations it'd probably be offered as part of a valet type service so they can move cars in and out of them. So the target market isn't the cost-conscious consumer anyway.

Commuter college parking lots - Captive market. Few options for competition. High likelihood of gouging.

Movie theatre parking - Stay times would mostly be only 2 to 3 hours, so most people would use it just as a boost. Pricing would likely be low for the first 2 to 3 hours, as a competitive advantage for that movie theatre over others. Time spent beyond that would probably rise dramatically, to prevent people from leaving their car there. Many cinemas are in shopping centers, so the charging spots nearest the theatre might have rates that rise dramatically after 2-3 hours.

Big box retailer parking - The longer you stay, the more you're probably buying on that trip. Low likelihood for gouging.

Large apartment complexes - You'll have to pay extra per month for a spot with a charger. Or you get one installed yourself. The electricity would be tied to your own utility bill.

Looks like the kind of thing that will shake out in the marketplace. People will probably have an idea beforehand about what kinds of places are likely to offer free or cheap charging, and which places are likely to gouge.

It's complex

You don’t always get the choice you like in parking. Even less often can you get the choice you like in charging station and parking. You park where you can get — a combination of price and distance from your destination. This lower amount of competition is why some parking lots are $40/day and some are $15/day not that far from one another.

Some charging stations don’t allow you to “hog” the station, which is to say you have to pay extra to park in the spot, not charging. Not as much as charging, but you are depriving them of revenue. That’s why I propose the system where the charger has several plugs so if you stop charging the guy next to you can charge.

Yes, people might give bad ratings. But I am not talking about secret charges, you would have to agree to the price. Perhaps you would punish that company later, and so they would not get too greedy. But it is only that which prevents them from getting greedy. My point is it’s unlike gasoline. If a gas station charges $6/gallon nobody goes there. If it’s the station in Death Valley (which does charge about $1 extra/gallon) you grumble, and you don’t fill up, but you go there, and they feel that’s the right plan. But gasoline, unlike parking, doesn’t really vary that much in a town.

Shopping centers: Not usually very long stays, but yes, they want you. Anybody who gives you free parking, in fact. Workplaces: A perk for a while, but I am talking about the world where lots of cars are electric, in which case they no more give you that than they erect a gas station and give out free gas.

Parking: Hard to say. Nothing’s free, after all. We are talking about replacing a large fraction of the multi-hundred-billion gasoline industry here. For now, it’s a way to attract a customer. But as I note, parking prices are all over the map.

Airport: The issue is you can’t hog the plug for a week, so a solution for that is needed. Staff might unplug you to make this work.

In a world...

In a world where lots of cars are electric, there will be lots of charging stations, and thus lots of competition.

If a charging station has a limited number of charging bays they're going to have significant disincentive to allow people to plug in their cars for long periods like 4 to 8 hours. So you might only ever be gouged for the price of a couple hours of electricity, and/or you know that you're only going to be able to get a bit of a boost in any particular location.

My general belief is that price gouging on charging for electric cars requires a number of conditions to apply together. The De Anza College parking lot is a perfect example, where the audience is captive for many hours and competition is low since the college has an essential monopoly on student parking. I haven't been there in a while, but the mall across the street probably has parking limits and frequent enforcement during school hours to discourage student parking, and the surrounding residential areas probably have area permits during the daytime by this point.

Airport long term parking is also captive, but as I remarked before if there are a limited number of chargers it'd have to be run as a valet-type service, so the attendants can swap the cars out at the charging stations. That makes it a premium offering in the first place. It's only when it gets to the point where there are enough electric vehicles on the road that there are enough charging bays that cars don't need to be swapped out of them where "regular people" (eg not affluent) might start using them, and thus getting gouged. At that point there's likely to be competition. Regardless, it's well known that airport long term parking is a very pricey thing anyway. Hotel daily parking is similar at the higher-end chains.

Other parking areas will have more competition, and/or more incentive to provide free or low cost charging as a perk in order to acquire your business.

Lots of competition

While there will be some competition, my point is that it’s much more limited. Gas stations 30 miles apart are competing if they are both along your route. The charging stations must be quite close to compete. There are, after all, lots of parking lots, and they do compete to an extent, but we still manage to get parking lots not far from each other where one has double the price of the other. Especially in CBDs. That’s not the same order of competition.

The airport could be valet, or you could have a station that plugs in 20 cars but charges them one at a time. Even easier if the cars can be commanded how much charge to take to make the switching easy. (If your car can’t do this it can’t charge at these stations.)

Again the problem with valet is that if the electricity cost is $2, then the valet service probably costs more than that. For a fat Tesla which is empty, the electricity cost could be $8 which makes it worth it. Also possibly worth it only to charge a night when you have all the cars overnight.

Airport long term parking = premium service

The point about airport long term parking is that people using it already know it's a premium service up front. It's not something that cost-conscious consumers tend to make use of in the first place. Then the added cost of being gouged for the electricity to charge a vehicle while it's parked there is a very small fraction of the total. So it's largely immaterial anyway.

Premium service?

You mean the airport’s own brand long term parking? Or the general concept of long term parking? LTP is not premium, the short-term is, but I guess the airport LTP is premium over the private lots, though often no better, or at most having more frequent shuttles.

But either way it’s the same. I presume the typical car stays in LTP for 3 or more days, even a week. You don’t want to monopolize a charger for that long, so you either need humans to move chargers around or move the cars around, or chargers that can plug into 8 cars and cycle around them I would think.

But any long term parking, even the cheap stuff, costs enough that the cost of the electricity is not a big deal. Well, I guess it could be in an empty Tesla, where at the 30 cent/kwh tier 3 rate, you would pay $25 of electricity to fill it. Even at the cheap grid rate it’s still around $9 to fully fill a Tesla model S. If batteries get cheap as predicted, and so 85kwh becomes a common battery, $9 becomes harder to give away with a day’s parking, though not so hard to give away with a week’s. Of course, it would be rare for a car to show up that empty. It could even get to the point that if you are empty you go to the lot that gives free charging, and if not so empty, you go to the lot that charges by the kwh.

When and where it matters

"the problem with valet is that if the electricity cost is $2, then the valet service probably costs more than that."

That's my point, though. If you can't afford or don't want to pay for the valet service, you're not going to be getting a charge, and you're not going to be gouged on the price of the electricity. If you're affluent enough to afford the valet service then being gouged on the cost of the electricity won't really be noticeable.

IOW, airport medium/long term parking, and similarly big chain hotel overnight parking, is largely an edge case in a discussion of price gouging on electricity for electric car charging.

Then by the time it's worthwhile enough for a lot to have a large enough number of bays that they don't need to have valets move vehicles in and out of them, electric vehicles would be popular enough overall that there would likely be competing lots, and the competition will either keep the price down, or at least give the consumer choices.

My whole point is that the times and places where it actually *matters* that you're getting gouged on electricity pricing for electric vehicle charging just doesn't look like it's going to be that common. It's overly focusing on a few trees and not noticing the rest of the forest.

Competition in parking

My point is that there is much less competition in parking than there is in gasoline. There is some competition, but it’s still possible for parking lots a short distance apart to vary in price by a factor of 2x, or even more. That never even remotely happens in gasoline.

The people who bundle electricity with parking will put some constraints on electricity prices, but only so much, until your car can recharge itself.

I think what I’m pointing out remains true. Today automotive fuel is one of the largest industries in the world, and the province of the biggest companies in the world. It runs under highly competitive economics as a commodity. Wars are fought over its price and supply.

The move to electric cars moves automotive power into a very different world. A large fraction of the cost becomes batteries (and the interest on them), and the other component of the cost is electricity in the places you need it, which again has very different rules than gasoline, including the very different competition patterns. Even at home, people pay very different prices for electricity. I pay 30 cents/kwh. The neighbours literally 300 feet away pay 11 cents because they are in a different town with a municipal utility. (I wish I could run a cable over the border street.) But when you go driving and try to recharge you will find everything from free superchargers if you bought a Model S to other free chargers, to market rate chargers, to free-with-parking chargers, to 50 cents/kwh “what the market will bear” chargers.

> What solves this

> What solves this problem?
> Bigger/cheaper batteries, so you don’t fell you must charge at a given spot — though it will still be very tempting.

Apart from doing basic things, that improve energy consumption efficiency, such as vehicle weight reduction, improve of aerodynamics and efficient driving behaviour. There are possibilities to improve the maximum range by changing the design of energy storage system..

To increase recuperation efficiency main batteries should be used together with the smaller but more efficient supercapacitor buffer, which will allow deep recuperation and quick energy release when driving heavy urban.

For the car which likely drives mostly on highways and and have to cover longer distances, the module of supercapacitors can be replaced by a "range extender", like 30kg Wankel motor in AUDI A1 e-Tron, or small gas-turbine, like Capstones.

Or they can use the that space to have even more batteries or leave compartment empty if they don't needed it and want to save money..

Improving the range

Improving the range of electric cars is actually a complex question, at least when you are cost conscious. The battery, after all, is the most expensive part of the car, and the most expensive part of your energy system (more expensive than the electricity you will put in it during its life.)

  • If you reduce the car’s weight or make it more aerodynamic, you increase the range. But do you just increase the range, or do you take this as a chance to reduce the battery?
  • There is a diminishing return curve on range, because more battery means more weight, so each kg of battery is less effective at adding range
  • You pay for all the battery no matter how much you use it. Having 2x or 3x the range you actually need just so you can occasionally go that far is wasteful, because you spend all that money and carry all that weight just for rare uses. Here, swap or rapid-charge or boosters can be much more efficient.

In other words, it’s hard to beat the value of charging because it adds no weight to your car, and no dollars to your purchase price. Range adds both.

Then maybe optimisation of

Then maybe optimisation of fleet can come to help? With traffic simulation (before) and efficiency analisys taxi company can optimize amount of batteries or other range extenders it actually needs on each car. The construction of the the car should of course allow to take some part of battery from one car and add to another..

The same for privately used cars. Usually a man can plan his movements around the city and his vacation days. So he will be able to run a simulation or use already accumulated statistics to choose optimal battery capacity. Extra capacity for upcoming longer drive he can rent from a charging station..

Extra capacity

Well, right now the market is mostly working on cars for individual owners with fixed batteries. Electric is not a good choice for a taxi driving 15 hours/day right now. For that you want battery swap, or cars cheap enough you can have them in downtime for many hours. (Supercharging is believed to lessen battery life, but Tesla is making claims they now are able to solve that problem so we’ll see.)

Robocars will indeed make such plans, and taxis could also (if they have swap) so they will always charge at the best rates. It is private owners who are constrained to charge at somewhere convenient to their destinations.

Maybe bidding on who charges first?

With your idea of charging spots with four plugs but only the ability to charge one at once, it got me thinking - maybe there would be a rate you would choose for priority. Whomever chose the highest rate would get the first priority. There might be a highest tier where nobody could outbid you for priority. Otherwise you might come back to see that someone has delayed you. Or it might send you a text to let you know you are delayed and you could up your bid. Interesting.

Also people who have a charging station at home but live walking distance from desirable destinations might find a way to make a little money off their home charging station while they are not using it by installing a device to let people pay to use it. I could see a company working that out as a business model if regulations allow.

Who goes first

It’s difficult to do much complex here. If I drive up first and park, I expect and need a charge, even if somebody arrives later and outbids me. Now, if I tell the system I will be there for 8 hours, and only need 4 hours of charging, it’s OK if they give a charge to somebody only there for 4 hours first, as long as I am assured my 4 hours before I get back.

Almost OK — I may need to return early. One option is to alert me on my phone and say, “We’ll lower your price if you agree to charging later, which means you can’t come back early” and I might agree.

If I am not desperate, I might even agree to yield to a more desperate person for some reward like free charging.

Problem is at the proper market price for electricity — 10 cents/kwh — the reward just is not that great. Will I take on a major inconvenience to save 50 cents? Doubtful.

But this article is about the reverse — how people might pay several dollars for convenience, causing wide variation in pricing. With gasoline, $3 is a small fraction of the total cost of the fill-up, and so tankful prices do range by more than $3. On the other hand, with a Leaf, $3 is more than the whole cost of the electricity so convenience fees make a big difference in the economics.

Downtown parking already works that way.

Much of what you describe is already in play with downtown parking lots. I work not far from three major venues and pass a large number of parking lots on my "last mile" to the office each day. The prices vary by as much as 20x depending on what's going on, and the outlying lots go up once the closer ones are full. It's not as dynamic as an network connected electronic system could be, but it's still amazing to watch. As a daily commuter, my solution is to contract with a garage for a reasonable rate that doesn't vary. I even take a discount on my monthly rate in exchange for giving up parking (with notice) on one or two peak days per month. The market found a way - good thing, because I couldn't afford to work in that location if I had to pay the variable top market rate each day. The widespread gouging you describe reminds me of cell phone roaming charges in the early days. So expensive you only used it dire emergencies. I have to think that people would choose not to own an EV if charging was that painful.

I also drive a EREV. With the range extender on board and a relatively small battery (40 miles), I quickly figured out that it was pretty much never in my best interest to use a paid public charger, given the pricing schemes I've run across to date, which is typically dollars per hour parked instead of looking at how many kwh I pull. I have yet to see a situation where is wasn't cheaper and easier to just burn a little gas if I need more miles. Heck, I even have free access to 110v outlets in the garage at work, but it's not financially worth the risk that someone might damage or steal my way-overpriced charge code.

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