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.